This document discusses recent changes to VAT policies in East African countries as they relate to the tourism industry. It notes that while countries like Uganda and Tanzania have maintained VAT exemptions for tourism-related services and accommodations after lobbying from the industry, Kenya has eliminated several exemptions. There is currently a lack of harmonization between the different VAT regimes in East Africa. Harmonizing these policies will help the region realize the full economic benefits of integration under the East African Community.

1. CONTENTS
▶▶ ISRAEL
Israeli VAT: is it necessarily
an additional cost for foreign entities? 1
▶▶ EDITOR’S LETTER 2
▶▶ BELGIUM
Relaxation of Belgian self-billing rules 3
▶▶ EAST AFRICA
VAT relief for the tourism industry
in East Africa 4
▶▶ FRANCE
France’s new reverse charge mechanism
on construction works 5
▶▶ IRELAND
Member-owned golf clubs – possible
claims for VAT overpaid on green fees 6
▶▶ LATVIA
Further improvement of
Latvia’s VAT legislation 6
▶▶ ROMANIA
CJEU judgment C-424/12 –
SC Fatorie SRL vs. General Directorate
of Public Finance Bihor 7
▶▶ SINGAPORE
Major Exporter Scheme 8
▶▶ SLOVAKIA
Slovakia’s recent legislative changes 9
▶▶ SPAIN
Spanish VAT exemption on deliveries of
goods to another EU Member Country 9
EASTAFRICA
VAT relief for the tourism industry
READ MORE 4
FRANCE
New reverse charge mechanism on
construction works
READ MORE 5
BELGIUM
Relaxation of self-billing rules
READ MORE 3
MARCH 2014 ISSUE 1
WWW.BDOINTERNATIONAL.COM
INDIRECT TAX NEWS
ISRAELISRAELI VAT: IS IT NECESSARILY AN ADDITIONAL COST FOR FOREIGN ENTITIES?
I
sraeli VAT law does not have a
mechanism similar to the 13th
Council
Directive 86/560/EEC of the European
Union under which EU Member States refund
local VAT paid by non-EU entrepreneurs on the
purchase of goods or services in the territory
of a member state. This means Israeli VAT can
sometimes be an additional cost for non-
Israeli entrepreneurs.
Nevertheless, there are some ways foreign
entities can mitigate Israeli VAT costs.
VAT in Israel
Israel’s VAT law has been in effect since
1 July 1976. The VAT rate in Israel is currently
18% and there is no reduced VAT rate, though
there is a zero rate and exemptions in certain
situations. Israel imposes VAT liability, in
general, on the following transactions:
• The sale of “assets”, both tangible and
intangible.
• The provision of services.
• The importation of goods.
Israel’s application of VAT on consumption
in Israel is extended also to “imported”
intangibles or services provided to Israeli
entrepreneurs by foreign suppliers. It may be
collected in one of two ways: from the Israeli
purchaser (provided that the purchaser is
not an individual) or by requiring the foreign
vendor to register in Israel and file VAT returns.
In principle, a foreign entity that has a
substantial presence in Israel should register
for VAT and file VAT returns. Nevertheless,
the border line between a liability of the
foreign resident to register in Israel and
alternatively the liability of the Israeli recipient
of the service to issue a self-tax invoice for
the services (similar to the “reverse charge
mechanism” in the EU) may be blurred. It
should be noted, additionally, that in certain
situations there is some room for argument
that the service is out of the scope of Israeli
VAT law and so neither the foreign services
provider nor the recipient would be liable to
report to the Israeli VAT authorities.

2. 2 INDIRECT TAX NEWS 1
Israeli VAT is also imposed on certain kinds of
benefits, supports, and subsidies received by
taxable persons.
How to mitigate Israeli VAT costs
Although no Israeli VAT refunds are available
for foreign entities that purchase goods or
services in Israel or from Israeli suppliers, there
may be ways for a foreign entity to minimise
its Israeli VAT costs.
1. Register for VAT
One possible course of action, provided
that it can be justified under the Israeli
VAT law (meaning that local taxable
transactions are conducted or are expected
to be conducted), is for the foreign entity
to register in Israel for VAT purposes.
Foreign entities that register and fulfil all
the requirements can deduct input VAT or
have it refunded. It should be noted that
registration for VAT does not automatically
create a permanent establishment for
Israeli income tax proposes.
