Financial Services VAT Alert. Tracking EU VAT Developments

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www.pwc.com/nl

Financial Services

VAT Alert

Tracking EU VAT

Developments

May 2012 Edition 2012/5

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Editorial

Dear readers,

Hereby we present the May edition of the FS VAT Alert. In this edition you will find the most important VAT developments that have occurred over the past month.

Especially interesting in our view, is that the judgment of the Dutch Court of Appeal regarding the provision of 'leads' being VAT exempt became definitive since no further appeal has been lodged.

Enjoy reading! Frans Oomen

EUROPEAN UNION

1. Advocate-General's opinion

in Deutsche Bank AG:

individual portfolio

management not VAT exempt

Advocate-General Sharpston is of the opinion that in the case of Deutsche Bank AG, the (discretionary) portfolio services granted to private investors are outside the scope of the VAT exemption.

Background

Deutsche Bank provides asset management services to private investors, consisting of executing orders of securities, at its discretion and without prior permission of the investors, however in accordance with a strategy chosen by the investor. The main question raised by the German judge to the European Court of Justice, is whether the management services provided by Deutsche Bank to private investors should be

classified as VAT exempt "transactions in securities".

Judgment

The Advocate-General considers that: 1) Portfolio management services form a

single supply for VAT purposes; and 2) Such services do not fall within the

exemption provided for in Article 135(1)(f) of Council Directive 2006/112/EC.

The Advocate-General is in effect giving comfort to the status quo, whilst

acknowledging that the point is nonetheless finely balanced.

The Advocate General comments that she does not in principle consider that the arguments presented by the Appellant and the Commission (which submitted that the

future amendment will settle the matter clearly in favour of the exemption. It therefore remains to be seen what the European Court will decide. However, whatever the decision reached, it will be of great significance to a wide range of

investment funds, as well as their managers and administrators. Irrespective of the eventual outcome in this case, the

Advocate-General has appeared to open the door to exemption in circumstances where the parties agree that transactions in securities are the most important activity undertaken.

Elmar Jaster

+49 221 2084

elmar.jaster@de.pwc.com

2. Opinion of the Committee of

the Regions on a common

system of taxation of

financial transactions

The Committee of the Regions gave its opinion on a common system of taxation of financial transactions following the proposal for a Council Directive on a common system of financial transaction tax in the EU. The Committee of the Regions welcomes the submission of a Commission proposal for a Council Directive on a common system of financial transaction tax in the EU, as requested in its 2011 work program. The Committee considers the introduction of a European financial transaction tax (FTT) to be a further important step towards the urgently needed re-establishment of the supremacy of democratic politics over the serious discrepancies which have occurred in the functioning of financial markets. In addition the Committee highlights that the

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speculation. The Committee supports the objective of EU-wide application of the planned harmonisation and, should that not prove feasible despite all efforts made,

calls for the immediate establishment of a European FTT system using the enhanced cooperation instrument, to include the euro area at the very least.

Frans Oomen

+31 88 792 51 56

frans.oomen@nl.pwc.com

3. Expert study on the

feasibility and economic

impact of a common EU

standard VAT return

The EU Commission has appointed PwC to conduct an expert study on the feasibility and economic impact of a common EU standard VAT return.

On 31 May a conference will be held in Brussels. This conference is aimed at giving a broad base of stakeholders (covering businesses, business organisations and tax authorities) the opportunity to get involved in this project.

EU Member States have long been aware of the difficulties and administrative burdens caused by the differences in national VAT returns. In response to this and in line with the Communication on the future of VAT released in December 2011, the EU

Commission has appointed PwC to conduct an expert study on the feasibility and economic impact of a common EU standard VAT return.

Frans Oomen

+31 88 792 51 56

frans.oomen@nl.pwc.com

CZECH REPUBLIC

4. Increased VAT rates as of

2013

The Czech Government has approved the additional economic measures which should keep the deficit of the state budget in the next three years under three percent of gross domestic product. The revenue side of the budget should be supported by, amongst others, increasing the VAT rates as of 2013. The VAT rates will be increased to 15 % and 21 %. The increase in VAT rates will only apply in the years 2013 to 2015.

The extent of supplies subject to a particular rate will not change with the exception of the transfer of some medical devices and children’s nappies to the basic VAT rate as application of reduced VAT rate on these products is in violation of EU legislation.

