Key note presentation on 'Intermediated delivery and third party billing:Implications for the operation of the VAT system'. From Vienna Conference on 'The Future of VAT in a Digital Global Economy'. September 24 - 26, 2014.

1. Vienna Conference “The Future of VAT in a Digital Global Economy"
Session IV – Intermediated delivery and third party billing
www.pwc.com
Sophie Claessens (PwC) 25 September 2014

2. @ PwC 2014
Session overview
Vienna Conference
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25 September 2014
Background
The world’s Digital Transformation
Challenges in identifying who owes the VAT in a digital supply chain
Why bother?
Business scenarios and their VAT implications
One digital content service, multiple intermediaries
Agency / Principal
Above-the-VAT-line billing vs. Below the VAT line billing
The EU approach EU VAT Directive Implementing provisions Explanatory Notes ECJ case law
Fitness for purpose?

3. @ PwC 2014
The world’s digital transformation More connectivity…
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25 September 2014
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% UK Active Adult Population
Transitional
Digital Natives
Traditional Consumers
Digital converts
Digital natives

4. @ PwC 2014
Delivery and billing of digital content
A complex distribution chain…
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25 September 2014
Aggregator
Content
owner
Content
owner
Content
owner
Portal
Content
owner
Content
owner
App
Store
Content
owner
Content
owner
Consumer
• Different sales situations
• Long and cross-border supply
chains
• Multiple intermediaries
• Different roles and legal
responsibilities
• Use of payment service
providers
• Cash flows do not always
coincide with service delivery

5. @ PwC 2014
Challenges in identifying who owes the VAT What’s the relevance?
Vienna Conference
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25 September 2014
Money
Service
Who is the «real» supplier for VAT?
•who is liable for VAT accounting on the supply to the consumer?
•what is the contractual and commercial capacity of the intermediary?
•where is the burden of proof?
•Tax authorities interests: assure VAT revenues and ease of control
•Business stakes: uncollected VAT exposure, margin evaporation, unfair competition
Content Provider
Intermediaries
Private
Consumer

6. @ PwC 2014
Role of the intermediary Above-the-VAT-line billing
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25 September 2014
The Access Operator acts as the direct content provider (operator branded content)
The Access Operator acts as commissionaire/undisclosed agent (third party content)
Money
Service
Billing

7. @ PwC 2014
Role of the intermediary Below-the-VAT-line billing
Vienna Conference
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25 September 2014
The content provider contracts directly with the end user, the access operator acts as a disclosed agent towards the content provider.
Money
Service
Billing

8. @ PwC 2014
Who owes the VAT in a digital supply chain? EU VAT 2015 decoded
Vienna Conference
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25 September 2014
Implementing Measures
Amends
Amends
Rules for 904/2010
in light of MOSS
Amends in light
of MOSS
Explanatory Notes
Implementing Reg 1042/2013
Implementing Reg 282/2011
Reg 904/2010 Combating Fraud
Implementing Reg 815/2012
MOSS guidelines
Implementing Reg 967/2012
National Legislation
Directive 2008/8/EC
Principal VAT Directive 2006/112/EC
Member State Interpretations
Taxpayer

9. @ PwC 2014
Who owes the VAT in a digital supply chain? Article 9a(1)
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25 September 2014
Vienna Conference
Where electronic services are supplied through a telecommunications network, an interface or a portal.....a taxable person taking part in that supply shall......be presumed to be acting in his own name but on behalf on the electronic service provide unless that service provide is explicitly indicated as the supplier by that taxable person and this is reflected in the contractual arrangements between the parties.......

10. @ PwC 2014
Who owes the VAT in a digital supply chain? Article 9a(1)
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25 September 2014
Vienna Conference
Key questions
Who is “taking part” in the supply?
What does it mean to those involved?
When can the Content Provider be explicitly indicated as making the supply to the consumer?
What are the limitations?
Are payment providers “taking part” in the supply?

11. @ PwC 2014
Who owes the VAT in a digital supply chain? Article 9a(1) continued
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25 September 2014
Vienna Conference
“........In order to regard the electronic service provider as being explicitly indicated as the supplier of the electronic services by the taxable person, the following conditions must be met:
(a) the invoice issued or made available by each taxable person taking part in the supply of the electronic services must identify the electronic services and the supplier of those electronic services;
(b) the bill or receipt issued or made available to the customer must identify the electronic services and the supplier of those services.
A taxable person who, in regard to a supply of electronic services, sanctions the charge to the customer, sanctions the delivery of the services or sets the general terms and conditions of the supply, shall not be able to explicitly indicate another person as the supplier of those services.”

12. @ PwC 2014
Who owes the VAT in a digital supply chain? Article 9a(2)
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25 September 2014
Vienna Conference
Article 9a also applies to
Telephone services provided through the Internet (VoIP)
Supplied through a telecommunications network, an interface or a portal such as a marketplace for applications.

13. @ PwC 2014
Who owes the VAT in a digital supply chain? Article 9a
Complex decision chart with presumptions and rebuttals
Vienna Conference
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25 September 2014

14. @ PwC 2014
EU VAT supply chain rules – Fit for purpose? Some summary thoughts…
Vienna Conference
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25 September 2014
•Different perspectives and roles of the parties in the chain
•Available information flow/knowledge within the chain?
•Taxable amount, location & status of customer, registration (s), invoicing, VIES etc, etc?
•Interpretation by MS?
•Robustness of Art 9a?
•Potential for errors
•VAT, commercial, legal, IT and accounting impact?
•Need for commercial and legal certainty and protection
•Need to be ready for January 2015

15. Thank you!
The information in this presentation is solely for guidance on matters of general interest and is provided without any liability for decisions taken-or not taken- based on it. The application and impact of laws can vary widely depending on the specific circumstances and facts involved. This presentation is not a substitute for professional advice. Before taking any action, please ensure that you obtain advice based on your particular circumstances from your usual PwC client service team or your other tax advisers. The materials contained in this presentation were assembled on 26 May 2011 and were based on the law applicable and information available at that moment in time.
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