- eg double taxation in a narrow vs a broad sense; formal vs substantial; typical vs atypical; technical vs non-technical; legal vs juridical vs economic; direct vs indirect; and horizontal vs vertical double taxation (see Helmut Debatin and Franz Wassermeyer (eds), Doppelbesteuerung, Vor Art 1, para 1, with further references).
- See Hans G Ruppe, ‘General Report' in ‘International Problems in the Field of General Sales Taxes on Sales of Goods and Services’ (1983) 68b IFA Cahiers de Droit Fiscal International 114.
- For further detail see Joachim Englisch, Wettbewerbsgleichheit im grenzüberschreitenden Handel (Mohr Siebeck, 2008) 762 ff; Thomas Ecker, A VAT/GST Model Convention (IBFD, 2013) 35 ff, both with further references. ‘Supply’ is used here in its broadest sense, to include all types of transactions that may trigger VAT and also covering cross-border movement of goods.
- For a more detailed discussion of the rationale underlying VAT, see Ecker (n 3) 95 ff, with further references.
- See OECD, ‘The Application of Consumption Taxes to the International Trade in Services and Intangibles: Progress Report and Draft Principles' (2005), www.oecd.org/tax/consumption/34422650.PDF, 3 (all websites accessed August 2013); Commission, ‘Introduction of a Mechanism for Eliminating Double Imposition of VAT in Individual Cases' (consultation paper) TAXUD/D1/… 5 January 2007, 2–3; Nils Erikson, ‘Should Tax Treaties Play a Role for Consumption Taxes?’ (2005) 33 Intertax 168; Rebecca Millar, ‘GST Issues for International Services Transactions' (2004) 4 Australian GST Journal 288; Rebecca Millar, ‘Cross-Border Services: A Survey of the Issues' (2007) 13(2) New Zealand Journal of Taxation Law and Policy 302, 325; Englisch (n 3) 769 ff; Ecker (n 3) 37 ff, with further details and examples; see also OECD, Working Party No 24 of the Fiscal Committee, First Report on Double Indirect Taxation (1966) FC/WP 24(66)1, 9 ff; Ruppe (n 2) 121 ff.
- Possible negative consequences of VAT double (non-)taxation can, for instance, be a restraining effect on international trade, distortion of competition, potential negative welfare effects, and increased consumer prices. For a more thorough analysis of the negative consequences of VAT double (non-)taxation, see Ecker (n 3) 30 ff, with further references.
- The most prominent example is probably the European Union, where VAT is almost completely harmonised. Other examples comprise, for instance, the ANDEAN Community, the Union Economique et Monétaire Ouest Africaine (UEMOA) and the Communauté Economique et Monétaire de l'Afrique Centrale (CEMAC).
- See OECD, ‘The Application of Consumption Taxes to the International Trade in Services and Intangibles' (2004), www.oecd.org/tax/consumption/32997184.pdf, esp para 40.
- See most recently OECD, ‘International VAT/GST Guidelines, Draft Consolidated Version, Invitation for Comments' (2013), www.oecd.org/tax/consumption/ConsolidatedGuidelines20130131.pdf; for prior developments, see also Thomas Ecker, ‘OECD-Begutachtungsentwurf zu internationalen MwSt-Richtlinien mit brisantem Inhalt’ (2013) 23 Steuer und Wirtschaft International 118; Alain Charlet and Stéphane Buydens, ‘The OECD International VAT/GST Guidelines: Past and Future Developments' (2012) 1 World Journal of VAT/GST Law 175; Thomas Ecker, ‘Aktuelle Arbeiten der OECD im Bereich der Mehrwertsteuer' (2009) 19 Steuer und Wirtschaft International 542.
- For a classification, description and evaluation of different measures against VAT double (non-)taxation, see Ecker (n 3) 49 ff.
- Elena Variychuk, ‘The Russian Federation’ in Michael Lang, Pasquale Pistone, Josef Schuch and Claus Staringer (eds), The Impact of the OECD and the UN Model Conventions on Bilateral Tax Treaties (Cambridge University Press, 2012) 915.
