VAT.
Current Problems with Fraud and
Abuse and Prospects for Future
dr hab. Krzysztof Lasiński-Sulecki
Brno 2017
AGENDA
• VAT. Introductory remarks
• Types of VAT fraud
• Fraud vs. abuse
• Why is VAT fraud possible?
• Case law and VAT fraud
• Legislative measures against VAT fraud
• Revolutionary change of the VAT system as a solution
• Other developments
Krzysztof Lasiński-Sulecki kls@umk.pl
INTRODUCTORY REMARKS
Old Town Panorama
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
VAT applies generally to transactions relating to goods or
services.
Taxable transactions:
• supply of goods:
- domestic supply
- exportation (zero-rated)
- intra-Community supply (zero-rated)
• supply of services
• importation of goods
• intra-Community acquisition of goods
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
‘Supply of goods’ shall mean the transfer of the right to
dispose of tangible property as owner.
Art. 14(1) of the VAT Directive
‘Supply of services’ shall mean any transaction which does
not constitute a supply of goods.
Art. 24(1) of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
Intra-Community transactions in goods
Member State 1 Member State 2
supply of goods
intra-Community supply intra-Community acquisition
zero-rated domestic rate applies
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
Cross-border supplies of services
Member State 1 Member State 2
supply of services here OR supply of services here
only one transaction in one Member
State (place of supply rules apply)
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
VAT is proportional to the price charged by the taxable
person in return for the goods and services which he has
supplied.
%
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
Czech Republic: standard rate – 21%
VAT DUE INPUT VAT
Price: 100+21=121 150+31,5=181,5 200+42=242
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
VATABLE
PERSON
3
+VAT +VAT
VAT. INTRODUCTORY REMARKS
Tax to be remitted to tax authorities by VATABLE PERSON 2:
31,5 - 21 = 10,5
Price: 100+21=121 150+31,5=181,5 200+42=242
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
VATABLE
PERSON
3
+VAT +VAT
VAT. INTRODUCTORY REMARKS
VATABLE PERSON 2 carries out exempt transactions:
no VAT due no right to deduct (exceptions exist)
Price: 100+21=121 150+0=150
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
+VAT +VAT (exempt)
VAT. INTRODUCTORY REMARKS
VATABLE PERSON 2 carries out zero-rated transactions:
0 – 21 (right to deduct still exists) = -21
Price: 100+21=121 150+0=150
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
VATABLE
PERSON
3
+VAT +VAT (0)
VAT. INTRODUCTORY REMARKS
The final burden of VAT rests ultimately on the consumer.
No right to deduct.
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
The final burden of VAT rests ultimately on the consumer.
a consumer
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
The final burden of VAT rests ultimately on the consumer.
a vatable person
C-110/94 INZO
C-219/12 Fuchs
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
‘Taxable person’ shall mean any person who, independently,
carries out in any place any economic activity, whatever the
purpose or results of that activity.
Any activity of producers, traders or persons supplying
services, including mining and agricultural activities and
activities of the professions, shall be regarded as ‘economic
activity’. The exploitation of tangible or intangible property
for the purposes of obtaining income therefrom on a
continuing basis shall in particular be regarded as an
economic activity.
Art. 9(1) of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
VAT. INTRODUCTORY REMARKS
Every taxable person shall state when his activity as a taxable
person commences, changes or ceases.
Art. 213(1)(first sentence) of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Town Hall
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
VAT Gap – the difference between the amount of VAT actually
collected and the VAT Total Tax Liability (VTTL), in absolute or
percentage terms.
http://europa.eu/rapid/press-release_MEMO-15-5593_en.htm
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
VAT Gap (estimates for 2013)
EU-26 167 654 million euro 15.2 %
Czech Republic 2761 milion euro 19.1 %
Finland 812 million euro 4.1 %
Italy 47 516 million euro 33.6 %
Poland 10 131 million euro 26.7 %
Romania 8 296 million euro 41.1 %
Slovenia 186 million euro 5.8 %
Spain 12 094 million euro 16.5 %
http://europa.eu/rapid/press-release_MEMO-15-5593_en.htm
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Types of VAT fraud:
• underreported supplies,
• inflated refund claims,
• domestic sales disguised as exports or intra-Community
supplies,
• fictitious traders,
• missing traders,
• carousel fraud.
