VAT, solar panels and the supply of power

Solar panels that generate electricity in excess of your domestic requirements typically feed the excess power back into the utility lines. This excess is sold to the utility company.

Under certain circumstances, this on-going supply of power leads to the supplier being a taxable person for VAT – the European Court of Justice rules as much in the Fuchs case (see below for a pdf of the ruling). Even though there is only a single customer (i.e. the utility company), the seller is considered as a taxable person for VAT.

This notion creates all sorts of interesting VAT complications. For example, what if the sales are below the registration threshold, or what if the seller is an individual who can opt for the special rules for small undertakings?

The Dutch tax authorities have finally issued a comprehensive approach to the VAT implications of the sale of energy. If you read Dutch, see here:  (also see here: and here: (sorry, had to shorten these links) and otherwise, if you are interested, let me know and I will explain the Dutch rules.

I have not been able to find similar responses to the Fuchs-ruling in other member states – please add a comment if you know more!

Download (PDF, 215KB)

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Mandatory e-invoicing gets popular

At the IPT annual conference earlier this month we talked about invoices as the backbone of any VAT system, and also about the efforts of many authorities to address VAT fraud through specific invoicing rules. I highlighted the popularity of the lottery system on restaurant receipts – the scratch “fa piao” that China has had since 2002 – which is now also considered in EU countries.

Where a fa piao works great for forcefully documenting business-to-consumer sales, for business-to-business supplies China uses the so-called Golden Tax system, where VAT sales invoices are pre-certified online by the government. On the buyer’s side, only VAT on these invoices can be considered in the calculation of the input tax recovery.

The EU has struggled for decades to get their arm around the VAT and legal aspects of e-invoicing. I vividly remember that some countries accepted e-invoicing – as long as “an ‘original’ hardcopy of the invoice would be presented at the local post office for certification”.

E-invoicing in the EU has been harmonized since January 1, 2013, so all we need to deal with is the various exceptions and interpretations of the 28 member-states. Although the EU Commission claimed that business would save 18 billion Euro under the new e-invoicing rules, concerns of fraud have muffled that initial enthusiasm. Don’t ever think of implementing multi-country e-invoicing without first speaking to a multinational VAT specialist!

In an effort to fight VAT fraud, Argentina has now mandated electronic invoicing. Starting with specific industry sectors, the expectation is that most Argentinian businesses (and even some individuals) will be required to apply electronic invoicing. There is a currently existing system for e-invoicing in Argentina, but that will be abandoned in favor of the new one.

Edicom has a good summary here:, and if your Spanish is up to scratch you can find the official text of General Resolution 3749 here, on page 12: (Note that this is a 7MB pdf file)

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Thank you for 5 years!

Today (July 1, 2015) marks the fifth anniversary of the start of my one-man-VAT-band. I have many thoughts about the past five years, and I just wanted to share a couple on this occasion.

Needless to say that it has been a pretty interesting journey, both professionally and for my family. The gist of it is that my job has become much more appealing – although I make longer hours, the work is much more flexible. The mailman asked the other day if I had retired, because he always runs into me when I bring the kids to school! I got much more exposure to my family and am probably more involved in bringing up the kids than I could ever make time for while working in a Big 4 environment.

The other major benefit – and frankly speaking eye-opener – is that I am now able to take the time to get to know my client’s business and organization. As a result, my VAT advice has become much more practical and relevant for the client – not because Big 4 advisers are not doing a good job, but simply because my rate and my approach are better suited for U.S. based multinationals that have no or limited in-house VAT capability.

Before you get a picture that is too rosy – this all of course comes at significant financial cost. My income this year is just over half of what I made in my last year as a director at PWC New York – enough said!

Business development is not easy for anyone practicing VAT in the U.S. But I found out the hard way that there is an additional drawback for an independent tax adviser.

Potential clients would say “Look Mark, you are exactly what we need. Your approach, experience and profile fit great into our global organization. I would engage you on the spot, but the Head of Tax has a cozy relationship with … [name of any Big 4 firm] and I am not prepared to defend working with a one-man-band.” I have been told these exact words and variations on the theme 5 times over the past six months. I don’t have a solution – such companies need to take a leap of faith too. As my clients will tell you, I don’t compete with Big 4 VAT advisers, in fact, we work together often – as brilliantly demonstrated during my recent Singapore trip.

