Transport & Logistics Newsalert

Welcome to the latest edition of the Transport & Logistics Newsletter – bringing you the latest sector developments from Belgium and across Europe. Highlights of this edition include the outlook for T&L M&A in Q2 of 2014, the new CJEU Skandia case law and the latest T&L insights in our Global Economic Crime Survey 2014.

We hope you enjoy the read!

Introductions for individual articles:



Transactions between head office and branch are subject to VAT if head office or branch is part of a VAT group

Recently, the Court of Justice of the European Union (CJEU) rendered its decision in the Skandia America Corporation case (case C-7/13) regarding the question whether transactions between a head office and its branch are subject to VAT if the branch is part of a VAT group in an EU Member State.

The Court gave a short and clear-cut answer.

A VAT group is a single taxable person. The supply of services between the head office and its branch that is a member of a VAT group in another EU Member State must be considered to be made to the VAT group as a whole and not to the branch. The supplies are made for consideration and are therefore taxable in the hands of the VAT group in accordance with the general VAT rules.

Following the position of the CJEU, all cross-border head office/branch transactions within the EU are subject to VAT in accordance with the general VAT rules if the branch or head office is part of a VAT group in their Member State of establishment. Note that head office/branch transactions remain out of scope of VAT if neither of them belongs to a VAT group (CJEU – FCE Bank case C-210/04).

The CJEU decision could have a significant impact on intra-group transactions where one establishment is a member of a VAT group in another EU Member State:

  • risk of additional non-deductible VAT in the case of activities with no or limited right to input VAT deduction (e.g. holding activities, financial & insurance activities, etc.);
  • shift of VAT liability as ‘new’ taxable transactions will occur;
  • the issuance of correct VAT invoicing, reporting and ERP set-up changes.

In some cases, the impact of this decision could be positive as an increase of the right to deduct input VAT could occur as ‘new’ taxable transactions occur.

All businesses with head office/branch transactions within the EU should therefore consider the retroactive impact of the Skandia America Corporation case.

As this judgment applies in all Member States and to cross-border transactions, a review in all Member States where businesses operate using VAT groups that include branches/head offices as members is recommended.

The Belgian VAT authorities have already announced that in the weeks to come that they will update Administrative Notice on VAT grouping (N°42/2007 (E.T.111.702) of 09.11.2007) in view of the new CJEU Skandia case law.

If you have any further questions or wish to have a review on the possible impact on your business, please do not hesitate to contact,VAT Director (+32 3 259 32 63) or, VAT Senior Manager (+32 3 259 31 47)


Lower employer contributions for companies investing and creating new jobs in support areas where mass layoffs have occurred (steunzones, zones d’aide)

In brief

The Act of 15 May 2014[1] implementing the Pact for Competitiveness, Employment and Recovery has installed the framework for a new significant tax incentive equal to 25% of withholding tax on salaries (corresponding to about 5% of the labour cost) to stimulate investments and new employment in areas that are hit by mass redundancies. The rate of 25% was determined by the Royal Decree of 13 June 2014[2]. The employer may, during a period of two years, keep 25% of professional withholding tax on salaries for qualifying new employment, up to a global ceiling of €7.5 million over a period of three years. The measure is not cumulative with similar partial exemptions of withholding tax on salaries for scientific research, overtime, shifts or night work, or for athletes younger than 26 years.

In detail

Who can benefit?

Small- and medium- sized companies (SMEs)[3] and large enterprises[4] can benefit from the temporary reduction of withholding tax on salaries. According to the European definition, a 'SME' is an employer with a workforce of less than 250 (annual average) and an annual turnover (excluding VAT) of up to €50 million or a total balance sheet of up to €43 million for the last and the last but one taxable year. The concept is to be viewed on a consolidated basis, and companies in which the government has a direct or an indirect interest of 25% or more are excluded.

Qualifying investments?

The following types of investments in the support areas that generate additional employment or new jobs qualify:

  • for large companies: only “initial investment projects”, i.e. investments in tangible and intangible assets relating to the formation of a new establishment or the diversification of the output of an establishment into products not previously produced in the establishment;
  • for SMEs, in addition to “initial investment projects”, also investments in tangible and intangible assets relating to the extension of the capacity of an existing establishment or a fundamental change in the overall production process of an existing establishment;
  • also an acquisition of assets directly linked to an establishment can qualify as “initial investment project”, provided the establishment has closed or would have closed if it had not been purchased (an entbity whose closure is announced or part of a bankrupt company or a company in judicial reorganisation) and provided it is bought by an investor that is not related to the seller. The sole acquisition of the shares of an undertaking does not qualify as initial investment.

