eu tax alert...eu tax alert january 2014 - edition 125 overview 2013 the eu tax alert is an e-mail...

January 2014 - edition 125EU Tax Alert

OVERVIEW 2013

The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.

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ContentsState Aid / WTO• RecoveryofbenefitfromIrishdifferentialairtravel

tax rate ordered

• LiechtensteinR&DregimefoundnottobeStateaid

• CJrulesFinnishlossdeductionregimeincaseof

changeofownershiptopossiblyamounttostateaid

(P Oy)

• ‘Compulsoryvoluntarylevy’doesnotamountto

StateaidaccordingtoAdvocateGeneral(Doux

Élevage SNC)

• FirstmodernizationproposalsfornewStateaid

Regulationslaunched

• CommissionallowsnewSpanishschemeforearly

depreciationoffinance-leasedassets

• CommissiondeclaresItalianmunicipalrealestate

taxexemptiontobeillegalaid

• Spanishtaxbenefitstoleaseandfinancingofships

foundpartlyincompatible

• NewinvestigationintoSpanishgoodwillschemein

respectofindirectnon-Spanishtakeovers

• Commissionopensfullinvestigationinto2010

GibraltarCorporateTaxRegime

• France’sinclusionofnon-EUtimechartersinits

tonnagetaxregimeunderinvestigation

• Norwayrecommendedtoabolishtaxexemptionfor

retailactivitiesofpublichospitalpharmacies

Directtaxation

• ECOFINandCounciloftheEUdiscuss

amendmentstotheSavingsDirectiveandmeasures

againsttaxevasionandtaxfraud

• Councilagreestoenhancedcooperationon

FinancialTransactionTax

• CJrulesthatItalianlegislationonintra-Union

transfersofassetsisnotinbreachoftheMerger

Directive(3D I)

• CJrulesinlinewithNational Grid Industhat

theNetherlandshasfailedtoamenditsexittax

ruleswithrespecttocompaniesandbusinesses

(Commission v Netherlands)

• CJrulesthatthene bis in idemprincipleoftheEU

CharterofFundamentalRightsdoesnotpreclude

theimpositionofcombinedtaxpenaltiesand

criminalpenaltiesfornon-compliancewithVAT

obligations(Åkerberg)

• Finnishrulesondeductibilityoflossesuponmerger

ofcompaniesofdifferentMemberStatesinbreach

ofthefreedomofestablishment(A Oy)

• CJholdsthatinsurancepremiumtaxistobepaid

intheMemberStatewherethepolicyholderresides

atthetimeofthepaymentofthepremium(RVS

Levensverzekeringen)

• CJholdsthattherefusaloftheGerman‘splitting

method’tofrontierworkersviolatestheEC-

SwitzerlandAgreementonthefreemovementof

persons(Ettwein)

• CJrulesthatthemethodusedbyGermanyfor

calculatingforeigntaxcreditiscontrarytothefree

movementofcapital(Beker and Beker)

• CJrulesonscopeofexemptionformanagementof

specialinvestmentfunds(GfBk)

• CJrulesonscopeofexemptionformanagementof

specialinvestmentfunds(Wheels and others)

• Spanishrulesonexittaxesuponchangeof

corporateresidenceortransferofassetsofa

permanentestablishmentinbreachofthefreedom

ofestablishment(Commission v Spain)

• DistrictCourtofTheHagueruledthatthepossibility

toformafiscalunityunderNetherlandslawisnotin

breachwiththefreedomofestablishment

• ECHRfindsHungarianlegislationprovidingfora

98%taxoverpaymentstoemployeesofthepublic

sectorforterminationofemploymentinbreachof

therighttoprivateproperty(N.K.M. v Republic of

Hungary)

• CJrulesthatBelgianlegislationontaxationof

interestincomederivedfromsavingdepositsheldin

foreignbanksisinbreachofthefreemovementof

services (Commission v Belgium)

• CJrulesthatnon-applicationofthenotionalinterest

deductionrulesincaseofBelgiancompanieswith

foreignpermanentestablishmentsisinbreachofthe

freedomofestablishment(Argenta)

• CJrulesthatDanishexittaxrulesoncross-border

transfersofassetswithinacompanyareinbreach

ofthefreedomofestablishment(Commission v

Denmark)

• ECHRfindsthatSwedenviolatedArticle1of

Protocol1andArticle8oftheConventionforthe

3

whichhaveaforeignlinkmaybeinbreachofthe

freedomofestablishment(Felixstowe Dock)

• AGMengozzifindsthatdenialoftaxexemption

toinvestmentfundresidentinthirdcountryunder

PolishlawiscompatiblewithEUlaw(Emerging

Markets Series of DFA Investment Trust Company)

• EntryintoforceofstrongerEUrulestohelpfighttax

evasion

• DanishHighCourtreferspreliminaryquestionto

theCJregardingrulesonrecaptureoflossesfrom

PermanentEstablishmentsofacompany(Nordea

Bank)

• UKchallengesthelegalityofCouncilDecisionto

authoriseenhancedcooperationonacommon

frameworkofFTTandthescopeandobjectivesof

theinitialCommissionproposal(UK v Council)

• NetherlandsSupremeCourtreferspreliminary

questionstotheCJregardingtheamendments

totheNetherlands30%ruling,effectiveasper

1January2012

• CommissionrefersBelgiumtotheCJregardingits

provisionsoninheritancetax

• CommissionetributariaprovincialdiRomarefers

twocasestotheCJregardingthecompatibilityof

ItalianRulesontaxationofwinningsobtainedfrom

casinos

• NorwegianAppealsBoardoftheCentralTaxation

OfficeforLarge-SizedEnterprisesrequestsAdvisory

OpiniontoEFTACourtregardingcompatibilityof

CFCruleswiththeEEAAgreement

• CourtofAppealofAntwerpreferscasetotheCJ

regardingBelgianrulesontaxationofimmovable

property

• SupremeCourtoftheNetherlandsreferscaseto

theCJregardingNetherlandslegislationonthe30%

ruling(X)

• CommissionasksDenmarktoamenditsrules

regardingexittaxationofindividuals

• CommissionissuesproposedDirectiveonFinancial

TransactionsTaxtobeimplementedunder

enhancedcooperation

• CommissionasksBelgiumtochangeitstaxationof

paidinterest

• PublicconsultationsonEUTaxpayer’sCodeandEU

TaxIdentificationNumber

ProtectionofHumanRightsandFundamental

Freedoms(Rousk v Sweden)

• CourtofAppealsofTheHaguerulesthata

‘Papillion’fiscalunityconcernsapurelyinternal

situation,wherebythereisnoaccesstotheTFEU

• CJrulesthatPortuguesethin-capitalization

legislationapplicabletothirdcountriesisinbreach

ofthefreemovementofcapital(Itelcar)

