Michaela Merz


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UK: Only the owner of the imported goods can deduct the import VAT as from 15 of July 2019


HMRC is aware of incorrect treatment by businesses whereby import VAT has been incorrectly deducted as input tax by non-owners of the goods.  As from 15th July 2019, HMRC will only allow claims for input VAT deduction if the owner is the importer and pays the UK import VAT. In case the non-owner is the importer and pays the UK import VAT, HMRC will not allow an input VAT deduction. A transitional period to 15th July 2019 has been put in place for businesses to make any necessary changes and implement correct procedures. This is especially important for toll manufacturer, who are acting as importer and recover the import VAT paid. These toll manufacturer does not own the goods.

Toll operators  import goods, process them and distribute them within or outside of the UK but to other EU countries (for instance for clinical trials). The toll operator does not take ownership of the goods and does not resell them. The only supply by the toll operator is of its services to its client not resident and not registered for VAT in UK (the owner of the imported goods).

Title to the goods at all times remains with the owners. However, the toll operator acts as ‘importer of record’ on UK import declarations, pays the import VAT to HMRC and receives the import VAT certificate (C79). HMRC has become aware that a number of UK toll operators who have paid import VAT on behalf of their not resident and not VAT  registered customers have also claimed a corresponding deduction for input tax under section 24 of the VAT Act 1994. However, there is no provision in UK law for such deduction.

There is no evidence to suggest that the businesses concerned have knowingly applied the wrong treatment. In all cases seen by HMRC, the toll operator has dealt with the importation and paid or claimed the import VAT to provide an administrative and cash flow benefit to their customers, as part of the overall service they provide.

The correct procedure is for the owner to be the importer of record and reclaim the import VAT, either in accordance with section 24 of the VAT Act 1994 (if registered for VAT in the UK) or under the Thirteenth VAT Directive (86/560/EEC).

For further details please see here >

Image source: unsplash.com


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Soapbox derby


With my youngest we went to see the soapbox derby in Unterägeri.

Everything that was needed for a good atmosphere was present at the racetracks. There was Barbecue with ‘Cervelat’ and ‘Bratwurst’. Drinks to keep us hydrated an ice cream van and many spectators. Thank god for the fact that it didn’t rain even though the sky was rather cloudy. The little race drivers gave their all. We sat down at the ‘Jogurtkurve’ where you could,  depending on how well you raced around the curve, gain or lose two seconds, which then contributed to the point scoring at the end of the game.

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Seifenkistenrennen


Wir haben mit meinem Jüngsten in Unterägeri das Rennen der Seifenkisten besucht.

Die Rennstrecke hatte alles was es zu gute Atmosphäre braucht. Ein Grill mit Cervelat und Bratwurst. Getränke um nicht zu verdursten, ein Glaceverkäufer, viele Fans. Gott sei Dank hat es nicht geregnet, auch wenn es bewölkt war. Die kleinen Rennfahrer waren mit dem Herz voll dabei. Wir haben uns in die “Jogurtenkurve” (die Kurve bei der Molkerei) platziert, dort wo man zwei Sekunden verschenken oder herausholen konnte, die am Ende um einen Podestplatz entscheiden konnten. Bestimmte Autos sind gemütlich reingefahren und es war von vornherein klar, die sind einfach dabei aber mit wenig Ambitionen auf Sieg. Der Kampf um den Podestplatz wurde jedoch gnadenlos geführt. Einige sind sehr rasant in die Kurve reingerast und haben die Kurve sehr eng geschnitten um das Maximum herausauszuholen. Das hellblaue Rennauto hat die Kurve so eng geschnitten, dass es teilweise nur auf zwei Rädern gefahren ist. Wir staunten über den Kampfgeist und der Kreativität der Produzenten der Fahrzeuge. Jedes von ihnen ein Unikat, wahrscheinlich hergestellt in langen Stunden. Der Fantasie waren keine Grenzen gesetzt, ausser dass man ein Steuerrad und Bremsen haben musste.

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CANADA: No more surtax on steel and aluminium as from 20, May 2019


On May 17, 2019, Global Affairs Canada released a joint statement with the United States, announcing the elimination (which became effective May 20, 2019) of all tariffs imposed by the United States under section 232 of the Trade Expansion act of 1962 (19 USC §1862) – duties on steel and aluminum, and all retaliatory tariffs imposed by Canada

Both countries have also agreed to terminate all pending litigation between them in the World Trade Organization, with respect to the section 232 duties on steel and aluminum and Canada’s retaliatory surtax. Continue reading


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Apprentices


Tuesday we were in the restaurant. A small restaurant beside the lake with a wonderful sunset. The atmosphere was fantastic.

