VAT-Value Added Taxation-Uncle Sham’s NEXT Raid On Your Wallet

Posted: March 21, 2015 in Uncategorized

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ALERT The Global VAT Craze – MAR 21, 2015

WSJ reports:

It’s the hottest trend among tax collectors, raising a gusher of revenue for spendthrift governments worldwide.

We refer to the value-added tax (VAT), and a new report from accounting firm Ernst & Young says that VAT “systems are spreading” around the world and “rates are rising.”

Americans, be warned.

The VAT is a sort of turbo-charged national sales tax on goods and services that is applied at each stage of production, not merely on retail transactions.

Politicians love it because it is the most efficient revenue-raiser known to man, and its rates can be raised gradually to finance new entitlements or fill budget holes.

The VAT is typically introduced with a low rate but then moves up over time until it swallows huge chunks of national economies.

E&Y finds that rates have been rising again, especially since the financial panic and recession.

E&Y says standard VAT rates now average a knee-buckling 21.6% in the European Union, up from 19.4% in 2008.

Average standard rates in the industrial countries of the Organization for Economic Cooperation and Development have climbed to 19.2% from 17.8% in 2009.

While VAT systems are often presented as models of simplicity that theoretically treat all goods and services alike, politicians can’t resist picking winners and losers, creating higher or lower rates for industries at their whim.

“The politicians always start running with exemptions,” says E&Y’s Gijsbert Bulk…

In Luxembourg, renovation of rented dwellings triggers a relatively low 3% VAT, though the country’s standard rate has recently moved to 17% from 15%.

Following a court fight in Ireland, the VAT exemption for golf greens fees has recently been expanded to cover visitors at nonprofit clubs.

Meanwhile, cleanliness is now more expensive in Spain, as E&Y reports that the VAT rate on “certain sanitary products” has been lifted to 21% from 10%.

End Of Article-Source: http://www.economicpolicyjournal.com/2015/03/alert-global-vat-craze.html

No Let Us Consider How This Will Play Out In “Uncle Sham Land”.

First, How Much Of this Is Likely To “Be On” Big Corporations?

Anybody Remember “Lux-Leaks”?

PriceWaterhouseCooper, the Global giant in Corporate Accounting-and the Star of this little Tax-Evasion Soap Opera [though most of you have yet to hear about this in the MSM…]has a Service JUST FOR dealing with VAT.

Though the initial information about the 350 and counting American Companies swept up in the Lux-Leaks Disclosures garnered a little exposure in the Global Press-it passed OUT of Public Scrutiny in a hurry.

So Get Up to Speed-Here Are A Series Of Links To What YOU NEED TO KNOW About this-as it IS robbing you of YOUR tax dollars while the Industries like the Koch Brothers milk Uncle Sham for subsidies-skating by paying little or no taxes:

[1] Leaked Documents Expose Global Companies’ Secret Tax Deals
Tiny European duchy a “magical fairyland” for corporations seeking to cut tax bills:
http://www.icij.org/project/luxembourg-leaks/leaked-documents-expose-global-companies-secret-tax-deals-luxembourg

[2] Explore the Documents: Luxembourg Leaks Database
Search more than 350 global companies to see their secret tax agreements with Luxembourg: http://www.icij.org/project/luxembourg-leaks/explore-documents-luxembourg-leaks-database

[3] Tricks of the Trade
They are everyday brand names, products and services we all use – but where does the money go and how much tax do these companies pay?
http://www.icij.org/luxleaks/tricks-trade

KEY FINDINGS

1. Pepsi, IKEA, AIG, Coach, Deutsche Bank, Abbott Laboratories and nearly 340 other companies have secured secret deals from Luxembourg that allowed many of them to slash their global tax bills.

2. PricewaterhouseCoopers has helped multinational companies obtain at least 548 tax rulings in Luxembourg from 2002 to 2010.

These legal secret deals feature complex financial structures designed to create drastic tax reductions.

The rulings provide written assurance that companies’ tax-saving plans will be viewed favorably by Luxembourg authorities.