• CJrulesthatturnoverofpermanentestablishment

abroadmaynotbetakenintoaccountforthe

calculationoftheprorataoftheheadoffice(Le

Crédit Lyonnais)

• CJrulesthatexchangeofinformationpursuantto

theMutualAssistanceDirectivedoesnotrequirethe

obligationtopreviouslyinformthetaxpayerofthe

requestforassistanceortheobligationtoinvitethe

taxpayertotakepartintheexaminationofwitnesses

(Sabou)

• CJrulesthatFinnishlegislationwhichdeniesthe

deductionofcapitallossesfromthesaleofreal

estatelocatedinanotherMemberStateinnotin

breachofthefreemovementofcapital(K)

• AdvocateGeneralopinesthatinterestonrepayment

oftaxchargedcontrarytoEUlawisduefromthe

dateofpaymentofthetaxandnotfromthedateof

claimforrepayment(Irimie)

• EuropeanEconomicandSocialCommitteeissues

OpiniononCommissionActionPlantostrengthen

thefightagainsttaxfraudandtaxevasion

• AGMengozziconsidersGermaninheritancetax

legislationinbreachofthefreemovementofcapital

(Yvon Welte)

• AGVillalónopinesthatBelgiantaxruleswhich

denytaxdeductionforachildincaseofafamily

establishedinBelgiumbutderivingitsincomein

anotherMemberStateisinbreachofthefreedomof

establishment(Imfeld and Garcet)

• AGWatheletconsidersthatUKtaxruleswhich

retroactivelycurtailtheperiodforreimbursementof

unduetaxpaidarenotcompatiblewiththeprinciples

ofeffectiveness,legalcertaintyandtheprotection

oflegitimateexpectations(Test Claimants in the FII

Group Litigation)

• AGJääskinenconsidersthatUKlegislationwhich

precludeslossreliefbetweendomesticcompanies

4

• CommissionproposesamendmentstoParent-

SubsidiaryDirective,inordertotackletaxavoidance

inEurope

• CommissionpublishesreportsoftheEUJoint

TransferPricingForum

• CommissionrequestsGreecetostopdiscriminatory

inheritancetaxprovisions

• CommissionrequestsFranceandLatviato

implementEUrulesagainsttaxevasion

• CommissionbringsBelgiumtotheCJregardingtwo

discriminatoryprovisionsinBelgianlaw

• Commissionappointsthemembersoftheexpert

grouponthetaxationofthedigitaleconomy

• DevelopmentsintheNetherlands:CourtofAppeal

ofAmsterdamreferspreliminaryquestionstothe

CJinthreecasesregardingthecompatibilityofthe

Netherlandsfiscalunityregimewiththefreedomof

establishment

• FinancialTransactionTax:wheretheNetherlands

stand

VAT

• CommissionproposesastandardVATreturn

• Councilholdspolicydebateon‘quickreaction

mechanism’againstVATfraud

• EntryintoeffectofnewVATrules

• CJrulesthatVATonacquiredbuildingsthat

aredemolishedwithaviewtoconstructionofa

residentialcomplexisdeductible(SC Gran Via

Moineşti)

• CJrulesthatrighttodeductionmaybedeniedifthe

taxablepersonkneworshouldhaveknownthathe

wasinvolvedinVATfraud(Bonik)

• CJclarifiesmeaningoftheterm‘constructionwork’

inderogatingmeasure(BLV)

• CJrulesonretrospectivereductionoftaxable

amountundertheSecondVATDirective(Grattan)

• CJrulesonchargeableeventinthecaseofsupply

ofconstructionserviceswhereconsiderationis

providedinkindintheformofbuildingright(Orfey)

• CJrulesthatre-invoicedcostsofinsurancefall

underVATexemption(BGZ Leasing)

• CJrulesthatSpainhasincorrectlyappliedthe

reducedVATrateoncertainpharmaceuticaland

medicalsupplies(Commission v Spain)

• CommissionrefersSpaintotheCJregarding

discriminatoryrealestatetaxation

• CommissionrequestsDenmarktochangetaxrules

onforeigninvestmentinstitutes

• CommissiondecidestosetupanExpertGroup

knownas‘PlatformforTaxGoodGovernance,

AggressiveTaxPlanningandDoubleTaxation’

• EFTASurveillanceAuthoritydecidestobringIceland

beforetheEFTACourtfortaxingcompanieson

unrealisedcapitalgainsoncross-bordermergers

• CommissionrefersFrancetotheCJregarding

discriminatorypropertytaxrules

• Commissionproposestoextendthescopeof

automaticexchangeofinformationwithintheEU

• CommissionasksfiveMemberStatestoimplement

theDirectiveonadministrativecooperationintotheir

domesticlaws

• CommissionrequestsPortugaltoenddiscriminatory

taxationofnon-residentcompanies

• CommissionrequestsSpaintoenddiscriminatory

taxationofinvestmentsinnon-residentcompanies

• EuropeanParliamentCommitteeonEconomic

andMonetaryAffairsissuesreportontheproposal

foraCouncildirectiveimplementingenhanced

cooperationintheareaoffinancialtransactiontax

• CommissionrefersUKtotheCJregardingits

legislationoncross-bordergrouprelief(Commission

v UK)

• EFTASurveillanceAuthoritysendsreasonedopinion

onLiechtensteintaxrulesonnotionalinterest

deduction

• CommissionrequestsBelgiumtoamendtherules

applicabletotaxationofforeigncollectiveinvestment

undertakings

• CommissionrequestsBelgiumtoamenditstaxation

oncertainsettlements

• CommissionrequestsRomaniatoamenditstax

rulesonnon-residents’employmentincome

• CommissiondecidestoreferBelgiumtotheCJ

regardingtheapplicationoftaxexemptionsgranted

toUnioninstitutions

• CommissionrequestsFrancetoamendits

legislationontaxationofcapitalgainsonprecious

metals

• CommissioncreatesExpertGrouptoguideEU

approachonthetaxationofdigitaleconomy

5

goingconcernwherebytheassetsandliabilitiesare

continued(X BV)

• CJclarifieswhetherfineforbelatedrectification

iscontrarytotheprincipleofneutralityand

proportionality(Rodopi)

• CJrulescontractualtermsarenotdecisiveto

determinethesupplierandrecipientofservices

(Paul Newey)

• CJrulesonplaceoftaxabilityofstorageservices

(RR Donnelley)

• VATonservicesrelatingtopensionfundis

deductibleifitislinkedtoVATtaxableactivitiesof

employer(PPG Holdings)