This course of action is often recommended
if a foreign entity’s Israeli customers are
indifferent to the VAT charged by the
foreign entity registered for Israeli VAT.
2. Inputs prior to VAT registration
In principle, deduction of input VAT in
Israel is allowed only following registration
for VAT in Israel. Nevertheless, in certain
situations, foreign entities can ask the
Israeli VAT authorities for special approval
to claim VAT refunds for invoices they
received from Israeli suppliers with full rate
VAT before they have registered for VAT in
Israel.
It should be noted that this approach may
result in a VAT refund being paid with
respect to VAT invoices issued to an entity
other than the one that has been registered
as a VAT entrepreneur and regardless of
whether the invoices were issued more
than six months before registration.
(Normally input VAT must be claimed
within six months of the date the invoice is
issued.)
3. Zero rated VAT
Foreign entities purchasing goods or
services in Israel, or from Israeli suppliers,
should also consider whether a zero rate of
VAT may apply on the purchase. In Israel,
to qualify for a zero rate of VAT a number
of conditions set out in the VAT law and
regulations must be met and the Israeli VAT
authorities interpret them very strictly. For
example, one of the conditions for a zero
rate of VAT to apply on services received
by a foreign entity from an Israeli supplier
is that the services must not have been
provided to the foreign entity in addition to
an Israeli entity in Israel.
It should be noted that the authorities’
interpretation in this respect may include
third party Israeli entities that don’t pay
for the service and that are not at all a
party to the agreement with the services
provider. For example, an Israeli supplier
that is engaged with a foreign company
in supplying intermediary services and
introduction of potential Israeli clients to
the foreign company will usually be subject
to full rate VAT on those services.
Another example of a situation where
a zero rate of VAT may not apply is the
provision of service related to an asset
(tangible or intangible) that is located in
Israel.
Issues related to zero rated VAT are often
the subject of litigation and dispute by
Israeli tax authorities. Nevertheless, foreign
entities should consider whether a zero
rate might apply, as it is a viable solution in
some cases.
4. Alternative structure of planning for the
transaction
On a case-by-case basis there may be other
ways of structuring and invoicing particular
transactions in a way that can help foreign
entities achieve VAT optimisation.
We recommend that before agreements for
purchases of goods or services are concluded,
taxpayers seek Israeli tax advice regarding the
VAT implications.
AYELET YITZHAKI
Israel – Tel Aviv
ayelety@bdo.co.il
Dear Readers,
W
elcome to the First Edition of
Indirect Tax News for 2014.
Hopefully this year will see
a continuation in the improvement in
economic conditions across the globe
and that the recent developments in the
Ukraine won’t have too much of an adverse
effect on business activity.
As always, this edition of Indirect Tax News
is focussed on providing our BDO clients
and colleagues with a useful snapshot of
evolving indirect tax related developments
in the different countries in which our
contributors are based.
If you feel any of the issues addressed
are of specific interest to you and you
require additional detail, please feel free
to reach out either directly to the writer
of the article or please contact your local
BDO indirect tax advisor.
As always, if you have any thoughts on
making this publication more user friendly
or would like an article about any specific
matter, please feel free to email me at
ifeerick@bdo.ie
Kind regards from Dublin.
IVOR FEERICK
Chair – BDO International VAT Centre of
Excellence Committee
Ireland – Dublin
ifeerick@bdo.ie
EDITOR’S
LETTER

3. 3INDIRECT TAX NEWS 1
T
he system of self-billing has been part
of the Belgian VAT legislation for years
but until recently, strict rules have
restrained Belgian businesses from issuing
self-bills. On 1 January 2013, however, the
VAT legislation was amended to relax the
conditions for self-billing and the Belgian VAT
authorities have now issued a VAT circular to
explain the practical impact of the new rules.
The old rules
Previously, in order to use the self-billing
system, a VAT payer had to conclude mutual
agreements with its suppliers and inform the
VAT authorities of each of these agreements.
Each document that referred to a self-billing
agreement was also subject to an individual
acceptance procedure which had to include a
signature for acceptance and a number that
referred to the supplier’s sales ledger.
More flexible acceptance procedure
Over the years some minor simplifications
were introduced, but as of 1 January 2013,
contracting parties can now freely determine
the nature of the acceptance procedure. This
means, for example, that contracting parties
can apply self-billing under a merely tacit
agreement.
