Published 11 July 2001
Circular No. 4/2001 July 2001 TO THE MEMBERS OF ASSURANCEFORENINGEN GARD -gjensidig- Dear Sirs
Re: Value Added Tax – Impact of new Norwegian Regulations on Assuranceforeningen Gard -gjensidig- (the “Club”) and its Members
Introduction
Changes to Norwegian value added tax (“VAT”) regulations, which came into effect on 1 July 2001, will necessitate some amendments to the Club’s administrative procedures. The changes in no way affect a Member’s rights of recovery from the Club. However, to enable the Club to comply with VAT requirements, the Club needs the information requested in the attached form, i.e. for every operating company in your Group that has a ship(s) entered in the Club, the Club needs to know the domicile of the operating company, its VAT number, if any, and the names of the ship(s) operated by it. The changes in administrative procedures relate to the payment by the Club of invoices from outside advisers, such as lawyers, surveyors and correspondents, for work done in handling claims covered by the Club. Such invoices are normally paid directly by the Club – as they will continue to be - although strictly speaking they are payable in the first instance by the Member on whose behalf the work is done. For VAT purposes, this is an important distinction since the Club cannot be registered for VAT, but most Members domiciled in countries with VAT regimes will be. To minimise the Club’s costs, but without prejudice to the Member, all outside advisers’ invoices will in future be addressed to “The Member, c/o the Club”, thus ensuring that it is the Member, not the Club, that is the recipient of the services. Where VAT is payable on such invoices, the Club will pay them, but, if the Member is registered for VAT, the Club will then invoice the Member for the VAT since the Member will be able to recover the VAT (using the documentation that the Club will provide). Conversely, if a Member is required to pay VAT on such an invoice and cannot recover the VAT, he will be reimbursed by the Club. The remainder of this circular contains a more detailed discussion of the new VAT regulations.
Impact of the new Regulations on the Members - the Reverse Charge Principle
The Club indemnifies its Members against certain liabilities, losses, costs and expenses as set out in the Rules, and in this respect outside advisers such as lawyers, surveyors, correspondents, consultants, etc. are engaged to provide assistance. Under the new VAT regime, which is based on the applicable EU legislation, services from such external advisers may attract VAT. This will be the case even if the services are imported from abroad. One of the rules in the EU VAT legislation is that the purchase of certain services from abroad creates a VAT liability, not on the supplier of the service, but on the recipient. In such cases the recipient of the service charges itself VAT at the rate applicable in the State where he is domiciled for VAT purposes on the invoice total of the service. This is known as the reverse* charge* principle. This means that if the services are billed to the Club, the Club will have to pay VAT on such services. This will not be recoverable by the Club from the Norwegian tax authority in as much as the Club is not registered for VAT purposes in Norway.
New Procedures for Payment of Invoices from External Service Providers
In order to minimise the effect of VAT being loaded on the fees from external advisers, the Club has reviewed its current fee payment procedures for claims handling services. As a result, invoices for claims handling services will hereafter be addressed directly to The Member c/o the Club[1].* The Club will still, in accordance with ordinary procedures, pay the invoices for claims handling services, but will send an invoice addressed to the Member so that, where VAT has been properly charged by the external service provider, the Member can recover it from his appropriate tax authority. The procedures will differ depending on the domicile of the Member and the external service provider, as set out in the table below. Procedures 1 and 4 are relevant for Members domiciled in Norway and registered for VAT. Procedures 3 and 6 will apply for Members domiciled outside Norway. Member domiciled in Norway. Registered for VAT Member domiciled in Norway. Not registered for VAT Member domiciled outside Norway. Supplier domiciled in Norway 1 2 3 Supplier outside Norway 4 5 6 We will comment on each of the six procedures in turn:
Both the Member (registered for VAT) and the supplier are domiciled in Norway The supplier addresses the invoice to The Member c/o the Club* including VAT if the service attracts VAT. The invoice must be sent to The Member c/o the Club* as an original together with a copy. The Club will then pay the invoice on behalf of the Member, including VAT, and thereafter send a debit note covering the VAT together with the original invoice to the Member. The Member will then have sufficient basis for recovering the VAT from the appropriate authorities and to reimburse the Club.
Both the Member (not registered for VAT) and the supplier are domiciled in Norway The supplier addresses the invoice to The Member c/o the Club* including VAT if the service attracts VAT. The invoice must be sent to The Member c/o the Club* as an original together with a copy. The Club will then pay the invoice on behalf of the Member including VAT. Since the Member is not registered for VAT, the Member will not be entitled to recover the VAT from the tax authorities.
The Member is domiciled outside Norway – the supplier is domiciled in Norway The supplier addresses the invoice to The Member c/o the Club* excluding VAT in as much as the services are deemed to be exported to abroad. The invoice must be sent as an original together with a copy to The Member c/o the Club*. The Club will then pay the invoice on behalf of the Member pursuant to ordinary procedures.
The Member (registered for VAT) is domiciled in Norway – the supplier is domiciled abroad The supplier addresses the invoice to The Member c/o the Club* excluding VAT. The invoice must be sent to The Member c/o the Club* as an original together with a copy. The Club will then pay the invoice on behalf of the Member, and thereafter send the original invoice to the Member in order for the Member to pay and calculate the VAT in accordance with the reverse charge* principle. The Member may be entitled to recover VAT from the tax authorities.
The Member (not registered for VAT) is domiciled in Norway – the supplier is domiciled abroad. The supplier addresses the invoice to The Member c/o the Club* excluding VAT. The invoice must be sent to The Member c/o the Club* as an original together with a copy. The Club will then pay the invoice on behalf of the Member , and in order to avoid any questions as to whom the services have been rendered the original invoice should be sent to the Member for the purpose of paying VAT, if any, pursuant to the reverse charge* principle. Upon confirmation from the Member that the VAT, if any, has been paid the Member will be reimbursed by the Club.
The Member is domiciled outside Norway – the supplier is domiciled outside Norway The supplier addresses the invoice to The Member c/o the Club* excluding VAT. The invoice must be sent to The Member c/o the Club* as an original together with a copy. The Club will pay the invoice on behalf of the Member.
If the Members and the supplier are subject to the same foreign VAT regime, the invoice from the external supplier to The Member c/o the Club* may include VAT. However, if the Member is registered for VAT, Procedure 1 above will apply whilst Procedure 2 will apply if the Member is not registered for VAT.
In order to insure that external service providers of claim related services can issue invoices correctly, the VAT status of each Member in respect of each ship entered in the Club ought to be established. Accordingly a form is attached, which each Member is kindly asked to complete for all ships entered in the Club. If you have any questions about the above procedures, do not hesitate to contact us. Yours faithfully GARD SERVICES AS As agent only for Assuranceforeningen Gard -gjensidig-
Claes Isacson Chief Executive Officer
APPENDIX
DETAILS OF VAT REGISTRATION
For each operating company in your Group that has a ship(s) entered in the Club, please supply the following:
Name and address of the company:**
Is the company registered for VAT? YES/NO**
If YES, please supply VAT details:** Country prefix VAT number
Please list the ship(s) entered in the Club that are operated by this company. Please consult your legal/tax advisers and return the complete form(s) by 31 July 2001 to:
Gard Services AS Servicebox 600 NO-4809 Arendal Norway Attn: Insurance Department [1] The term Member means in this context the ship operating company within the Member Group.
Gard is a member of