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Underreported supplies
Consumers of goods and services have no right to deduct. VAT
constitutes additional cost for them.
Inflated refund claims
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Domestic sales disguised as exports or intra-Community
supplies
domestic supplies export and
e.g. 21% VAT rate intra-Community
supplies zero-rated
(exemption with the
right to deduct)
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Fictitious traders
Missing traders
Carousel fraud
Krzysztof Lasiński-Sulecki kls@umk.pl
TYPES OF VAT FRAUD
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
Copernicus in front of the Town Hall
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
business purpose tax purpose illegal activity
Krzysztof Lasiński-Sulecki kls@umk.pl
COMPLIANCE ABUSE FRAUD
FRAUD VS. ABUSE
Krzysztof Lasiński-Sulecki kls@umk.pl
LOWERING TAX
Nobody likes paying
taxes
ABUSE
FRAUD
tax mitigation
tax planning
(also:
aggressive)
tax avoidance
tax abuse
circumvention
tax evasion
tax fraud
FRAUD VS. ABUSE
A finding that there is an abuse presupposes an intention on
the part of the Community exporter to benefit from an
advantage as a result of the application of the Community
rules by artificially creating the conditions for obtaining it.
Evidence of this must be placed before the national court in
accordance with the rules of national law, for instance by
establishing that there was collusion between that exporter
and the importer of the goods into the non-member country.
C-110/99 Emsland-Stärke
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
EU CH
Export subsidies higher
than customs duties
Krzysztof Lasiński-Sulecki kls@umk.pl
1.
2.
FRAUD VS. ABUSE
The Sixth Directive must be interpreted as precluding any
right of a taxable person to deduct input VAT where the
transactions from which that right derives constitute an
abusive practice. For it to be found that an abusive practice
exists, it is necessary, first, that the transactions concerned,
notwithstanding formal application of the conditions laid
down by the relevant provisions of the Sixth Directive and of
national legislation transposing it, result in the accrual of a tax
advantage the grant of which would be contrary to the
purpose of those provisions. Second, it must also be apparent
from a number of objective factors that the essential aim of
the transactions concerned is to obtain a tax advantage.
C-255/02 Halifax
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
Articles 43 EC and 48 EC must be interpreted as precluding the
inclusion in the tax base of a resident company established in
a Member State of profits made by a controlled foreign
company in another Member State, where those profits are
subject in that State to a lower level of taxation than that
applicable in the first State, unless such inclusion relates only
to wholly artificial arrangements intended to escape the
national tax normally payable. Accordingly, such a tax
measure must not be applied where it is proven, on the basis
of objective factors which are ascertainable by third parties,
that despite the existence of tax motives that controlled
company is actually established in the host Member State and
carries on genuine economic activities there.
C-196/04CadburySchweppesKrzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
It is incumbent upon the referring court to analyse all the
circumstances of the main proceedings in order to determine
whether that agreement constituted a wholly artificial
arrangement concealing the fact that the services at issue
were not actually supplied by the company acquiring the
licence, but were in fact supplied by the company granting it,
examining in particular whether the establishment of the
place of business or fixed establishment of the company
acquiring the licence was not genuine…
C-419/14 WebMindLicenses Kft.
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
FRAUD TAX ABUSE
TAX EVASION TAX AVOIDANCE
Krzysztof Lasiński-Sulecki kls@umk.pl
FRAUD VS. ABUSE
The Court of Justice often mentions tax fraud and tax abuse
simultaneously.
The VAT Directive allows Member States to introduce
measures aimed at eliminating tax evasion and tax
avoidance (at the same time).