Naturally, parties must still reach a preliminary
agreement for self-billing. However, they are
free to choose the format and content of that
agreement. There is no longer an obligation
for a written agreement, though we would still
recommend one.
Cross-border transactions
The EU VAT directive contains rules to
determine which EU member state is entitled
to set the invoicing rules in cross-border
situations. The member state where the
operation is located is generally authorised to
determine the applicable rules. For example,
if a Belgian customer issues a self-bill for
an intra-Community supply of goods from
Hungary, the Hungarian invoicing/self-billing
rules will apply.
Supplier remains responsible
Despite the relaxation of the self-billing rules,
the supplier of goods and services remains
responsible for timely invoicing, even when its
customer issues self-bills. This means that the
VAT risk (VAT claim, administrative fines, and
so on) remains with the supplier.
With the new, more flexible rules, self-
billing has become more feasible for Belgian
businesses. We suggest that VAT payers
that already issue self-bills verify whether
the procedures they apply for self-billing
are still in line with the new regulations and
whether further simplification (for example,
automation) is possible.
CINDY DE BOCK
ERWIN BOUMANS
Belgium – Brussels
cindy.debock@bdo.be
erwin.boumans@bdo.be
BELGIUMRELAXATION OF BELGIAN SELF-BILLING RULES

4. 4 INDIRECT TAX NEWS 1
EASTAFRICAVAT RELIEF FOR THE TOURISM INDUSTRY IN EAST AFRICA
T
he diversity and abundance of wildlife
found in the East African (EA) region has
made the region a magnet for tourists.
Not surprisingly, EA governments are eager
to harness this potential engine of economic
development and all the EA member states
have identified tourism as a critical economic
sector that deserves priority treatment.
Even taking into account the differences in
governing styles and philosophies of each of
the member states, the variation found in
the tourism industry – and the tax treatment
of these industries by each EA country – is
quite significant. All EA countries have a Value
Added Tax (VAT) regime. However, what
exactly is taxable, and the amount of tax
payable, differs significantly from one country
to another.
This article highlights the recent changes in
the VAT regimes of Uganda, Kenya, Tanzania,
and Rwanda as they apply to the tourism
industry. It also highlights the need for
harmonisation of the VAT laws affecting
critical sectors of the economies of the
member countries ahead of the full integration
of the East African Community (EAC). Such
harmonisation will help all member states
realise the full synergistic benefits of the EAC.
One of the key themes of
Uganda’s 2013/14 Budget speech was the
need for the government to prioritise the
continued development of the tourism sector.
In her speech, Uganda’s Finance Minister
Maria Kiwanuka identified the key constraints
to tourism in Uganda. She then pledged to
continue to support tourism platforms as
vehicles for promoting domestic cultural and
other product development. However, in
the same breath, the government reinstated
the VAT on the supply of accommodation in
tourist lodges and hotels outside the Kampala
district. The Finance Minister explained
that this measure would raise a significant
amount of revenue and also improve tax
administration.
After presentation of the budget, the
influential tourism industry lobbied the
government, seeking to reverse the tax. The
industry argued that imposition of VAT would
make Uganda less competitive within the
EA tourism industry because most tourists are
not VAT registered in Uganda, which means
the tourists would bear the full impact of the
tax. Tourism operators also noted that they
had already sent out itineraries to their clients
and it was too late to revise the prices quoted.
The exemption, when it was introduced
in 2002, initially applied to the supply
of accommodation in hotel and tourist
lodges everywhere in Uganda. In 2003 the
exemption was restricted to the supply of
accommodation in tourist lodges and hotels
outside Kampala and Entebbe. And in 2008
the exemption was amended so that it only
applied to the supply of accommodation in
tourist lodges and hotels outside the Kampala
district.
The intensive lobbying by the Ministry of
Tourism, Uganda’s Tourism Board, and
the Parliamentary Committee on Tourism
succeeded and the government agreed to
continue exempting from VAT supplies of
accommodation in tourist lodges and hotels
outside of the Kampala district. By reversing
course on the proposed tax, Uganda has
followed the lead of the other EAC member
states that try to use favourable VAT laws to
compete for tourist dollars.
