News from Accountancy Europe - March 2019

European Commission 

Commissioner Moscovici hints for the first time possibility of enhanced cooperation on digital tax - 21 February 2019

Speaking at a conference on taxation organised by the think-tank Bruegel, Commissioner Moscovici hinted that he would consider using enhanced cooperation if Member States fail to agree on the digital services tax (DST) at the upcoming 12 March ECOFIN meeting.

The event was about the prospect of introducing qualified majority voting (QMV) into EU s tax decision-making, instead of the current unanimity rule that allows even just one Member State to block a tax proposal. The Commissioner expressed frustration that only three Member States out of 28 (Sweden, Denmark and Ireland) block the DST whilst all others are willing to move ahead.

Commission has launched an EU-wide multilingual campaign urging SMEs to prepare for Brexit - 22 February 2019

The European Commission has launched an EU-wide multilingual campaign urging SMEs to prepare for Brexit including VAT and tax implications.

The Communication campaign is taking place through the regular Commission-owned channels, but also relies on national and local multipliers to reach the target audience in their national language.

The material consists, notably, of the following:

  • Dedicated web page in 24 languages on TAXUD Europa
  • “Trader checklist” in 24 languages
  • “Brexit Customs Guide for Businesses” in 24 languages
  • Press release in 24 languages and lines to take for the press
  • Announcement in the midday Press-Briefing
  • News-announcement on the website

 

European Parliament

European Parliament Plenary adopts definitive regime opinion - 12 February 2019

The European Parliament has adopted its position on the introduction of detailed technical measures for the operation of the definitive VAT system for the taxation of trade between Member States. The report, prepared by the MEP Fulvio Martusciello (EPP/ITA), was approved with 493 votes in favour, 48 against and 137 abstentions.

In the adopted report, the MEPs support the transition to the destination principle. The MEPs also proposed that stricter and more harmonised criteria should be put in place to determine which companies can benefit from the status of a certified taxable person, and that fines and penalties for abusers should be established.

As always on tax matters, the European Parliament merely submits its non-binding opinion on this file whilst the EU Member States must decide by unanimity.

 

Court of Justice of the EU - Rulings 

Case C‑295/17: Taxable transactions - cancellation charges - 22 November 2018

CJEU has ruled that:

  • Article 2(1)(c) of the VAT Directive means that the predetermined amount received by an economic operator where a contract for the supply of services with a minimum commitment period is terminated early by its customer or for a reason attributable to the customer, which corresponds to the amount that the operator would have received during that period in the absence of such termination a matter which it is for the referring court to determine must be regarded as the remuneration for a supply of services for consideration and subject, as such, to VAT.
  • The fact that the objective of the lump sum is to discourage customers from not observing the minimum commitment period and to make good the damage that the operator suffers in the event of failure to observe that period, the fact that the remuneration received by a commercial agent for the conclusion of contracts stipulating a minimum period of commitment is higher than that provided for under contracts which do not stipulate such a period, and the fact that the amount invoiced is classified under national law as a penalty, are not decisive for classifying the amount predetermined in the services contract which the customer is liable to pay in the event of early termination.

 

Other News

EESC publishes opinion on the definitive VAT regime - 7 February 2019

The European Economic and Social Committee (EESC) has adopted its opinion on the proposal for a definitive VAT regime. 

Whilst EESC welcomes the proposal, it is also concerned that it may turn out to be a prohibitive obstacle for both SMEs and start-ups, and maintains that the system of reverse charge should be granted to all B2B cross-border supplies of goods, until the implementation of a definitive regime. 

The report also recommends adequate investment in IT hardware/software to efficiently manage the amount of information, and to enable businesses to continue operating without unnecessary interruptions. 

EESC’s opinion is non-binding, but given that its constituents include both industry and civil society organisations, its mandate holds great political legitimacy.

 

MEP Questions & Answers

VAT on EU environmental grants - 21 January 2019

The European Commission has replied to a question asked by the MEP Janusz Zemke (S&D/Poland) with regard to VAT on environmental grants.

In his question, Mr. Zemke asks the Commission whether EU rules require Member States to include EU grants in the VAT base, whether Member States are prohibited to set a lower rate or exempt grants from VAT, and whether EU grants can be increased by the VAT due so that the residents do not incur tax liabilities going beyond their own contribution to environmental investment.

In his reply, Commissioner Moscovici underlines that subsidies that are directly linked to the price of a supply of goods or services must be included in the taxable amount on which VAT is levied. Thus, whether the EU grants received are indeed directly linked to the price must be assessed on a case-by-case basis. 

Moreover, he states that if the subsidy has to be included in the taxable amount, Member States are not allowed to apply a lower VAT rate than the one usually applied to the supply in question nor can they exempt the subsidy from VAT. However, the Commissioner also highlights that where VAT must be applied, it may be declared as an eligible cost by the beneficiary of an EU grant unless otherwise specified in the EU spending programme. The applicable eligibility rules regarding VAT are announced in the respective Calls for proposals.

 

Call for preferential VAT rate on alcohol used in gastronomy - 24 January 2019

The European Commission has replied to a question asked by the MEP Norbert Erdős (EPP/Hungary) with regard to VAT on alcohol used in gastronomy. 

In his question, Mr. Erdős asks the Commission what are  its views concerning a possible reduction of VAT on quality beers and wines used in gastronomy.

In his reply, Commissioner Moscovici underlines that under current VAT rules Member States may apply a reduced VAT rate of a minimum of 5% to the supply of restaurant services including alcoholic beverages supplied in restaurants. The VAT rates reform proposed by the Commission and currently being negotiated on between Member States would also provide for the possibility of such reduced rates or even a full exemption.

 

Reverse charging - 4 February 2019 

The Council has replied to a question asked by the MEP Stanislav Polčák (EPP/Czechia) with regard to reverse charging.

In his question, Mr. Polčák laments that the newly agreed reverse charge mechanism provisions are only temporary. He asks the Council whether it has considered instead more stable legislation on reverse charging as constant changes in regulations are the road to hell. 

In its reply, the Council acknowledges that it adopted the reverse charge measures referred to by the MEP, and merely states that the Member States are also currently working on the Commission s definitive regime proposals.

 

Double taxation - 6 February 2019

The European Commission has replied to a question asked by the MEP Nuno Melo (EPP/Portugal) with regard to double taxation.

In his question, Mr. Melo refers to a specific case involving a US company supplying car parts to a European consumer, and argues that VAT charged on transport costs on which this tax has already been levied amounts to double taxation. He asks the Commission whether it is legal to charge customs duties not only on the value of the good that justified the creation of the duty, but also on transport costs that have nothing to do with this good, and whether VAT and customs duties can be charged on transport costs for which VAT, or equivalent tax, has already been paid.

In his reply, Commissioner Moscovici notably confirms that the taxable amount for the importation of goods is the value for customs purposes which includes, among others, customs duties due upon importation and transport charges incurred up to the first place of destination in the Member State of importation. He argues that this ensures equal treatment of imports of goods compared with similar domestic products that will bear VAT. As a general principle, the transport costs are exempt from VAT or an equivalent tax (if at all existing, which is not the case in the US) in the country of origin/exportation, the Commissioner concludes.

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News from Accountancy Europe - April 2019

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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.