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
St. Johnses’ Cathedral
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
In respect of the supply of goods or services, other than as
referred to in Articles 74 to 77, the taxable amount shall
include everything which constitutes consideration obtained
or to be obtained by the supplier, in return for the supply,
from the customer or a third party, including subsidies directly
linked to the price of the supply.
Art. 73 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
In order to prevent tax evasion or avoidance, Member States
may in any of the following cases take measures to ensure
that, in respect of the supply of goods or services involving
family or other close personal ties, management, ownership,
membership, financial or legal ties as defined by the Member
State, the taxable amount is to be the open market value
Art. 80 (in principio) of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
Every taxable person shall keep accounts in sufficient detail
for VAT to be applied and its application checked by the tax
authorities.
Art. 242 of the VAT Directive
Every taxable person shall submit a VAT return setting out all
the information needed to calculate the tax that has become
chargeable and the deductions to be made including, in so far
as is necessary for the establishment of the basis of
assessment, the total value of the transactions relating to
such tax and deductions and the value of any exempt
transactions.
Art. 250(1) of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
• Goods sent to third countries are rarely examined at borders.
• No border controls in intra-EU trade.
Krzysztof Lasiński-Sulecki kls@umk.pl
WHY IS VAT FRAUD POSSIBLE?
A right of deduction shall arise at the time the deductible tax
becomes chargeable.
Art. 167 of the VAT Directive
The chargeable event shall occur and VAT shall become
chargeable when the goods or the services are supplied.
Art. 63 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
Rabiańska Street
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
Transactions such as those at issue in the main proceedings,
which are not themselves vitiated by VAT fraud, constitute
supplies of goods or services effected by a taxable person
acting as such and an economic activity within the meaning of
Articles 2(1), 4 and 5(1) of the Sixth Directive, where they fulfil
the objective criteria on which the definitions of those terms
are based, regardless of the intention of a trader other than
the taxable person concerned involved in the same chain of
supply and/or the possible fraudulent nature of another
transaction in the chain, prior or subsequent to the
transaction carried out by that taxable person, of which that
taxable person had no knowledge and no means of
knowledge. C-354/03, C-355/03 and C-484/03 Optigen
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
The right to deduct input VAT of a taxable person who carries
out such transactions cannot be affected by the fact that in
the chain of supply of which those transactions form part
another prior or subsequent transaction is vitiated by VAT
fraud, without that taxable person knowing or having any
means of knowing.
C-354/03, C-355/03 and C-484/03 Optigen
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
KNOWLEDGE TEST
QUESTION NO. 1
Am I a fraudster?
Yes, I am. No, I am not.
No right to deduct Next question
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
KNOWLEDGE TEST
QUESTION NO. 2
Do I know that my supplier is a fraudster?
Yes, I do. No, I don’t.
No right to deduct Next question
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
KNOWLEDGE TEST
QUESTION NO. 3
Should I reasonably know that my supplier is a fraudster?
Yes, I should. No, I had no grounds to suspect…
No right to deduct I can deduct input VAT
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
GOOD FAITH WHEN BASIC REQUIREMENTS
HAVE NOT BEEN MET
zero-rating: C-409/04 Teleos and C-271/06 Netto Supermarkt
right to deduct: ? (see the reference in C-277/14 Stehcemp)
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
What if:
domestic legal order does not refer to good faith?
Example: Poland
Where the sale of goods or services has been documented by
invoices or corrective invoices issued by a trader who does
not exist (a ‘non-existent trader’), those invoices and customs
documents may not form the basis for reducing the tax due
and refunding the value added tax credit or refunding input
tax.
No right to deduct when documented transaction has not
actually taken place.
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
• C-18/13 Maks Pen
• C-131/13 Italmoda
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
Where the national courts must or may raise of their own
motion points of law based on binding rules of national law,
they must do so in relation to a binding rule of European
Union law such as that which requires that the national courts
and authorities refuse entitlement to the right to deduct value
added tax where it is established, in the light of objective
evidence, that that right is being relied on for fraudulent or
abusive ends.