In its 2013/14 budget speech, Tanzania’s
government pledged to continue to promote
delivery of tourism services and improve the
tourism environment. But, in the same budget
the government proposed abolition of the VAT
exemption on tourist services, such as guiding
tourists, game driving, water safaris, animal
and bird watching, park fees, tourist charter
services, and ground transport. As in Uganda,
tourism stakeholders argued that the VAT
imposition would make Tanzania a more
expensive, and therefore a less competitive,
tourist destination. After consultation with
the Tourism Confederation of Tanzania (TCT),
the Tanzanian government decided not to levy
VAT on tourist services.
Kenya, in its VAT Act of 2013, eliminated
several tax exemptions that the tourism
industry previously enjoyed. Specifically, the
supply of tour operation and travel agency
services including travel, hotel, holiday and
other supplies made to travellers (excluding
in-house supplies and services provided for
commission, other than commission earned on
air ticketing) are no longer exempt from VAT.
In addition, the supply of services by hotels to
foreign travel and tourism promoters, tours
within Kenya that follow a predetermined
written itinerary and that are recommended
by the Director of Tourism and are conducted
in conjunction with local tour associations, are
no longer zero rated supplies. Furthermore,
the supply of materials and equipment for use
in the construction of tourist hotels financed
using external funding is also no longer zero
rated in Kenya.
Rwanda’s LAW NO N° 37/2012 of 09/11/2012,
on the other hand, still exempts from VAT:
the supply of tourist vehicles; special tourist
airplanes; equipment for the tourism and hotel
industry; and “relaxation places” approved
(and listed) by the Minister of Finance.
Clearly, there is a lack of harmony in the
VAT regimes currently being pursued by
the individual EA member states. There are
wide differences regarding which goods and
services are impacted by VAT. While Kenya,
for example, has effectively shifted from
legislative incentives, Uganda and Tanzania’s
efforts to follow suit have been thwarted
by powerful tourism industry stakeholders.
Rwanda, however, has continued its
tourism industry VAT incentives. And, while
Uganda’s VAT exemption targets tourist
accommodation, Tanzania’s exemption is more
extensive, covering tourist services in general.
Meanwhile, Rwanda exempts from VAT the
supply of tourist vehicles but Uganda taxes
their supply (taxpayers who are engaged in a
continuous and regular business of hiring of
tour and travel passenger vehicles can claim
input VAT incurred for the supply). Unlike its
neighbours, Kenya’s legislative policies seem to
indicate a shift from the use of the VAT regime
to compete for tourists within the region.
Ultimately, these competing VAT regimes will
have to be harmonised if the goal of a full
economic union in the EAC is to become a
reality. The sooner that is achieved, the better
the experience will be for tourists who intend
to visit the region. Unfortunately, the current
strategy of using tax policy to poach tourists
from each other does little to expand tourism
within the EA.
RITA ZABALI
ROBERT BUSUULWA
Uganda – Kampala
rita.zabali@bdo-ea.com
robert.busuulwa@bdo-ea.com

5. 5INDIRECT TAX NEWS 1
FRANCEFRANCE’S NEW REVERSE CHARGE MECHANISM ON CONSTRUCTION WORKS
F
rance has implemented a new reverse
charge mechanism applicable to
subcontracts for construction works
(article 283, 2 nonies of the French Tax Code).
This particular reverse charge mechanism
applies to subcontracting agreements
concluded as of 1 January 2014 related to
construction, repair, cleaning, transformation,
and demolition of immovable properties.
This new mechanism applies only to French
subcontractors.
Under this new rule, the French subcontractor
issues an invoice to the principal entrepreneur
(the party who enters into agreement with the
final client) without VAT but it must mention
the “reverse charge (auto liquidation)”.
Application of this new mechanism does not
impact the French subcontractor’s right to
deduct input VAT.
It is important to note that this new
mechanism is not applicable to foreign
subcontractors. Indeed, where a foreign
subcontractor performs construction work
in France for a principal registered for French
VAT purposes, the reverse charge mechanism
applicable under article 283.1 sub-paragraph 2
of the French Tax Code (article 194 of the VAT
council Directive 2006/112/CE) continues to
apply.
The principal entrepreneur has to report in
its French VAT return the VAT corresponding
to the services performed by the French
subcontractor. If the principal entrepreneur
fails to do so, the principal entrepreneur incurs
a penalty of 5% (article 1788 A of the French
Tax Code).