In the small room there were four people taking and serving the orders. We wanted to order a drink as aperitif. It soon became clear that communication in German or English will be difficult. It was after work, we were all relaxed. We were not worried that we had to repeat the five drinks time and again until he had succeeded in registering them. But with the aperitif „Spritz», nothing helped. It was obvious that he did not know what it is. We had to go to the bar and show him the bottle.

When he later came in our direction with the tray and five drinks, I became aware that certain skills have to be practised. I had the feeling that he would not reach our table and that the drinks would crash to the floor. I was wrong. He did make it. Except that there was no glass for the bottle of beer and we had to insist that he bring one; it worked. I watched how he poured a “Stange” and was surprised, because it looked as if it was the first time in his life he had done this. The beer ran out of the glass, then he poured some out, re-filled it and spilled it. The same happened several times. Everything has to be learned.

The whole evening it seemed as if the employees had wandered in here for the first time in their lives and had no idea how to serve. The highlight was when one of them came with two plates in his hands – in each hand one plate. He stood before the table at a loss and I assume that he was considering how he should best put the two plates down on the table. Before I could help him, he leant sideways and the contents of one plate slid onto the lap of our youngest.

That evening it was again clear to me that many things that we consider to be absolutely obvious are not obvious. Much has to be learned, practised and rehearsed. Finally one should not get so excited about what goes wrong, and rather take pleasure in what functions effortlessly. In all honesty, it was a lot of fun for me to act as an honorary assistant that evening in the restaurant.

Image source: Anja Müller / pixelio.de


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Lehrlinge


Wir waren am Dienstag im Restaurant. Ein kleines Restaurant am Seeufer bei wunderbarem Sonnenuntergang. Die Stimmung war fantastisch.

In dem kleinem Raum hat es vier Leute gehabt, die Bestellungen aufnahmen und ausführten. Wir wollten Getränke zum Apéro bestellen. Es war sehr schnell klar, dass die Verständigung auf Deutsch oder Englisch schwierig wird. Es war Feierabend, wir waren alle gelassen. Es hat uns nichts ausgemacht die fünf Getränke immer wieder zu wiederholen, bis er es geschafft hatte, sie zu notieren. Jedoch beim Aperol Spritz nütze alles nichts. Offensichtlich wusste er nicht, was das ist. Wir mussten mit zur Bar und ihm die Flasche zeigen.

Als er später mit dem Tablett mit fünf Getränken in unsere Richtung lief, wurde mir bewusst, dass bestimmte Fertigkeiten geübt werden müssen. Ich hatte eher das Gefühl, dass er unseren Tisch nicht erreichen wird und die Getränke am Boden zerschellen. Ich täuschte mich. Er hat es geschafft. Ausser dass bei der Flasche Bier ein Glas fehlte und man es bei ihm mit Nachdruck verlangen musste, klappte es. Ich schaute ihm zu, wie er eine “Stange” abfüllte und wunderte mich, weil es so aussah, als ob dies alles das erste Mal in seinem Leben sei. Das Bier ist aus dem Glas herausgelaufen, dann hat er ein bisschen ausgeschüttet, noch mal nachgefüllt und verschüttet. Das Gleiche hat sich mehrmals wiederholt. Einfach alles muss gelernt werden.

Der ganze Abend ist so gelaufen, wie wenn sich die Angestellten zum ersten Mal in ihrem Leben hierher verirrt hätten und keine Ahnung hätten, wie man bedient. Als Höhepunkt kam einer von ihnen mit zwei Tellern in der Hand – in jeder Hand ein Teller. Er blieb ratlos vor dem Tisch stehen und ich schätze, dass er sich überlegte, wie er die zwei Teller am Tisch abladen sollte. Bevor ich ihm helfen konnte, lehnte er sich zur Seite und der Inhalt des einen Tellers kippte in den Schoss unseres Jüngsten.

An diesem Abend wurde mir nochmals klar, dass viele Sachen, die wir als absolute Selbstverständlichkeit betrachten, eben nicht selbstverständlich sind. Das vieles gelernt werden muss, geübt und einstudiert. Schlussendlich sollte man sich weniger über das, was schief geht aufregen und sich mehr freuen über alles, was tadellos funktioniert. Ehrlich gesagt hat es mir schlussendlich Spass gemacht an dem Abend als ehrenamtliche Mithilfe in dem Restaurant tätig zu sein.

