cross-border commerce – how to deal with indirect taxes? · 5/23/2017 cross-border commerce –...

5/23/2017

Cross-border commerce –How to deal with indirect taxes?

www.pwc.ch

23 May 2017

Michaela Merz

PwC

Electronic commerce (e-commerce)

• Transaction of buying and selling online;

• Using World Wide Web, mobile phones, tablets, computers with access to the Internet.

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PwC

Functionality of indirect tax

3

Supplier

• Indirect tax is based on trade flows and transactions and not on profits or income;

• Indirect tax taxes the consumption of goods / services;

• Multiple rules exist to define place of taxation for indirect tax purposes.

Supplier sale

payment

delivery

sale

payment

delivery

Cross-border supplies of e-services

4

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PwC

E-services

Download of music Download of games E-learning

Webhosting

Download of software

Download of Apps

5

PwC

Current place of taxation rules for cross-border e-commerceServices supplied and delivered online to the EU

EU VAT

Swiss supplier

Place of taxation from a Swiss perspective

Place of taxation from an EU perspective:

Consumers in the EU

EU VAT

E-services

Consequences:

• Liability for VAT in multiple additional countries

• Lower product margin

• Adaptation of systems and billing

6

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PwC

Current place of taxation rules for cross-border e-commerceMini One Stop Shop for e-services supplied to EU recipients

EU or Non-EU supplier

local EU VAT authorities

19% German VAT17% Lux VAT20% UK VAT

7

PwC

MOSS - number of registrations within the EU

0

500

1000

1500

2000

2500

3000

3500

DE GB NL AT FR PL ES CZ IT SE BE DK CY FI SK BG HU RO EE MT LU SI LV PT LT HR EL

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PwC

Current place of taxation rules for cross-border e-commerceServices supplied and delivered online to Swiss consumers

EU VAT

EU supplier

Place of taxation from an EU perspective

Place of taxation from a Swiss perspective:

Consumers in SwitzerlandE-services

Consequences:

• Supplier liable for Swiss VAT if sales > CHF 100’000

• Competitive advantage compared to local suppliers (if below CHF 100’000)

CH VAT if sales beyond CHF 100’000

9

Cross-border supplies of goods andservices

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PwC

Current place of taxation rules for cross-border commerceServices supplied to the EU / rest of the world

Financial adviceLegal advice

11

PwC

Current place of taxation rules for cross-border commerceServices sold online to Swiss consumers

EU VAT

EU supplier

Place of taxation from an EU perspective

Place of taxation from a Swiss perspective:

Consumers in SwitzerlandServices

Consequences:

• Supplier is not liable for VAT

• Higher product margin CH VAT from CHF 10’000 if any

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5/23/2017

PwC

Current place of taxation rules for cross-border e-commerceServices sold online to the EU / rest of the world

EU VATCH VAT

Swiss supplier



Consumers in the EUServices

Consequences:

• Double non-taxation

• Higher product margin

• Competitive advantage compared to local suppliers

13

PwC

Current place of taxation rules for cross-border e-commerceGoods sold online to the EU / rest of the world

14

5/23/2017

PwC

Current place of taxation rules for cross-border e-commerceGoods sold online to the EU / rest of the world

EU VATCH VAT

Swiss supplier



Consumers in the EU

Consequences:

Who imports the goods?

• Consumer: no VAT registration for the supplier;

• Supplier: VAT registration in the EU.

15

Recent VAT developments

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PwC

Taxation of e-commerce at destination

Countries which tax the electronically supplied services in country of the service recipient and/or are about to introduce the taxation in recipient’s location

17

PwC

Revision of Swiss VAT Act Liability of foreign supplier for VAT if worldwide turnover > CHF 100’000

Foreignsupplier • Foreign suppliers of goods / services

to Swiss consumers will be liable for Swiss VAT as from 2018 – if their worldwide turnover exceeds CHF 100’000;

• Equality with local suppliers;

• 30’000 additional taxpayers expected in Switzerland.

Goods / services

18

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PwC

OECD international VAT guidelines Taxation of all B2C services at destination - recommendation

Supplier+19% MWST

• Negative impact on the margin between 1% -27%;

• Higher compliance costs;

• Higher resource demand;

• Adaptation of booking and billing systems;

• Different VAT regimes;

• Personal liability of the directors;

• Transparency;

• Data availability.

19

Potential solutions

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5/23/2017

PwC

Taxation of e-commerce at destinationInternational One-Stop-Shop

Mini One Stop Shop in the EU

Light Maximum

OECD

One StopShop

Central VAT registration at one VAT Authority(in the country of the establishment of the supplier)

21

PwC

Thank you for your attention!

22

5/23/2017

Cross-border commerce - how to deal with indirect taxes?

Swisscom Ltd.

GBS-TAX

Giesen Romana

23.05.2017

C1 - Public

> OECD / EU – where the recipient is resident/established

> In general right approach as final use/consumption shall be taxed

> EU implemented MOSS to enable tax payer to file one return and to lower administrative burdens

> Outside EU no alignment in terms of filing

> OECD recommends to align filing and install technology that reduces administrative burden and costs for all parties

> But outside EU no efforts evident

24Electronic supplies– B2C – quo vadis

5/23/2017

> What is an electronic supply?

– No exact definition available

– Every country has it’s own definition-> double taxation possible

> Where is the final place of consumption?

– Invoice address vs. country code of the debit card vs. IP screened at order etc.

