international vat association lisbon 19

6. The importance of VAT fraud in the EU The types of fraud Missing trader intra-Community fraud A number of possible solutions What your association has been doing Will the existing VAT regime survive ?

25. IVA Report � key successes

26. IVA Report � key successes

27. IVA Report � key successes

28. Articles to date�

31. THE WAY FORWARD 3 YEAR STRATEGIC PLAN

32. AGENDA Status Quo What�s missing? Reaching our Potential How to get there 3-Year Strategy Proposal Feedback from Members Conclusion Next Steps

33. STATUS QUO STRUCTURE 70 Members � 600 per annum

34. WHAT�S MISSING No significant improvement in reciprocity/ opening of major new markets Increasing obstacles - Tax Administrations Delays in obtaining refunds Lack of industry statistics Credible Professional Body to represent

35. WHAT�S MISSING Truly International VAT Body

36. REACHING OUR POTENTIAL

37. REACHING OUR POTENTIAL Clear �GAP� for international body: Contribute and influence Serves Members� interests Efficient operation - international VAT Requires key ingredients: Will of the Membership Credibility Resources (Financial & Human capital) Activity

38. HOW TO GET THERE More active Broader base Clear aims Clear actions Funding

39. HOW TO GET THERE Make IVA more credible Make IVA more attractive Grow membership Active lobbying

40. 3-YEAR STRATEGY Board proposals have been expanded into a draft 3-year strategy which encompasses the following:

41. 3-YEAR STRATEGY

42. PROPOSAL Realign our mission to adopt a more �active� agenda Raise the profile and credibility of IVA Expand our the Membership base Restructure funding requirements Form activity committees dedicated to specific tasks: Knowledge sharing Lobbying / influencing Funding Member�s affairs etc.

43. FEEDBACK FROM MEMBERS Comments & Suggestions? What else would you like the IVA to do?

44. IVA to punch its weight - deliver more Become recognised voice of the industry Requires more active agenda Requires increased profile and credibility Board needs mandate to implement 3-year plan Board ready to implement CONCLUSION

45. Review and prioritise activities Budget Establish subscription tables Form committees Active recruitment NEXT STEPS

48. Friday 20th April 2007 8.45 Coffee 9.00 Opening Remarks - JC Bouchard 9.10 Commission update � Marysse Volvert 10.15 Update on Portugal � Maria Lourdes Amancia 10.45 Coffee 11.15 HMRC 8th/13th Directive claims Electronic data capture � P McMenamin 11.45 UK Face Vet rejections � J McInnes 12.30 Lunch Agenda

49. Friday 20th April 2007 14.00 Questions from the morning session 14.15 UK Recovery in financial services � R OStilly 14.45 UK Developments � P Beighton 15.00 Coffee 15.15 ECJ Case update � S. Dale 16.00 Q & A Session on problems encountered � IVA Board 16.30 Closing remarks � JC Bouchard Agenda

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63. Most VAT package (place of supply of services) at this stage almost ready from technical point of view reached consensus on many changes some few contentious issues still remaining prospect of agreement high

64. Most VAT package (one stop shop) provides single place of compliance for non-established taxable persons electronic VAT return (VAT due by rate and VAT deductible) to Member State of identification direct payment to Member State of consumption coordinated control

65. Most VAT package (one stop shop) at this stage slow in progress up to now remains with divergent views in need of more time to reach agreement

66. Most VAT package (one stop shop) at this stage link between new rules on place of supply of services and the one stop maintained possible intermediate solution identified efforts focus on mini one stop shop

67. Most VAT package (one stop shop) at this stage look towards existing e-commerce scheme need to ensure that changes in place of taxation are accompanied by facilitation measures

68. Most VAT package (refund of VAT) leaves principles unchanged modernises procedure by introducing fully electronic procedure giving more legal certainty for businesses providing for better control

69. Most VAT package (refund of VAT) at this stage discussions well advanced agreement not far gone prospects of success good

70. Most VAT package (other elements) harmonising rules by which deduction is excluded targeting luxuries, amusements, entertainment travel and accommodation restaurant and catering vehicles

