1. Nexia EMEA Warsaw 6 th February 2015 John Voyez Smith & Williamson 00 44 (0)20 7131 4285 john.voyez@smith.williamson.co.uk

2. FCE Bank plc Skandia VAT implications Direct tax implications Inter company charges

3. In Italy transactions within a single entity treated as supplies. FCE = no supply between branches of a single entity whether within the same country or across borders. Note that the CJEU did consider: -whether the Italian branch carried on an independent economic activity; and -whether the branch could be regarded as an independent bank; and -whether the branch held its own capital. FCE Bank plc [Case C – 210/04]

4. SAC claimed no supply to SS following FCE CJEU held that the Swedish VAT group is to be seen as an independent entity => must account for reverse charge on supplies received from SAC => produces irrecoverable VAT. Question – is a branch an entity capable of joining a VAT group? The Skandia case [Skandia America Corp Case C-7/13] US co SAC Swedish branch SS X co Y co Z co Swedish VAT group services

5. Aimed at avoidance of VAT by exempt businesses by routing services through an overseas company/group. UK legislation deems there to be a supply by A co to B co [VATA 1994 S43(1)(a)] UK anti avoidance provisions A co’s non EU establishment A coB co no supply services X co consultants no supply UK partly exempt VAT group

6. CJEU decision not surprising as it ensures no avoidance – reverse charge is not avoided in the EU on services received BUT Does it compromise the integrity of FCE Need for international groups to unwind branch structures (is that also an issue for direct tax) Gives rise to ability to recover VAT on costs incurred on making outbound charges previously ignored. Implications – VAT

7. Supplies between branches are taxable for direct tax purposes. Valuation issues - what value to use for VAT? -bundled supplies How are the supplies valued for corporate tax purposes? Is there a clash between direct and indirect valuations or should the same value be used for both taxes? Is it important that the same values are used? Transfer pricing adjustments for direct tax could have VAT implications. Will transfer pricing become an issue for VAT? Implications – Direct and Indirect tax

8. © 2014 Nexia International Limited. All rights reserved. The trade marks NEXIA INTERNATIONAL, NEXIA and the NEXIA logo are owned by Nexia International Limited. Nexia International and its member firms are not part of a worldwide partnership. Member firms of Nexia International are independently owned and operated. Nexia International does not accept any responsibility for the commission of any act, or omission to act by, or the liabilities of, any of its members. John Voyez Smith & Williamson