On November 6, 2015, at the annual meeting of the OECD Global Forum on VAT, the INTERNATIONAL VAT/GST GUIDELINES were published.

 

In the Introduction to the Guidelines the following is noted:

“At the second meeting of the OECD Global Forum on VAT, in April 2014 in Tokyo, the high-level officials of 100 jurisdictions and international organisations endorsed the first three chapters of the OECD International VAT/GST Guidelines as global standards for the application of VAT/GST to international trade. In the Statement of Outcomes of this meeting, they urged the OECD to finalise the work on the remaining elements of the Guidelines and to present the completed Guidelines for endorsement at the next meeting of the Global Forum. This work has been carried out since April 2014 and the resulting new elements of the Guidelines have been merged with those that were endorsed at the 2014 Global Forum to form a fully consolidated draft. This consolidated draft was approved by the OECD’s Committee on Fiscal Affairs (CFA) on 7 July 2015 with OECD and G20 countries working together on an equal footing, and is now presented for discussion at the third meeting of the OECD Global Forum on VAT.

 

These new elements of the Guidelines notably include a recommended solution for the effective collection of VAT/GST on the remote business-to-consumer sales of digital products by foreign suppliers (B2C Guidelines). These B2C Guidelines were developed in the context of the OECD/G20 Project on Base and Erosion and Profit Shifting (the BEPS Project). They were included in the 2015 Final Report on BEPS Action 1 “Addressing the Tax Challenges of the Digital Economy” that was endorsed by G20 Finance Ministers at their meeting on 8 October 2015 in Lima, Peru, as part of the final BEPS Package.”

 

The table of contents of the International VAT/GST Guidelines is as follows:

 

PREFACE

 

 

CHAPTER 1: Core Features of Value Added Taxes Covered by the Guidelines 

A.      Overarching purpose of a VAT: A broad-based tax on final consumption

B.      The central design feature of a VAT: Staged collection process

C.      VAT and international trade: The destination principle

D.      Application of generally accepted principles of tax policy to VAT: The Ottawa Taxation Framework Conditions

 

 

CHAPTER 2: Neutrality of Value Added Taxes in the Context of Cross-Border Trade

A.      Introduction

B.      Basic neutrality principles

C.      Neutrality in international trade

C.1    Taxation principles

C.2    Administration and compliance

D.      Applying the VAT neutrality principles in the context of cross-border trade: Commentary on the Guidelines on neutrality

D.1    Principles of good tax administration

D.2    Reciprocity

D.3    Groups of countries

D.4    Commentary on the Guidelines

D.4.1    Commentary on Guideline 2.1

D.4.2    Commentary on Guideline 2.2

D.4.2.1 Similar levels of taxation

D.4.2.2 Businesses in similar situations

D.4.2.3 Similar transactions

D.4.2.4 Summary

D.4.3    Commentary on Guideline 2.3

D.4.4    Commentary on Guideline 2.4

D.4.5 Commentary on Guideline 2.5

D.4.6 Commentary on Guideline 2.6

 

 

CHAPTER 3: Determining the Place of Taxation for Cross-Border Supplies of Services and Intangibles

A.      The destination principle

B.      Business-to-business supplies – The general rule

B.1    Defining the general rule

B.2    Applying the general rule - Supply of a service or intangible to a legal entity with single location

B.3    Applying the general rule - Supply of a service or intangible to a legal entity with multiple locations

B.3.1 Direct use

B.3.2 Direct delivery

B.3.3 Recharge method

B.3.4 Conclusion

B.4    Commentary on applying the general rule - Supply of a service or intangible to a legal entity with single location

B.4.1 Supplies to single location entities – Supplier

B.4.1.1 The determination of the place of taxation is not affected by any onward supply

B.4.1.2 The determination of the place of taxation is not affected by the direct provision of the services or intangibles to a third party business other than the customer of the supply

B.4.1.3 The determination of the place of taxation is not affected by the direction of the payment flows and the identity and location of the payer