- Russian treaties on indirect taxes, hereinafter referred to as ‘indirect tax treaties', cover VAT and excise tax.
- At present, the official members of the CIS are Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan (associate member) and Uzbekistan. Ukraine participates de facto but has not yet signed the CIS Charter. For more information on the CIS, see www.cis.minsk.by.
- See eg Agreement on Establishment of the Free Trade Zone of 15 April 1994, unofficial translation—terminated (initially concluded between Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan Ukraine and Georgia); Agreement on the Free Trade Zone of 18 October 2011, unofficial translation (concluded between the abovementioned countries except for Azerbaijan, Georgia, Turkmenistan and Uzbekistan). The Agreement on the Free Zone refers to WTO law provisions and is mainly dedicated to customs duties, as well as to the application of special protective, antidumping, compensation and other measures in interstate trade. The Agreement also provides for restriction of subsidies (state aid) which may lead to infringements of interests of other contracting parties.
- See Agreement on Establishment of the United Customs Territory and Establishment of the Customs Union of 6 October 2007, unofficial translation; Agreement on Eurasian Economic Commission of 18 November 2011, unofficial translation (the Eurasian Economic Commission is a permanent dispositive body of the Customs Union and United Economic Space). As of 1 July 2011, the internal customs borders between Belarus, Kazakhstan and Russia were abolished. Currently the customs control points exist only at the external borders of the Customs Union.
- Protocol of 11 December 2009 on Imposition of Indirect Taxes on Works and Services in the Customs Union, unofficial translation.
- Treaty of 10 October 2000 between the Government of the Russian Federation and the Government of the Republic of Kyrgyzstan on the Principles of Collection of Indirect Taxes in Mutual Trade, unofficial translation; Treaty of 20 October 2000 between the Government of the Russian Federation and the Government of the Republic of Armenia on the Principles of Collection of Indirect Taxes in Mutual Trade, unofficial translation; Treaty of 29 November 2000 between the Government of the Russian Federation and the Government of the Republic of Azerbaijan on the Principles of Collection of Indirect Taxes in Mutual Trade, unofficial translation.
- Treaty of 4 May 2001 between the Government of the Russian Federation and the Government of the Republic of Uzbekistan on the Principles of Collection of Indirect Taxes in Mutual Trade, unofficial translation; Treaty of 29 May 2001 between the Government of the Russian Federation and the Government of the Republic of Moldova on the Principles of Collection of Indirect Taxes in Mutual Trade, unofficial translation.
- Treaty of 25 January 2008 on the Principles of Collection of Indirect Taxes on Export and Import of Goods, Works Performed, and Services Provided in the Customs Union, unofficial translation.
- Protocol on Collection of Indirect Taxes and on Mechanism of Control over the Payments in Relation to Export and Import of Goods in the Customs Union of 11 December 2009, unofficial translation.
- For a more thorough analysis of strategies against VAT double (non-)taxation and their pros and cons, see Ecker (n 3) 49 ff, with further references; see also Helmut Loukota, ‘Multilateral Tax Treaty Versus Bilateral Tax Treaty Network' in Michael Lang and Helmut Loukota (eds), Multilateral Tax Treaties: New Developments in International Tax Law (Linde Verlag, 1988) 90.
- On the concept of income and VAT treaties, see also Ecker (n 3) 177. It is interesting to note, though, that at least one Russian tax treaty, namely that with Belarus (currently replaced by the EurAsEC Customs Union Indirect Tax Treaty), initially contained a subject-to-tax provision for export (Art 2 of the Treaty between the Government of the Russian Federation and the Government of the Republic of Belarus on Principles of Collection of Indirect Taxes in Relation to Export and Import of Goods, Provision of Works and Services of 15 September 2004, unofficial translation. The agreement was terminated by the Protocol of 14 July 2011 due to the adoption of the EurAsEC Customs Union Indirect Tax Treaty).