CARINE DUCHEMIN
MARIE-CHARLOTTE BAILLY
France – Paris
cduchemin@djp-avocats-bdo.frc
mcbailly@djp-avocats-bdo.fr

6. 6 INDIRECT TAX NEWS 1
IRELANDMEMBER-OWNED GOLF CLUBS – POSSIBLE CLAIMS FOR VAT OVERPAID ON
GREEN FEES
F
ollowing the recent ruling by the Court
of Justice of the European Union (CJEU)
in the case Bridport & West Dorset Golf
Club Ltd v HMRC (Bridport), the Irish Tax
Authorities have issued an eBrief (No 09/14)
outlining the effects of the court ruling on
member-owned golf clubs in Ireland, including
such clubs’ revised VAT obligations.
Under Irish VAT legislation there is an
exemption from VAT for the provision of
facilities for sports activities, including
membership fees, annual subscriptions, and
capital levies paid by members of privately
owned golf clubs.
However, prior to the Bridport ruling, Irish
legislation obliged such organisations to
charge and account for VAT in respect of
income from non-members, such as green
fees, at the rate of 9%. (Prior to 1 July 2011,
the VAT rate applicable to green fees
was 13.5%.)
For VAT purposes, a member is defined as
an individual who, having paid their annual
subscription fee, is entitled to play golf on
the course without having to make a further
payment for at least 200 days per year.
Bridport & West Dorset Golf Club, which is
a privately owned golf club, appealed the
imposition of VAT on green fees by HMRC in
the UK, arguing that a privately owned golf
club should not be liable to account for VAT on
such income.
The case was heard by the CJEU in
October 2013 and last December the
court determined that, in accordance
with the European VAT legislation
(Article 133(d) and Article 134(B) of the
EU VAT Directive 2006/112), the grant of the
right to use a privately owned golf club to a
visiting member cannot be excluded from the
VAT exemption.
The Irish Tax Authorities have now outlined in
their eBrief that, effective 1 January 2014, the
green fees charged by member-owned golf
clubs to non-members should be treated as
VAT exempt, as should the green fee element
of competition fees. It should also be noted
that, as a result, member-owned golf clubs
whose non-member green fees are VAT
exempt as of 1 January 2014 will no longer
be entitled to VAT recovery on the costs
associated with such fees.
In the circumstances, it is reasonable to expect
that most, if not all, Irish member-owned
clubs now have reasonable grounds for filing
claims for the recovery of VAT they accounted
for on any such income received over the
past four years subject, of course, to making
any adjustments on VAT credits previously
reclaimed that are no longer allowed because
of the newly exempt income stream.
Irish Revenue is currently examining the
implications of this ruling in relation to 2013
and earlier years to determine whether making
such refunds with respect to historic VAT
filings would unjustly enrich the clubs. We
expect that Irish Revenue will issue further
guidance in the coming months.
LISA COLE
Ireland – Dublin
lcole@bdo.ie
LATVIAFURTHER IMPROVEMENT OF
LATVIA’S VAT LEGISLATION
L
atvia introduced some minor
amendments to its VAT Law, effective
1 January 2014.
Input VAT deduction right in case of
contribution in kind
As a result of the amendments, taxpayers
are not required to refund to the government
the input VAT they deducted with respect
to assets (other than immovable property)
invested in the share capital of another legal
entity, so long as the invested assets are to be
used for provision of taxable transactions. As
a result, in the case of investments in kind, no
input VAT corrections must be made.
A taxable person who made an investment in
kind in 2013 of an asset (other than immovable
property) in the share capital of another entity
and who has partially refunded the input VAT
deducted can adjust their VAT return and
increase their deductible input VAT for the
amount of the refunded input VAT.
Expansion of the rights to deduct input VAT
for lost /damaged goods
Previously under Latvian VAT, a taxpayer had
to adjust input VAT deductions for any lost or
damaged goods, unless the goods were stolen
or destroyed as a result of a natural disaster,
or due to other forced actions, and only if the
taxpayer could provide documentation to
prove the loss or damage.
As of 1 January 2014 taxpayers do not have
to adjust their input VAT deductions for lost
or damaged goods if the value of such goods
does not exceed the projected quota of losses
for the enterprise. If the quota has been
exceeded, corresponding adjustments of input
VAT deductions must be made for the amount
of the excess. The projected quota of losses is
calculated by an enterprise based on the data
related to its history of lost goods over the
three previous taxation years.