So let me take this moment to say a heartfelt thank-you to my committed supporters, friends and certainly also my dedicated clients. You know who you are. Without your friendly coaching, gentle steering and truly remarkable confidence, this one-man-band would have played only a few gigs. Every day I recognize and celebrate your active support, and I look forward to the next five years of US VAT, Inc.


P.S. The VAT Blog turned 5 too! I will celebrate once I hit 500 postings – about 20 more to go.

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Again: VAT and holding companies

This is not an item that U.S. companies generally want to spend a lot of time on. But on occasion holding companies incur VAT – predominantly on expenses relating to consulting, legal work, M&A deals etc.

These VAT charges can be substantial, and the question is whether a holding company is “in business” and is therefore a taxable person, and if so, if that taxable person is entitled to a VAT refund of VAT incurred (or “reverse charged” VAT).

Courts have been struggling with this for many years, due to minute differences in facts and circumstances in the various cases brought before them.

There is another such case pending before the European Court of Justice. Larentia + Minerva GmbH & Co. KG (C-108/14) will be published on July 16.

PWC is organizing a webinar on July 20 at 10am Eastern to share their thoughts and comments. Click here to sign up:

Hat-tip to Bart van Osch

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VAT management = data management

Over the past couple of years I have been helping U.S. based multinationals to get a grip on managing their business data and ensure efficient, timely and compliant VAT filings and VAT invoices.

Electronic invoicing and self-billing (or e-procurement) finally seems to be taking off after many hiccups, where not only accounting data but also vendor and customer master data have an important effect on VAT.

It has been a fascinating addition to my old-school job of VAT adviser, and it opened my eyes to practical, day-to-day challenges of in-house indirect tax practitioners – I also recognized how profoundly different sales/use tax filings are from global VAT compliance. IT departments (not a common tax ally) are deeply involved with data management, and some of my clients even have IT specialists embedded into their internal tax organization.

I have spend many a blog post on this challenge, and my new search function will help you identify them on this blog (see the box in the column on the right). Also have a look at, where Richard Cornelisse and his team share their views on tax data managament.

In addition, all Big 4 accounting firms have something to say at various levels of complexity. The below pdf from KPMG discusses audit and compliance developments in relation to “Big Data”. I have yet to see a more comprehensive article that includes all aspects (i.e. e-invoicing and e-procurement mentioned above) – but KPMG’s discussion is a worthy addition to your summer reading list.

Download (PDF, Unknown)

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VAT increase vs. economic growth

When Japan recently increased its consumption tax rate, it seemed to hinder economic growth. We have seen the same in Spain and to a certain extent also in Italy.

The Washington DC-based Tax Foundation now makes the case that VAT increases do not necessarily lead to recession, at least not in the case of Japan. Japan cut the corporate tax rate at the cost of a set of Consumption Tax increases and thus substituted tax on companies for tax on individual consumption.

This move towards taxing consumption vs. taxing income is an ongoing trend and theme in most countries’ tax reform. In practical terms, VAT/GST continues to increase in popularity, and its global impact becomes more tangible.

Did you know that the average company in a VAT jurisdiction must manage an amount somewhere between 20%-45% of its gross sales in VAT only? Imagine what would happen if a company miscalculates input VAT or output VAT.

The brief item of the Tax Foundation is here:

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KPMG’s June 30 webcast: GST in India

As I suggested in an earlier blog post (see here), GST is getting more traction in India. They are looking at an implementation date of April 1, 2016 – which seems a bit tight to me.

KPMG India is organizing a webcast on Tuesday,  June 30 2015  at 3pm GMT – 10am Eastern with the following agenda:

  • Is 1 April 2016 deadline for implementation of GST realistic, given that the bill has been now referred to a select committee?
  • Likely timelines for critical milestones such as draft GST legislation, setting up of IT infrastructure, etc.
  • Impact of GST on businesses and how corporates should plan for this transition?

Register here:
Sorry to report that KPMG has not scheduled a similar webcast at a more West Coast-friendly time.

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