D
FISCAL LAW
D1 Value added taxes (VAT)
Time
The time allotted to this module is 1 hour
Objectives
In this lesson you will learn:
a. How to explain what is meant by transferring regulations.
b. To explain the importance of a VAT identification number in relation to combating
fraud.
c. To describe the administrative obligations according to international VAT
regulations.
d. To explain the workings of VAT levies by means of examples.
e. To express the relation between haulier/shipper and the relation haulier/private
individual in VAT levies.
Intro
In this lesson, we restrict ourselves to the international regulations with regard to
the VAT regulation.
The following paragraphs will provide further clarification on the diagram. In
succession, we will deal with:





The transferring
the transferring regulations (D1.1);
VAT identification number (D1.2);
VAT levies (D1.3);
relation haulier/shipper (D1.4);
relation haulier/private individual (D1.5).
regulation
Explanation
VAT
identification
number
Example
The most important question in relation to the international VAT regulation is:
how does the transferring regulation work?
In the transferring regulation, the VAT is ´transferred´ to the client. In other
words, the VAT will have to be paid by the customer, regardless of which EU
country the client is in.
The client has the obligation to declare the received amount of VAT to the tax
department concerned. At the same time, however, he can deduct the VAT. This
rather complicated administrative regulation requires some additional
administration.
Within the framework of the new VAT legislation, every entrepreneur will
receive a VAT identification number. In fact, this is the existing VAT number to
which a country code is added.
The VAT can be transferred if the entrepreneur is in possession of the VAT
identification number of his client.
In this new VAT legislation, the VAT identification numbers of both parties
should be stated on the invoice. This requirement only applies for international
transactions within the EU (delivery and services between different countries).
A Dutch haulier transports goods from the Netherlands to France. The client is
a Dutch shipper. The invoice must contain two VAT identification numbers, the
VAT number of the haulier and the VAT number of the shipper, as this is a
international transaction within the EU.
A Dutch haulier transports goods from Rotterdam to Eindhoven. The client is a
French shipper. It is not necessary to fill in both the VAT identification numbers,
as this is not an international transaction.
VAT
Levies
Two questions are important in relation to tax levies:
1.
2.
Where does the transportation of goods take place, so where should the
transportation service be taxed? In other words, which EU Member State
should collect the VAT?
The second question relates to who is obliged to pay the VAT?
The basic rule is that the international transportation of goods within the EU is
taxed in the Member State of departure.
There is, however, one exception:
If the client is domiciled in another Member State than the state of origin, the
transportation of goods is taxed in the Member State of the client. The client,
however, should in this case have a VAT identification number.
Example
Suppose that a Dutch haulier transports goods from Belgium to Germany for a
French shipper.
Question:
Which Member State is allowed to levy VAT?
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


The Netherlands, because the haulier is domiciled here?
France, because the shipper is domiciled there?
Belgium, because this is where the transport originates?
Germany, because this is the destination?
Answer:
If the French shipper has a VAT identification number, the VAT has to be paid
in France.
Question
How is the VAT regime applied in the situation where a Dutch transport
company transports goods from France to the Netherlands for a French
shipper?
Relation
haulier/
shipper
Where is it taxed?
The transport between two EU Member States is always taxed in the Member
State of the client. However, the client must be registered for VAT in the
Member State.
If the haulier is domiciled in the same Member State as the client, there is no
problem and the haulier invoices with his own VAT. If the haulier is not
domiciled in the same Member State, the VAT is transferred to the client.
Example
Suppose that the client is domiciled outside the EU. In this case,
the haulier calculates the VAT of the country of departure. (The transferring of
VAT is not allowed in this case). This transport is then in the VAT 0 tariff, i.e. no
VAT is payable.
Example
Suppose that the haulier is domiciled outside the EU (and the client – with VAT
identification number – is domiciled in the EU). The VAT is then transferred to
the client.
Relation
haulier/private
individual
Exception
Transport services for private individuals are taxed according to the basic rule.
The exception does not apply to private individuals. After all, they do not have a
VAT identification number. Transportation of goods for private individuals is
therefore always taxed in the Member State of departure. This situation will
mainly apply to removal companies.
Example
A removal from Spain to the Netherlands, executed by a Dutch removal
company.
In this case, VAT will have to be imposed in Spain through a fiscally liable
representative there.
The procedure is as follows: the haulier sends an invoice without VAT to this
representative. The representative issues a new invoice that (in this case)
includes Spanish VAT and has to declare and pay the VAT. He needs to keep a
proper administration.
Summary
VAT is a tax on consumer spending. It is collected on business transactions and
imports by VAT registered persons.
Important elements for consideration are:


Transferring regulations
Responsibilities of haulier/shipper
Questions
1.
What does the transferring regulation entail?
Explain how the VAT is arranged in all the following situations:
2.
A Dutch haulier transports goods from France to the Netherlands for a French
shipper.
3.
A Dutch haulier has a domicile in France and goods are transported from
France for a French shipper.
4.
A Dutch haulier transports goods for a Belgian client from Belgium to France.
5.
A Dutch haulier transports goods for a French private individual from
Belgium to France.
6.
A Dutch haulier transports goods as a contractor for a Belgian haulier. The
goods are transported from the Netherlands to France.