The European Commission has issued a new tool which enables businesses to check on the VAT rate for specific supplies. It is based on commodity codes but there are drop down menus for detailed descriptions. The tool covers both goods and services. There are both a simple and advanced search functions and the database also covers other taxes:
The European Commission has published the various VAT rates applied to different types of supply in all Member States (and the UK!) here.
This is a helpful and detailed document that also shows historic VAT rates.
The European Commission (EC) has today proposed new rules which it is claimed will give Member States more flexibility to set VAT rates and to create a better tax environment to help SMEs flourish.
The proposals are the final steps of the EC’s overhaul of VAT rules, with the creation of a single EU VAT area to dramatically reduce the €50 billion lost to VAT fraud each year in the EU, while supporting business and securing government revenues.
Further details: “Action Plan on VAT – Towards a single EU VAT“
The EC has recently published a paper on the possible VAT implications of Transfer Pricing (TP) here
This Working Paper considers when TP adjustments may affect the application of VAT. The main conflict is highlighted as the difference between how sales are valued. For TP purposes value is determined via arm’s length (open market value) versus the subjective value, ie; the price actually paid, for VAT purposes.
Transfer Pricing
The arm’s length principle is the international transfer pricing standard that Organisation for Economic Co-operation and Development (OECD) member countries have agreed, and which should be used for tax purposes by Multinational Enterprise Group (“MNE group”) and tax administrations, including the price, match comparable market conditions and that profits are fairly divided between the jurisdictions in which MNE operates.
According to the OECD TP Guidelines, by seeking to adjust profits by reference to the conditions which would have been obtained between independent enterprises for comparable transactions and under comparable circumstances, ie; in “comparable uncontrolled transactions” the arm’s length principle treats the members of an MNE group as entities operating separately rather than as inseparable parts of a single unified business. Because the separate entity approach treats the members of an MNE group as if they were independent entities, attention is focused on the nature of the transactions between those members and on whether the conditions thereof differ from those that would be obtained in comparable uncontrolled transactions.
VAT
It is not generally required for VAT purposes that the consideration which must be present in order for a transaction to be qualified as taxable, has to reflect the market value of the goods or services supplied. In fact, as to the concept of “consideration”, it is settled case law of the CJEU that the taxable amount for the supply of goods or services is represented by the consideration actually received for them.
I shan’t rehearse the details here as they are clearly set out in the paper linked to above.
However, it is an important area of tax and I strongly recommend reading the Working Paper for any business or adviser involved in international supplies. It is also an interesting read for students of the tax technical side of such supplies.
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