Where to invest?             

In contrast to SMEs, large companies can only enjoy the 25% discount for new investments in areas where support zones overlap with the European regional aid map[5].

Excluded enterprises and sectors? 

Excluded are enterprises that are themselves in difficulty because either they are involved in a formal procedure of bankruptcy, judicial reorganisation or liquidation or, as a result of losses, their net assets have fallen to less than half of the fixed capital and their loss in the last twelve months before the investment is higher than a quarter of the fixed capital.

The following sectors are excluded: iron and steel, synthetic fibres, fisheries and aquaculture, agriculture and forestry, airlines, energy, and, in so far as it relates to investments in transport means and transport equipment, passenger and freight transport.

Job creation condition?

The investor must first submit a file explaining the expected employment and specifying an expected timing. Once the deadline for the anticipated completion of the investment is exceeded by more than half the time initially set, the employer loses the right to apply the favourable measure. From the starting date of the investment, the company has three years to create the new employment. The partial exemption of professional withholding tax may only be applied to employment resulting from the investment. The exemption is applicable for two years, per employee, from the creation of the new job.

A net increase in the number of employees in the establishment concerned is required, compared with the average over the previous twelve months after any job lost during that period is deducted from the number of jobs apparently created . In an acquisition, however, all jobs are considered new.

The newly created employment must be retained for at least three years (by SMEs) or five years (by large enterprises). If not, the unpaid withholding tax will still have be paid to the tax authorities.

Requirements for support zones? 

The support zones are delimited by the Regions. The basic requirement is that, in a period of three years, at least 500 workers are affected by collective redundancies (closure or restructuring) in one or more establishments of one or more enterprises in a continuous area of 20 km2 that lies within a circle with a maximum radius of 5 km. In areas with high structural unemployment (at least 125% of the national average), 'only' 250 layoffs are required. The Regions have three years to define a support zone from the time the information and consultation procedure as required by the “Renault Act” has been completed. The regime itself remains applicable for six years in that area. For defining support zones, closures announced after 1 July 2012 can be taken into account (which includes the announced closure of Ford Genk).

The support zone may extend to up to 40 km from the affected enterprise. The support zone itself may thus be larger than the area that is taken into account in order to reach the 500 (or 250) required redundancies. The same Royal Decree has set down the following limits: each Region may propose up to 4 support zones restricted to a maximum area of 2,000 km2 and a maximum population of 200,000 per Region.

The Flemish Region has proposed two support zones for 6 years: one around Genk (closure of Ford) and one around Turnhout (collective layoffs at Philips and Heinz), enclosing only the business zones and science parks located in the 40 km circles around Genk and Turnhout, which would have a total size of only 210 km2 and a population restricted to 80,000 in total. Thus, the limited capacity has not yet been exhausted and there is still room for additional support zones. The zones will become operational once the necessary co-operation agreement with the Federal Government has been concluded.

Addendum: 40 municipalities proposed by the Flemish Region for the regional aid map 2014-2020

Only within this set of municipalities investment support to large companies will be allowed under certain conditions in the context of the State aid rules of the European Commission. The scenario proposed by the Flemish Region is based on the existing regional aid map 2007-2013, and the addition of nine more municipalities in the province of Limburg(*) and six municipalities in the district of Eeklo(*).

  • for West Flanders: Ostend, Middelkerke, Diksmuide, Reninge, Ypres and Wervik;
  • for East Flanders: Ronse, and the district of Eeklo (Assenede *, Eeklo*, * Kaprijke*, Maldegem *, St. Laureins* and Zelzate*);
  • for Antwerp: Balen, Mol and Dessel;
  • for Limburg: As, Beringen, Genk, Leopoldsburg, Heusden-Zolder, Bree, Lommel, Maaseik, Hechtel-Eksel, Houthalen-Helchteren, Dilsen-Stokkem, Herstappe, Lanaken, Tongeren, Maasmechelen, Lummen*, Opglabbeek*, Sint-Truiden*, Tessenderlo*, Zutendaal*, Ham*, * Kinrooi*, Bilzen* and Borgloon*.

The Flemish Government, along with the other Regions, will notify the proposed regional aid map to the European Commission for approval. The new map will become effective on 1 July 2014.