• CJclarifieswhatevidenceisrequiredtoprovethat

supplieshavetakenplace(Evita-K)

• CJrulesondeductionofVAToncostsincurredin

relationtohiredstaff(AES)

• CJclarifiesscopeofVATexemptionforleaseof

immovableproperty(Medicom)

• CJrulesonconceptofcivilandcommercialmatters

inrespectofjudicialcooperationbetweenMember

States (Sunico)

• CJrulesthatsuppliesfornoconsiderationmust

undercircumstancesberegardedashavingbeen

carriedoutforconsideration(Serebryannay)

• CJrulesonapplicationoftraveloperatormargin

schemeinvariousMemberStates

• CJrulesthatamountdueincaseofadjustmentof

VATinitiallydeductedbyataxpayershouldbelevied

fromthatsametaxpayer(Pactor Vastgoed)

• CJclarifiesrulesonpaymentofdefaultinterestin

caseofalateVATrefund(Steaua Română)

• CJrulesonmethodtotaxgamingmachineturnover

(Metropol)

• CJclarifieswhentheconcludedpricemustbe

regardedtobeinclusiveofVAT(Corina-Hrisi Tulică

and Călin Ion Plavoşin)

• CJrulesonVATconsequencesofpaymentsmade

withcreditcardsusedinafraudulentmanner

(Dixons Retail Plc)

• AdvocateGeneralopinesthatnon-taxablepersons

maybeamemberofaVATgroup(Commission v

Ireland)

• AdvocateGeneralopinesthataVATgrouping

systemmaynotbelimitedtospecificsectors

(Commission v Sweden)

• CJclarifiesthedefinitionof‘buildingland’forVAT

purposes(Woningstichting Maasdriel)

• CJrulesondeductionofVAT(improperly)entered

on invoices (Stroy Trans and LVK – 56)

• CJrulesthatgrantingaccesstoaquaticparkmay

constituteservicescloselylinkedtosports(Město

Žamberk)

• CJrulesthatVATonlegalcostsforcriminal

proceedingsbroughtagainstmanagingdirectors

intheirpersonalcapacityisnotdeductiblebythe

company(Wolfram Becker)

• CJrulesthatIrelandincorrectlyappliesareduced

VATrateoncertainsuppliesofhorsesand

greyhounds(Commission v Ireland)

• CJrulesthatVATregistrationmaynotberefused

withoutsoundlegitimategrounds(Ablessio)

• CJrulesonscopeofexemptionformedicalservices

(PFC Clinic)

• CJrulesthatnon-VATentrepreneursmayparticipate

inaVATgroup(Commission v Ireland and others)

• CJclarifiesrulesonrefundofimproperlyinvoiced

VAT (Rusedespred)

• CJrulesonrestrictionofVATgroupingtospecific

sectors (Commission v Sweden)

• CJrulesthatdeductionofVATmayinprinciplebe

refusedincaseofincompleteinvoices(Petroma

Transport SA)

• CJrulesonbasisofassessmentforassetsheld

after cessation of taxable activities (Hristomir

Marinov)

• CJrulesonPolishprovisiononhowtoestablishthe

timeacompanybecomesliabletopayVAT(TNT

Express Worldwide)

• CJclarifiesrulesonrepaymentofinputVATfor

whichthedeductionwaspreventedinbreachofEU

VATlaw(Alakor)

• CJrulesonthequalificationaseconomicactivityof

exploitingaprivatephotovoltaicinstallationwhichis

connectedtothenetwork(Fuchs)

• CJrulesonVATdutyforprivateservicefromVAT-

registeredprivatebailiff(Kostov)

• CJrulesonsupplyofimmovablepropertysoldby

ajudgmentdebtorinacompulsorysaleprocedure

(Promociones y Construcciones)

• CJholdsthatforVATpurposes,thesaleofa30%

participationisnottoberegardedasatransferofa

6

• CJrulesontheconditionsforreliefofimportdutyfor

avehiclewhoseownerisregisteredoutsideEUand

usedbyanEUresidentperson(Fekete)

• CJrulesthatRomanianruleslimitingtheinterest

payableonrepaidtaxareinbreachofEULaw

(Mariana Irimie)

• CJrulesontheretroactiverecoveryofantidumping

dutyonimportsoffasteners(Paltrade)

• CJrulesontherefusaltoreimburseexcises

forgoodstransportedtoanotherMemberState

(Scandic Distilleries SA)

• CJrulesonthelegalrequirementswithregardto

exciseproductsshippedtoanotherEUMember

State (Metro Cash & Carry Denmark)

• CJrulesontheincurrenceofacustomsdebtfor

goodsstolenfromacustomswarehouse(Harry

Winston)

• CJrulesonpossibilityofretrospectiveapplicationof

preferentialcustomsdutytariffthatwasnolongerin

effectondateofrequestforrepayment(Sandler AG)

• CJrulesonthedoubletaxationoftheuseand

registrationofacar(X)

• AdvocateGeneralopinesoncriteriafordetermining

thelimitsapplicabletothetransportofproducts

subjecttoexciseduty(Commission v France)

• AccordingtoAGWahl,aSpanishtaxonretailsales

ofhydrocarbonsiscontrarytoEUlaw

• CommissionadoptsCommunicationclarifyingEU

rulesoncartaxes

• CommissionadoptsCommunicationonCustoms

Union:boostingEUcompetitiveness,protectingEU

citizensinthe21stcentury

• EUrequestsWTOdisputesettlementpanelover

Argentina’simportrestrictions

• EUandSingaporeagreeonlandmarktradedeal

• Commissionproposesimprovedrulestoenforce

EUrightsunderinternationaltradeagreements-

UpdatedwithaRegulation

• Customs:strengtheningthesecurityofthesupply

chain

• Drugprecursors:Commissionadoptsproposalfor

aCouncildecisiononthesigningofanEU-Russia

agreement

• CommissionrefersHungarytotheCJovertax

exemptionofpálinka

• AdvocateGeneralopinesthathouseholderqualifies

asVATentrepreneurforsupplyofelectricity

producedbysolarpanelsystem(Urfahr)

• AdvocateGeneralfindsthatitisforthenational

judgetodeterminewhatisthecorrectunderstanding

totreatcommercialadvertisingscreeningtax

accordingtothenationallaw(TVI)

• AGKokottdeliversOpiniononscopeofVAT

exemptionforeducationalservices(MMDP)

• AdvocateGeneralopinesthatsupplyofdrugs

closelyrelatedtooutpatientcareisnotVATexempt

(Klinikum Dortmund)