INITA SKRODERE
GITA AVOTINA
Latvia – Riga
inita.skrodere@bdotax.lv
gita.avotina@bdotax.lv

7. 7INDIRECT TAX NEWS 1
ROMANIACJEU JUDGMENT C-424/12 – SC FATORIE SRL VS. GENERAL DIRECTORATE OF
PUBLIC FINANCE BIHOR
O
n 6 February 2014 the Court of
Justice of the European Union (CJEU)
issued its decision in a case
concerning Fatorie SRL (Fatorie), deciding that
the taxpayer is responsible for accounting
for VAT under a domestic reverse charge
procedure, even if it had paid VAT on the
basis of an incorrectly created invoice and the
supplier had become insolvent.
Fatorie, a Romanian company, exercised its
right to recover the tax on acquisition of goods
and services (input VAT) based on an incorrect
invoice it received from its Romanian supplier,
Megasal Constuctii SRL (Megasal). The
invoice was incorrect because it included VAT,
rather than applying the local reverse charge
mechanism.
Fatorie actually paid the invoiced tax to
Megasal and then claimed that amount
as input VAT. This treatment was allowed
by the Romanian tax authority in its initial
tax audit but, in a subsequent audit the tax
authority rejected Fatorie’s VAT deduction
right and concluded that Fatorie must pay
the VAT amount plus late payment penalties,
even though Fatorie had simply relied on the
invoice Megasal provided. Meanwhile, Megasal
became insolvent and it failed to pay to the
government the output VAT it collected from
Factorie. Fatorie challenged the Romanian tax
authority’s assessment in court.
In the case, the CJEU was asked to rule on
whether, under the provision of EU Council
Directive 2006/112 EC, a taxable person’s
claim to a VAT deduction could be rejected,
even though the taxpayer paid the VAT
based on an invoice that it had been issued
by the taxpayer’s supplier and even though
the taxpayer did not realise the supplier
should have applied the local reverse charge
mechanism.
The CJEU was also asked to decide on whether
application of the legal certainty provision
prohibits the Romanian tax authority
from changing its initial assessment that
acknowledged Factorie’s ability to claim the
amount as input VAT.
The ECJ ruled that in a transaction subject
to the reverse charge regime, Council
Directive 2006/112/EC and the principle of
fiscal neutrality do not preclude Fatorie from
being deprived of the right to deduct the
VAT that it paid on the basis of an incorrectly
drawn up invoice, even where the invoice
cannot be corrected because the supplier is
insolvent.
Additionally, the court ruled that the principle
of legal certainty does not preclude an
administrative practice whereby, within a
limitation period, the tax authority reverses
a decision it had taken that had granted the
taxpayer the right to deduct VAT and then,
following a new investigation, it orders the
taxpayer to pay that tax with late payment
interest.
DAN BARASCU
HORIA MATEI
Romania – Bucharest
dan.barascu@bdo.ro
horia.matei@bdo.ro

8. 8 INDIRECT TAX NEWS 1
A
ll imports of goods into Singapore are
subject to GST at the standard rate
(currently 7%) payable to Singapore
Customs at the point of importation. Import
GST is recoverable from the Inland Revenue
Authority of Singapore (IRAS) through
periodic GST submissions, subject to input
tax recovery conditions. Businesses that do a
lot of importing and exporting may face cash
flow problems because there is no output
GST collected on their export sales against
which they can offset the import GST paid to
Singapore Customs.
To alleviate cash flow problems of businesses
that are considered major exporters, IRAS has
introduced the Major Exporter Scheme (MES).
This favourable scheme allows for suspension
of the 7% GST on non-dutiable goods
imported into Singapore. Businesses that
qualify for this special scheme can clear non-
dutiable goods without having to pay GST to
Singapore Customs, which reduces their cash
flow costs. In July 2006 the suspension of
import GST was extended to goods removed
from the Zero GST warehouse (a designated
area approved by Singapore Customs for
storing imported non-dutiable goods on
which the GST has been suspended) by
MES businesses. The 7% GST is only charged
if the goods are subsequently supplied in
Singapore – they remain zero rated (GST 0%)
when they are exported out of Singapore.