Martin Divis

+420 25115 2574

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DID YOU KNOW? LUXEMBOURG

VAT rates pegged for current legislative period

Jean-Claude Juncker, Prime Minister of Luxembourg, has declared in his 'State of the Union' speech on May 8, 2012, that the Luxembourg VAT rates will not increase during this legislative period (most likely ending in 2014).

Marie-Isabelle Richardin +352 49 48 3009

marie-isabelle.richardin@lu.pwc.com

5. Amendment of the Czech

VAT Act

Possible changes in the Czech VAT Act relating to the exemption of insurance activities as of January 2013.

The draft amendment of the Czech VAT Act replaces the terms "insurance or

reinsurance activities" with more accurate "provision of insurance" and "provision of reinsurance" limiting the scope of

exemptions strictly to provision of these services. In case of related activities, incl. insurance and reinsurance intermediation, the exemption will only apply to services provided by insurance intermediaries. Activities concerning the insurance claims settlement will be excluded from the exemption.

Martin Divis

+420 25115 2574

martin.divis@cz.pwc.com

NETHERLANDS

6. No further appeal in Court

judgment about the provision

of 'leads' being VAT exempt

As mentioned in the April 2012 edition of the FS VAT Alert, the Court of Appeal ruled that the provision of 'leads' by an intermediary, to providers of financial products, is VAT exempt. The Ministry of Finance has not appealed against the Court judgment. Therefore that judgment is definitive. Background

The company in this case operates a website where consumers can compare financial products. The data of the potential

consumers are available, against payment, to selected financial institutions. After payment these financial institutions are able to get in contact with these potential consumers.

Judgment

The Court of Appeal ruled that for the exemption for insurance negotiation services to apply, the most decisive factor is that the negotiation activity of the company must be aimed at enabling two parties, the potential consumer and the insurer, to reach an agreement. In that regard, the Court has held that negotiation is an act of mediation, which may consist in pointing out to one of the parties to the contract suitable opportunities for the conclusion of such a contract. On these grounds the mediation activities of the company in this case is exempt.

Frans Oomen

+31 88 792 51 56

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7. New Dutch VAT rules

regarding the VAT liability

for the supply of mobile

phones and computer parts,

effective 1 June 2012

On 29 May 2012, the Dutch State Secretary of Finance announced that he has taken measures to combat VAT carousel fraud. From 1 June 2012, an optional ‘reverse charge mechanism’ applies to the supply of mobile phones and computer parts. The announced rules do not apply to supplies with a value below Euro 10,000. Under the ‘reverse charge mechanism’, the recipient of a supply is liable for the VAT due on this supply. He can deduct this VAT amount in the same VAT return, insofar as he is entitled to deduct VAT.

The State Secretary needs the approval of the European Commission and the entire Council for his plan to make the application of the reverse charge mechanism

mandatory for the mentioned supplies. This approval has been applied for, but because finalising such procedures takes 10 months on average, the State Secretary has decided to implement the system as optional from 1 June 2012. He reasons that if a customer is faced with a supplier that categorically wants to charge VAT, this could be a indicator for possible VAT fraud which means that the customer should be on the alert for this.

In the Decree published on 30 May 2012 a definition of mobile phones and computer parts is given to clarify to which

transactions the reverse charge mechanism can be applied. The list provided by the State Secretary merely provides examples and is not exhaustive. The Euro 10,000 threshold applies per total invoice amount and this is a VAT exclusive amount.

Please note that under the current rules, businesses can already be held jointly liable for the VAT charged on these supplies under the Dutch Tax Collection Act. For more information about these new rules, please contact your regular PwC VAT adviser.

Jeroen Bijl

+31 88 792 51 52 jeroen.bijl@nl.pwc.com

8. Refund of Dutch VAT beyond

the VAT Directive's deadline,

only possible by submitting

paper requests

A Dutch VAT return on 'older' periods than the prescribed period in the Refund Directive, can only be submitted to the Dutch tax authorities on paper and not through the portal site.

In case Dutch companies charge VAT to recipients( entrepreneurs) in EU member states, these recipients are able under Dutch policy to submit a Dutch VAT return on 'older' periods than the prescribed period in the Refund Directive. For this purpose they should submit the refund requests on paper.

This only applies to countries with which the Netherlands has made specific agreements. It concerns the following countries: Belgium, Bulgaria, Cyprus, Greece, Hungary and Sweden. In case entrepreneurs from other EU countries want to reclaim Dutch VAT, they should submit a VAT return request through the local portal site of their own tax authorities. Frans Oomen

+31 88 792 51 56

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9. VAT rate increased to 21%,

effective 1 October 2012

As mentioned in the April 2012 edition of the FS VAT Alert, the standard VAT rate will increase from 19% to 21% from 1 October 2012.