• Commissionproposalregardingtaxationof

telecommunications,broadcastingandelectronic

services

• CommissionrefersFranceandLuxembourgtoCJ

overVATratesone-books

• CommissionrefersUKtoCJforitsreducedVATrate

onsupplyandinstallationofenergy-savingmaterials

• ProposalforderogatingmeasureallowingLatviato

restricttherighttodeductVAToncars

• CouncilmeetingoncombatingVATfraud

• CommissionrequestsPolandtoamendits

legislationonreducedVATrates

• CouncilagreesonmeasurestocombatVATfraud

• Councilagreesonrulesforplaceofsupplyofcertain

services

• Councilreachespoliticalagreementonmeasuresto

combatVATfraud

• StudyonVATGap

• CommissionpublishesguidelinesonminiOneStop

Shopregime

• CommissionrefersLuxemburgtotheCJoverits

reducedVATrateondigitalbooks

• CommissionrefersSwedentotheCJoverVATon

postalservices

CustomsDuties,ExcisesandotherIndirect Taxes

• Anti-dumpingdutyonimportsofbio-ethanolofUS

origin

• CJrulesonquantitativeassessmentcriteriafor

tobaccoproductsacquiredinoneMemberStateand

transportedtoanotherMemberState(Commission v

France)

7

• China’santi-dumpingdutiesonX-raysecurity

scannersfromtheEUfoundillegalbyWTOpanel

• CommissionproposestomodernisetheEU’strade

defenceinstruments

• ProposaltopostponedateofapplicationoftheMCC

• TheEuropeanCommissionreadyforanexofficio

tradedefenceactionagainstChinesemobile

telecommunicationsequipment

• EUstrategytostepupfightagainstillicittobacco

trade

• EUReport:Tradeprotectionismstillonriseacross

theworld

• Commissionpublishesthe2014versionofthe

CombinedNomenclature

• CommissionrefersBelgiumtoCourtovercustoms

offices’openinghoursandfees

CapitalDuty

• BelgianConstitutionalCourt:Preliminaryruling

requestedfromCJoncompatibilityoftaxon

conversionofbearershareswithCapitalDuty

Directive

• PortugueseTaxArbitrationCourtrequestsfora

preliminaryrulingonthecompatibilityofstampduty

legislationwiththecapitaldutyDirective

8

LiechtensteinR&Dregimefoundnottobe State aid On12December2012,theEFTASurveillanceAuthority

foundtheproposedchangestotheLiechtenstein

R&DregimenottoamounttoStateaid.Liechtenstein

hadproposedtointroduceataxdeductionof80%of

thepositiveincomefromintellectualpropertyrights.

Qualifyingrightswerebroadlydefined.Besidesincome

fromregisteredtrademarks,designsandpatentrights,

incomefromsoftwareaswellastechnicalandscientific

databaseswouldalsoqualify.

TheAuthorityfoundthatthetaxauthoritieswouldnot

haveamarginofdiscretioninawardingthededuction,

norwouldthedeductionbelimitedtocertainsectorsof

theeconomyasthepresenceofR&Dactivitieswouldbe

theonlycriterion.Asaresult,theR&Dmeasurelacked

selectivity.

CJrulesFinnishlossdeductionregimeincaseofchangeofownershiptopossiblyamounttostateaid(P Oy) On18July2013,theCJgaveitspreliminaryrulingin

respectofStateaidaspectsoftheFinishlossdeduction

regimeincaseP Oy(C-6/12).TheFinishregimewould

normallyallowfora10-yearcarryforwardoffiscal

lossessufferedfrombusinessactivities.Inthecaseof

achangeinownershipofmorethan50percentafter

lossesweresuffered,ingeneral,deductionwouldno

longerbepossible.Thisrulewasimposedinorderto

preventtradinginloss-makingcompanies.Authorisation

fordeductionmaybegrantedneverthelessinspecial

circumstances,ifnecessary,toensurecontinuationofa

company’sactivities.Amongthespecialcircumstances

recognisedwere:aninter-generationtransferoffamily

businesses,asaletoemployees,thepurchaseofa

newundertaking,anintra-groupchangeofownership,

achangeinownershipaspartofarescueprogramme,

maintainingemployment,changesinownershipin

respectoflistedcompaniesandtheexpansionof

activitiesasaresultoftheacquisition.

TheCJpointedoutthatthepresenceofanauthorisation

systemdoesnotleadtoselectivityperse,ifthe

authoritieseffectivelyhavetocheckobjectivecriteria

inordertoserveapurposerelatedtothetaxsystem,

suchastheobjectivetoavoidtradeinloss-making

State Aid/WTORecoveryofbenefitfromIrishdifferential air travel tax rate orderedInMarch2009,Irelandintroducedanairtraveltaxwith

ageneralrateofEUR10perdepartingpassenger(on

anaircraftcapableofcarryingatleast20persons).

AloweredEUR2ratewasavailableforflightsfrom

anIrishairporttoanydestinationwithin300kmfrom

Dublinairport.ThistaxwasreplacedinMarch2011by

auniformEUR3rateafteraCommissioninvestigation

intopossibleinfringementsofthefreedomofservices

andofanEUregulationontheoperationofairservices.

AfteraformalStateaidinvestigationintothelowerrate

thatwasenactedfrom2009to2011,theCommission

foundthelowerratetoamounttounlawfulStateaid.

TheCommissionconsidered,amongstothers,thata

lowerratecouldnotbejustifiedonthebasisofdistance

asitwasnottheactualdistancefromaparticularairport

butthedistanceofthedestinationfromDublinthatwas

leading.Moreover,thedeparturefromanIrishairport

wasthetaxableeventforthetax,asaresultofwhich

thedistancecriterionmainlyfavourednationalflights.

TheCommissionfoundthattheflightseligibleforthe

lowerrateweremainlyoperatedbyafewoperatorswith

closelinkstoIreland.Despitethefactthatthetaxwould

bepassedontoindividualconsumers,theCommission

foundthattheoperatorsstillprofitedbybeingableto

sellshort-routeticketsatalowerprice.

TheCommissionhenceorderedtherecoveryofthe

differenceinrateofEUR8perpassengerfromatleast

threeIrishairlinesandpotentiallyotherstobeidentified

bytheIrishgovernment.Thisorderrelatestothe2009-

2011timeframeanditisprovidedthatinterestisdueas

well.Shouldanyaidfallwithinthescopeoftheblock

exemptionregulationorthedeminimisregulation,it

wouldnothavetoberecovered.ThisisleftfortheIrish

authoritiestodetermine.(Theorderdatesfrom25July

2012,butthedetaileddecisionwasonlyreleasedtothe

publicrecentlyon30April2013.Appealswerefiledin

November2012.)

