Swiss Day RKGConsultJune2010final

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Transcript Swiss Day RKGConsultJune2010final

Raj Ganguly RKG Consulting, London www.rkgconsulting.com

VAT issues

 What is “LVCR”, its availability & its benefits?

 Valuation of goods for LVCR  What are the tax risks & how to reduce these?

 Recent developments  Why Switzerland for VAT fulfilment to Europe?

What is LVCR?

 “Low Value Consignment Relief” is the relief from VAT given to a private individual (non-taxable person) who imports items valued at less than 22 euros from outside the VAT territory of the EC.

 The relief is given to the “individual” (the buyer), not to the retailer making the sale.

 The individual must “import” the goods from the non EC territory rather than retailer “delivering” the goods.

 Remember its always the “customer’s” goods the dispatch of which you are “arranging” to their order and to their account.

Availability of the €22 relief

 Generally available throughout the EU with the exception of Denmark where the relief is restricted.

 However, the member states reserve the right not to give relief in respect of “mail order” sales in cases where they suspect tax avoidance or “abuse”.

 “Mail order” sales can include “internet” sales  UK gives relief of £18 (value of goods £17.99 or less)  The rest of the EU, goods value must be €21.99 or less.

Benefits of LVCR

 Fairly self-explanatory  Cheaper product prices for the retailer compared to competitors who do not have a non-EU presence  Faster delivery times as CN22 labels get “waved” through  Retailers do not have to comply with onerous cross border “distance selling” VAT obligations  “Pre-paid” VAT scheme available in certain cases for items €22 & above, which enhances customer satisfaction and therefore “ratings”.

Valuation of goods / pricing

 Does VAT apply to postage & packing?

 What is “intrinsic” value of the goods?

 What is “customs” value of the goods?

 What are the VAT procedures for labelling on packets?

 What accompanying documents should be included within the packets, what should be the values shown therein and how should these values reconcile with the website prices?

 Promotion schemes: discount vouchers, two-for-one, special offers, “club” schemes, etc.

What are the tax risks – VAT ?

 “Free circulation of goods” issues  EC transit procedures & documents  Returns & refunds  Customer terms and conditions not properly drafted – contract “acceptance” happens onshore  Title, ownership & risk passes to customer onshore  Intra-group service agreements are not “watertight”  Offshore retailer unknowingly develops “sales agency” relationships onshore copyright RKG Consulting 2010 www.rkgconsulting.com

Tax risks - VAT

 Contracts with suppliers not re-structured properly  “Buying” & “selling” does not take place offshore  Appropriate stock control procedures not in place  IT systems do not properly segregate “onshore & “offshore” sales RESULT  VAT authorities mount investigations & try to implement the “abuse of rights” and tax “avoidance” provisions of settled ECJ cases such as “Halifax” copyright RKG Consulting 2010 www.rkgconsulting.com

Tax risks – direct tax

 Company residence: business must be “centrally managed & controlled” from offshore / non-EC jurisdiction and able to stand on its own as independent “unit”  Proper “substance” (corporate presence/directorships) must be maintained offshore  Intra-group goods or services transfers must satisfy “transfer pricing” provisions  Offshore retail unit should avoid creating “permanent establishment” onshore.

 “Wood v Holden” – yes, it does work.

Recent developments

There will be a discussion of recent events in the industry, tax cases and other interesting developments.

VAT “retail” court cases

           Dollond & Aitchison Jersey (contact lenses: single or multiple supplies) Bugeja (video DVD hire/sale: “buy-back” schemes) Debenhams Retail (artificial separation of goods/service “avoidance scheme”) Robertsons Electrical (“cooling off” – ownership, risk, title) RAL Channel Islands (place of supply: Guernsey or UK? ) Bookit, FDR, SEC, CSC, SDC (credit card payment handling fees) Halifax, BUPA, WHA (tax avoidance & abuse of rights) Redcats (Brands) Ltd (mail order: when does ownership pass for VAT?) Plantiflor (VAT on postage) Compton & Woodhouse (goods on sale or approval issues) Many other relevant VAT cases on various aspects of retail / mail order copyright RKG Consulting 2010 www.rkgconsulting.com

Why Switzerland for Fulfilment to Europe ?

 Unique geographical position at the “heart of Europe”  Quicker dispatch times to large markets like Germany  Smoother “bulk” stock importation into CH, pick n pack and despatch.

 Availability of skilled staff, professional service providers and robust economic environment  “Neutral” country  Availability of LVCR VAT relief  National postal operator lends “substance” copyright RKG Consulting 2010 www.rkgconsulting.com