3. Companies have channeled hundreds of billions of dollars through Luxembourg and saved billions of dollars in taxes.

Some firms have enjoyed effective tax rates of less than 1 percent on the profits they’ve shuffled into Luxembourg.

4. Many of the tax deals exploited international tax mismatches that allowed companies to avoid taxes both in Luxembourg and elsewhere through the use of so-called hybrid loans.  

5. In many cases Luxembourg subsidiaries handling hundreds of millions of dollars in business maintain little presence and conduct little economic activity in Luxembourg.

One popular address – 5, rue Guillaume Kroll – is home to more than 1,600 companies.

6. A separate set of documents reported on by ICIJ on Dec. 9 expanded the list of companies seeking tax rulings from Luxembourg to include American entertainment icon The Walt Disney Co., politically controversial Koch industries and 33 other firms.

The new files revealed that alongside PwC tax rulings were also brokered by Ernst & Young, Deloitte and KPMG, among other accounting firms.

Main Resource Page: http://www.icij.org/project/luxembourg-leaks

Here’s The PWC Page that deals with VAT:

Value Added Tax

Value Added Tax (VAT) in the Luxembourg Asset Management industry

VAT can be an important cost to the Asset Management industry. Funds and asset managers must consider both VAT risks and opportunities in the set-up and development of their product range.

VAT in a nutshell

VAT is a tax on transactions;

VAT is neutral for businesses insofar the activities they perform are subject to VAT or are deemed to be subject to VAT;

VAT rules are deemed to be harmonised within the European Union, but in practice differences among Member States are important (VAT rates, scope of VAT exemptions, VAT reporting obligations, etc.);

For VAT exempt businesses, VAT generally is a final cost that affects profitability or performance.

Background

In Luxembourg, funds’ activity itself is regarded as exempt from VAT with often no full recovery right. As a consequence, any of VAT incurred by a fund on its purchases impacts the performance of the fund.

The EU VAT Directive (Directive 2006/112/EC) provides for a VAT exemption for the management of special investment funds as defined by Member States. Thanks to this exemption, a range of services supplied to funds are not subject to VAT.

This however comes as a result that suppliers providing exempt services (management companies, administrative agents, etc.) have to deal on their turn with the question of the recovery of VAT on their purchases.

Key VAT considerations in the Asset Management sector in Luxembourg

VAT position of funds

In Luxembourg the following funds are regarded as VAT taxable persons:

Regulated investment funds (UCITS and non-UCITS) under corporate form;
Pension funds;

Specialised investment funds (SIF) under corporate form;

SICARs – Société d’Investissement en Capital à Risque (Investment company in risk capital);

Securitisation vehicles.

FCPs (contractual form) have no legal personality. However, the management company of these funds is a taxable person and is liable for VAT on behalf of the FCP.

Being a VAT taxable person determines the place of taxation of services received from service suppliers established outside Luxembourg.

Being a VAT taxable does not mean that the funds are entitled to deduct/recover VAT borne on costs.

Place of taxation of services received by the funds

The place of taxation of services received is the place where the funds are established as a main rule (there are some exceptions to that principle).

When the place of taxation is in Luxembourg, you have to consider whether the services may be VAT exempt or if VAT is applicable.

VAT treatment of the main supplies of services
Services

Place of taxation

VAT treatment

Person liable to pay the tax

Management services

Luxembourg Exempt N/A
Investment advice

Luxembourg Exempt N/A
Risk Management

Luxembourg Exempt N/A
Administrative services

Luxembourg Exempt N/A
Depositary services

Control / Supervision

Luxembourg
12%

Depositary bank
Other services

Luxembourg Exempt N/A
Transfer agent

Luxembourg Exempt N/A
Paying agent

Luxembourg Exempt N/A
Domiciliation services (management companies)

Luxembourg 15% / Exempt* ManCo / N/A
Domiciliation services (funds)

Luxembourg Exempt N/A
Distribution services

Luxembourg Exempt N/A
Legal advice

Luxembourg 15%
Fund / Manco / Lawyer

Audit services

Luxembourg 15% Auditor
* Domiciliation services when rendered to the management company of a FCP should be VAT exempt since a FCP has no legal personality and is required to appoint a management company to act on its behalf.