C-18/13 Maks Pen
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
It is incumbent on those courts, in the assessment of whether
that right to deduct was relied on for fraudulent or abusive
ends, to interpret the national law, so far as possible, in the
light of the wording and the purpose of Directive 2006/112, in
order to achieve the result sought by that directive, which
requires that they do whatever lies within their jurisdiction,
taking the whole body of domestic law into consideration and
applying the interpretative methods recognised by that law.
C-18/13 Maks Pen
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
Sixth VAT Directive must be interpreted as meaning that it is
for the national authorities and courts to refuse a taxable
person, in the context of an intra-Community supply, the
benefit of the rights to deduction of, exemption from or
refund of value added tax, even in the absence of provisions
of national law providing for such refusal, if it is established,
in the light of objective factors, that that taxable person knew,
or should have known, that, by the transaction relied on as a
basis for the right concerned, it was participating in evasion of
value added tax committed in the context of a chain of
supplies.
C-131/13 Italmoda
Krzysztof Lasiński-Sulecki kls@umk.pl
CASE LAW AND VAT FRAUD
Does «Italmoda» apply to abuse as well?
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND
FRAUD
Leaning Tower
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Measures
(nearly) purely legal: legal + technical:
reverse charge electronic invoicing
joint and several liability (+ database)
split payment
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism
no VAT VP2
liable for
VAT due on this supply
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
supply
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism
no VAT VP2
liable for
VAT due on this supply
100 + 21
if 100% recovery rate
followed by - 21
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
supply
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (cross-border)
VAT shall be payable by the person to whom the goods are
supplied when the following conditions are met:
(a) the taxable transaction is a supply of goods carried out in
accordance with the conditions laid down in Article 141;
(b) the person to whom the goods are supplied is another
taxable person, or a non-taxable legal person, identified for
VAT purposes in the Member State in which the supply is
carried out;
(c) the invoice issued by the taxable person not established in
the Member State of the person to whom the goods are
supplied is drawn up in accordance with Sections 3 to 5 of
Chapter 3. Art. 197 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies OBLIGATORY)
• investment gold
• transactions between a taxable person who is a member of a
regulated gold bullion market and another taxable person
who is not a member of that market
• transactions taxed pursuant to Art. 352 of the VAT Directive
Art. 198 of the VAT Directive
OBLIGATORY
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(a) the supply of construction work, including repair,
cleaning, maintenance, alteration and demolition
services in relation to immovable property, as well as the
handing over of construction works regarded as a supply
of goods,
(b) the supply of staff engaged in activities covered by point
(a),
(c) the supply of immovable property, as referred to in
Article 135(1)(j) and (k), where the supplier has opted for
taxation of the supply pursuant to Article 137,
Art. 199 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(d) the supply of used material, used material which cannot
be re-used in the same state, scrap, industrial and non
industrial waste, recyclable waste, part processed waste
and certain goods and services, as listed in Annex VI,
(e) the supply of goods provided as security by one taxable
person to another in execution of that security,
(f) the supply of goods following the cession of a reservation
of ownership to an assignee and the exercising of this
right by the assignee,
Art. 199 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(g) the supply of immovable property sold by a judgment
debtor in a compulsory sale procedure.
Art. 199 of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
Member States may, until 31 December 2018 and for a
minimum period of two years, provide that the person liable
for payment of VAT is the taxable person to whom any of the
following supplies are made:
(a) the transfer of allowances to emit greenhouse gases as
defined in Article 3 of Directive 2003/87/EC of the
European Parliament and of the Council of 13 October
2003 establishing a scheme for greenhouse gas emission
allowance trading within the Community, transferable
in accordance with Article 12 of that Directive,
Art. 199a of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(b) the transfer of other units that may be used by operators
for compliance with the same Directive,
(c) supplies of mobile telephones, being devices made or
adapted for use in connection with a licensed network
and operated on specified frequencies, whether or not
they have any other use,
(d) supplies of integrated circuit devices such as
microprocessors and central processing units in a state
prior to integration into end user products,
Art. 199a of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(e) supplies of gas and electricity to a taxable dealer as
defined in Article 38(2),
(f) supplies of gas and electricity certificates,
(g) supplies of telecommunication services as defined in
Article 24(2),
(h) supplies of game consoles, tablet PC's and laptops,
(i) supplies of cereals and industrial crops including oil seeds
and sugar beet, that are not normally used in the
unaltered state for final consumption,
Art. 199a of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
(j) supplies of raw and semi-finished metals, including
precious metals, where they are not otherwise covered
by point (d) of Article 199(1), the special arrangements
for second-hand goods, works of art, collector's items
and antiques pursuant to Articles 311 to 343 or the
special scheme for investment gold pursuant to Articles
344 to 356.
