1. Nexia ETG Graz – February 2007 John Voyez Director Smith & Williamson February 2007

2. VAT Question on land and property A client (X co) provides land and property related services in the EU member states. X co’s supplies include property consultancy and services connected to property ownership and disposal. X co is currently only registered for VAT in one EU member state (not your country). The questions that arise are; 1)For the supply of services related to land and property, does the "simplification mechanism'' exist in your member state such that business clients registered for VAT in your member state may account for VAT on behalf of X co. 2)If the simplification mechanism can be applied such that there is no requirement for X co to register for VAT in your member state, are there any special procedures which must be applied, or is there any specific wording which will need to be shown on X co’s invoices? 3)If the simplification mechanism can be applied, do local regulations permit X co to make EC 8th Directive claims (subject to the normal rules) in respect of any local VAT incurred on business costs in the member states?

3. 4)If X co’s client is not registered for VAT in your member state, does this mean X co will be required to register for VAT in your member state? 5)If the simplification procedure cannot be applied, and X co is obliged to register for VAT in your member state, what is the VAT registration threshold in your member state? 6)If it is necessary for X co to register for VAT your member state, (a) what fees will your firm charge to register X co for VAT, and (b) what is your firm’s fee for completing and submitting VAT returns? Note that the number of transactions and invoices over the course of a year will be small. 7)Are there any other issues which may be relevant?

4. Spain Simplification - Provided that the recipient of the services is established in Spain and VAT registered, the reverse charge will apply and X co is not required to register Registration - If the recipient of the services is not VAT registered, then X co will be required to register for VAT in Spain Invoicing - Under the reverse charge, X co should disclose on its invoice that it is not required to register in Spain. Wording should be as follows - “Supplier not established in Spain for VAT purposes. Reverse charge applies under Article 84 of the Spanish VAT Law 37/1992” Quote client’s VAT number EC 8 th Directive Claims - Yes, claims can be made subject to the normal rules VAT Registration Threshold for non-established traders - There is no minimum registration threshold. If the simplification procedure cannot be applied then VAT should be charged on all invoices and X co should seek registration Other issues - Place of supply of certain intermediary services eg. legal services related to the sale of property is uncertain in some cases due to the wording of Spanish law Estimated cost for registration - ?

5. Germany Simplification - As long as X co does not have a fixed establishment in Germany the reverse charge will apply. However if X co is involved in the leasing of property in Germany, it would be considered to be established in Germany in which case the reverse charge may not apply Registration - If the recipient of X co’s services is not VAT registered in Germany, the recipient would be obliged to register in order to self-account for the VAT on the services received. In practice this is unlikely to be an issue Invoicing - Under the reverse charge, invoices should not be issued with German VAT. Wording should be as follows; “You owe VAT according to Sec. 13b UStG”. Quote client’s VAT number EC 8 th Directive Claims - ? VAT Registration Threshold for non-established traders - ? Other issues - Legal and tax advice in connection with real estate is not considered to be a “closely connected” to land Estimated cost for registration - ?

6. Netherlands Simplification - Provided the recipient of the services is registered for VAT or a legal entity within the meaning of the Dutch legislation, the reverse charge should apply Registration - If X co’s client is not registered for VAT or a legal entity within the meaning of the Dutch legislation then X co will have to register for VAT Invoicing - Under the reverse charge, invoices should be issued without a charge for, or a mention of VAT. Invoices have to show wording indicating that the liability is shifted to the customer. Quote client’s VAT number EC 8 th Directive Claims - ? VAT Registration Threshold for non-established traders - ? Other issues - ? Estimated cost for registration - ?

7. Italy Simplification - Provided X co is non resident in Italy and making supplies to VAT registered business in Italy the reverse charge can be applied Registration - If the recipient of the services is not VAT registered, X co will be required to register for VAT in Italy Invoicing - No specific guidance, but suggested it is made clear that the client should account for VAT. Quote the client’s VAT number on the invoice EC 8 th Directive Claims - If advantage of the simplification rule is taken, a refund on VAT costs may not be granted VAT Registration Threshold for non-established traders - ? Other issues - If X co expects to incur Italian VAT on business costs, X co should consider registering for VAT in Italy. Note that VAT on restaurant and hotel bills and transportation cost are not recoverable Estimated cost for registration - ?

8. France Simplification -Yes. The place of taxation of X co’s services will be France Registration - From 1 September 2006 non resident businesses will not be liable to register in France and the customer (if registered in France) will have to self-account for VAT Invoicing - French VAT should not be charged on the invoice. Wording should be “French VAT due by the customer – article 283-1 of the FTC”. X co should also quote the customer’s French VAT number on the invoice EC 8 th Directive Claims - Yes, but this may be time consuming because of the new VAT regime for non resident suppliers from 1 September 2006 VAT Registration Threshold for non-established traders - There is no minimum registration threshold, but X co will only be liable for the payment of VAT on services rendered to non TVA registered clients under the new VAT regime. Registered client’s will self-account for VAT Other issues - ? Estimated cost for registration - ?