To qualify for the MES, the taxpayer’s zero
rated supplies must be more than 50% of their
total supplies. This is determined based on the
sum of their standard rated supplies (GST 7%)
plus zero rated supplies (GST 0%) and exempt
supplies. Alternatively, a taxpayer qualifies
where the value of its zero rated supplies
is more than S$10 million for a 12-month
period. In determining the zero rated supplies
that meet the criteria to qualify for the MES,
the zero rated supplies must be of goods for
export and “international services” as provided
under Section 21(3) of the GST Act.
Applicants for the scheme that have good
internal controls and proper accounting
records and a good compliance history with
IRAS and Singapore Customs stand a higher
chance of being awarded the MES status. In
certain situations, IRAS may require a letter
of guarantee before MES status is approved or
renewed.
Newly set up companies with no historical
financial data can be granted provisional MES
status, though additional information and a
letter of guarantee are usually required in such
cases.
IRAS may revoke a taxpayer’s MES status for
misuse. A taxpayer can only use its MES status
to import its own goods for business purposes
or to import goods of non-GST registered
overseas persons that the taxpayer acts as a
GST agent for pursuant to the GST Act.
MES renewal
MES status is not granted indefinitely; it
must be renewed every three years. The IRAS
formally invites businesses that continue to
satisfy the qualifying conditions to apply for
renewal of their MES status. The renewal
process has undergone a number of changes in
recent years.
Previously, approved MES businesses were
required to submit an auditor’s assurance
report that their numbers were true and
fair. In January 2009 a new procedure was
introduced whereby an approved MES business
had to complete a self-review checklist and
submit a formal declaration form.
With effect from 1 January 2013, the self-
review checklist and formal declaration
form were replaced with the GST Assisted
Self-Help Kit (ASK) declaration form. ASK is
a comprehensive self-assessment review
package designed to help GST registered
businesses effectively manage their
compliance.
Now all new applications and renewals must
undergo the ASK review process using the
ASK package. The ASK declaration form must
be reviewed and certified by a tax professional
(either in-house or external) who has been
accredited by the Singapore Institute of
Accredited Tax Professionals as either an
Accredited Tax Advisor (ATA (GST)) or as an
Accredited Tax Practitioner (ATP (GST)). The
certified ASK declaration form is then subject
to IRAS review and approval. If approved,
MES status is valid for another three years.
How BDO can help
The three year period will soon be up for a
group of businesses that have had MES status
and recently they have been invited by IRAS
to apply for renewal of their status. These
businesses will need to submit their certified
ASK declaration form based on the new
requirements by the due date the IRAS
specified in their letter.
BDO Singapore assists and supports
companies who are applying for, or renewing,
their MES status by performing the ASK review
of past GST submissions and providing
ASK certification.
BDO recommends GST registered businesses
conduct their ASK review early, well in advance
of the deadline provided by IRAS, to avoid the
losing their MES status.
EU CHIN SIEN
YVONNE CHUA
Singapore
chinsien@bdo.com.sg
yvonnechua@bdo.com.sg
SINGAPOREMAJOR EXPORTER SCHEME

9. 9INDIRECT TAX NEWS 1
SPAINSPANISH VAT EXEMPTION ON
DELIVERIES OF GOODS TO
ANOTHER EU MEMBER COUNTRY
O
n 17 October 2013, the Central
Economic-Administrative
Court (CEAC) ruled on the issue
of proving a taxpayer’s status in claims for
exemption from VAT on deliveries of goods
from Spain to another EU Member Country.
The CAEC has held that Spain’s requirements
for information to support the exemption have
been too strict.
Under Article 25 of the Spanish VAT Act the
delivery of goods can be treated as exempt
from VAT when they are dispatched or
transported to another Member Country if
the party acquiring the goods is registered
for VAT purposes in a Member Country other
than Spain. Proof of the acquiring party’s VAT
registration is currently done by presentation
of the tax identification number issued to the
acquiring party in the Member Country to
which the goods are to be delivered. Before
a transaction, taxpayers delivering goods to
countries within the EU are required to check,
via the VIES database, the validity of the tax
identification or VAT number of the party
acquiring the goods.
As a result of the above rules, Spanish
courts were refusing claims for exemption
on deliveries within the EU if the seller was
unable to provide the tax identification or
VAT number of the purchaser, or when the
purchaser’s number was invalid at the time of
conducting the transaction.
However, based on the decision of the
European Union Court of Justice in its
judgment in VSTR dated 27 September 2012,
(ref. C-587/10), the CEAC concluded that
the principle of tax neutrality, which prevails
in VAT cases, is violated when the right
to exemption on deliveries within the EU
is dependent on compliance with mere
formalities.