Art. 199a of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
A Quick Reaction Mechanism (QRM) - special measure to
combat sudden and massive fraud liable to lead to
considerable and irreparable financial losses
Art. 199b of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Reverse charge mechanism (domestic supplies FACULTATIVE)
1) a Member State applies to the European Commission (cc:
other Member States) – simultaneously: application for a
special measure
2) the European Commission may ask for further information
within 2 weeks
3) … and further information within 1 week
4) negative opinion or confirmation of the European
Commission within 1 month
5) if confirmation received the Member State may apply the
measure from that date
Art. 199b of the VAT Directive
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
100 + 21 = 121
VP2 may be held liable for 21
Krzysztof Lasiński-Sulecki kls@umk.pl
VATABLE
PERSON
1
VATABLE
PERSON
2
supply
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
• C-384/04 Federation of Technological Industries
• C-499/10 Vlaamse Oliemaatschappij
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
Member States are permitted to enact measures under which
a person is to be jointly and severally liable to pay a sum in
respect of VAT payable by another person.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
In the exercise of the powers conferred on them by European
Union directives, Member States must respect the general
principles of law that form part of the European Union legal
order, which include, in particular, the principles of legal
certainty and proportionality.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
Whilst it is legitimate for the measures adopted by the
Member States to seek to preserve the rights of the public
exchequer as effectively as possible, such measures must not
go further than is necessary for that purpose.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
A system of strict joint and several liability go beyond what is
necessary to preserve the public exchequer’s rights. Imposing
responsibility for paying VAT on a person other than the
person liable to pay that tax, even where that person is an
authorised tax warehouse-keeper bound by the specific
obligations referred to in Directive 92/12, without allowing
him to escape liability by providing proof that he had nothing
whatsoever to do with the acts of the person liable to pay the
tax must, therefore, be considered contrary to the principle of
proportionality. It would clearly be disproportionate to hold
that person unconditionally liable for the shortfall in tax
caused by acts of a third party over which he has no influence
whatsoever. Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
It is not contrary to European Union law to require the person
other than the personal liable to pay the tax to take every step
which could reasonably be required of him to satisfy himself
that the transaction which he is effecting does not result in his
participation in tax evasion.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability
The fact that the person other than the person liable to pay
the tax acted in good faith, exhibiting all the due diligence of a
circumspect trader, that he took every reasonable measure in
his power and that his participation in fraud is excluded are
important points in deciding whether that person can be
obliged to account for the VAT owed.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-499/10 Vlaamse Oliemaatschappij
VOM is a service provider which unloads, stores in (tax)
warehouses and transfers onto lorries petroleum products
arriving by boat for its customers. The customers store the
goods in those warehouses until they are sold to the final
customer, mainly retail petrol filling stations. For those
services, VOM invoices a ‘service fee’ which depends on the
number of litres handled.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-499/10 Vlaamse Oliemaatschappij
Article 51a(3) of the Belgian Value Added Tax Code provides:
‘In the case of warehousing arrangements other than customs
warehousing, the warehouse-keeper, the person responsible
for the transport of the goods from the warehouse as well as,
where applicable, his principal, are jointly and severally liable
towards the State for the payment of the tax, together with
the persons who are liable for the tax… ’
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-499/10 Vlaamse Oliemaatschappij
Ghebra NV (‘Ghebra’) was a fuel wholesaler and stored its
petroleum products in VOM’s warehouse. On 20 June 2003
Ghebra was declared insolvent.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-499/10 Vlaamse Oliemaatschappij
Ghebra NV was a fuel wholesaler and stored its petroleum
products in VOM’s warehouse. On 20 June 2003 Ghebra was
declared insolvent.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-384/04 FTI
Sections 17 and 18 of the Finance Act 2003 (UK) were enacted
