Mastering International VAT: Insights from Florian Hanslik, Partner at terraVAT GmbH (Part 1)

[00:00:00] Meredith Smith: Welcome to SALTovation. The SALTovation Show is a podcast series featuring the leading voices in salt, where we talk about the issues and strategies to help you make sense of state and local tax. All right, Florian, thank you so much for being here on the SALTovation Podcast. We really look forward to this discussion today.

[00:00:20] Florian Hanslik: very much for the

[00:00:22] Meredith Smith: invite. So you've transitioned from a background in politics and government to specializing in indirect tax, particularly the VAT. You started with KPMG in Switzerland. And so could you talk us through that transition? What drew you to indirect tax? And what about kind of the VAT captured your interest?

[00:00:47] Florian Hanslik: Well, politics is my passion. It remains my passion, will always be my passion. Um, I was working in the European Parliament for a couple of years and it was probably the best time of my life. I had a girlfriend, she was in Switzerland and, uh, after a couple of years of commuting between Brussels and Zurich, I decided to go to Switzerland under the condition that I find a decent job and, uh, just for two years, Uh, and to do some, to write some theses and do a PhD and, um, they go back to politics.

[00:01:25] Uh, that was 20 years ago. I'm still in Zurich. Um, what brought me into indirect access is I wanted to do something international. European Parliament is probably the most international workspace you can actually have. You have currently 27 different countries working for a goal, uh, different, different parties, but extremely international.

[00:01:48] And, uh, I was growing up in a very international family. My, one of my brothers is living in Prague and the Czech Republic, the rest in Vienna and Austria. Um, we always had, you know, friends or kids from, from somewhere else staying with our family because my parents pushed us to learn languages as much as possible.

[00:02:07] And then we did exchanges. So internationalism is, uh, I grew up with internationalism. And, uh, when I was looking for a decent job in Switzerland, uh, where I can earn enough money, uh, to, to raise a family, then everybody said, well, you like Texas and at university, start with VAT because. This is the most international text you can actually get to.

[00:02:32] And that was with KPMG, uh, and then Deloitte. And, uh, um, I have to, I have to confirm. This is what I like. I don't want to, I don't want to be responsible for one country, for Switzerland. My father was a lawyer. My grandfather was a lawyer. My brothers are lawyers. This is all focused on one country. And I was always, I wanted to see more.

[00:02:57] I wanted to get in touch with more people, other people. Uh, other, other cultures, uh, other countries, other languages. And that's the reason why I'm, well, why we are sitting here today talking about VAT and custom duties, because it's getting interesting when we have different countries. involved.

[00:03:16] Meredith Smith: Yes, that's amazing.

[00:03:17] Um, podcasting is generally an audio platform. And so, but the way that you speak of kind of internationalism and wanting to do something from like a larger scale, just your face lights up so you can truly tell just the way that you speak about it, just like how passionate you are about it. And that's, that's wonderful.

[00:03:35] And, you know, us as state and local tax professionals, right, we are isolated to one country. Right. But with all of our own, with the state's governing bodies that can do kind of what they want within that, you know, kind of that same passion we have, which I think is why we brought you on to kind of talk about the other side of kind of what we do from, you know, a greater country perspective.

[00:04:01] So thank you for, for spending that time to share that passion with us.

[00:04:05] Stacey Roberts: Yes. Um, when we have clients or taxpayers that are maybe, uh, global and they start doing business in the U S they're surprised at how the States are so different. And so a lot of times we say, yeah, the States are pretty much each a different country.

[00:04:23] So think about it that way. So I think that's why we can align a little bit, right? Because we get excited about it. It's, it's a little bit of a puzzle, uh, but I think those of us that do this like puzzles. And so that's part of the reason we're in it.

[00:04:39] Florian Hanslik: Absolutely. Absolutely.

[00:04:41] Meredith Smith: And so with the complexity of that regulations, companies are increasingly in need of experts like yourself.

[00:04:48] How? Did you cultivate kind of that expertise in VAT and what experiences, experiences contributed to kind of like growing that knowledge and gaining that context to kind of become the expert that you are?

[00:05:06] Florian Hanslik: My first director at KPMG, she was, she was, uh, From Argentina. And she was very, very also driven by international clients and international knowledge and curiosity on indirect taxes.