- For the difference between harmonisation and tax treaties that limit taxing rights, see Ecker (n 3) 62 and 177.
- See Arts 1 and 2 in connection with Arts 3 and 4 OECD Model.
- Peggy Musgrave, ‘International Aspects of Value Added Taxes: Lessons for Developing Countries' (2001) 12 VAT Monitor 111.
- Exceptions are, for example, cases where the place of taxation is determined by reference to the supplier location or where a customer location rule applies together with a reverse charge.
- For more detail, see Ecker (n 3) 79 ff and 181 ff. See also Thomas Ecker, ‘Tax Treaties as Solution for Value Added Tax and Goods and Services Tax Double Convention' in Michael Lang, Peter Melz and Eleonor Kristoffersson (eds) and Thomas Ecker (assoc ed), Value Added Tax and Direct Taxation (IFBD, 2012) 1269, 1274 ff.
- This is also supported by the fact that the title of the Protocol refers to ‘works performed and services provided in the Customs Union, which indicates that the treaty partners did not intend to relinquish their taxing rights in favour of any third countries that are not party to the treaty. A similar approach for the limitation of scope for VAT treaties is proposed by Thomas Ecker (see Ecker (n 3) 187 ff).
- For more detail and arguments for this distinction, see Ecker (n 3) 138 ff, with further references.
- It should be noted that the ‘place of taxation’ is the result of the combination of place of supply rules, zero-rating rules and rules on the taxation of imports. Therefore, it is important to highlight that ‘place of taxation’ and ‘place of supply’ are different concepts and need to be distinguished. In an international context and especially for comparative purposes it makes sense to have recourse to the concept of ‘place of taxation’ as states may use different techniques and a different mix of place of supply, zero-rating and import rules to determine whether they can tax a supply. For more details on the distinction between place of supply and place of taxation, see Ecker (n 3) 133 ff, with further references.
- For more details and further references, see Ecker (n 3) 389 ff.
- It should be noted, though, that the EurAsEC Customs Union Indirect Tax Treaty does not explicitly state that the 0% VAT rate is equivalent to tax exemption, but the treaty states that taxpayers have the right of deduction in respect of VAT paid for the resources used for the manufacture and sale of goods.
- See eg Art 1 EurAsEC Customs Union Goods Protocol.
- For more detail on the distinction between place of supply and place of taxation, see Ecker (n 3) 133 ff, with further references.
- See Letter of the Russian Ministry of Finance No 03–07–13/21 of 12 September 2012.
- Note that the respective agreements of the EurAsEC Customs Union use the wording ‘member states’ instead of ‘contracting states’.
- For electronic exchange of information within the Customs Union see section 8 (Exchange of information).
- Hence, in combination the rules on exports and imports of goods only limit taxing rights (instead of harmonising the domestic place of taxation rules). On the other hand, the agreements of the EurAsEC Customs Union also contain harmonising elements, such as the abovementioned minimum documentation requirements for exports and imports, or rules on the tax base of imports (as explained below).
- Alan Schenk and Oliver Oldman, Value Added Tax (Brill, 2001) 182 ff, with a few special exceptions mentioned; see also Alan Tait, Value Added Tax: International Practice and Problems (International Monetary Fund, 1988) 309.
- An exception is temporary imports of tangible property. These are generally not taxed. Suppliers of services may, for instance, need to import equipment to carry out their professional duties only to export them again once the supply has taken place. These temporary imports should not be considered taxable imports (see Tait (n 39) 394–5 for further details and examples).
- This is in accordance with international practice. For background and further detail, see Ecker (n 3) 305 ff and 364 ff.
- See section 4 (Scope of the treaties) for more detail. A similar approach is taken by Ecker for his VAT/GST Model Convention (see Ecker (n 3)).
- On the use and necessity of proxies for place of taxation rules, see Ecker (n 3) 131 ff, with further references; Thomas Ecker, ‘Place of Effective Use and Enjoyment of Services: EU History Repeats Itself' (2012) 22 International VAT Monitor 407.
