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Below are highlights of recent devlopments across the EU in the fields of indirect taxation, including referrals of Member States to the ECJ over infringements. For further information, please contact Damien Fiott on This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
ECJ allows German VAT exemption for certain forms of gambling
On 10 June 2010, the European Court of Justice ruled that it is within the discretionary power of member states to limit and to make conditional the VAT exemption of certain forms of gambling (C-58/09, Leo-Libera)
Commission wants to keep 15% minimum VAT rate beyond 2010
On 24 June 2010, the European Commission has proposed a directive prolonging the minimum standard VAT rate of 15% until the end of 2015. The current minimum rate is in place since 1993 and has been prolonged four times already. The Commission considers that the benefit from the achieved harmonisation would be lost if VAT rate competition among member states became stronger.
Commission refers seven member states to Court over VAT grouping rules
On 24 June 2010, the European Commission has decided to refer the Netherlands, Ireland, Finland, Sweden, the UK, the Czech Republic and Denmark to the Court of Justice for failure to respect the VAT grouping rules. VAT grouping is allowed for the purpose of administrative simplification under the VAT Directive, which gives Member States the option to treat those who are legally independent but closely bound to one another by financial, economic and organisational links as one single taxable person.
Commission calls on Belgium to amend its rules on reduced VAT rates for transactions involving buildings
On 3 June 2010, the European Commission has demanded Belgium to amend its legislation applying, subject to certain conditions, the 6% reduced rate to supplies of residential buildings and building works. Under Belgian law, a reduced rate is applied to the first € 50,000, while the balance of the taxable amount remains subject to the standard rate of 21%. The VAT Directive which lists the operations that may be subject to the 6% reduced rate of VAT includes the „provision, construction, renovation and alteration of housing, as part of a social policy". This social policy reference however is not demanded by Belgian law
Aircraft, horses, water sports: Commission requests Ireland, the Netherlands, Poland and Austria to change preferential VAT treatment
On 24 June 2010, the Commission sent reasoned opinions, the second step of infringement proceedings, to the said member states. The Netherlands were requested to change their VAT exemptions for water sports activities as the scope of the exemption is considered to be too wide, covering also activities not closely linked to sport or physical education. The Irish case concerns a reduced VAT rates for horses and greyhounds that does not appear to have a clearly defined social reason or to benefit the final consumer. The Polish case concerns VAT exemptions for transactions related to aircrafts. The VAT directive does not know any criterion like the weight of the aircraft as it is contained in Polish law. The Austrian case, too, relates to aircrafts, namely VAT exemptions for aircraft used by state institutions deemed incompatible with the VAT directive. Commission refers France to the Court for super-reduced VAT rates and tobacco limitations for private persons On 24 June 2010, the European Commission has decided to refer France to the EU Court of Justice for failure to comply with Community rules on the super-reduced rate of VAT for certain theatre performances and for limiting the quantity of manufactured tobacco that can be purchased by private individuals in other Member States. As a general rule of the VAT Directive, the minimum reduced VAT rate is 5%. Temporary measures allow member states to continue applying lower rates that were in place at the beginning of 1991 but these rates may not be extended to new areas. France had been applying a rate of 2.1% to tickets for the first 140 performances of theatre productions under the condition that no refreshments were served during the performance. The Commission contests that that condition has later been deleted.
French legislation provides for strict limits on the quantities of manufactured tobacco that may be transported (1 kg) and held (2 kg) in France by private individuals who purchased it in other Member States. Such limits do not exist in EU law, provided that the products are intended for own consumption and be transported by the private individuals themselves. According to the Commission, the amount of the tobacco cannot be applied as sole criterion. Advocate-General delivers opinion in VAT fraud case "R"
On 29 June 2010, Advocate-General Pedro Cruz Villalón delivered his opinion on the case C-285/09, "R". The request for a preliminary ruling on the VAT exemption of intra-community deliveries was referred to the Court by the German Supreme Court (BGH). The question was essentially whether the country of origin of the goods may refuse the vendor who is established and liable to tax in this country a tax exemption if the vendor has actually effected a intra-community delivery but has not declared specific facts concerning the operation and thereby enabled the buyer established in the country of destination to evade tax. Mr Cruz Villalón is of the opinion that a tax exemption should be granted regardless of whether the vendor was in good faith or not. Even though a sanction would be desirable, the vendor would have to be sanctioned in a way compatible with the VAT Directive
Commission refers seven member states to Court over VAT grouping rules
On 24 June 2010, the European Commission has decided to refer the Netherlands, Ireland, Finland, Sweden, the UK, the Czech Republic and Denmark to the Court of Justice for failure to respect the VAT grouping rules. VAT grouping is allowed for the purpose of administrative simplification under the VAT Directive, which gives Member States the option to treat those who are legally independent but closely bound to one another by financial, economic and organisational links as one single taxable person.
In July 2009, the Commission adopted a communication on the VAT grouping option, setting out how the provisions on VAT grouping in EU legislation should be applied in practice, in a way that respects the basic principles of the EU VAT system and ensures that it has no adverse impact on the Internal Market. Having examined national provisions on this issue, the Commission found that the legislation in seven Member States was incompatible with the EU rules on VAT grouping. For NL, IE, FI, UK, CZ and DK, the problem is that they allow non-taxable persons to join a VAT group. This is not in line with the provisions of the VAT Directive. Proceedings against SE and FI are due to the fact that these Member States limit the VAT grouping system to financial and insurance services. EU VAT grouping rules do not allow for such a sectoral limitation. For NL, the proceedings also cover the failure to notify changes to the application of their VAT grouping scheme to the VAT Committee.
On 24 June 2010, the European Commission has decided to refer the Netherlands, Ireland, Finland, Sweden, the UK, the Czech Republic and Denmark to the Court of Justice for failure to respect the VAT grouping rules. VAT grouping is allowed for the purpose of administrative simplification under the VAT Directive, which gives Member States the option to treat those who are legally independent but closely bound to one another by financial, economic and organisational links as one single taxable person.
In July 2009, the Commission adopted a communication on the VAT grouping option, setting out how the provisions on VAT grouping in EU legislation should be applied in practice, in a way that respects the basic principles of the EU VAT system and ensures that it has no adverse impact on the Internal Market.
Having examined national provisions on this issue, the Commission found that the legislation in seven Member States was incompatible with the EU rules on VAT grouping. For NL, IE, FI, UK, CZ and DK, the problem is that they allow non-taxable persons to join a VAT group. This is not in line with the provisions of the VAT Directive. Proceedings against SE and FI are due to the fact that these Member States limit the VAT grouping system to financial and insurance services. EU VAT grouping rules do not allow for such a sectoral limitation. For NL, the proceedings also cover the failure to notify changes to the application of their VAT grouping scheme to the VAT Committee