9

FirstmodernizationproposalsfornewStateaidRegulationslaunchedInDecember2012,theCommissionlauncheditsfirst

setofproposalsforrevisionofStateaidRegulations,

twoofwhichareofparticularinteresttothetaxfield.

Firstly,iftheproposalsareadopted,the1999

ProceduralRegulation(CouncilRegulationNo

659/1999)willberenewedwiththeobjectivetofocus

Stateaidenforcementonthemoredistortivecases

intheinternalmarketwhilespeedingupthedecision-

makingprocess.Complainantsmustprovidethe

Commissionwithmorecompleteandcorrectinformation

abouttheallegedaidandthecomplainantmust

demonstratehowhisinterestswouldbeaffectedby

theaid.Asaresult,theCommissioncouldrestrictitself

todealingwithwell-foundedcomplaints.Currently,the

Commissionreceivesover300complaintsperyear,

manyofwhichareeither‘notmotivatedbygenuine

competitionconcernsornotsufficientlysubstantiated’

intheCommission’sview.TheCommission,however,

mustinvestigateeveryallegedinfringementunder

currentrules.

ThecooperationbetweentheCommissionandnational

judgeswillbeformalizedandtheCommissionwillbe

requestingtheauthoritytoconductparallelinquiries

aboutaidinacertainsectororofacertaintypein

severalMemberStatesatonce.TheCommission

alsoproposedthatitbeallowedtosubmititsviewsin

nationalcourtproceedingsasamicus curiaeiftheEU’s

publicinterestsorequires.

TheCommissionalsoproposedthatitbegrantedthe

authoritytoenforcethegatheringofmarketinformation.

Uponopeningaformalinvestigation,itmayrequest

informationwiththepossibilitytoapplyapecuniary

sanctionifincorrectormisleadinginformationis

provided(therewouldstillbenoobligationtoreply)or

apecuniarysanctionforlateornon-compliancewith

arequestforinformation.MemberStatesandpublic

authoritieswouldbeexemptfromsuchsanctions.

Secondly,theCouncil’sEnablingRegulation(Council

Regulation(EC)No994/98)willbeamendedwhich

companies.Iftheauthoritieshaveabroaderdiscretion,

forinstance,whentakingthemaintainingofemployment

intoaccountasanon-taxrelatedobjective,then

selectivityismostlikelyasthenatureorgeneralscheme

ofthetaxsystemwouldnotservetojustifysuchan

exemption.Itis,however,forthenationalcourtto

establishwhattheproperreferenceframeworkis:either

thebaselinewouldbebeingentitledtoadeductionor

thebaselinewouldbenotbeingentitledtoadeduction

afteratakeover.TheCJfoundthatitcouldnotestablish

theproperbaselineitselfgiventhatthereferringcourt

hadnotprovideditwithallnecessaryinformation,such

asguidanceontheprovisionsofrelevantlawandits

scopeofapplication,aswellasnationaladministrative

andjudicialpractice.

TheCJthenpointedoutthat,astheregimeatissueis

tobeconsideredexistingaidalreadyinforceinFinland

beforeitsaccessiontotheEU/EEA,nationalcourts

donothavethepowertoprohibitsuchaidfrombeing

putintoeffect.However,assomeamendmentshad

beenmadetotheFinishregimesincethenwhichcould

amounttonewaid,itisforthereferringcourttocheck

whetheranysuchamendmentswouldplayaroleinthe

casebeforeit.

‘Compulsoryvoluntarylevy’doesnotamounttoStateaidaccordingtoAdvocateGeneral(Doux Élevage SNC) On31January2013,AdvocateGeneralWathelet

renderedhisOpinioninthecaseDoux Élevage SNC

(C-677/11).Anumberofcompanieshadfiledanappeal

attheFrenchCounseild’Étatarguingthatalevy

imposedonthemonbehalfofasectoralorganisation

wasmeanttofinanceunlawfullygrantedaid,giventhat

thelevyoutweighedthebenefitstheyreceivefromthe

activitiesofthatorganisation.TheAdvocateGeneral

proposedtotheCourttoholdthattheinterventionof

anationalauthoritytoimposeavoluntarylevybya

sectoralorganisationonallcompanieswithinasectorto

avoidfreeridersdoesnottoamounttoStateaid,asit

doesnotleadtotheuseofStateresourcesbutoffunds

fromeconomicsubjects.Hedoespointout,however,

thatsuchlevycanrunafoulofotherprimaryEUlaw,an

issuenotaddressedbythereferringcourt.

10

regimedidnotmeettheselectivityrequirementand

hencewasnotStateaid.

Itshouldbepointedoutthatthisdecisiondoesnotaffect

theoutcomeofanongoinginvestigationintoaprevious

taxleasedepreciationschemeinSpain.

CommissiondeclaresItalianmunicipalrealestatetaxexemptiontobeillegalaid On19December2012,theCommissionruledthatan

Italianrealestatetaxexemptionfornon-commercial

entitiesledtoincompatibleStateaid.Furthertoa2006

amendment,carryingoutactivitiesonsuchpremises

thatwerenotexclusivelyofacommercialnaturewas

allowed.Asaresult,somecommercialactivitiescould

thereforeprofitfromtheexemption.

TheCommissionalsofoundthatecclesiasticinstitutions

andamateursportclubsdidnotprofitfromanalleged

‘perpetualnon-commercialstatus’astheyweresubject

tocontrolsbythetaxauthoritiesinrespectofthe

activitiescarriedout.

Recoveryhasnotbeenorderedinthiscasedueto

‘absoluteimpossibility’,aratheruniqueprecedent.Inthe

Commission’sview,Italyhadsuccessfullyarguedthat

itwouldbeimpossibletodetermineretroactivelywhich

partoftherealestatehadbeenusedexclusivelyfor

non-economicactivitiesandwhichparthadnot.

