SESSION C ASSESSING THE SPECIFIC RULE 17-18 April 2014 Tokyo, - PowerPoint PPT Presentation

SESSION C ASSESSING THE SPECIFIC RULE 17-18 April 2014 Tokyo, Japan Christophe Waerzeggers, IMF

Context = B2B cross-border supplies of services and intangibles  As a rule, and irrespective of their place of taxation, these supplies should not raise net VAT revenue in any jurisdiction involved  Determining their place of “taxation” therefore a misnomer, instead focus is on neutrality 2

Country A Country B A B Country A and/or Country B may tax, but whoever taxes will have to give tax back  Guidelines: no tax in Country A (exempt with credit, zero rate); OR tax in Country B (reverse charge, or A to register); OR no tax (no reverse charge if B entitled to full ITCs)  In B2B context place of taxation therefore effectively means place of tax credit/refund 3

Guidelines prescribe outcomes or results, not legal designs or methods  Destination principle ∴ taxation in country of consumption , determined by customer location (= Main Rule), unless this “doesn’t lead to an appropriate result” (= Specific Rule(s))  IMF drafts typically follow ‘New World’ not EU model, using iterative instead of categorization approach  Not all VATs have direct refund mechanisms or liberal registration policies, thus rely on cross-border rules to achieve neutrality Two common “Specific Rules” found outside EU model: 4

(1) Presence of a person (C), to whom the services are rendered / delivered , in the jurisdiction of the supplier Country A Country B A B ？ C 5

(2) Place of (effective) use or enjoyment and/or consumption of services (e.g., TV broadcasting) Country A Country B Broadcast Co Individual Pay TV subscribers 6

(2) Problems with place of (effective) use or enjoyment (e.g., advertising) Country A Country B Marketing Co Global Co Local ？ Licensee Local media Viewers/Readers/Listeners 7