This document summarizes key indirect tax updates from a presentation by Grant Thornton UK LLP on September 16, 2015. It discusses recent EU case law on Italy VAT changes and payment handling services. It also covers fuel supply exemptions and the Union Customs Code. Global rate changes and new tax regimes being implemented in countries like India, UAE and Egypt are summarized. Developments in the digital economy and VAT treatment of non-resident suppliers are highlighted.

1. © 2015 Grant Thornton UK LLP. All rights reserved.
International Indirect Tax update
16 September 2015

2. © 2015 Grant Thornton UK LLP. All rights reserved.
Your presenters today…
Alex Baulf
International Indirect Tax Associate Director
alex.baulf@uk.gt.com
+44 (0)207 728 2863
Henry Cairns-Terry
International Indirect Tax Associate Director
henry.cairns-terry@uk.gt.com
+44 (0)121 232 5173
Michael Alexander
Customs Associate
michael.d.alexander@uk.gt.com
+44 (0)207 728 2532

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EU case law and policy

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Italy VAT change
• Goods sent for processing Italy were treated as temporary
movements whether the goods went back to the EU member
state they came from or somewhere else
• Similarly, goods sent from Italy were treated as temporary
movements even if they were not returned to Italy.
• Following the joined cases C-606/12 and C-607/12 Dresser-
Rand, Italy now accepts this is not correct.
• From 18 August 2015, goods will need to return to the same
country for it to qualify as a temporary movement. So:
• Non-resident taxpayers may need to register for VAT in Italy
• NB Penalties for non compliance
• Italian businesses sending goods for processing elsewhere can now count
the exports for Plafond purposes.

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What was the case about?
• Warranty contracts supplied to buyers of second-hand cars
• Mapfre said the mechanical breakdown contract was not
insurance
Mapfre Warranty (Case C-584/13)
Customer Dealer
Assistencia Warranty
Payment
Payment
Insurance block contract

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Mapfre (continued)
What the court said
• The Court said the customer had a contract of insurance which
was exempt from VAT, but subject to French insurance tax
Why is the case important?
• Because it shows that the ECJ will look at the nature of what is
provided rather than:
• The status of the provider
• The regulatory position
Who should take notice?
• Any one who sells extended warranty products

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NEC (Case C-130/15)
• The Upper Tribunal has referred this case about payment
handling services to the European Court
What the case is about
• Two issues:
• Was it a payment handling service? Yes
• Exempt from VAT? ECJ to decide
Why is the case important?
• More and more case coming forward about payment and similar
services.

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NEC - continued
• In Way Ahead Group, the Tribunal drew a distinction:
• Debt collection service (AXA Denplan – Case C-175/09) – standard rated
• Payment processing (Sparkassernes Datacenter – Case C-2/95) – exempt
as long as the service changed 'the legal and financial situation of the
parties'
• You could say it like this:
• Push – initiated by the payer – payment processing
• Pull – initiated by the creditor – debt collection
• However, HMRC policy leans towards the position that:
• If you are a telco – standard rated
• Even if the service changes the legal and financial situation of the parties

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What was the case about?
• Fuel supplied to ships on the high seas, whether exempt when
supplied via an intermediary
• An earlier case, Velker (Case C185/89), confirmed that
exemption was only available at the final stage, ie the sale to the
ultimate user
Fast Bunkering Klaipeda (Case C-
526/13)
Fuel supplier Intermediary
Ship
Sale
Sale

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Klaipeda (continued)
What the court said
• In circumstances where the sale to the intermediary took place
no earlier than transfer to the user of the right to dispose of
goods as owner (here, delivery of fuel to the ship), it was
possible for the supply to be exempt.
Why is the case important?
• Because it confirms the transfer of the right to dispose of goods
as owner is not the same as transfer of legal title.
• See also cases such as Lease Plan Luxebourg (Case C-390/96)
• This affects the analysis of what is the supply at the final stage.
Who should take notice?
• Any distribution situation (eg LRD) where exemption is claimed.

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Customs & International Trade
Update on the UCC

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Union Customs Code
• Legislation enters into force on 1st May 2016
• Delegated and Implementing acts in 7th draft, it is expected that
this is the draft that will be voted on by the European Council and
Parliament – therefore it is likely that the 7th draft will become law
• Therefore, it's time to understand what impact the UCC will have
on your business

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UCC – timeline
• 1st January 2016 – HMRC likely to stop accepting applications
under old "community customs code" rules
• 30th April 2016 – Many customs authorisations expire – traders
need to check expiry date of time limited authorisations
• 1st May 2016 – UCC becomes law in the EU – HMRC to
transitionally renew authorisations under 'old' rules
• After 1st May – HMRC to begin re-authorising existing customs
authorisations under UCC rules. These will be post-dated until
2019 if the trader wishes not to use UCC facilitations

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UCC – What you need to do
• Check the expiry dates of all authorisations and understand if
you need to take any immediate action
• Understand the UCC guarantee requirements and
wavers/reductions available to 'trusted traders'
• Understand changes to customs warehousing valuation rules
• Understand what actions will trigger a customs procedure to be
reauthorised under UCC rules