SpanishtaxbenefitstoleaseandfinancingofshipsfoundpartlyincompatibleOn17July2013,theCommissionheldtheapplication

ofthetonnagetaxregimebyspecialeconomicinterest

groupingsamountedinparttounlawfulaid.Essentially,

maritimeoperatorswouldbuytheirshipsfromagroupof

investorsinsteadofdirectlyfromashipyard.According

totheCommission,theseinvestorswouldbeallowedto

write-offshipsacquiredonthebasisofafinanciallease

inthreetofiveyearsafterthestartoftheconstruction,

whilethensellingittothemaritimecompaniesunderthe

tonnagetaxregimeatapriceofabout70-80%ofthe

originalprice.Asaresultofthesubsequentapplication

ofthetonnagetaxregime,notaxonthecapitalgain

isthebasisfortheCommission’sGeneralBlock

ExemptionRegulation(GBER).Thelatterallows

MemberStatestoproceedwithgrantingcertaintypesof

aid–withinstrictlimits–withoutfirsthavingtowaitfora

decisionbytheCommission.Intheproposal,thescope

oftheEnablingRegulationwillbeextendedtonew

categoriesofaidinthefollowingareas:

Cultureandheritageconservation;damagescaused

bynaturaldisasters;damagescausedbyadverse

weatherconditionsinthefisheriessector;forestryand

thepromotionofcertainfoodproducts;conservation

ormarinebiologicalresources;amateursports;aidof

asocialcharacterfortransportofresidentsinremote

regions;coordinationoftransportorreimbursements

forthedischargeofcertainpublicserviceobligations;

certainbroadbandinfrastructureand–mostimportant

forthetaxdomain–innovation.

OncetheEnablingRegulationhasbeenadoptedby

theCouncilandenteredintoforce,theCommissionwill

adoptagradualapproachinchangingitsGBER,as

thelatterspellsoutthestrictconditionsforeachtype

ofaidinordertobeexemptfromthepriornotification

andstand-stillprocedure.Onlyinareaswherethe

Commissionhassufficientexperiencetodefinethose

conditionswillitbeabletodoso.

CommissionallowsnewSpanishschemeforearlydepreciationoffinance-leasedassetsOn20November2012,theCommissionapproved

anewSpanishschemethatallowsfortheearly

depreciationofthecostsofcertainassetsacquired

throughafinancialleasescheme.

Taxpayerswillbeallowedtodeductthecostsofleased

assetsassoonastheirproductionstartsinstead

ofhavingtowaitforthemomentoffirstuse.This

schemecanonlybeappliedtothoseassetsthatare

manufacturedaccordingtoapurchaser’stechnical

specificationsandwhoseproductiontimespansmore

thanoneyear.Eligibilitywillbeautomaticandwillnot

besubjecttoapprovalup-frontbytheSpanishtax

authorities.Asaresult,theCommissionfoundthatthis

11

scopeofapplication.Aratherraresuspensioninjunction

hasbeenissuedaccordingly,orderingtheSpanishtax

authoritiestoceaseapplyingitsnew‘administrative

interpretation’immediately.

Commissionopensfullinvestigationinto2010GibraltarCorporateTaxRegimeOn16October2013,theEuropeanCommissionopened

aninvestigationintoGibraltar’s2010CorporateTax

regime,thethirdregimeitconsecutivelyscrutinizes.The

focusofitsinvestigationisonacorporatetaxexemption

forpassiveincomesuchasinterestandroyalties.The

2010regimecombinesastrictlyterritorialtaxregime

withageneralexemptionforpassiveincomeregardless

ofsource.

IntheCommission’sview,thereisnovalidjustification

fortheexemption,asitwouldbenefitaparticular

groupofcompaniesthatmainlyreceivesthiskindof

income.Eventhoughtheexemptionhasbeenpartially

revokedasofJuly2013-inrespectofinter-company

interestpaymentsoverGBP100,000perdebtor-the

Commissionistocontinueitsinvestigationtodetermine

whethertherewasabreachofStateaidrulesinthe

meantime.

Thiscaseislikelytoraiseissuesinrespectofanalytical

taxationthatmayhaveanextensiveimpactthroughout

theentireEU.Onceafinaldecisionhasbeenreached,

youwillbeupdatedintheEUTaxAlert.

France’sinclusionofnon-EUtimechartersinitstonnagetaxregimeunderinvestigationOn6November2013,theCommissionopenedaformal

investigationintotheFrenchtonnagetaxregime.France

allowedtimecharteredvesselssailingunderanon-EU

flagtoqualifyfortheregimewithoutanylimitation,asit

seems.Uponpriorapprovaloftheregime,Francestill

hadanEU-flagrequirement.Interestedpartieshave

beeninvitedtocomment.

inrespectoftheshipwouldbedue.Thisapplicationof

thetonnagetaxregimewasfoundnottobeinlinewith

Stateaidrules.

Hence,theCommissionorderedtherecoveryofthe

benefitfromtheinvestors.Thepricereductionof

70-80%wasconsideredtobetheresultofaprivate

transactionandassuch,didnotresultinaidtothe

maritimecompanies.Theinvestorswillbeallowedto

creditsomepartofthisamountagainsttheamountof

recoverableaid;thepressreleasecurrentlyavailable

doesnotprovidespecificdetailsatthistime.Inaddition,

anyaidtotheinvestorspriortoApril2007didnothave

toberecoveredastheCommissionfoundthatits

previousdecision-makingpracticecouldhavegivenrise

tolegaluncertainty.

Itmustbepointedoutthattheeconomicinterest

groupings,i.e.theirinvestorsasthesegroupingsare

transparentfortaxpurposes,havebeenexplicitly

prohibitedfrompassingontherepaymentobligations

tothirdparties,suchasshipyardsorthemaritime

companiesinvolved,evenunderexistingcontracts.

NewinvestigationintoSpanishgoodwillschemeinrespectofindirectnon-SpanishtakeoversIn2009and2011,theCommissionruledagainsta

Spanishtaxschemeallowingfortheamortisationof

financialgoodwillinthecaseofforeigntakeovers(both

intra-EUandextra-EU),wherenosuchamortisation

wouldbeavailableinthecaseofadomestictakeover.

TheCommissiondidallowforatransitionperiod,as

someaidcouldnotberecovereddueto(adisputable

findingof)legitimateexpectationsorduetothefact

thatitservedtooffsetcertainobstaclesintradefaced

insomenon-EUcountries.In2012,theSpanish

authoritiesdecidedtoextendthetransitionalregimeto

indirectacquisitionsaswell,whichhadneitherbeen

envisionedbytheCommissionnorsanctionedbyit.

Asaresult,theCommissiondecidedtoopenanew

investigationintothisSpanishregimeon17July2013,

warningallbeneficiariesthattheycouldnothaveany

legitimateexpectationsinrespecttothisextended

12

atnational,EU,andgloballevels.Inthiscontext,there

isincreasingsupportforfurthereffortsontheadoption

ofautomaticexchangeofinformationandonimproving

theimplementationandenforcementofstandards

ofbeneficialownershipinformationrelevantfortax

purposes.BoththeECOFINandtheCounciloftheEU

alsosupporttheeffortsattheOECDlevelonthework

onBaseErosionandProfitShifting.Atthelevelofthe

EUinstitutions,furtherworkwillbecarriedforwardby

theCommissiononrecommendationsonaggressive

taxplanningandprofitshifting.Inthatregard,the

Commissionintendstopresentaproposalbeforethe

endoftheyearfortherevisionofDirectiveonCouncil

Directive2011/96/EUof30November2011(Parent/

SubsidiaryDirective)asisreviewingtheanti-abuse

provisionsintherelevantEUlegislation.