- See OECD (n 9) paras 3.6 ff.
- In our opinion, the term ‘taxpayer’ as used in this provision should cover only taxpayers for VAT purposes. If one considers that para 5 of Art 3 allocates taxing rights to the state in which the taxpayer provides services or works, together with the fact that for VAT purposes only businesses can provide taxable services and works, this suggests that ‘taxpayer’ should be interpreted as taxpayer for VAT purposes. Furthermore, the proxies chosen in Art 3 of the EurAsEC Customs Union Works and Services Protocol are very similar to those that had been in place in the EU before 2010. As a consequence, it could be argued that the former EU rules and their underlying reasoning could be useful for the interpretation of the provisions in question (see also below in this article). Before EU Directive 2008/8/EC, the respective EU provision (Art 56 EU VAT Directive) applied only to B2B supplies. Finally, taking into account the name and the purpose of the Protocol, one can assume that only VAT taxpayers were meant to be covered.
- We are not aware of any judicial case in this respect. However, due to the reasons mentioned in n 45, we would suggest that the term ‘taxpayer’ should be interpreted as taxpayer for VAT purposes.
- See Letter of the Department of the Tax and Customs Tariff Policy of the Russian Ministry of Finance No 03–07–08/144 of 4 June 2012; Letter of the Russian Ministry of Finance No 03–07–08/284 of 11 October 2011; Letter of the Russian Ministry of Finance No 03–04–08/129 of 24 November 2004.
- That means before the changes that were introduced through EU Directive 2008/8/EC, most of which have become applicable as of 1 January 2010.
- See Art 43 EU VAT Directive before its change through EU Directive 2008/8/EC.
- See former Art 45 EU VAT Directive (now Art 47).
- See former Art 52(a) EU VAT Directive (now Arts 53 and 54(1); as of 2011, however, for B2B supplies, the link to the place of performance has been reduced to services in respect of admission to the events).
- See former Art 52(c) EU VAT Directive (now Art 54(2)(c), which since its introduction in 2010, however, only applies to B2C).
- Since its introduction in 2010, Art 59 only applies to B2C supplies of services rendered to non-taxable persons outside the EU. Similar to Art 59, the former Art 56 EU VAT Directive had never applied to services rendered to a non-taxable person in the EU (with the exception of electronically supplied services).
- See EU Directive 2008/8/EC.
- See Guideline 3.2 of the OECD (n 9).
- See Guidelines 3.6 and 3.7 of the OECD (n 9).
- See Case No A57–7802/2011, Decision of the Federal Arbitration Court of Povolzhsky Region of 14 December 2011. In that case a Kazakh firm supplied ferrous steel scrap to a Russian taxpayer. Russian tax authorities argued that an import VAT at the general rate of 18% should be levied. Based on Art 3 of the EurAsEC Customs Union Indirect Tax Treaty, the court concluded that no import VAT should be levied, as under Art 149 of the Russian Tax Code the supply of ferrous and non-ferrous scrap within the territory of Russia (eg internal supply) is exempt from VAT. Therefore, import of the same goods from Kazakhstan should enjoy the same treatment.
- For background, further detail and references, see Ecker (n 3) 393 ff; see also Marc Bourgeois and Adeline Römer, ‘Effects of Existing Tax Treaties on VAT (Relevance aof Arts 24–27 OECD Model for VAT/GST)' in Lang et al (n 27) 1,231 ff.
- Some authors even consider Art 24(3) not applicable to VAT: see Adam Zalasiński, ‘Article 24(1) of the OECD Model Convention and the Exclusion of MFN Treatment' [2007] Intertax 460, 467–8; for a different opinion, see Michael Tumpel and Christian Stangl, ‘Das Betriebstättendiskriminierungsverbot’ in Michael Lang, Claus Staringer and Josef Schuch (eds), Die Diskriminierungsverbote im Recht der Doppelbesteuerungsabkommen (Linde, 2006) 69, 72–73, with further references; Bourgeois and Römer (n 58) 1245; Kasper Dziurdź, ‘Umsatzsteuerbefreiung für Kleinunternehmer und Diskriminierungsverbote in Doppelbesteuerungsabkommen’ (2010) 20 Steuer und Wirtschaft International 266, 267 ff; Michael Lang, ‘Umsatzsteuer und Doppelbesteuerung’ in Markus Achatz and Michael Tumpel (eds), Umsatzsteuer und internationales Steuerrecht (Linde, 2012) 30 ff.