to combat ‘missing trader’ intra-Community fraud, including
‘carousel’ fraud, in the field of VAT.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-384/04 FTI
The national measures at issue in the main proceedings
provide that a taxable person other than the person who is
liable can be made jointly and severally liable to pay the VAT
with the latter person if, at the time of the supply to him, the
former knew or had reasonable grounds to suspect that some
or all of the VAT payable in respect of that supply, or of any
previous or subsequent supply of those goods, would go
unpaid.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-384/04 FTI
A person is presumed to have reasonable grounds for
suspecting that such is the case if the price payable by that
person was less than the lowest price that might reasonably
be expected to be payable for those goods on the market, or
was less than the price payable on any previous supply of
those goods. That presumption is rebuttable on proof that the
low price payable for the goods was attributable to
circumstances unconnected with failure to pay VAT.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Joint and several liability C-384/04 FTI
While Article 21(3) of the Sixth Directive allows a Member
State to make a person jointly and severally liable for the
payment of VAT if, at the time of the supply, that person knew
or had reasonable grounds to suspect that the VAT payable in
respect of that supply, or of any previous or subsequent
supply, would go unpaid, and to rely on presumptions in that
regard, it is none the less true that such presumptions may
not be formulated in such a way as to make it practically
impossible or excessively difficult for the taxable person to
rebut them with evidence to the contrary.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Split payment
price (seller’s account)
VAT (seller’s VAT account)
Taxable person has limited
rights to this account
Krzysztof Lasiński-Sulecki kls@umk.pl
price
(VAT inclusive)
LEGISLATIVE MEASURES AND FRAUD
Split payment
Is it in line with the Directive 2011/7/EU of the European
Parliament and of the Council of 16 February 2011 on
combating late payment in commercial transactions?
‘Amount due’ means the principal sum which should have
been paid within the contractual or statutory period of
payment, including the applicable taxes, duties, levies or
charges specified in the invoice or the equivalent request for
payment.
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Electronic invoicing (+ database)
all transactions registered electronically (a cloud)
Krzysztof Lasiński-Sulecki kls@umk.pl
LEGISLATIVE MEASURES AND FRAUD
Denying VAT registration?
C-527/11 Ablessio
new Romanian registration rules
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM
Congress Hall (2015)
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Different options for B2B intra-EU supplies of goods
analysed by the VAT Expert Group (2012-2014)
(presentation partly based on documents
of the European Commission)
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Maintaining the status quo (option no. 1)
Number of transactions: 2
Place of taxation: place of departure (0%)/place of
arrival
Person liable for: supplier (0%)/customer
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Adapting current rules whilst still following the flow of the
goods with the supplier charging the VAT of the Member
State of destination (option no. 2a)
Number of transactions: 1
Place of taxation: place of arrival
Person liable for: supplier
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Adapting current rules whilst still following the flow of the
goods with the reverse charge mechanism (option no. 2b)
Number of transactions: 1
Place of taxation: place of arrival
Person liable for: customer when the supplier is not
established in the state of taxation
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the rules governing B2C sales with the supplier
charging the VAT of the Member State of destination
(option no. 3a)
Number of transactions: 1
Place of taxation: place of departure or place of
arrival
Person liable for: supplier
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the rules governing B2C sales with the reverse
charge mechanism (option no. 3b)
Number of transactions: 1
Place of taxation: place of departure or place of
arrival
Person liable for: customer when the supplier is not
established in the state of taxation
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the rules governing the place of supply of
services with the supplier charging the VAT of
the Member State of destination (option no. 4a)
Number of transactions: 1
Place of taxation: place of establishment of the
customer
Person liable for: supplier
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the rules governing the place of supply of
services with the reverse charge mechanism (option no. 4b)
