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Below are highlights of recent devlopments across the EU in the fields of direct and indirect taxation, including referrals of Member States to the ECJ over infringements. For further information, please contact This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
French VAT representative regime referred to ECJ
France was referred to the ECJ on 5 May 2010 over a reverse charge system whereby the client is designated as liable to pay VAT if the supplier or vendor is not established in the country. This is not being contested. However, by derogation from this system, the vendor is allowed to declare in his own tax statement the tax owed by his clients, in principle as reverse-charged, and to offset this from his own due VAT. To be able to do this, a non-established vendor must register for VAT in France and designate a tax representative to declare and pay the VAT on his behalf. This is considered incompatible with the VAT Directive which provides that taxable persons established in the EU and certain third countries should not have to designate a tax representative for VAT in another Member State.
Belgian tax exemption on interests
The Commission has referred Belgium to the ECJ over measures which allow tax exemptions for interest paid by domestic banks, but not for interest paid by foreign banks. Only Belgian residents who have a savings deposit account with a Belgian bank can benefit from the tax advantage. The Commission considers that the Belgian provisions restrict the free movement of capital and the freedom to provide services.
Finnish withholding tax on dividends
Finland is also being referred to the Court because of failure to comply with a reasoned opinion on its legislation which discriminates against foreign pension funds. Dividends paid to a non-resident pension fund by a foreign company based in Finland for tax purposes are subject to a withholding tax on gross income of 19.5%. Finnish pension funds, on the other hand, are taxed under a special regime: instead of a withholding tax, 75% of dividend income is subject to corporation tax. Since the nominal corporate income tax rate is 26%, the resulting tax rate for dividends paid to Finnish pension funds is 19.5%. However, tax is calculated on their net income, i.e. after deduction of costs as well as current pension liabilities, resulting in an effective tax rate on dividend income paid to a Finnish pension fund of less than 19.5%.
Spanish inheritance and gift tax The Commission has requested Spain to amend its tax provisions on inheritance and gift tax which impose a higher tax burden on non-residents or assets held abroad. The provisions are considered incompatible with the free movement of workers and capital. Commission calls on Greece to respect Court ruling on the taxation of used cars
On 5 May 2010, the European Commission has decided to continue the infringement procedure against Greece on its car registration system, which still discriminates against used cars bought in other Member states, despite some modifications in the law. The Commission has requested Greece to modify the depreciation rules used in the determination of the taxable value of second-hand cars.