[00:05:22] And, uh, I was closely working with her, with her together. So focusing on the LATAM region, but nevertheless, not losing also the site on Europe and what's going on in Europe. And, uh, very similar, what, what you said right beforehand, although we have the European union, every country is a little bit, well, it's a, it's a very similar regulation from, from an indirect tax perspective, but every country is, is, is nevertheless, it's different.

[00:05:49] And, uh, She showed me actually how you work internationally. She also, um, How shall I say, um, she, she made me curious learning more about the different countries and the different, also different regions. Well, I knew that we have a VAT system in Europe, but how is it working in the Latin region? How is it working, working in the African region, Asia, Asia Pacific, and, uh, I learned a lot.

[00:06:14] We had many, many calls, uh, with the LATAM region and, uh, uh, well, late at night in Switzerland, uh, and, uh, we had pizza, uh, pizza sessions at midnight, uh, because we had calls with, with LATAM partners and LATAM clients, but it was a lot of fun and, uh, she really supported me and she really encouraged me to do this, uh, also to continue, to continue doing this and, uh, this, uh, uh, Because I grew up international and I'm really interested in internationalism, this, uh, this was, I would say, the starting point of, uh, that it's actually good to have somebody who knows how the indirect text system in the different areas of the world is really focusing.

[00:06:57] I know everybody's expecting this from the big four, but when I left the big four, I started, uh, uh, a midsize. So I started to, to build up the midsize, uh, that, uh, I started to build up the indirect tax practice of a midsize company. And, uh, There, I used my knowledge I gained in KPMG and Deloitte to build it up, to build up a network, not of the big four, but, oh, the big, yeah, it was the big four, but, uh, with, uh, VAT experts all around the world, and I'm still very proud of this network because I have VAT or indirect tax specialists, um, And I would say 60 or 70 percent of all the countries, they know me, we are working close together.

[00:07:42] I'm not just a number. They know me, how I'm working, how I'm thinking, what I need. And it's just so much fun to work together with them. And at the very end. assist the companies. I'm the point of contact for the companies. They have issues in New Zealand. They have issues in, I don't know, South Africa. They have issues in Chile.

[00:08:01] They approach me and then with my network, I can help the companies. And, uh, it's again, it's, it's a people's business. It's wonderful talking with the companies, understanding the issues they need and the questions they have, number one, with my VAT knowledge, I can tell them and that's also what I think is needed to be pointed out.

[00:08:24] Is when you understand the VAT system in one country, you can use it in all the other countries. It's everywhere, more or less working the same, but with some local specifics. So I can tell them on a high level basis, it should be like this, it should be like that. And then when we go into detail, I'm, I'm contacting my people in the different areas of the world.

[00:08:43] And, uh, that's, uh, that's really a lot of fun. Again, it's, I'm not the person sitting the whole time. in front of a computer and reading, uh, contracts and, and laws while we have to do this, but I also really like talking to people.

[00:08:58] Meredith Smith: I think really probably resonates with myself and Stacey and just that, like, it's, it's the people we've never gone in.

[00:09:05] Well, I've never gone in house because I love being able to talk with a software company over here, a manufacturing company over here, just a variety of businesses, a variety of people, because as you said, it truly is, is a people business.

[00:09:20] Florian Hanslik: And what Um, I have many clients, many of my clients are based in the U.

[00:09:23] S. And the U. S. is so completely different. The indirect tax system in the U. S. is completely different to the indirect tax system of what is called VAT or GST. And, uh, well, I like the U. S. I went to high school in the U. S. I got engaged in the U. S. It's the country of my heart and then, uh, I love traveling to the US and meeting people like you, like we do it now, but also companies, uh, and, and clients and talk, talk through about the indirect tax issues globally.

[00:09:57] Meredith Smith: Well, I think we just have a few more to send your way. That's not

[00:10:02] Florian Hanslik: the reason why I said it now. No,

[00:10:06] Stacey Roberts: but

[00:10:07] Florian Hanslik: it's

[00:10:07] Stacey Roberts: just It's not a shameless plug. It's okay.

[00:10:11] Florian Hanslik: No, maybe it is. It's okay. I mean it like this. I mean it. It's just a lot of fun assisting companies.