Person liable to pay the VAT

The Luxembourg funds or management companies are liable to reverse-charge the VAT on cross-border transactions (if no exemption applies) by reporting the transactions into their Luxembourg VAT returns and remit the corresponding VAT to the authorities.

VAT compliance obligations of Luxembourg funds and management companies
Funds and management companies need to register for VAT purposes in Luxembourg if they receive goods from EU-suppliers for more than 10,000 euros within a calendar year and / or services from foreign suppliers on which they must reverse charge Luxembourg VAT..

Unless the fund / management company is also performing a taxable activity which grants a VAT recovery right, the fund/management company would have to register under the simplified regime (obligation to file an annual VAT return).

Outsourcing / delegation of services

Outsourced / delegation of services may fall outside the scope of the VAT exemption for management of special investment funds, resulting in an additional cost.

To be exempt, delegated services must form a distinct whole and are specific and essential for the management of the fund.

Standard VAT rates in the main asset management EU countries
15.0 %
19.0 %
19.6 %
20.0 %
23.0 %
Luxembourg
Germany
France
UK
Ireland
0
2.5
5
7.5
10
12.5
15
17.5
20
22.5
25

Luxembourg has the lowest standard VAT rate in the European Union (15%)

Solutions exist to limit the risk of VAT leakage on outsourced / delegated services

Main operational and business implications:
Five tips to manage the VAT costs for the Asset Management industry

1. Get in control
Categorise for VAT purposes services supplied and received

2. Reduce risks
Review VAT treatment and VAT reporting on a regular basis

3. Secure VAT treatment
Document and formalise fee arrangements with a specific VAT review

4. Kick-out unnecessary VAT costs
Minimise the cost of unrecoverable VAT and identify savings opportunities

5. Simplify compliance
Have efficient processes and systems for VAT in place such as decision tables and VAT coding

This publication is for information purposes only and does not constitute any kind of tax and/or legal advice. The reader should not act on the basis of this publication without seeking professional advice. PricewaterhouseCoopers, Société coopérative, its partners, employees and or agents, neither owe nor accept any duty of care or any responsibility to any other party, whether in contract or in tort (including without limitation, negligence or breach of statutory duty) however arising, and shall not be liable in respect of any loss, damage or expense of whatever nature which is caused to any other party.

Additional Documents in pcf Downloads From PWC:

1. https://www.pwc.com/gx/en/tax/pdf/impact-of-vat.pdf
2. http://www.pwc.com/gx/en/paying-taxes/assets/pwc-paying-taxes-2014.pdf
3. http://www.pwc.lu/en/tax-research/index.jhtml

Remember, PWC LED the Corporations to Luxembourg and other Tax Havens, essentially eliminating most of their tax liability. In the US, some corporations not only have NO tax liability, but have subsidies none-the-less.

IF The VAT becomes prevalent in the US, your costs for EVERYTHING will rise as they’re implemented…and since they tend to be incremental, you’ll hardly notice until they start getting out of hand. Since the US has more players in Business than most countries, because of the tremendous growth of Value-Added Companies in recent years-“incremental” could be faster than the EU has experienced.

Last, but not least, anyone wonder why the push is back on for the TTIP and TPP?

If implemented those “Trade Deals” would effectively blunt any significant investigation into this who Tax Evasion drama, making it virtually impossible for any Governmental Investigative Authority to move past the Corporate Governance that would trump it according to the leaked data.

So, America, keep watching Oligarch TV, stay distracted and at each others throats, and you will do nothing but accomplish the Elite’s fairly transparent goal of stripping the Middle Class of it’s resources and choices. If you failed to read ALL the documentation presented here-you’ll have no one but yourselves to blame.

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