Doing business with Latin America: Coping with the realities of ‘free’ trade with the Pacific Alliance

 

Nora Zs. Bartos was one of the speakers at a recent seminar held by the Latin American Chamber of Commerce. Her presentation was about the considerable tax and legal challenges of doing business in the Pacific Alliance. The fact that it got such a great response suggests that this is a highly topical issue for companies in Switzerland. We would therefore like to summarise the main points as a resource for organisations seeking to harness the opportunities in this region of Latin America.

With around 230 million inhabitants and a combined GDP of almost USD 1.9 trillion, the four member states of the Pacific Alliance (PA) – Chile, Colombia, Mexico and Peru – are a hugely attractive market committed to free trade. Since its inception in 2011, the PA has removed numerous obstacles to trade. More than 90% of trading in goods is already tariff-free, and the goal is to reach 100% within a few years. From a distance, it is an unclouded success story. However, if you are a Swiss company looking to do business with the PA, the reality is more complicated. Obstacles remain. It pays to be aware of them and what to do about them. A state-of-the-art enterprise resource planning (ERP) system is necessary.

In addition to removing tariffs on practically all trading in goods, the Pacific Alliance has already simplified customs processes, enhanced cooperation between sanitary and health authorities, and created a common platform for trading the shares of the four countries’ stock exchanges. In the long term it aims to achieve the ‘four freedoms’ that characterise the European Single Market: the uninhibited movement of goods, capital, services, and people.

The problem is that actual integration lags behind the ambition. While there is a free trade agreement between EFTA (of which Switzerland is a member) and the PA, it is difficult to work out what regulation applies for a particular transaction and whether your company can actually benefit from the agreement. Straightforward exports from Switzerland to an alliance member are relatively simple. Nevertheless, when a transaction involves several countries, things get tricky – exacerbated by the fact that rules of origin are not streamlined.

If you want to capitalise on the opportunities, state-of-the-art enterprise resource planning (ERP) software is necessary. A functioning ERP system enables you to collect, process and eventually present all the data needed to comply with regulation. It serves as a basis for reorganising your international supply chain to be more cost-efficient. Evaluating the probable total costs of different supply chains is a challenge when your business takes in a complex and unpredictable environment like the Pacific Alliance, but the right ERP system will give you greater clarity and understanding of what is actually involved.

At PwC, we specialise in helping clients find the most suitable ERP solution, implement the software, and interpret the results. Ultimately, we want to avoid a situation where you fail to see or misunderstand a regulation and realise in hindsight that you have lost part of the cost savings owing to administrative fees and obstacles. Our aim is to empower you to do profitable business with Latin America.

Contact Us

Dr. Nora Bartos
TLS Senior Manager
VAT, Customs and Excise
+41 58 792 51 14
nora.bartos@ch.pwc.com

Geneva International VAT Breakfast – New Year and new challenges in Indirect Taxes

International VAT Breakfast

In the fever of December’s last moment, many VAT topics such as the GST implementation in India or the change of the Swiss VAT rates across systems before New Year could have gone unspotted. For those who manage indirect taxes, it is clear that unnoticed changes can have significant consequences.

As a New Year’s resolution, during our next VAT Breakfast, we will look into recent topics that enable strategic development as well as those that are less game-changing but nevertheless require your attention in the start of 2018.

From a strategic perspective, we will address the latest progress in Brexit negotiations, the implementation of GST in India and the introduction of VAT in the GCC. We will also discuss the latest updates about the EU Commission initiatives and the upcoming end of the Cross Boarder Ruling pilot. Sharing feedback from various European countries, we will focus on reporting developments in 2017/2018 in Poland, Hungary and Serbia; the introduction of anti-fraud measures such as split payment in Romania, Poland and Italy; the reporting of imported e-services in Turkey as well as the Polish transport package.

Finally, we want to share with you the lessons learned and the biggest challenges faced in the first months after the Swiss VAT reform and the recent Swiss / EU case law. We hope to receive your views in return.

To register for this event: Click Here

Contact Us

Patricia More
Tel.+41 58 792 95 07
patricia.more@ch.pwc.com

NPO VAT Community breakfast: How will the VAT law revision impact your organisation?

On 1 January 2018, the VAT law revision will enter into force with many impacts for Swiss companies, associations and foundations, as well as foreign companies and non-profit organizations. VAT regulations rules and relevant turnover for determining threshold will change.

Are you wondering what this revision means for your organization?
Join our next NPO VAT community breakfast, which will take place on Tuesday 16 January at the PwC Geneva office from 8.30 – 11.00 am.

Details and registration

What should you expect from this event?

