News from Accountancy Europe September 2017

European Commission

Major VAT packages expected for the autumn - 19 September 2017 

The European Commission is driving its VAT reform agenda forward with full speed. On 4 October, it will publish the first step of its proposals to move towards a definitive regime and the destination principle. This will be accompanied by a proposal concerning the so-called certified taxable persons (CTPs). The second step is expected for 2018, and will lay down detailed technical provisions needed for the operation of the definitive VAT system. On 29 November, in turn, the Commission will publish proposals to reform the EU VAT rates system, to simplify VAT rules for SMEs, and to reinforce the existing instruments for administrative cooperation.

Commission publishes Communication on taxing the digital economy - 21 September 2017

The Commission has published its awaited Communication on taxing the digital economy. The Communication presents the Commission’s initial thinking on the matter, and lists several possible policy options - both long and short term, international and EU-specific that it will consider. According to the Communication, the Commission “stands ready” to present a legislative proposal by spring 2018.

Of particular interest, the Commission emphasises the need for international solutions (e.g. revising transfer pricing rules, PE, profit attribution rules), but EU-specific initiatives and especially short-term fixes could be considered in parallel:

  • CCCTB, in particular, provides an appropriate platform for a EU-level framework
  • On international reforms, the Commission seeks to establish a common, coherent EU position
  • As a reminder, the OECD will publish an interim report and proposals on the topic in April 2018, with a final report expected by 2020
  • If progress is too slow internationally, the Commission maintains that EU-specific long-term solutions should be considered

In terms of next steps:

  • December 2017: member states to agree on a common approach for taxing the digital sector


Commission publishes VAT gap report - 27 September 2017

The Commission has published its latest report on the VAT gap in the EU. According to the report, the total amount of VAT lost across the EU-27 in 2015 is estimated at EUR 151,5 billion. This represents a loss of 12% of the total expected VAT revenue. Member states estimated VAT gaps ranged from -1.4% in Sweden, to 37.18% in Romania. Overall, the VAT Gap decreased in the majority of member states, with the largest improvements noted in Malta, Romania and Spain. The gap increased in seven member states, namely Belgium, Denmark, Ireland, Greece, Luxembourg, Finland, and the UK.


Proposed VAT derogation to Romania published - 22 September 2017

A new proposed VAT derogation for Romania has been published. The derogation would allow Romania to grant a VAT exemption to any taxable persons whose annual turnover is no higher than the equivalent in national currency of EUR 88,500. All member states need to agree with the derogation, although no major obstacles are foreseen.


Digital tax agenda moves forward at Tallinn summit - 29 September 2017

The Estonian Presidency has organised a Digital Summit in Tallinn during which the hot topic of the moment, taxation of the digital economy, was also discussed.

In the preliminary summit conclusions, the EU member states commit to global change of taxation rules, and in parallel adapting European tax systems to ensure that digitally-generated profits in the EU are taxed where value is created. This fairly generic wording appears to leave the door open for all the policy options currently on the table, ranging from sticking to an OECD-led process to the EU taking unilateral action.

Ahead of the summit, France, Germany, Spain and Italy published their objectives for the meeting, outlining notably in greater detail their thinking on digital taxation, as well as other areas of digitalisation.

It appears that after the summit, up to 19 member states are supporting the digital tax initiative driven by France. No details have been provided on which countries exactly, but on top of the four initiating ones at least Austria, Bulgaria, Greece, Portugal, Romania and Slovenia are in favour. On the opposite side lie Hungary, Denmark, Czech Republic, UK, Ireland, Luxembourg, Sweden and Cyprus. The Netherlands is, apparently, still hesitating on its approach. Belgium has also expressed sympathy for the initiative, but insists that further technical work is needed first. Thus, the rest of the alleged supporters’ camp can be figured out by method of elimination.

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Court of Justice

C-552/15: Irish legislation on registration tax - 19 September 2017

The Grand Chamber of the CJEU has ruled that a member state cannot oblige a taxpayer to pay the full amount of a vehicle registration tax applicable in the event of permanent registration, with disregard to the actual limited duration of the proposed use in Ireland of the vehicle imported there, and although the temporary duration of the lease or rental has been determined precisely and is known in advance. The Court views that this obligation risks rendering the lease or rental in such situations costlier than if it was concluded with a company established in Ireland.

C215/16, C216/16, C220/16 and C221/16: Taxation of energy products and electricity - 20 September 2017

The First Chamber of the CJEU has ruled that member states may apply a levy on wind turbines designed to produce technology. Such a levy does not tax energy products or electricity, nor does it constitute a tax imposed on the consumption of energy products or electricity tax.

C616/15: Exemption for services supplied to their members by independent groups of persons - 21 September 2017

The Fourth Chamber of the CJEU has ruled that member may not restrict a VAT exemption to independent groups of persons (IGPs) whose members exercise a limited number of professions. The Court clarifies, in particular, that the VAT exemption to IGPs is not limited to the field of health and does not cover the financial sector.

C605/15: Exemptions for certain activities in the public interest - 21 September 2017

The Fourth Chamber of the CJEU has ruled that the exemption provided for activities undertaken in the public interest is only applicable to independent groups of persons (IGPs) whose members carry on an activity in the public interest as defined in the VAT Directive. By extension, services supplied by IGPs whose members carry on an economic activity in the area of insurance does not constitute such an activity in the public interest, and therefore are not entitled to the exemption.

C441/16: Refund of VAT charged on imported goods - 21 September 2017

The Tenth Chamber of the CJEU has ruled that a member state cannot refuse to refund the VAT paid on the importation of goods to a taxable person who is not established on its territory when, at the time of importation, the following conditions are met:

  • the performance of the contract through which the taxable person purchased and imported those goods was suspended
  • the transaction for which they were intended to be used was in the end not carried out
  • the taxable person did not provide proof of their subsequent movements

C326/15: Exemptions for certain activities in the public interest in financial services - 21 September 2017

The Fourth Chamber of the CJEU has ruled that the exemption provided for activities undertaken in the public interest is only applicable to independent groups of persons (IGPs) whose members carry on an activity in the public interest as defined in the VAT Directive. Services supplied by a group whose members carry on an economic activity in the area of financial services are not entitled to that exemption, since it does not constitute an activity in the public interest.

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Disclaimer:  The information contained in the present page is general and does not constitute legal advice. Before taking any decision or action on the above information you should take the appropriate professional advice.