9. Sweden Simplification - Yes. The simplification rule can be applied Registration - X co’s client must be VAT registered in Sweden otherwise X co must register for VAT in Sweden Invoicing - Invoice must state that X co is not taxable for the service provided. “The receiver of this invoice is taxable for this transaction according to 1 kap. § 4b” EC 8 th Directive Claims - Yes. VAT can be claimed on business costs VAT Registration Threshold for non-established traders - There is no minimum threshold. If simplification cannot be applied X co must register for VAT Other issues - It may be easier to register for VAT if X co is likely to incur a high volume of VATable costs rather than make an EC 8th Directive claim Estimated cost for registration - ?

10. Denmark Simplification - No - The simplification rules cannot be applied to services related to land and property. Registration - There will be a requirement to register for VAT in Denmark provided X co is deemed to supply property related services in Denmark. Invoicing - ? EC 8 th Directive Claims - Will not apply as businesses will have to register for VAT in Denmark VAT Registration Threshold for non-established traders - There is no minimum registration limit for businesses not established in Denmark Other issues - ? Estimated cost for registration - ?

11. Norway Simplification - No. The simplification rule does not exist. However, please note that a reverse charge procedure applies for import of services that are “capable of Delivery from a remote location” assuming that the performance of the services is not closely connected to a place within the Norwegian territory. This is the general reverse charge rule. Registration - There will be a requirement to register for VAT in Norway for services that are performed in Norway. Invoicing - ? EC 8 th Directive Claims - Yes. VAT can be claimed on business costs VAT Registration Threshold for non-established traders – X co will need to r register for VAT using a representative when X co’s services exceed the threshold of €6500. Other issues – The Norwegian government has established a working group to consider the introduction of a reverse charge procedure as a general rule for importation of all goods and services. A report will be released some time this year. Estimated cost for registration - ?

12. Finland Simplification – The simplification rule (reverse charge) can be applied. Even if the Finnish client is not VAT registered, the client is liable for VAT in terms of reverse charge when receiving services from X co who is not registered in Finland. Registration – X co is required to register if its client is another foreign entrepreneur who does not have a fixed establishment in Finland and is not registered to Finland or if the client is a private person. Invoicing - Reverse charge invoices should have the wording “reverse charge” and also quote both the client’s and the X co’s VAT numbers. X co’s VAT number must always be shown. EC 8 th Directive Claims - Yes. VAT Registration Threshold for non-established traders – When providing services to private persons or foreign entrepreneurs there is no minimum registration threshold. Where X co’s client is not registered for VAT in Finland and is not a private person or foreign entrepreneur, X Co’s client is still liable for VAT and X co can apply the reverse charge. Other issues – ? Estimated cost for registration - ?

13. Greece Simplification - No. The simplification rule is not applicable to services related to land and property in Greece. Registration - There will be a requirement to register for VAT in Greece. Invoicing - ? EC 8 th Directive Claims – No, as X co will have to register for VAT in Greece. VAT Registration Threshold for non-established traders – There is no minimum threshold. Other issues – In theory registration for VAT in Greece and completion and submission of VAT returns can be made by an EU business from its country of residence, without the need to appoint a local representative due to a change in Greek legislation. In practice the new law is not yet in effect because the Tax Authorities system cannot support e filing of returns and payment of VAT from abroad. Ministerial decisions are expected anytime now to clarify how the system will work. Estimated cost for registration - €700.

14. Austria Simplification – Yes. Registration – X co is required to register for VAT if its client is not registered for VAT and is neither a private person nor an authority, Invoicing - Specific wording must be shown on invoices. EC 8 th Directive Claims - Yes. However, VAT incurred on certain business costs such as cars cannot be claimed. VAT Registration Threshold for non-established traders – There is no minimum threshold. Other issues – ? Estimated cost for registration - €150 per hour

15. UK Simplification - Provided the supplier has no establishment in the UK and the recipient is UK VAT registered and receives the services for business purposes, simplification can be applied. Registration – If the recipient of the services is not VAT registered and not in business (or is using the services for a non business purpose) X co will be obliged to register for VAT in the UK (subject to reaching the VAT registration threshold of £61,000). Invoicing - The recipient’s VAT registration number should be obtained as evidence that they will be liable to account for any UK VAT due. The recipient’s VAT registration number (if this is not available alternative evidence that the recipient is in business in the UK should be obtained) should be quoted on the invoice together with wording indicating that the “the VAT must be accounted for by the recipient of this service”. EC 8th Directive Claims - subject to normal rules i.e. no recovery of input tax on business entertainment, cars etc. VAT Registration Threshold for non-established traders - If simplification is not applied, X co will need to register for VAT as either a “non established person” or by using a tax representative when X co exceeds the registration threshold (currently £61,000). Other issues - If significant costs are incurred in the UK, it may be more beneficial to register for VAT in the UK as 8th directive reclaims can be time consuming and troublesome. Estimated costs for registration - Our fees for registration would typically be in the region of £800 to £1,000. VAT return preparation would cost a minimum of £400 a quarter for smaller clients increasing with the level of complexity and transactions.

16. John Voyez Director Smith & Williamson