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Global update
New regimes, rates and rules

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Rate changes
Greece
• Super reduced rate decreased from 6.5% to 6%
• Super reduced rate in Greek Islands decreased from 5% to 4%
• Several items subject to the 13% rate increased to 23% including:
• hotel accommodation services
• restaurant meals
• selected basic foodstuffs
• selected educational services
… with effect 20 July 2015
But effective 1 October – 30% discount for "developed tourist islands" will
be abolished

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Rate changes
Kosovo
• Standard rate increased from 16% to 18%
• Introduction of a Reduced rate of 8%
… with effect 1 September 2015

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Regime changes
India
• Update on GST implementation (to replace CENVAT/Service Tax)
• momentum appears to have been stalled by politics – main Opposition
party using the proposal GST Constitution Amendment Bill as
opportunity to stonewall reforms in India unless political demand met
• Monsoon session of Parliament has been wasted
• 15th September – State Finance Ministers (who constitute the
Empowered Committee for steering GST reform in India) were in full-
day meeting with the Union Finance Ministry and senior policymakers to
agree on the draft Model GST Bills for Central-GST, Integrated-GST
and State-GST
• Expecting PR/conference to share decisions. Rumor that Empowered
Committee may even release draft GST Bills for public discussion.

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Regime changes
India
• Our view – April 2016 target date will be missed
… GST implementation delayed until April 2017?

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GST: Expected implementation dates
GST Roadmap/ to-do list Proposed
timeline
Likely
timeline
Centre-State consensus on GST structure for India (dual-GST)  
State revenue loss compensation formula agreed  
Constitution Amendment Bill (122nd Amended Bill) to drive agreed
structure tabled before Parliament
 
Recommendation by Select Committee of Rajya Sabha  
Approval of Lok Sabha on recommendations of Select Committee 13 Aug 2015 ?
Approval of Rajya Sabha on amended bill by 2/3rd majority ? ?
Model GST Bill (Central GST and State GST) / GST Rules (for Place of
Supply, Administration, etc.) released for discussion
Oct 2015 ?
GST bill introduced and approved by at least 50% State assemblies By Dec 2015 ?
President assent to give effect to GST structure Jan 2016
Appointment of GST Council within 60 days of Constitution Amendment Jan – March
2016
?
GST Act and Rules notified for implementing GST in India 1 April 2016 1 April 2017

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Regime changes
UAE
• Update on VAT implementation
• On 18th August 2015, UAE's Ministry of Finance published update on
latest developments
• "…confirms that the UAE has been conducting studies on the
implementation of a VAT draft law, along with the other GCC countries.
This is based on a previous agreement between the UAE and all GCC
states to impose a VAT tax law simultaneously. The draft law is still
pending and under negotiation due to the absence of a final agreement
between GCC countries on the tax rate and a list of tax exemptions."
… February 2017 earliest based on 18 month notice period?

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Regime changes
Egypt
• Anticipate Bill for VAT implementation by October 2015
• VAT to replace current sales tax regime (10%)
• VAT at same rate but a broader base and credit mechanism
• limited exemptions but zero-rating for export/international services
• recently announced changes to sales tax as transitional arrangements
• "Sales Tax Lottery" with a weekly cash-prize for compliant tax invoices
• increase in registration threshold to 500k Egyptian Pounds (approx. £40k)
• rate simplification
• withholding tax requirement on certain payment to counter fraud
… monitor as anticipate short lead time from legislation being
published

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Regime changes
– Digital Economy
Japanese Consumption Tax
• Following OECD guidance and global trend
• Non-resident suppliers of electronic/digital services must register and
charge Consumption Tax @8% to private consumers (B2C)
• Introduction of a reverse charge mechanism for B2B transactions
• … but requirement for supplier to "notify"
• JPY 10M threshold (approx. £55k) in "base period"
• need to appoint Tax Agent and file return through "Tax Accountant
Proxy"
… with effect 1 October 2015

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Regime changes
– Digital Economy
Asia-Pac
• Australia – "Netflix Tax" with effect 1 July 2017
• New Zealand – Public consultation this month
• Korea – non-resident "app providers" with effect
EMEA
• Albania - joins Switzerland, Norway and Iceland in harmonizing rules in
line with EU VAT Directive with effect 1 January 2015
• Morocco (believe current rules catch non-residents & Apple just
registered)
• Israel – recently issued draft circular on new legislation
• Turkey – anticipate new "electronic VAT registration" for non-residents

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Regime changes
– Digital Economy
North America
• Canada – Prime Minister has ruled out after public consultation but PST
could be due at provincial level?
• USA
• "Netflix tax" in Chicago municipality
• Marketplace Fairness Act?
• "click-thru nexus" provisions and taxable digital services

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Skandia
- VAT Expert Group
VAT Expert Group (EU business perspective)
• met on 11 September 2015 and key conclusions are:
• VAT grouping in of high importance for EU economy and provides
significant benefits for businesses and tax authorities
• "strong need for consistency in application of Skandia judgement"
across EU member states
• need for limited interpretation
• broad application of FCE Bank principals
• harmonised anti-avoidance for protection of revenue
… monitor application of Skandia across EU member states

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