PwC Transport & Logistics Newsletter - Regional Aid map 2014-2020

Please find below the links to the Belgian Act and the Royal Decree (both relating to the article above).

In Dutch: In French: European Guidelines
1. Act_15_05_2014 – NL 1. Act_15_05_2014 – FR Regional state aid 2014-2020
2. Royal_Decree_FA24 – NL 2. Royal_Decree_FA24 – FR

[1] Belgian Act of 15 May 2014 implementing the Pact for Competitiveness, Employment and Recovery, published in the Belgian Official Gazette of 22 May 2014.

[2] Royal Decree of 13 June 2014, published in the Belgian Official Gazette of 26 June 2014.

[3] New article 2758 of the Belgian Income Tax Code.

[4] New article 2759 of the Belgian Income Tax Code.

[5] According to the new Guidelines on Regional State Aid for 2014-2020, which will enter into force on 1 July 2014 (published in the Official Journal of the European Union C209 of 23 July 2013). The Flemish Region has proposed 40 municipalities for the regional aid map.


Intersections Q2 2014: Transportation and logistics industry mergers and acquisitions analysis

Intersections is PwC’s quarterly analysis of mergers and acquisitions (M&A) in the transportation and logistics (T&L) sector. Our second-quarter 2014 analysis is part of our ongoing commitment to providing you with a deeper understanding of related trends and prospects in the industry.

Our analysts are monitoring several trends expected to affect the values and locations of deals in the T&L sector:

  • While strategic investment has been weak this year compared with longer-term totals, the level of financial investment has been more robust. Financial investors also tend to focus on shipping and trucking.
  • Deal multiples are reaching record highs, continuing a trend in effect since the global recession. The general increase in equity market valuations has contributed to higher deal valuations, but infrastructure deals, which tend to carry above average multiples, remain popular.
  • Acquirers remain focused on local-market deals, as 2014 is on pace to be one of the decade’s weakest years for cross-border activity. Emerging market acquirers in particular are consolidating their local markets.  


Navigating your way to calmer waters?
Shipping sector briefing

Low asset and debt prices, and improved market conditions, make investing in the shipping sector attractive and potentially lucrative if the right type of vessel or operator is chosen.

The shipping industry has faced difficult times recently due to depressed demand and structural over-supply. Asset values are up to 70% lower than their peak market values.

Will the longer-term returns satisfy new investors? And will the influx of new investors help to resolve or exacerbate some of the wider industry issues?

Key messages

  1. The outlook for shipping in all segments is improving as demand growth and a slowing rate of deliveries are expected to begin to ease oversupply. In the long run this should improve utilisation, rates and asset values.
  2. However, a renewal of over ordering remains a key risk across the industry and could undermine the nascent recovery.
  3. The changing pattern of global trade will affect ship operators in different ways depending on their mix of vessels and geographic spread. Consideration should be given to the following:
    • Container: smaller independent operators not in alliances and operating smaller vessels could struggle on some of the larger trade routes
    • Bulker: larger vessels could benefit from continued demand for Iron Ore and coal in China, but the demand outlook remains unclear
    • Tanker: the future shape of tanker trade is uncertain given changing shipping patterns driven by shale oil. Large dirty and clean tankers may be better placed.
  4. Asset values are at their lowest in over 10 years and significantly below peak 2008 values. LTVs are likely to be at record highs, however, there is a reasonable expectation of recovery.
  5. Given forecast rate recovery, assets in the ‘right’ areas are likely to remain attractive to investors.
  6. Creative solutions can be found to minimise immediate risk and retain future upside potential.


PwC’s Global & Belgian Economic Crime Survey 2014: Transportation & Logistics insights

What are the biggest fraud issues in the transportation & logistics sector?

Here’s what we learned from our Global Economic Crime Survey 2014 respondents:

  • Procurement fraud is a particular problem. 39% of survey respondents reporting economic crime list this type of fraud, far more than the 29% across all industries. Frauds are happening throughout the process, but payments stand out as a weak area.
  • The transportation & logistics sector is facing a threat from within. 71% of economic crimes are committed by internal perpetrators, which makes it one of the industries with the highest rate of insider crime. Most insiders were either senior executives (20%) or middle managers (48%).
  • Operating in high corruption risk markets is challenging. 44% say their companies have altered business strategies in response to corruption risk. Increased due diligence is the most common response, but nearly half of sector respondents say their companies chose to walk away from an opportunity.


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