Members' Area

Tax Issues - Indirect Taxes

Background
Administration
Supplies of goods and services
Other Specialist Areas
Recovery of VAT
Publications

Background
VAT is a turnover tax which, although going under a variety of names, is to be found in every developed country in the world in one form or another. Within the European Union, the framework for the tax system is the same in every member state being based on the EC Sixth Directive. However, there are a number of differences in the way in which it is applied at national level. Outside the EU, many countries have adopted parts of the European model, and therefore in practice a number of similarities will be found.

Due to the widely different application of the tax system, and the possibility of substantial penalties for innocent errors, it is essential that local advice is taken from Nexia experts. This is particularly the case for non-resident businesses wishing to start trading in a new jurisdiction. Some of the areas where Nexia members are able to help are as follows.

Administration
Dealing with the national VAT authorities can prove difficult without local knowledge of the rules and registration requirements. From 1st January 2002 EU member states have not required the appointment of a fiscal representative by non-resident businesses for the purpose of registration and doing business. However, it is often advisable to appoint a representative in order to ensure tax obligations are met with the least amount of disruption to business activity. Many EU member states do still require non-EU businesses to appoint representatives.

Nexia members are able to assist clients, dealing with local registration issues and administrative requirements.

Supplies of goods and services
Supplies across borders can give rise to complex VAT issues with a separate set of rules for goods and services. Supplies of goods may in certain circumstances give rise to a requirement to register for VAT in other countries, of which the supplier may often be unaware.

The VAT liability rules for services are very complex, and it is important to understand these rules in order to know whether VAT is to be charged. Many non resident businesses will not charge VAT on supplies of services and be unaware of their obligations eg an American architect working on a property in the EU may be required to register for VAT in the country where the property is physically located subject to a range of simplification rules which may or may not operate.

Nexia members have built up a working knowledge of the VAT rules around the world, and how they operate in complex situations. They are able to provide invaluable assistance to clients to help them through the minefield of issues. This involves negotiating with local authorities and planning advice to minimise the impact of VAT.

Specialist Areas
Transactions involving land and property, and financial services, can give rise to complex VAT issues which, if not correctly identified, can lead to penalties. There are particularly difficult areas for non-resident businesses either setting up operations in a new country for the first time, or wishing to trade with clients in new locations. Nexia members are able to assist in resolving VAT liability issues by negotiating locally with the authorities, and advising on structures to reduce irrecoverable VAT.

Recovery of VAT
It is possible for non-resident businesses to recover VAT on certain business costs incurred in other countries. The rules for making claims are strict, and inevitably difficulties arise. It is often essential to have local representation in order to deal with the enquiries raised by the authorities, and to ensure repayments are made and dealt with efficiently. Nexia members are particularly well placed to assist with these matters.

Publications
Nexia has also produced, in association with Tolley's, VAT in Europe which is a useful basic guide book for all those wishing to do business in Europe.