  • Get a first overview on the law revision’s impacts
  • Study comparative cases and examples
  • Discuss your current concerns & challenges
  • Get insight and recommendations from our PwC experts
  • Network with VAT peers from non-profit organizations

EU Commission publishes a proposal for the Definitive VAT System for Cross Border EU Trade

As part of the VAT action plan introduced on 7 April 2016, the EU Commission announced a legislative Proposal for the Definitive VAT System for Cross Border EU Trade.

This proposal was published on October 4th, 2017 (hereafter referred to as the “Proposal”) and introduces the cornerstones of the Definitive VAT System for Cross Border B2B EU trade[1]. This will be followed by a second proposal which is expected to be published in 2018 which will provide detailed technical provisions and guidelines on the application of the Definitive VAT System and the use of the transitional measure (two-step approach: quick wins in 2019 and definitive VAT regime in 2022).

The current VAT system characterizes each EU B2B cross border supply of goods in (1) an exempt intra-Community supply in the Member State of departure and (2) a taxable intra-Community acquisition in the Member State of arrival of the goods. The Proposal foresees in the introduction of one taxable supply in the Member State of destination of the goods, the so-called intra-Union supply. As a first step of the Definitive VAT System, the Proposal introduces the concept of a Certified Taxable Person or CTP. This concept allows for an attestation that a business can globally be considered as a reliable taxpayer. Only when the intra-Union supply is performed for a CTP, the supplier can apply the reverse charge mechanism. This means that when the buyer is not a CTP, the supplier will be liable for the payment of VAT in the destination country through a one stop shop mechanism.

To meet the request of the Council, as stated in the Council Conclusions of November 2016, the Proposal also foresees further amendments to the VAT Directive (so-called quick wins) in regards to VAT Identification Numbers, Chain Transactions and Call Off Stocks. The Council also requested the Commission to draft a common framework with respect to the documentation required to claim an exemption for intra-Community supplies, the latter is included in the proposal amending the VAT Implementing Regulation.

In respect to Call off Stocks (i.e. the situation where a vendor transfers goods to a warehouse for the disposal of a known acquirer to another Member State and that acquirer becomes the owner of the goods upon withdrawing the goods from the warehouse), the proposed solution considers the Call Off Stock as giving rise to one single transaction i.e. intra-community supply in the Member State of departure and an intra-Community acquisition in the Member State of arrival provided this is performed between two CTPs. In addition the application of the VAT exemption for intra-Community supplies is made conditional upon the valid EU VAT registration of the acquirer.

That said, in the case where one party in the transaction to Call Off Stocks is not a CTP, it is likely that the vendor will have to obtain a VAT registration in the country where the warehouse is located and to account for the VAT in the destination country. Given this added complication introduced as part of the Proposal, it is unlikely that the Member States will be able to maintain their existing specific regimes in their respective territories.

Last but not least, the Proposal foresees that in cases involving Chain Transactions the transport is to be assigned to the first leg of the chain transactions if (i) the intermediate supplier has a VAT registration in another Member State than the Member State of departure, (ii) this intermediate supplier communicates to the initial supplier that the name of the Member State of arrival and (iii) both the intermediate supplier and the initial supplier are CTPs. When one of the conditions (i) or (ii) is not met the transport is allocated to the second leg of the chain transactions.

In the event that a non-CTP is involved, the automatic allocation of the transport will not apply and, thus, the parties will still have to document and demonstrate to which transaction the transport is allocated and apply the related VAT regime to the said transaction (domestic supply, intracommunity supply, etc.).

The Proposal for implementing regulations requires the Member States to apply the provisions as of 1 January 2019. Although there is still more than a year to go, companies should already be planning and evaluating what implications this can have on their supply chains.

In addition if these provisions focus primarily on the cross border EU trade of goods, one cannot exclude that the concept of Certified Tax Person will be extend to the B2B supply of services taking into account the existing background and the fact that such concept was discussed and considered during the implementation of the VAT package in 2010.

Within the next three months, companies should take the following actions:

  • Map Intra-Union Flows

    Detailed mapping of intra-Union flows will allow you to measure potential impacts of the change on your business and adopt an action plan (e.g., update IT systems, adjust invoice templates, manage VAT registration requirements, train your staff, review offers, contracts and agreements, etc.)

  • Assess Applying for Certified Tax Person Status

    Depending on your business flows and organisation, obtaining Certified Tax Person status could be required.

Download full newsletter

We look forward to supporting you in enabling your employees, IT systems and processes to deal with the new intra-Union VAT regime and managing your VAT position.