- See also Bourgeois and Römer (n 58) 1246; DziurdŹ (n 59) 266, 268.
- DziurdŹ (n 59) 266, 268 ff is doubtful; for further discussion and detail see also Ecker (n 3) 398 ff.
- For more detail, see Ecker (n 3) 400 ff; see also Bourgeois and Römer (n 58) 1246.
- See Ecker (n 3) 405 ff, with a proposal for such a provision.
- See Variychuk (n 11) 940.
- See para 1 OECD Model: Commentary on Art 25; as concerns the paragraphs relevant for the analysis in this paper, Art 25 of the UN Model reproduces Art 25 of the OECD Model (see paras 1 and 3 UN Model: Commentary on Art 25). Therefore, in the following, reference is made only to the OECD Model provision.
- See Ecker (n 3) 407 ff, with further references for more detailed analysis; see also Bourgeois and Römer (n 58) 1,252 ff.
- Compare eg Art 7 of the abovementioned treaty between the Government of the Russian Federation and the Government of the Republic of Belarus of 2004, and Art 4 of the abovementioned EurAsEC Customs Union Goods Protocol of 2009.
- For more detail see eg Ecker (n 3) 412 ff.
- See Variychuk (n 11) 941.
- The OECD Model Agreement on Exchange of Information on Tax Matters does not prima facie suggest an extension to VAT. Art 3(2) of the multilateral version of the agreement only states that ‘[t]he Contracting Parties, in their instruments of ratification, acceptance or approval, may agree that the Agreement shall also apply to indirect taxes'.
- eg the Protocol of 2007 to the Russia-Germany DTC of 30 December 1996. See Variychuk (n 11) 942.
- Council of Europe, European Convention on Mutual Assistance in Criminal Matters (20 April 1959), later extended to fiscal offences through Council of Europe, Additional Protocol to the European Convention on Mutual Assistance in Criminal Matters (17 March 1978); for further detail see Michael Engelschalk in Klaus Vogel and Moris Lehner (eds), DBA (CH Beck, 5th edn 2008) Art 26 para 19, with further references.
- See Protocol on Exchange of Information in Electronic Form between Tax Authorities of the Member States of the Customs Union regarding the Amount of Indirect Taxes Paid of 11 December 2009, unofficial translation, hereinafter EurAsEC Customs Union Information Exchange Protocol.
- Agreement on Establishment of the Eurasian Economic Community of 10 October 2000, unofficial translation. Note that Armenia, Ukraine and Moldova have the status of observers in respect of EurAsEC. Uzbekistan cancelled its EurAsEC participation in 2008. For more information see www.evrazes.com.
- It is highly probable that Kyrgyzstan will be the next EurAsEC country officially to join. A working group of the EurAsEC Customs Union on the issue of Kyrgyzstan's accession was created as early as 2011 (see Decision of the Interstate Council of the Eurasian Economic Community of 19 October 2011).
- See, for instance, a press office release of the Ukrainian President Viktor Yanukovych, available at www.president.gov.ua/en/news/27332.html; however, whether these countries will join the union will depend on domestic policy of those countries and will most probably not happen in the near future.
- For instance, the Vietnam and EurAsEC Customs Union are considering concluding an agreement on free trade in the near future. See a press release of the Eurasian Economic Commission, available at www.tsouz.ru/news/Pages/10–09–2012.aspx.
- For a fully developed example of such a model convention, see Ecker (n 3).
World Journal of VAT/GST Law
Volume 2, 2013 - Issue 2