Number of transactions: 1
Place of taxation: place of establishment of the
customer
Person liable for: customer
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the contractual flows with the supplier
charging the VAT of the Member State of destination (option
no. 5a)
Number of transactions: 1 or 2
Place of taxation: place of establishment of the
customer/place of establishment
incurring the costs
Person liable for: supplier/customer
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Aligning with the contractual flows with the reverse charge
mechanism (option no. 5b)
Number of transactions: 1 or 2
Place of taxation: place of business of the
customer/place of the
establishment incurring the costs
Person liable for: customer
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Viable Integrated VAT (VIVAT)
(option no. 6)
Number of transactions: 1
Place of taxation: place of departure/adjustments in
the place of arrival of the
transport
Person liable for: supplier /customer (for
adjustments)
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Compensating VAT (CVAT)
(option no. 7)
Number of transactions: 1
Place of taxation: place of departure/adjustments in
the place of arrival of the
transport
Person liable for: supplier/customer (for
adjustments)
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
The Single European VAT Area (SEVA)
(option no. 8)
Number of transactions: 1
Place of taxation: EU
Person liable for: supplier
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
origin taxation
Number of transactions: 1
Place of taxation: EU
Person liable for: supplier
advantages/disadvantages
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
Proposal for a COUNCIL DIRECTIVE amending Directive
2006/112/EC on the common system of value added tax as
regards the temporary application of a generalised reverse
charge mechanism in relation to supplies of goods and services
above a certain threshold.
EUR 10 000 per invoice
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
RECENT CHANGES IN POLAND
Registration and deregistration
• tax authorities can deny registration
• tax authorities can deregister taxable entities
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
RECENT CHANGES IN POLAND
Documentation
• quarterly VAT returns nearly unavailable
• VAT returns submitted electronically (exceptions still exist)
• quarterly and annual recapitulative statements unavailable
• recapitulative statements filed electronically
• Single Control File submitted electronically
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
RECENT CHANGES IN POLAND
Reverse charge:
• electronics
• metals
• scrap materials
• emission allowances
• construction services
Krzysztof Lasiński-Sulecki kls@umk.pl
REVOLUTION IN THE VAT SYSTEM?
RECENT CHANGES IN POLAND
Administrative penalties:
• additional tax liability of 20%, 30% or 100%
Criminal penalties:
• up to 25 years imprisonment
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
Barbarka
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
How neutral is VAT?
A taxable person the right to deduct the input VAT paid for the
acquisition or production of capital goods, for the purposes of
a planned economic activity related to rural and recreational
tourism, which are (i) directly intended for use by the public
free of charge, and may (ii) enable taxed transactions to be
carried out, provided that a direct and immediate link is
established between the expenses associated with the input
transactions and an output transaction or transactions giving
rise to the right to deduct or with the taxable person’s
economic activity as a whole, which is a matter for the
referring court to determine on the basis of objective
evidence. C-126/14 Sveda
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
How neutral is VAT?
BALTIC MYTHOLOGY RECREATIONAL (DISCOVERY) PATH. BAR
free access
construction costs covered from public funds – 90%
the provision of accommodation, food and beverages, the
organisation of trade fairs, conferences and leisure activities,
as well as the engineering and consultation associated with
those activities
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
How neutral is VAT?
BALTIC MYTHOLOGY RECREATIONAL (DISCOVERY) PATH. BAR
free access
construction costs covered from public funds – 90%
the provision of accommodation, food and beverages, the
organisation of trade fairs, conferences and leisure activities,
as well as the engineering and consultation associated with
those activities
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
How neutral is VAT?
Article 168(e) of the VAT Directive must be interpreted as not
precluding national legislation which excludes the deduction
of VAT on import which the carrier, who is neither the
importer nor the owner of the goods in question and has
merely carried out the transport and customs formalities as
part of its activity as a transporter of freight subject to VAT, is
required to pay.