71. Most VAT package (other elements) updating SME scheme with equal access Proposed maximum threshold of EUR 100 000 Objective: put all MS on equal footing Give flexibility to MS simplifying distance selling rules EU-wide threshold of EUR 150 000

72. Most VAT package (other elements) at this stage discussions going slow some parts not agreeable likely to be kept for later

73. Most Fight against fraud this is a clear priority for all parties concerned at the centre of ongoing discussions aimed at identifying appropriate measures focused on reverse charge as tool

74. Most Fight against fraud as background German and Austrian requests to apply general reverse charge for domestic transactions both rejected as too general to be covered by procedure United Kingdom request to use reverse charge in targeting certain sectors was granted agreed after discussions but more limited than asked

75. Most Fight against fraud alternatives under discussion are applying reverse charge taxing intra-Community transactions

76. Most Fight against fraud at this stage discussion is very much ongoing views vary considerably difficult to predict outcome need to report back to ECOFIN in summer

77. Most Reduced rates reform of reduced rates proposed in 2003 resulted in 2006 prolongation of experiment for labour-intensive services leaves obligation for the Commission to report on impact of reduced rates when applied to locally supplied services by mid-2007

78. Most Reduced rates at this stage work under way by independent economic think tank yet to come receiving final result from think tank reporting of outcome this summer identifying possible future avenues of reflection

79. Most Financial services need to modernise existing rules find (limited) solutions to most urgent and important problems legal uncertainty caused by outdated definitions, divergent application, rulings handed down by ECJ, etc. obstacle to modern business structures with outsourcing, pooling, cost-sharing, etc. competitive factor vis-�-vis third countries with VAT as additional cost

80. Most Financial services objective is to reduce administrative costs for administrations and businesses assure budgetary security for administrations and legal certainty for economic operators address inconsistencies between VAT provisions and objective of the Financial Services Action Plan modernise rules and ensure that they are more uniformly applied

81. Most Financial services possible elements full review of definitions serving for exemption right of option to tax improvements to right of deduction (pro-rata) limited cross-border grouping

82. Most Financial services at this stage work ongoing with preparing proposal in process of preparing impact assessment yet to come finalising preparatory work tabling proposal (autumn 2007)

83. Most Vouchers new rules must deal appropriately with cross-border situations (vouchers issued in one Member State but redeemed in another) ensure tax neutrality regardless of type of different payment (cash, voucher, other consideration) be simple and easy to enforce cope with future changes

84. Most Vouchers elements under consideration providing definitions of different types of vouchers harmonising tax point, if any reviewing taxation of distribution chain with a view to protect the taxable amount determining appropriate taxation of payment services supplied by the issuer of the voucher

85. Most Vouchers at this stage working to identify appropriate solutions taking account of work done on financial services yet to come much depending on progress made on financial services

86. Most Double imposition mechanism objective is to avoid double imposition of cross-border transactions put in place mechanism which may respond to problem limit this to individual cases cover cases not arising from different interpretation of basic legislation possibly have recovery of tax suspended until double taxation is eliminated

87. Most Double imposition mechanism at this stage web consultation currently ongoing until 31/05/2007 yet to come analysing responses to consultation Main question: is it a real problem for businesses and citizens? deciding on direction of work

89. VAT REFUNDS TO NON-ESTABLISHED TAXABLE PERSONS Lisbon, 20 April 2007 International VAT Association

91. Council Directives N� 79/1072/CEE of 6/12 (8th ) N� 86/560/CEE of 17/11 (13th ) Internal Law Decreto-lei n� 408/87 of 31/12

92. VAT paid on supplies of goods and services having taken place in Portugal Non-established taxable person

93. Definition of a non-established taxable person : Any person who can prove his VAT registration in another Member state or, being established in a third country, is a turnover tax taxable person, in so far reciprocity is assured.