B.4.2 Supplies to single location entities – Customer

B.4.2.1 The determination of the place of taxation is not affected by any onward supply

B.4.2.2 The determination of the place of taxation is not affected by the direct provision of the services or intangibles to a third party business other than the customer of the supply

B.4.2.3 The determination of the place of taxation is not affected by the direction of the payment flows and the identity and location of the payer

B.4.3 Supplies to single location entities - Tax administrations

B.4.3.1 The determination of the place of taxation is not affected by any onward supply

B.4.3.2 The determination of the place of taxation is not affected by the direct provision of the services or intangibles to a third party business other than the customer of the supply

B.4.3.3 The determination of the place of taxation is not affected by the direction of the payment flows and the identity and location of the payer

B.5 Commentary on applying the recharge method under the general rule - Supply of a service or intangible to a legal entity with multiple locations

B.5.1 First step - Supply to the MLE

B.5.1.1. Supplier

B.5.1.2 Customer

B.5.1.3 Tax administrations

B.5.2 Second step - recharge to the establishment(s) of use

B.5.2.1 Supplier

B.5.2.2 Customer

B.5.2.3 Tax administrations

C.      Business-to-consumer supplies –The general rules

C.1    Introduction

C.2    Business-to-consumer supplies – On-the-spot supplies

C.3    Business-to-consumer supplies – Supplies of services and intangibles other than those covered by Guideline 3.5

C.3.1 Determining the jurisdiction of the usual residence of the customer

C.3.2 VAT collection in cases where the supplier is not located in the jurisdiction of taxation

C.3.3 Main features of a simplified registration and compliance regime

C.3.3.1    Registration procedure

C.3.3.2    Input tax recovery – Refunds

C.3.3.3    Return procedure

C.3.3.4    Payments

C.3.3.5    Record keeping

C.3.3.6    Invoicing

C.3.3.7    Availability of information

C.3.3.8    Use of third-party service providers

C.3.3.9    Application in business-to-business context

C.3.3.10  Proportionality

C.3.4 International co-operation to support VAT collection in cases where the supplier is not located in the jurisdiction of taxation

D.      Business-to-business and business-to-consumer supplies - Specific rules

D.1    Evaluation framework for assessing the desirability of a specific rule

D.2    Circumstances where a specific rule may be desirable

D.2.1    Examples of circumstances where a specific rule might be desirable in a business-to-business context

D.2.2 Examples of circumstance where a specific rule might be desirable in a business-to-consumer context

D.3    Special considerations for supplies of services and intangibles directly connected with tangible property

D.3.1    Specific rule for supplies of services and intangibles directly connected with immovable property

D.3.2    Circumstances where a specific rule for supplies of services and intangibles directly connected with immovable property might be appropriate

D.3.3    Common features of supplies of services and intangibles directly connected with immovable property

D.3.4    Further description of the supplies of services and intangibles directly connected with immovable property for which a specific rule might be appropriate

D.3.5    Services and intangibles connected with movable tangible property

 

Annex 1: Examples to illustrate the application of the general rule on place of taxation for business-to-business supplies of services and intangibles to single location entities

 

Annex 2: Examples to illustrate the application of the recharge method under the general rule on place of taxation for business-to-business supplies of services and intangibles to multiple location entities

 

 

CHAPTER 4: Supporting the Guidelines in Practice: Mutual Co-operation, Dispute Minimisation, and Application in Cases of Evasion and Avoidance

A.      Introduction

B.      Mutual Co-operation, exchange of information, and other arrangements allowing tax Administrations to communicate and work together

B.1    Background

B.2    Existing mechanisms for mutual co-operation

B.2.1 Multilateral co-operation

B.2.2 Bilateral co-operation

C.      Taxpayer services

D.      Application of the Guidelines in cases of evasion and avoidance

D.1    Meaning of evasion and avoidance

D.2    Illustration of concepts of evasion and avoidance in a VAT context

 

Click here to be forwarded to the INTERNATIONAL VAT/GST GUIDELINES as published on November 6, 2015 and as available on the website of the OECD.

 

 

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