[00:10:20] Meredith Smith: Well, and And it maybe it is kind of the inbound outbound depending on kind of what side if we're going to talk, you know, kind of in isolation between the U.

[00:10:29] S. and Europe, um, right? We often get involved with companies who they know there's a sales tax issue. So let's figure out our domestic issues first, and then once we have a good feel about what we're doing, have kind of context around implementing a system in order to get compliant, now let's look at the other regions of the world.

[00:10:53] And so it's like, okay, we've got, you know, from a domestic standpoint, We're in good, we're in really good shape for our U. S. kind of indirect taxes. Now it's time to introduce the VAT. So do you think you have clients kind of similarly, but maybe European clients who are, all right, we might have some bad issues.

[00:11:15] Let's, let's get those up and running and then now where are we kind of all over the world and looking for, you know, compliance for kind of their non domestic taxes or indirect taxes?

[00:11:29] Florian Hanslik: Absolutely. Absolutely. So, um, honestly speaking, I think it's a little bit difficult for me to get, uh, RISC clients, RISC based clients, because I'm, Non Swiss and, uh, meeting the companies I'm, I'm working on, um, well, TerraVet is a very new company and my big aim is to get Swiss companies, but they are wonderful Swiss companies.

[00:11:53] They are also acting, of course, globally, all over the world. the world, also the U. S. And so I think there are many clients or the many companies who need also assistance in the U. S. So definitely, yes. Um, and in the last in the last couple of months, we had these issues already that they were looking for.

[00:12:14] They were looking for assistance also outside of Europe. Uh, and for us, first we have to conquer and succeed in Europe before we cross the Atlantic Oceans to go to the U. S.

[00:12:28] Meredith Smith: And,

[00:12:29] Florian Hanslik: uh, but that's the first target, of course, when succeeding in, uh, with their business in Europe.

[00:12:37] Meredith Smith: So what do you, what would you say are the the biggest challenges companies face and understanding kind of their VAT obligations?

[00:12:50] Florian Hanslik: Well, there are funny stories. Well, I have been, I told you already, I've been very often, I've been to the U. S. and I had many discussions also with U. S. people. Um, when we, when the European Union and also, well, not only the European Union, Switzerland and the U. K., uh, the, uh, implemented a system for electronically supplied services.

[00:13:10] So when, uh, Uh, there's a supplier of electronically supplied services, and there are private individuals in Europe or in Switzerland in the UK, and they are using this against a certain payment, then the supplier, even if they're outside of Europe, so let's take it the suppliers in the U. S., then they have to register in Europe, and they have to charge Local VAT, whether a private individual is.

[00:13:35] So the typical example is, um, is a dating platform, and based in the U. S. All the people are in the U. S. Uh, all the engineers are in the U. S. They are never, ever traveling to Europe. But, because there are private individuals who are paying in order to see the pictures and the texts and communicate with each other, um, place of supply will always be in the U.

[00:13:58] S. where the private individual is, and the stating platform has to register and charge European VAT. And then when this was implemented, when this was introduced about five or six years ago, we had a discussion, or I had a discussion with a U. S. company. They approached me if this is really correct. And in writing, And then I said, yes, and luckily, I'm sorry to say, but as long as we are talking about electronically supplied services to a private individual, yes, you have to register and you have to charge VAT.

[00:14:34] And the reply was, well, in 1776, we threw out the Europeans because they charged tax on us. We should do exactly the same once again. That was really funny. And I will never, ever forget this. But, uh, uh, To come, uh, to come to, to, to your, to your question back again. I think e-commerce, everything that is done electronically is, these are the huge changes we are facing.

[00:15:01] Our companies, suppliers are facing currently with covid e-commerce. Well, uh. Raised immensely the sales via e commerce and the tax authorities were overwhelmed and had to had to follow up with their regulations how to tax this and why and then in what direction it has to be taxed. And also I see now that was the first step e commerce now platforms are being taxed marketplaces are taxed and now we have big changes coming on in 2025.

[00:15:35] that, uh, events that are streamlined are being text when it's streamlined to a private individual. So if there's an event in the U. S., a huge event, and somebody is sitting in Switzerland and, uh, participating at this event because it is streamlined and paying for this, then, uh, this event organizer Has to register in Switzerland and has to challenge VAT.