94. The taxable person cannot have the seat of his economic activity, nor a fixed establishment from which business transactions are effected, nor his domicile or normal place of residence in Portugal The taxable person cannot have supplied any goods or services in Portugal, with the exception of: Transport services and services ancillary thereto Services provided in cases where tax is payable solely by the person to whom they are supplied

95. Application to be submitted by the taxable person (Model n.� 1496) Model 1496 can be purchased at: site www.incm.pt or Imprensa Nacional - Casa da Moeda R. D. Francisco Manuel de Melo, 5 1099 -002 LISBOA

96. Annex A to the 8th Directive Form http://eur-lex.europa.eu/LexUriserv/site/eu/ consleg/1979/L/01979L1072-20040501-en.pdf

97. Originals of invoices or any other document having the same legal value duly issued Taxable person certificate (EU -�8.th Directive) (valid for one year since issue)

98. Turnover tax taxable person certificate and proof of reciprocity (third countries - 13.th Directive) Deadline for submitting the request: until the last day of the month of June of the year following the one in which the tax became chargeable

99. Minimum: � 19,95 (Year ) � 159,62 (Quarter) Expenditure not eligible for refund��(art. 21 of the Portuguese VAT code - CIVA)

100. Expenditure listed in art�. 21�. of CIVA: Gas, diesel, fuel, LPG and natural gas (partially) Cars, boats, helicopters, planes, motorbikes Accommodation Food, drinks and tobacco * Luxuries * With limits

101. The request must be submitted to: �Direc��o-Geral dos Impostos Direc��o de Servi�os de Reembolsos AV. Jo�o XXI, n.� 76. 5.� 1049-065 Lisboa�

102. Applications by third countries established taxable persons (13.th DIRECTIVE). Appointment of a tax representative in Portugal, in possession of the competent legal instrument, who shall be held jointly and severally liable for payment of the tax

112. V � Grounds for refusal

118. Were located here at the overseas repayment unit in Derry in Northern Ireland and are responsible for auditing and processing claims under the 8th & 13th Directives Were located here at the overseas repayment unit in Derry in Northern Ireland and are responsible for auditing and processing claims under the 8th & 13th Directives

119. Provide some facts & figures

121. Total 33,395 8th Dir 19,721 13th Dir 13,674 What does that mean in terms of numbers. This slide shows the number of claims we recieved in total in 2005.What does that mean in terms of numbers. This slide shows the number of claims we recieved in total in 2005.

122. Total �279.5million 8th Dir �168.4million 13th Dir �111.1million

123. SPLIT OF CLAIMS 2006

125. Numbers of errors per incomplete claim returned

127. ORU SCANNING AND DATA CAPTURE PROJECT

128. New process takes data from paper application and populates the existing database. A new database for all the invoices received by the unit

130. What the new schedule should look like

132. ORU SCANNING AND DATA CAPTURE PROJECT

134. Overview of general EU law principles The UK face vet procedure and problems encountered Application of EU law principles to the UK face vet procedure The UK appeal procedure Our action to-date

135. INTERNATIONAL VAT CLAIMS UK FACE VET REJECTIONS

136. Today�s talk Overview of general EU law principles The UK face vet procedure and problems encountered Application of EU law principles to the UK face vet procedure The UK appeal procedure Our action to-date

137. Overview of general EU law principles

138. Some sources of EU law Treaties Directives Regulations

139. EU Directives

140. Implementation of Directives Directives must be implemented adequately and must give proper effect to Community law e.g. Commission v France [1974] ECR 359 Directives must be implemented within specified time limits Directives must be implemented in accordance with general EU law principles e.g.: Proportionality; and Discrimination.

141. Proportionality General rules: Is the measure suitable to achieve the desired end? Is it necessary to achieve the desired end? Does the measure constitute a burden on the individual that is excessive in relation to the objective sought to be achieved? Cases: R v Intervention Board, ex parte E.D. & F. Man (Sugar) Ltd [1985] ECR 2889; Rewe-Zentrale AG v Bundesmonopolverwaltung fur Branntwein [1979] ECR 649; Commission v UK [1982] ECR 2793

142. What happens when Directives have been incorrectly implemented?

143. What happens when Directives have been incorrectly implemented? cont�..

144. Conditions for direct effect Subject matter must be unconditional and sufficiently precise �Unconditional� = where the Directive sets out an obligation which is not qualified by any condition �Sufficiently precise� = where the obligation is set out in unequivocal terms

145. What happens when Directives have been incorrectly implemented? cont�.

146. Where are we now? Supremacy of EU law Implementation of EU law � particularly Directives Ways of dealing with misimplemented Directives

147. The UK face vet procedure Relevant to a client if that client: Relevant to that client because: The procedure consists of:

148. The relevant legislation

149. Requirements for VAT to be refunded (under the UK legislation) A valid �certificate of status� must be enclosed The amount claimed must exceed �16.00 The claim must be signed by the Claimant or by their authorised agent The claim must include the original invoices, with the values in � sterling If the claim is submitted by an agent, it must include a letter of authority from the Claimant.