Consequently, a VAT exemption may only
be denied where the taxpayer has failed to
meet the material requirements to support
the VAT exemption. Thus, mere provision of
the tax identification or VAT number of the
party acquiring the goods serves to prove the
tax status of the party acquiring is sufficient.
However, if the seller is in a position to prove
status by other means, it would be unlawful to
refuse exemption, even if the tax identification
or VAT number of the party taking delivery of
the goods is not valid on the date of delivery.
DAVID SARDÁ
ALEX SOLER
Spain – Barcelona
david.sarda@bdo.es
alex.soler@bdo.es
Introduction of VAT ledger statement
R
ecent amendments to the Slovak
VAT Act introduced a new reporting
requirement: the VAT Ledger
Statement, effective 1 January 2014. The new
requirement is one of the measures aimed at
battling carousel fraud schemes from 2012
to 2016.
The VAT Ledger Statement is a required filing
that must be submitted by a VAT payer with
respect to every taxable period, along with a
VAT return, both of which must be submitted
within 25 days of the end of a taxable period.
Ledger Statements must be electronically
submitted.
The VAT Ledger Statement must provide
tax authorities with details about business
transactions involving VAT payers. The
information for the VAT Ledger Statement is
derived mainly from invoices the VAT taxpayer
has received and issued. All transactions
involving a place of supply in Slovakia must
be included in the taxpayer’s VAT Ledger
Statement. One of the main purposes of the
VAT Ledger Statement is to make it easier for
the tax authorities to crosscheck transactions
between suppliers and their customers to
verify claims to input VAT.
VAT payers are not required to file the
VAT Ledger Statement if the tax liability
and/or input tax deduction they report in
their VAT return is zero, nor does this new
filing obligation arise if the only types of
transactions reported by the VAT payer in its
Slovak VAT return relate to the following:
• Intra-community supplies of goods from
Slovakia to purchasers in another EU-
member state,
• The supply of goods in intra-community
triangular transactions, and
• The export of goods to a non-EU country.
Mandatory electronic filing of documents
From 1 January 2014 selected taxpayer
must electronically file all tax and customs
documents. The requirement applies to all
tax payers that are VAT registered or that
are represented by a tax advisor. Those
required to make electronic filings must
sign their submissions using an advanced
electronic signature or they must file a
written agreement regarding electronic
communication with the Slovak tax
authorities.
Other changes
Several other changes were made to the VAT
law, including:
• The statutory deadline for a VAT taxpayer
to file its EC Sales List has been changed
from being due by the 20th
day of the month
following the relevant VAT period to the
25th
day of the following month.
• When a new member joins a VAT group,
the change in VAT group registration can
now be made any time in the calendar year.
Previously, such changes were only effective
from 1 January of the following calendar
year.
• The obligation to pay a VAT guarantee has
been extended as follows:
–– To VAT payers who are automatically
registered under the law, and
–– Where a taxpayer’s VAT registration
status changes from being registered as
a foreign VAT payer to being registered
as a domestic VAT payer or from being
registered for distance selling over
a threshold to being registered as a
domestic VAT payer.
VLADIMIR BIL
MIROSLAV TAIN
Slovakia – Bratislava
bil@bdoslovakia.com
tain@bdoslovakia.com
SLOVAKIASLOVAKIA’S RECENT LEGISLATIVE CHANGES

10. 10 INDIRECT TAX NEWS 1
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© Brussels Worldwide Services BVBA, March 2014. 1403-07
CONTACT PERSONS
The BDO VAT Centre of Excellence consists of the following persons:
Ivor Feerick (Chair) Ireland Dublin ifeerick@bdo.ie
Andrea Haslinger Austria Vienna andrea.haslinger@bdo.at
Erwin Boumans Belgium Brussels erwin.boumans@bdo.be
Annette Pogodda-Grünwald Germany Berlin VAT@bdo.de
Deirdre Padian Ireland Dublin dpadian@bdo.ie
Erwan Loquet Luxembourg Luxembourg erwan.loquet@bdo.lu
Rob Geurtse Netherlands Rotterdam rob.geurtse@bdo.nl
Claudio Giger Switzerland Zurich claudio.giger@bdo.ch
Tom Kivlehan United Kingdom Reading tom.kivlehan@bdo.co.uk