[00:16:00] So it's going more and more in direction that actually where goods and services are being used, uh, VAT will be applicable. And I think these are the huge changes. It's going more and more, and I'm sure you know it much better than I do, but from a corporate tax perspective, companies are taxed because their services are used in the countries, uh, and not where actually their, their establishment is.

[00:16:27] And this is also in this direction, also the indirect tax system is working. Oh, it's, it's, it's heading to where services, where goods are actually used. This is the place where. VAT or GST will be valid, uh, will be, um, uh, will be applicable. So, for companies, this means you need to know where the, where the customers are, in which country, what is the tax rate, what is the good, is it a service, is it exempt?

[00:16:52] There are so many things you have to be aware of that, uh, it is impossible for a company if, unless they have a huge tax team and they're all VAT specialists, but most of the companies don't have this, uh, uh, That, uh, you have, you have to have somebody to talk to. And usually, Um, I have many clients that talk to me before they start the business, but this is the ideal way of life of my, for the company and for myself.

[00:17:23] Usually you start business and then you find out, oops, I missed something.

[00:17:27] Meredith Smith: Yep. We are.

[00:17:28] Florian Hanslik: And then time is counted.

[00:17:30] Meredith Smith: Yep. Right. We, we tend to operate in the oops business. Yeah, right.

[00:17:37] Florian Hanslik: We have the last ones to get enrolled. Exactly.

[00:17:40] Stacey Roberts: Yes, absolutely. I did want to just clarify on the changes that you were just mentioning for 2025.

[00:17:46] So you said streamline. So does that mean something that might be digitally streamed? Okay. So, um, like a sporting event or something that would be streamed. Um, somebody in Switzerland is watching this event, the NBA

[00:18:06] Meredith Smith: finals that are,

[00:18:07] Florian Hanslik: for example, I always, when I, when I, when I speak as seminars, I always say, well, I love offers.

[00:18:13] And then I know that the Metropolitan Opera is streamlining their performances to the whole world. You just pay a little bit You pay a little bit, and then you can sit in your, uh, I don't know, in your living room with the computer on your lap and say, okay, um, I'm watching today, I don't know, La Traviata from Verdi at the Metropolitan Opera, life.

[00:18:38] I don't know if the Metropolitan Opera really knows that they should charge S for 2025. Oh, that, that they are aware. Now. On the other side, it does not mean automatically that you have to become VAT registered because that's a cultural, cultural performance. And this is from most of the countries, it is exempt from VAT.

[00:18:58] But I don't know if this applies to every country or not.

[00:19:03] Meredith Smith: Interesting. So, oh, go ahead.

[00:19:06] Florian Hanslik: Then you have to know where your customers are. Are you still doing this also in the future? Yes and no. Uh, do you want that, well, of course you have to pay something in order to, to, to have the live performance. At the moment when there's no payment, well, then we're out of EIT, out of scope of EIT, but as long as you pay, um, then, yeah.

[00:19:27] So there are many things you have to think through and I don't know if the people really know about this.

[00:19:33] Meredith Smith: Well, no, and that was kind of my next culture, my next culture. My next question is, you know, you, if there's kind of an exemption for cultural, is there What's the definition of culture, right? Is, are the, is the NBA culture or is it opera culture?

[00:19:50] That's a sporting

[00:19:51] Florian Hanslik: event. This could be a sporting event. Also sporting events are exempt under certain conditions. Yes, but again, every country a little bit different. And it does not mean that it's, uh, in Switzerland, it is exempt. It does not mean that in, I don't know, Norway, it is exempt. Also exempt. So you have to do some kind of investigations upfront.

[00:20:12] And then I would say it's a business decision, how many, how many people will watch the opera performance? Is it really worthwhile applying for registration? What is the risk? Um, from a legal perspective, of course, probably find out yes. How long does it take? In the UK, currently, a registration takes two months because they are just overwhelmed tax authorities.

[00:20:35] So you have to, you have to think in advance. You just cannot say, okay, on the 31st of December, I am right now that changes and I have to get registered. I need the registration number. As for tomorrow, this will not work.

[00:20:50] Meredith Smith: This podcast is for educational purposes only, and is not intended, nor should it be relied upon as legal, tax, accounting, or investment advice.

[00:20:58] You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.

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