C-187/14 DSV Road
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
How neutral is VAT?
Under the wording of Article 168(e) of the VAT Directive, a
right to deduct exists only in so far as the goods imported are
used for the purposes of the taxed transactions of a taxable
person. In accordance with the settled case-law of the Court
concerning the right to deduct VAT on the acquisition of goods
or services, that condition is satisfied only where the cost of
the input services is incorporated either in the cost of
particular output transactions or in the cost of goods or
services supplied by the taxable person as part of his
economic activities.
C-187/14 DSV Road
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Articles 2(1) and 6(1) of the Sixth Directive are to be
interpreted as meaning that a sum paid as a deposit, in the
context of a contract relating to the supply of hotel services
which is subject to value added tax, is to be regarded, where
the client exercises the cancellation option available to him
and that sum is retained by the hotelier, as a fixed
cancellation charge paid as compensation for the loss suffered
as a result of client default and which has no direct
connection with the supply of any service for consideration
and, as such, is not subject to that tax.
C-277/05 Société thermale d’Eugénie-les-Bains
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Article 24(1) of the VAT Directive must be interpreted as
meaning that the term ‘supply of services’ includes
subscription contracts for the supply of consulting services to
an undertaking, in particular those of a legal, commercial or
financial nature, under which a supplier has agreed to be
available to the customer during the term of the contract.
C-463/14 Asparuhovo Lake Investment Company
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Articles 2(1) and 10(2) of Sixth Council Directive must be
interpreted as meaning that the issue by an airline company
of tickets is subject to value added tax where the tickets
issued have not been used by passengers and the latter are
unable to obtain a refund for those tickets.
C-250/14 and C-289/14 AirFrance KLM and Hop! BritAir SAS
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Article 2(1) and the first and second subparagraphs of
Article 10(2) of the Sixth Directive must be interpreted as
meaning that the value added tax paid when the air ticket was
purchased by a passenger who has not used it becomes
chargeable on receipt of payment of the ticket price, whether
by the airline company itself, by a third party acting in its
name and on its behalf, or by a third party acting in its own
name but on behalf of the airline company.
C-250/14 and C-289/14 AirFrance KLM and Hop! BritAir SAS
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Articles 2(1) and 10(2) of the Sixth Directive must be
interpreted as meaning that, in the event that a third party
sells an airline company’s tickets on behalf of that company in
the context of a franchise agreement and pays that company,
in respect of tickets issued and no longer valid, a lump sum
calculated as a percentage of the annual turnover from the
corresponding flight routes, that sum constitutes a sum that is
taxable as consideration for those tickets.
C-250/14 and C-289/14 AirFrance KLM and Hop! BritAir SAS
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
distributors
consumers
Krzysztof Lasiński-Sulecki kls@umk.pl
LEBARA pre-paid phone cards
OTHER DEVELOPMENTS
What’s in a service?
A telecommunications services operator which offers
telecommunications services consisting in selling to a
distributor phonecards which display all the information
necessary for making international telephone calls by means
of the infrastructure provided by that operator and which are
resold by the distributor, in its name and on its own behalf, to
end users, either directly or through other taxable persons
such as wholesalers or retailers, carries out a supply of
telecommunications services for consideration to the
distributor.
C-520/10 Lebara
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
On the other hand, that operator does not carry out a second
supply of services for consideration, this time to the end user,
where that user, having purchased the phonecard, exercises
the right to make telephone calls using the information on the
card.
C-520/10 Lebara
Krzysztof Lasiński-Sulecki kls@umk.pl
OTHER DEVELOPMENTS
What’s in a service?
Can Lebara recover the amount of tax paid when the
phonecard has not been fully used?
Krzysztof Lasiński-Sulecki kls@umk.pl
KRZYSZTOF LASIŃSKI-SULECKI
KLS@UMK.PL
Thank you
Krzysztof Lasiński-Sulecki kls@umk.pl