> Invoicing

– Adjustment of IT systems to the requirements of every country?

> Registration

– Language issues, tax audits abroad

– MOSS – could be a solution, but no registration for MOSS possible if the company has a VAT registration in an EU Country even if it is for another business part

– Administrative cost of the registration and administration

– Intern: IT, extra headcount etc. plus extern: IT, tax advisor, fiscal representative

25Issues and questions with regards electronic supplies

> Mila Ltd

– Start up, very limited headcount, financed with so called risk capital with clear goals

– Platform at which so called "Friends" can offer manual/technical support, e.g. assemble a closet, configure a router etc.

– Contract is settled on the platform but between the “Friend” and the customer, but in a lot of cases the “Friend” is not seen as a (tax)business but a private customer too, therefore the medium via the platform is a B2C supply

– Limited clients, every country needs to be tested to its needs and how it works out

> VAT results on E-commerce and B2C

– VAT is due in every country in which the platform is operating (even with only one client and turnover of CHF 1)

> Consequences for the Start up

– High administrative burden with regards tracking of clients, correct invoicing etc.

– High cost on registration, tax advice, IT etc.

26Expectations vs. reality

5/23/2017

Either the Start up acts compliant with regards taxes and becomes unprofitable und illiquid

Or

The Start up doesn’t act compliant with regards to taxes and might have a chance to grow or it will be caught in the act and again high administrative cost plus penalties will result and finally a

shut down due to unprofitability / illiquidity like in the first option

The issue itself is not the VAT which is due at the place of the final consumption but the administrative burden and the cost for being compliant.

The “tax set up” by now is hostile to innovation, as small start ups / F&E’s that try to be present on a global market are disadvantaged. The current set up helps the big global players.

27And now?

5/23/2017

BLACKSOCKS SA - Seefeldstrasse 301a - CH-8008 Zürich - www.blacksocks.com

AMCHAM

May 23, 2017

BLACKSOCKS.COM: Cross Boarder Commerce since 1999.



Our product idea: The Sockscription™

Shipping rhythm:• 4 shipments of 3 pairs• 6 shipments of 3 pairs• 1 shipments of 10 pairs

5/23/2017


The More Button: Re-Order with one click


- Customer from 127 countries.

- 20% growth in Export

- 35% of Sales Export

- Costs for export administration is

increasing every year.

5/23/2017

Federal Tax Administration FTA

Partial Revision of the VAT ActEffect on foreign businesses

Raffaello Pietropaolo

Head of Swiss VAT Administration

Zürich, 23 May 2017

Swiss-American Chamber of Commerce

34Federal Tax Administration FTA

Partial Revision of the VAT ActTax liability: threshold based on worldwide turnover

Exemption from tax liability if worldwide turnover from taxable supplies is less than CHF 100'000

(Art. 10 para. 2 lit. a and c revVAT-Act)

Exemption from tax liability if worldwide turnover from taxable supplies is less than CHF 100'000

(Art. 10 para. 2 lit. a and c revVAT-Act)

≥ CHF 100'000 ≥ CHF 100'000

≥ CHF 100'000 ≥ CHF 100'000

Subsidiary Acquisition tax on supplies of immovable property

(Art. 45 para. 1 lit. c revVAT-Act)

Subsidiary Acquisition tax on supplies of immovable property

(Art. 45 para. 1 lit. c revVAT-Act)

5/23/2017


Partial Revision of the VAT Act Low-value consignments – tax liability of businesses abroad (I)

LVCR: VAT ≤ CHF 5LVCR: VAT ≤ CHF 5

Turnover from LVCR < CHF 100’000Place of supply: abroadno liability to VAT in CH

Turnover from LVCR < CHF 100’000Place of supply: abroadno liability to VAT in CH

Turnover from LVCR ≥ CHF 100’000

Place of supply: CH*

Liability to VAT: CH

Importer: business abroad

Turnover from LVCR ≥ CHF 100’000

Place of supply: CH*

Liability to VAT: CH

Importer: business abroad

* Art. 7 para. 3 lit. b revVAT-Act


Partial Revision of the VAT Act Low-value consignments – tax liability of businesses abroad (II)

If the place of supply has shifted to Switzerland:

• all cross-border supplies concerned

• customs declaration by the sender

• import VAT deducted as input tax

If the place of supply has shifted to Switzerland:

• all cross-border supplies concerned

• customs declaration by the sender

• import VAT deducted as input tax

If annual turnover from LVCR is < CHF 100’000 tax liability ends with deregistration by the business.

If annual turnover from LVCR is < CHF 100’000 tax liability ends with deregistration by the business.

5/23/2017


Required data for the VAT registration

Turnover worldwide

Turnover in Switzerland

including exempt turnover

VAT reporting method / mode


Online registration in 5 easy steps

Legal Form Company Information Activity Declaration

Modalities Submit

Available in German, French and Italian

www.estv.admin.ch

- Legal form- Branch

- Address- Tax representative

- Business activites- Start in Switzerland- Turnover worldwide- Turnover Switzerland

- Reporting method- Reporting mode

- Optional comments- Contact details- Submit

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Additional steps for foreign companies

Tax Representative

Place of business in Switzerland

Security Deposit

Amount defined by the Federal Tax Administration (FTA)

Certificate of registration including VAT-Number


VAT rates as from 1 January 2018

5/23/2017


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cross-border commerce – how to deal with indirect taxes? · 5/23/2017 cross-border commerce –...

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