Business
Cross-border contracts
Attorney Jean-Luc Schaus of Pierre Thielen Avocats recently spoke at a British Chamber of Commerce luncheon about the pitfalls of international transactions. He told Delano that businesses should carefully consider the “applicable law” clause in their cross-border agreements. AG: What is an “applicable law” clause? J-LS: Most international contracts, if not all, bear a provision stating what law is supposed to apply to such contract. For instance a clause could say “this contract shall be governed by Luxembourg law.“ AG: Is it better to sign contracts under Luxembourg law? J-LS: As long as you choose the law of a civilised country--the UK, US, Luxembourg, Spain--it will not have a substantive influence on the outcome. All legal systems are reasonable and coherent in their own way. You can’t argue New York or Luxembourg laws are better or worse. They’re just different. What is true is that if you go to a judge here in Luxembourg and you plead a case under, for example, Spanish law, then it will cost you two or three times as much, and it will last two or three times as long. AG: WHY IS THAT? J-LS: You need to hire at least two legal teams. For example, an English law team and if you sue here, a Luxembourg legal team. If you plead a case under foreign law, then you have to prove [the foreign laws]. The judge does not know foreign law; he knows the law in his own jurisdiction. All of this is a nightmare in practice.
Olivier Minaire
Olivier Minaire
AVOIDING HEADACHES
Nicolas Kadri: mid-sized firms could potentially recover 20,000 euro
Tax
MONEY LEFT ON THE TABLE
The eyes of many business managers glaze over at the mention of cross-border VAT refunds, but KPMG aims to help recover millions of euro due to companies in the Grand Duchy. Luxembourg firms are failing to claim millions of euro in tax refunds each year, says KPMG Luxembourg. That’s despite the launch of an official online portal last year that was supposed to help make the process easier. So the consultancy recently launched a service to help clients recover cross-border value-added taxes (VAT). Under EU rules, companies are entitled to refunds on VAT paid in European countries where they do not operate. According to KPMG, this can include everything from travel expenses and professional service fees, to training courses and even mobile phone charges. Figuring out the eligible amounts is fairly complicated, as each country determines its own tax and refund rates for each good and service. There are no hard-and-fast rules for how much VAT a company can recover, explains Nicolas Kadri, the big four’s VAT manager. However, he estimates that KPMG can--for example--recover 20,000 to 30,000 euro for a Luxembourg-
based IT company with 150 employees. Until last year, companies had to “complete paper-based claim forms for every single country, in their language, and follow-up with each different VAT authority.” The Grand Duchy’s government introduced www.VATrefund.lu in 2010, which allows simpler electronic filings. Yet “you still have to follow-up with individual VAT authorities and there’s still the language issue,” Kadri says. In addition, users are limited to attaching five mega bytes of data for their supporting documents. “Most of the time companies don’t recuperate VAT because they don’t know they can or they don’t know how. Or if they know how, they don’t want to because it’s a complete hassle.” KPMG charges a fixed percentage of recovered taxes. “So there’s no risk: if there’s no refunded VAT, there’s no fee.” “We believe there is huge potential for this market,” says Kadri. He estimates that today only about 3,000 out of 30,000 Luxembourg firms are recovering crossAG border VAT refunds.
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05.05.2011 12:46:20 Uhr