The VAT rate increase may affect the pricing of products, but will also lead to a higher cost for businesses that cannot fully reclaim input VAT. These changes will also have to be included in the businesses’ bookkeeping systems.

We expected that transitional measures would be introduced, which would be comparable to the transitional measures introduced with regard to previous changes of the VAT rates. Under such transitional measures, the tax point is based on the time of the actual supply. As a result, possible VAT advantages created by payments made before the VAT increase for supplies made after the VAT increase are undone. These earlier transitional measures also address, for example, real estate projects that have commenced before the VAT increase and that are completed after the VAT increase. However no reference was made to such transitional measures.

We would advise businesses to discuss the impact of this VAT increase with their PwC VAT adviser.

Jeroen Bijl

+31 88 792 51 52 jeroen.bijl@nl.pwc.com

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Contact

For more information, please do not hesitate to contact your local PwC Indirect Tax expert or one of the experts mentioned below: Austria Christoph Wagner tel: +43 1 501 88 36 41 christoph.wagner@at.pwc.com Greece Mary Psylla tel: +30 210 687 4543 mary.psylla@gr.pwc.com Poland Marcin Chomiuk tel: +48 22 523 4807 marcin.chomiuk@pl.pwc.com Belgium Koenraad de Bie tel: +32 2 710 43 14 koenraad.de.bie@pwc.be Hungary Tamas Locsei tel: +36 14 619 358 tamas.locsei@hu.pwc.com Portugal Mario Braz tel: +351 213599652 mario.braz@pt.pwc.com Bulgaria Nevena Haygarova tel: +359 2 9355 162 nevena.haygarova@bg.pwc.com Ireland John Fay tel: +353 1 792 8701 john.fay@ie.pwc.com Romania Diana Coroaba tel: +40 21 202 8693 diana.coroaba@ro.pwc.com Cyprus Chrysilios Pelekanos tel: +357 22 555 280 chrysilios.pelekanos@cy.pwc.com Italy

Alessia Angela Zanatto tel: +39 02 91605728 alessia.angela.zanatto@it.pwc.com Slovakia Valeria Kadasova tel: +421 2 59 350 626 valeria.kadasova@sk.pwc.com Czech Republic Martin Diviš tel: +420 25115 2574 martin.divis@cz.pwc.com Latvia Ilze Rauza tel: +371 6 7094512 ilze.rauza@lv.pwc.com Slovenia Marijana Ristevski tel: +386 1 583 6019 marijana.ristevski@si.pwc.com Denmark

Jan Huusmann Christensen tel: +45 3945 9452 jan.huusmann.christensen@dk.pwc.com Lithuania / Belarus Kristina Krisciunaite tel: +370 5 239 2365 kristina.krisciunaite@lt.pwc.com Spain Miguel Blasco tel: +34 9 1568 4798 miguel.blasco@es.landwellglobal.com Estonia Tanja Kriisa tel: +372 614 1977 tanja.kriisa@ee.pwc.com Luxembourg Marie-Isabelle Richardin tel: +352 49 48 48 3009 marie-isabelle.richardin@lu.pwc.com Sweden Lars Henckel tel: +46 8 5553 3326 lars.henckel@se.pwc.com Finland Juha Laitinen tel: +358 9 2280 1409 juha.laitinen@fi.pwc.com Malta David A. Ferry tel: +356 2564 6712 david.ferry@mt.pwc.com Switzerland

Tobias Meier Kern tel: +41 58 792 43 69 tobias.meier.kern@ch.pwc.com France Stéphane Henrion tel: +33 1 56 57 41 39 stephane.henrion@fr.pwc.com The Netherlands Frans Oomen tel: +31 88 792 51 56 frans.oomen@nl.pwc.com United Kingdom Jamie Randell tel: +44 207 213 8253 jamie.t.randell@uk.pwc.com Germany Felix Becker tel: +49 69 9585 6665 felix.becker@de.pwc.com Norway

Yngvar Engelstad Solheim tel: +47 95 26 06 57 ynvar.solheim@no.pwc.com United States Evelyn G Lam tel: +1646 204 1094 evelyn.g.lam@us.pwc.com

Disclaimer. Clients receiving this Alert should take no action without first contacting their usual PwC Indirect Taxes Advisor. This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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Financial Services VAT Alert. Tracking EU VAT Developments