TheCounciloftheEUcalleduponMemberStates

toconsiderwhethertheircurrentlegislationincludes

(ormayinclude)ageneralanti-avoidancerulewhich

iseffectiveagainstabusivetaxarrangementsandin

compliancewiththeEUTreaties.

CouncilagreestoenhancedcooperationonFinancialTransactionTaxOn22January2013,theEconomicandFinancialAffairs

(ECOFIN)Counciladoptedadecisionauthorising11

MemberStates(Belgium,Germany,Estonia,Greece,

Spain,France,Italy,Austria,Portugal,Slovenia,

Slovakia)toproceedwiththeintroductionofaFinancial

TransactionTax(‘FTT’)throughenhancedcooperation.

Thedecisionwastakenbyqualifiedmajorityvoting.In

thevoting,theCzechRepublic,Luxembourg,Maltaand

theUnitedKingdomabstained.

TheCouncilemphasisedinitsPressReleasethatitis

onlythethirdtimethatanenhancedcooperationhas

beenlaunchedtoallowalimitednumberofMember

Statestoproceedwithaparticularmeasure,andthe

firsttimeintheareaoftaxation.

TheCommissionwillnowmakeaproposaldefining

thesubstanceoftheenhancedcooperation,whichwill

havetobeadoptedbyunanimousagreementofthe

participatingMemberStates.

NorwayrecommendedtoabolishtaxexemptionforretailactivitiesofpublichospitalpharmaciesOn20November2013,theEFTASurveillanceAuthority

recommendedNorwaytotakeappropriatemeasures

inordertoensurethatthefinancingofpublichospital

pharmacieswillbeinlinewiththeEEA’sStateaid

provisions.Asthesepharmaciesalsosellproductsto

thegeneralpublic,besidesdeliveringpharmaceuticals

tohospitals,Norwayshouldensurenocross-

subsidisationtakesplaceviaseparateaccounting

fortheretailactivitiesandensureareasonableprofit

onthoseactivities.Furthermore,Norwayhasbeen

recommendedtoabolishthetaxexemptionforpublic

hospitalpharmaciesinsofarastheincomefromretail

activitiesisconcerned.

DirectTaxationECOFINandCounciloftheEUdiscussamendmentstotheSavingsDirectiveandmeasuresagainsttaxevasionandtaxfraudOn14Mayand22May2013,theEuropeanCouncil

andtheCounciloftheEuropeanUnionheldmeetings

(respectively)inwhichtheydiscussedpossible

amendmentstoDirective2003/48/EConthetaxation

ofsavingsincomeaswellaspossiblemeasurestofight

taxevasionandtaxfraud.

ItwasapprovedtomandatetheCommissionto

negotiateamendmentstotheEU’sagreementswith

Switzerland,Liechtenstein,Monaco,AndorraandSan

Marinoonthetaxationofsavingsincome.Theaimisto

ensurethatthesefivecountrieswillcontinuetoapply

measuresthatareequivalenttotheEU’sdirectiveon

thetaxationofsavingsincomewhichisbeingamended.

TheamendmentstotheDirectiveincludeenlarging

itsscopetoincludealltypesofsavingsincome,as

wellasproductsthatgenerateinterestorequivalent

incomeandatprovidingalook-throughapproachforthe

identificationofbeneficialowners.

Regardingtheneedtocombattaxfraudandtax

evasionaswellasaggressivetaxplanning,thereisa

recognitionthatappropriatemeasuresshouldbetaken

13

TheCJstartedbyrecallingthattheMergerDirective

imposesafiscalneutralityrequirementwithregardto

thereceivingandacquiredcompanieswhichparticipate

inatransferofassets.However,suchrequirementis

notunconditional.Inparticular,thereceivingcompany

mustcomputeanynewdepreciationandanygainsor

lossesinrespectoftheassetsandliabilitiestransferred

accordingtotherulesthatwouldhaveappliedtothe

transferringcompanyifthetransferofassetshadnot

takenplace.WhileistruethattheMergerDirectivesets

conditionsforthedeferralatthelevelofthereceiving

companyasregardsthevaluationofthebusiness

transferred,itishoweversilentonthevaluationfor

taxpurposesbytheMemberStateofresidenceof

thetransferringcompany(Italy)ofthesharesthatare

receivedinexchangeforatransferofassets.Thisis

furtherconfirmedbythehistoryoftheMergerDirective,

astheCommissionhadattempted,ontwooccasions,

toensurethattheMergerDirectiveaddressedthe

valuationofsharesreceivedbytransferringcompanies

inordertoavoideconomicdoubletaxationofthe‘same’

capitalgain.Itdidsointhe1969proposal,which

includedaprovisionaccordingtowhichtheshares

ofthereceivingcompanycouldbeattributedinthe

balancesheetofthetransferringcompanywithavalue

correspondingtotherealvalueofthetransferredassets

withoutthisleadingtotaxation.In2003,theCommission

proposedasimilaramendmenttotheMergerDirective

thathasnotbeenadopted.Therefore,theMerger

DirectiveimposeslimitedobligationsonMemberStates

withrespecttocompanieswhichtransferassetstoa

companyresidentinanotherMemberStateandreceive

sharesinexchange.Thatlimitedobligationisthatboth

thetransferringcompanyandthereceivingcompany

musthavetheoptionoftakingadvantageoffiscal

neutralityasguaranteedbytheDirective.This,however,

iswheretheMemberState’sobligationsend.There

isnorequirementfortransferringcompaniestovalue

sharesreceivedinanyparticularway.

TheCJstressedthatitisclearthattheItalianlegislation

wouldhaveallowed3DItoattributethevaluewhich

thebusinesstransferredhadbeforethatoperationto

thesecuritiesreceivedinexchangeforthattransferof

(FormoreontheCommission’soriginalproposal

foradirectiveonthecommonsystemofFTTof

28September2011seeEUTaxAlertno.97,October

2011.Formoreontheprocedureforenhanced

cooperationseeEUTaxAlertno.110,November2012.)

CJrulesthatItalianlegislationonintra-UniontransfersofassetsisnotinbreachoftheMergerDirective(3D I) On19December2012,theCJdelivereditsjudgment

inthe3D I case(C-207/11).Thecasedealswiththe

compatibilityofItalianprovisionsrelatingtothedeferral

ofcapitalgainstaxarisingfromanintra-Uniontransfer

ofassetswithCouncilDirective90/434/EECof23July

1990onthecommonsystemoftaxationapplicableto

mergers,divisions,transfersofassetsandexchanges

ofsharesconcerningcompaniesofdifferentMember

States(‘MergerDirective’).