150. Requirements for VAT to be refunded (under the UK legislation) cont�. The claim must be submitted by: 30th June in the year following the year in which the tax was incurred (Eighth Directive claims) 31st December in the year following the year in which the tax was incurred (Thirteenth Directive claims) If claim is refused, it cannot be re-submitted beyond the deadline (the �no second chance principle�)

151. Problems we have encountered Client A and Client B A and B have their registered office in the USA A and B made a claim for the refund of UK VAT A and B had applied for a form IRS 6166 to satisfy the �certificate of status� requirement, but no form had been issued at the time of the claim Claim refused because no �certificate of status�

152. Yes: The �certificate of status� requirement of Regulation 191(b)(i) does not reflect the terms of Article 3.1 of the Thirteenth Directive The �certificate of status� requirement is disproportionate The �no second chance� principle is disproportionate

153. What are the remedies that may be sought? A refund of VAT on the basis that: The relevant UK legislation should be interpreted in accordance with the principle of indirect direct effect The relevant UK legislation should be set aside and the relevant EU legislation relied upon under the principle of direct effect Damages under the Frankovich principle

154. Where are we now? Our view is that: The UK has implemented the Thirteenth Directive incorrectly A variety of remedies are available

156. The appeal procedure S.83 VAT Act 1994: an appeal may be made to the VAT and Duties Tribunal where a taxpayer does not agree with a decision by HMRC s.83(a) VAT Act 1994 to s.83(z) VAT Act 1994: sets out the matters which may be appealed Where the Tribunal does not have jurisdiction, the matter may be eligible for Judicial Review e.g. British Sky Broadcasting Group Plc v Commissioners of Customs and Excise [2001] EWHC Admin 127 (23rd February 2001)

157. Tribunal Procedure: SI 1986/590 Rule 4(1): The time limit for appealing is 30 days from the date of the decision OR Rule 4(2): 21 days from the date stipulated by an HMRC officer when they grant an extension to the deadline for submitting an appeal Rule 19(1) an application can be made for an appeal to be served out of time

158. Preparation for the hearing of the appeal Appellant�s and HMRC�s list of documents HMRC�s statement of case Witness statements and other evidence Bundles of documents

159. Costs Generally, a Tribunal direction is made for the unsuccessful party to pay the �reasonable� costs of the successful party As a rule of thumb, usually about 66% of the total costs incurred is considered �reasonable�

160. Where are we now? The matters which can be appealed to be a VAT and Duties Tribunal are detailed in s.83 VAT Act 1994 Those which cannot be appealed to a VAT and Duties Tribunal may be eligible for Judicial Review Appealing a matter to a Tribunal can be an expensive process �the benefits must outweigh the costs

161. Client A and Client B Notice of appeal submitted in February 2007 Grounds of appeal are that: The Thirteenth Directive has been incorrectly implemented Client A and Client B are entitled to a refund of VAT or to damages under the Frankovich principle

162. Client A and Client B cont�.. Very brief Statement of case dated 22nd March 2007 received for Client B Client A will probably be �stood over� behind Client B Counsel to be instructed Argument is a legal, not a factual one Witness evidence unlikely

163. Where are we now? Appeals submitted for Client A and Client B Basis for appeals is that Thirteenth Directive has been misimplemented

164. Conclusion Face vet procedure is too stringent in light of the terms of the Thirteenth Directive We have had two clients with problems and are expecting more Two appeals have been submitted in respect of these clients

167. FINANCIAL INSTITUTIONSClaiming into the UK 19 � 20 April 2007 Lisbon

168. AGENDA Background Technical Arguments Activity of IVA � to date Next Steps & Advice to Members Conclusion

169. BACKGROUND

170. BACKGROUND WHA litigation Court of appeal rules in favour of WHA based on domestic legislation UK went �too far� in implementing 13th Directive Art. 17(3)(c) not carried through to 13th Directive HMRC believes it is entitled to amend UK domestic legislation to stop the mischief of WHA Reg. 190(1)(c) was added in Nov 2004, which blocks refunds of VAT for non-EU business making �specified supplies� ? i.e. Fin Institutions who make supplies to customers outside of E.U. Invoices dated Nov 04 onwards (mostly submitted in claims by 2005 and assessed by June 2006) would be rejected by HMRC Many agents have since seen rejections with standard 6 part questionnaires , or outright rejections.