Bildquelle: Anja Müller  / pixelio.de


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POLAND: Mandatory split payment as of September 1, 2019


On May 16, 2019 the Polish legislator published draft of amendments to the VAT act aimed at introducing mandatory split payment mechanism for selected goods and services in Poland. This is a follow up to derogation decision that granted Poland right to introduce mandatory split payment. Find below the most important information resulting from the draft legislation:

  • the obligatory split payment applies only to transactions made between taxpayers (B2B), which are subject to VAT in Poland and with value exceeding 15 000 zł,
  • the obligation to use the split payment mechanism will cover selected goods and services,
  • foreign entities settling transactions by means of bank transfers subject to VAT in Poland will be obliged to open a bank account in Poland,
  • new invoice layout requirements will be introduced in order to mark an invoice documenting delivery of goods / services subject to the mandatory split payment method,
  • it will be possible to cover multiple invoices with single split payment operation (collective payment),
  • funds accumulated on VAT account can be used to pay other tax liabilities (PIT, CIT, excise, customs duties) as well as social security (ZUS).

 

Goods and services covered by the mandatory split payment

 According to the annex to the draft legislation, the split payment mechanism will obligatorily be applied to 150 product and service groups defined in accordance with the Polish Classification of Products and Services (PKWiU) from 2008.

In general, the following groups of goods and services can be distinguished:

  • steel products, precious metals, non-ferrous metals;
  • waste, scrap, recyclable materials;
  • electronics, specifically: processors, smartphones, phones, tablets, net-books, laptops, game consoles, inks, toners, hard drives;
  • fuels for cars, fuel and lubricating oils;
  • greenhouse gas emission rights;
  • building and constructions services;
  • coal;
  • sale of car and motorcycle parts.

Sanctions for lack of compliance

There are numerous sanctions that can be imposed for lack of compliance with using split payment when it is required. In case of:

  • failure to include on the invoice information that transaction is subject to mandatory split payment regime, the invoice issuer may receive a fine of 100% of the VAT value resulting from such invoice,
  • failure to pay in the mandatory split payment regime, the buyer may receive a penalty equal to 100% of the VAT value resulting from such invoice,
  • failure to pay in the mandatory split payment regime, the buyer will not be entitled to treat such cost as tax deductible (from CIT / PIT perspective),
  • failure to pay in the mandatory split payment regime, the person responsible for the occurrence of such a situation will be subject to sanctions resulting from the fiscal penal code (up to 720 daily rates).

Important matters

Taking into account the risk of imposing significant sanctions, both on the part of the supplier and the buyer, it will be crucial to properly identify the transactions covered by the obligatory split payment method and then comply with this regime. However, there are doubts about the transaction value, i.e. how to determine what triggers the 15 000 zl transaction limit (is this amount based on individual invoice, transaction group, payment) and how to identify certain goods and services covered by the mandatory split payment. Specifically, the way car and motorcycle parts were mentioned (as a reference to type of activity being wholesale and retail trade) will cause significant interpretation troubles for automotive industry.

Entry into force

The legislator planned that rules on the obligatory split payment become effective from 1 September 2019. Some provisions (for example PIT / CIT sanctions related with not using split payment) will take effect from January 1, 2020.

Necessary actions

In order to avoid sanctions and possible personal liability, every taxpayer who purchases or sells oods or services covered by the mandatory split payment should be prepared for introduction on this regime.

Such preparation should include at least:

  • identification of goods and services for which split payment will have to be used (AP),
  • identification of goods and services for which a VAT invoice issued should contain the
  • information “split payment mechanism” (AR),
  • establishing rules on recognizing when 15 000 zł threshold is exceeded,
  • aligning payment and invoicing processes in order to achieve compliance with split payment rules.

If your booking, invoicing or payment processing is done via SSC, it will be particularly important to initiate changes of these processes early enough.

Another important matter is solvency. With cash flow impact by receiving only net values on regular accounts, funds accumulated on VAT account could become significant challenge over time. Especially business that are on VAT refund position should be aware of this.

For further details please contact

Tomasz Kassel, Partner
Tel. + 48 502 184 846
tomasz.kassel@pwc.com

Tomasz Pabiański, Director
Tel. + 48 502 184 952
tomasz.pabianski@pwc.com

Jakub Matusiak, Director
Tel + 48 502 184 468
jakub.matusiak@pwc.com

 

 

Image Source: unsplash.com