Contacts

Patricia More
Partner VAT, PwC Geneva
Tel. +41 58 792 95 07
patricia.more@ch.pwc.com

 

 

 

EUDTG Newsletter July – August 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Germany CJEU referral of domestic anti-treaty shopping rule as potential violation of the fundamental freedoms/ Parent-Subsidiary Directive

National Developments

  • Italy Tax Court of Appeal decision on EU law compatibility of withholding tax levied on dividends distributed to US pension fund
  • Netherlands Proposal Bill for new law on State aid recovery
  • United Kingdom Publication of EU Withdrawal Bill

EU Developments

  • EU Updated EU BEPS Roadmap for coordinated EU action under the Estonian EU Presidency
  • EU European Parliament adopts legislative resolution on public CBCR
  • EU European Parliament votes for EU Directive on double taxation dispute resolution mechanism in the European Union

Fiscal State aid

  • Cyprus Tax authorities issue interpretative circular for financing companies
  • EU European Commission finds Poland’s retail tax in breach of EU State aid rules
  • EU European Commission requires Belgium and France to abolish tax exemptions for ports

 

Read the full newsletter

 

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg


Contact

Armin Marti
Partner Tax & Legal Services, Leader Corporate Tax Services
+41 58 792 43 43
armin.marti@ch.pwc.com

Anna-Maria Widrig Giallouraki
Senior Tax Manager
+41 58 792 42 87
anna-maria.widrig.giallouraki@ch.pwc.com

Calibrate your tax compass

Tax Forum 2017

The right navigation instruments can help you reach your destination quickly and safely. Our tax pilots at the Tax Forum 2017 will guide you clear of the shallows and help you steer a course for your business targets.

Below you’ll find details of all the speakers, dates and venues. In Geneva and Zurich we’ll also be venturing into international waters and plumbing the depths of the US tax reform and Brexit.

Tap into the insights and experience of our experts and keep moving ahead. We look forward to seeing you at the Tax Forum 2017!

Here you’ll find various dates and venues to choose from.

Change in VAT rates effective 1 January 2018?

For the first time in the history of Swiss value added tax, there may be a reduction in the standard and special VAT rates! Whether and to what extent a reduction will be introduced on 1 January 2018 is up to the Swiss voting population to decide on 24 September 2017 as part of the vote on the reform of Old-Age and Survivors In-surance (AHV).

Definitive consequences as at 31 December 2017

The temporary additional financing of disability insurance (IV) from VAT funds will come to an end on 31 December 2017. The three tax rates will automatically decrease as a result. However, an increase of 0.1% to finance the railway infrastructure (FABI) will also come into force on 1 January 2018. Taking both these effects into account, the tax rates as at 1 January 2018 would be as follows:

Standard rate:  7,7%
Special rate:  3,7%
Reduced rate: 2,5%

Possible consequences of the “Pensions 2020” reform programme

It is not yet known whether the standard and special tax rates will be subject to an additional increase for pension funding purposes as at 1 January 2018. If the voting population accepts the proposal put to the vote on 24 September 2017, the VAT rates will remain at their current levels.

Are you, your company and your accounting software ready for a change in tax rates?

If the voting population rejects the proposed reform of Old-Age and Survivors Insurance, VAT rates will be reduced from 1 January 2018. This will leave just over three months to prepare for the changeover. The following points will need to be taken into account if the tax rates are modified:

  • Tax codes in accounting software:
    New output and input tax codes will need to be introduced (standard rate: 7.7%, special rate: 3.8%).
  • Applicable tax rate:
    The date on which a service is provided is decisive for determining whether it should be invoiced at the current or new tax rates. Services provided before the end of 2017 should be invoiced at the current tax rates. If your company issues an invoice in December 2017 for a service that will not be provided until January 2018 or later, the new tax rate should be used.
    With regard to input tax, the following principle applies: “The tax that has actually been invoiced may be deducted”, even if the tax rate shown is incorrect.
  • Invoicing forms and templates will need to be modified
  • Consequences to be taken into account in contracts, offers, etc.:
    VAT must be indicated in contracts (either by specifying the tax rate as a percentage or by including the statement “plus statutory VAT”).

Conclusion and recommendations

If the increase in tax rates is rejected in the vote on 24 September 2017, there will only be a very short period of three months until the end of the year in which to implement all the necessary changes. Steps should be taken in advance, particularly with regard to IT system migration. Automatic booking processes and information printed on invoicing forms should be checked before 1 January 2018. In general, we advise against overwriting existing tax codes with the new rates. Instead, new tax codes should be entered with a new validity period.

For more information, please contact your personal advisor at PricewaterhouseCoopers or get in touch with our VAT specialists. We look for-ward to hearing from you!