171. TECHNICAL CONSIDERATIONS Art. 17(3)(c) allows deduction of VAT relating to exempt supplies, where provided to customers outside of E.U. Ensures neutrality of the tax Art. 2 of 8th Directive (which mirrors 13th Directive) specifically mentions scope of refunds to transactions referred to in Art. 17(3)(a) and (b) Explanatory memorandum to 8th Directive clearly indicates why express reference to Art. 17(3)(c) is NOT required. Court of Appeal ignores this. Places significance to the omission of Art. 17(3)(c), implying that refund is not allowed. It seems as if neither the Court of Appeal nor HMRC have considered the explanatory memorandum to the 8th Directive.

172. TECHNICAL CONSIDERATIONS HMRC believes that, they are bringing UK legislation into line with E.U. legislation HMRC understands that in doing so, not only will they effectively stop the abusive nature of WHA-type arrangements, but will also block all legitimate claims. HMRC does not feel that it has sufficient protection in light of the Halifx doctrine to stop the mischief, and are simply hiding behind the Court of Appeal decision as providing the vires for their actions. IVA Members (and their clients) have, since June 2006, received two types of rejections for all of these claims: Query rejection, with 6 standard questions Outright rejection, quoting Regulation 190(1)(c) Feedback from Members suggest that HMRC in Londonderry have applied this legislation inconsistently, sending out mixed messages to Members and their client.

173. ACTIVITY OF IVA � TO DATE 24.11.06 � Representation at joint HMRC/ LSCA conference 20.12.06 � Meeting with HMRC Director of Business, Deputy Director of Policy 29.01.06 � Meeting with HMRC Director of Policy, Anti-Fraud and ORU Policy 13.04.07 � Letter of representation to HMRC by IVA with proposal: Provide a �way out� to HMRC Allow �legitimate� claims Reserve views on wider aspects of 13th Directive in view of complaint to commission

174. NEXT STEPS: ADVICE TO MEMBERS Follow up call with HMRC scheduled for 23 April 2007 Keep submitting claims Respond to all queries Keep all appeal periods open Provide feedback (via Pam)

176. Work in Progress 6166 Certificates from USA Out of Time claims Financial Services Companies New Address

177. 6166 Forms or alternative proof Correspondence and discussions are currently in place to propose alternative means of evidence of Taxable Status Public Notice 723 states: When you make your first claim you must also include a certificate from the official authority in your own country showing that you are registered for business purposes in that country. When you apply for the certificate, make sure you ask for it to show all the information that the UK authorities will need to process your claim. For example, if the invoices are made out in your company�s trading style, the certificate must show this as well as the name of the person registered. The certificate must contain: the name, the address and official stamp of the authorising body; your own name and address; the nature of your business; and your business registration number.

178. Claims from Financial Services Companies Negotiations are in place with regard to the validity of claims submitted on behalf of financial service companies. HMRC are requesting additional information for a number of claims of this nature. On submission of the additional information some claims are being paid, others are subject to further scrutiny or rejection

179. Out of Time Claims filed with Overseas Repayments Unit, HMRC Following members difficulties with claims returned as Out of Time, we have carried out some investigative work as to WHY these are not picked up at Face Vet stage This is because technically the claims are not out of time, it is the invoices submitted within the claim that are out of time. Face Vet Process literally checks that a claim is complete, i.e. Signed and dated claim ford, Original Invoices, Certificate of Taxable Status, Letter of Authority

180. Were located here at the overseas repayment unit in Derry in Northern Ireland and are responsible for auditing and processing claims under the 8th & 13th Directives Were located here at the overseas repayment unit in Derry in Northern Ireland and are responsible for auditing and processing claims under the 8th & 13th Directives