Partial revision of the Swiss VAT law: at least 30’000 foreign established businesses will have, in principle, to register for VAT in Switzerland

Swiss VAT Law imposes new obligation on foreign companies

As of January 1st, 2018 / January 1st, 2019, the partial revision of Swiss VAT Law will directly impact the foreign established companies operating in Switzerland

Please check out our technical flyer on the subject to find out more about these changes:

 

Do you want to know more about the new Swiss VAT obligations impacting foreign business or e-commerce business?

Please do not hesitate to contact us to discuss about your situation, your projects and more particularly the related VAT consequences in Switzerland or abroad.

We would be more than happy to discuss with you about the potential impacts, benefits, risks, costs, optimizations and obligations resulting from such changes.

Patricia More, Associée TVA, PwC Genève
+41 58 792 95 07 / patricia.more@ch.pwc.com

Olivier Comment, Directeur TVA, PwC Lausanne
+41 58 792 81 74 / olivier.comment@ch.pwc.com

EUDTG Newsletter March – April 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Belgium: CJEU judgment on interpretation of the subject-to-tax requirement of the Parent-Subsidiary Directive: Wereldhave
  • Belgium: AG Opinion on interest deduction limitation in light of the Parent-Subsidiary Directive: Argenta
  • Germany: CJEU referral on the German CFC rules: X

National Developments

  • Belgium: Supreme Court does not allow withholding tax refunds for dividends received by investment companies before 12 June 2003
  • Belgium: CJEU referral by the Commission of Belgium over the discriminatory tax treatment of foreign real estate income
  • Finland: Supreme Administrative Court confirms tax treatment of dividend income from third countries to be in line with Articles 63 and 65 TFEU
  • Italy: Amendments to the NID and Patent Box Regime
  • Norway: Government’s response to ESA’s decision on the compatibility of the Norwegian interest limitation rules with the freedom of establishment
  • Poland: Supreme Administrative Court judgment on the settlement of foreign branch losses
  • Spain: Supreme Court judgment on State aid recovery procedure
  • United Kingdom: England and Wales High Court judgment regarding repayment of stamp duty reserve tax: Jazztel plc v The Commissioners for HMRC
  • United Kingdom: The Great Repeal Bill White Paper

EU Developments

  • EU: European Parliament clears way for formal adoption of ATAD II by the ECOFIN Council
  • EU: Update on EU proposal for public country-by-country reporting
  • EU: Council adopts conclusions on EU relations with the Swiss Confederation
  • EU: Informal ECOFIN Council held in Malta in early April

Fiscal State aid

  • Greece: CJEU judgment on State aid implemented by Greece: Ellinikos Chrysos AE
  • Italy: CJEU judgment on Italian bankruptcy procedure: Marco Identi

Read the full newsletter here.

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg

EUDTG Newsletter January – February 2017

EU direct tax law is a fast developing area. This presents taxpayers, in particular groups and multinational corporations that have an EU or European Economic Area (EEA) presence, with various challenges.

The following topics are covered in this issue of EU Tax News:

CJEU Cases

  • Netherlands: CJEU judgment on pro-rata personal deductions for non-resident taxpayers: X
  • Netherlands:  CJEU judgment on the application of Article 64 (1) TFEU concerning the extended recovery period for foreign assets: X

    National Developments
  • Belgium: New Innovation Income Deduction replaces the Patent Income Deduction
  • Finland: Supreme Administrative Court confirms withholding tax treatment for non-UCITS and non-listed Maltese SICAV
  • Hungary:  Hungarian implementation of ATAD’s CFC rules
  • Italy: Italian Tax Court of First Instance judgment on the compatibility of withholding tax levied on dividends distributed to a US pension fund with EU law
  • Sweden: Swedish Supreme Administrative Court judgments on the denial of refund of Swedish withholding tax
  • Switzerland: Corporate Tax Reform III rejected by the Swiss voters
  • United Kingdom: Supreme Court judgment in R (on the application of Miller and another) v Secretary of State for Exiting the European Union

EU Developments

  • EU: ECOFIN Council agreement on ATAD II
  • EU: European Parliament Resolution of 14 February 2017 on the annual report on EU competition policy
  • EU: Public CBCR: European Parliament’s joint ECON & JURI Committee issues draft report
  • EU: EU Member States send letter to non-EU 92 countries in context of common EU list of non-cooperative tax jurisdictions
  • Spain European Commission requests Spain to amend its law implementing reporting obligations for certain assets located outside of Spain

Fiscal State aid

  • Luxembourg: Non-confidential version of the European Commission’s State aid opening decision in GDF Suez
  • Spain: AG Opinion on tax exemptions for Church-run schools

Read the full newsletter here.

This EU Tax Newsletter is prepared by members of PwC’s international EU Direct Tax Group (EUDTG).

Further information about our service offerings in EU taxes: www.pwc.com/eudtg