3DIisanItaliancompanywhichtransferredabranch

ofitsbusinesslocatedinItalytoacompanyresidentin

Luxembourg,receivingsharesinreturn.Followingthis

transaction,thetransferredbranchbecamepartofthe

Luxembourgcompanyasitspermanentestablishment

locatedinItaly.

3DIchosetoattributetoitssharesinthereceiving

companyavaluethatwashigherthanthevalue,for

taxpurposes,ofthebranchthathadbeentransferred.

3DIelectedtopayItaliansubstitutiontaxforthecapital

gainresultingfromtheoperationatarateof19%.

Therefore,itrenouncedtheregimeoffiscalneutrality

whichwouldhaveexempteditfrompayingtaxonthe

capitalgainsarisingatthetimeofthetransfer.Under

thefiscalneutralityregime,thevalueoftheshares

receivedmustbethesameasthelastbookvalue

whichthetransferredbranchofactivityhadbeforethe

transfer.Whenthesharesareenteredatahighervalue

itisnecessaryunderItalianlawtoconstituteareserve

betweenthebookvaluesofthetransferredbranchand

thesharesreceivedwhichwouldconstitutetaxable

incomeattherateof33%ifdistributed.3DIargued

thatthisaccountingconditionwasincompatiblewiththe

MergerDirective,thisbeingthereasonwhyithadopted

topaythesubstitutiontax.

14

Theoutcomeofthisinfringementprocedureisnot

surprisingtakingintoaccountCJ’sjudgementinthe

case National Grid Indus (C-371/10,seeEUTaxAlert

editionno.99,December2011)inwhichitwasdecided

thatexittaxrulesareallowedaslongasanoption

forthedeferralofthepaymentoftaxdueisgranted.

TheNetherlandshadnotamendeditsexittaxrules

bythedeadlineprescribedinthereasonedopinion

(24November2010)whichisdecisiveinthisrespect.

Amendmentssincethatdateshouldnotbetakeninto

accountaccordingtotheCJ.Consequently,itmakes

nodifferencethattheNetherlandscompliedwiththe

National Grid Indusjudgmentbyissuingadecreewith

retroactiveeffectto29November2011(seeEUTax

Alertedition102,February2012),aswellasthefact

thatabilliscurrentlypendingbeforetheUpperHouse

ofParliament(seeEUTaxAlertedition111,December

2012).

Duringthelegislativeprocess,theStateSecretary

hadpromisedtosuggestalimitedperiodofdeferralof

paymentoftaxdueatthehearingoftheinfringement

case.TheCJ’sruling,however,issilentinthisrespect.

Finally,wenotethatthisjudgmenthasawiderscope

thanNational Grid Indus,asitalsoconcernsbusinesses

carriedonbyindividuals.

CJrulesthatthenebisinidemprincipleoftheEUCharterofFundamentalRightsdoesnotprecludetheimpositionofcombinedtaxpenaltiesandcriminalpenaltiesfornon-compliancewithVATobligations(Åkerberg) On26February2013,theCJissueditsjudgmentinthe

case Åkerberg (C-617/10)concerningtheinterpretation

oftheprincipleofne bis in idemsetoutintheEU

CharterofFundamentalRights(‘Charter’)withregardto

Swedishlegislationpursuanttowhichthesameactof

non-compliancewithtaxobligationsmayentailbothtax

penaltiesandcriminalpenalties.

Article50oftheCharterlaysdownthene bis in idem

principle:‘Nooneshallbeliabletobetriedorpunished

againincriminalproceedingsforanoffenceforwhich

assetsandwouldthushaveallowedittobenefitfrom

thedeferraloftaxationofthecapitalgainsrelatingto

thosesecurities,subjecttoasingleconditionwhichis

compatiblewithEUlaw.Therefore,itconcludedthat

thefactthattheItalianlegislationoffersthetransferring

companytheadditionaloptionofattributingahigher

valuetothosesecuritiesthanthevalueofthebusiness

transferredbeforethatoperation,corresponding,in

particular,tothevalueofthecapitalgainarisingupon

thattransfer,butmakestheexerciseofthatoption

conditionaluponthatcompanycarryingoverinitsown

balancesheetaspecialreservefundequivalentto

thecapitalgainsthusarising,cannotbeconsidered

incompatiblewiththeMergerDirective.

CJrulesinlinewithNational Grid IndusthattheNetherlandshasfailedtoamenditsexittaxruleswithrespecttocompaniesandbusinesses(Commission v Netherlands) On31January2013,theCJdelivereditsjudgment

inthecaseCommission v Netherlands(C-301/11).

Inthisinfringementprocedure,initiatedbythe

CommissionagainsttheNetherlands,theCJruled

thattheNetherlandshasfailedtoamendexittax

rulesonunrealizedcapitalgainsupontransferofa

companyorbusinesstoanotherMemberState.The

Netherlandshasexceededtheprescribedperiodto

amenditslegislationasrequestedbytheCommission

initsreasonedopinion.Anintentionofthegovernment

toamenditsexitrulesisinsufficienttoavoidthe

declarationofinfringement.

On23September2008,theCommissionsentarequest

forinformationtotheNetherlandswithregardtoitsexit

taxrulesapplicabletounrealizedcapitalgainsupona

transferofacompanyorbusinesstoanotherMember

State.AccordingtotheCommission,taxationofsuch

unrealizedcapitalgainscouldbeinbreachofArticle49

TFEU.Followingthereasonedopinion(seeEUTaxAlert

edition78,April2010),intheabsenceofamendment

tothelegislation,theCommissiondecidedtoreferthe

NetherlandstotheCJ(seeEUTaxAlertedition86,

December2010).

15

thefactthatsuchactionsbytheSwedishauthorities

weretheconsequenceofthebreachbyMrÅkerberg,

interalia,ofhisobligationstodeclareVAT.From

theprovisionsoftheVATDirective,itfollowsthat

everyMemberStateisunderanobligationtotakeall

legislativeandadministrativemeasuresappropriate

forensuringcollectionofalltheVATdueonitsterritory

andforpreventingevasion.Inaddition,Article325

TFEUobligestheMemberStatestocounterillegal

activitiesaffectingthefinancialinterestsoftheEU

througheffectivedeterrentmeasures.TheEU’sown

resourcesincluderevenuefromVATcollectedbythe

MemberState.TheCJconsideredthatthereisadirect

linkbetweenthecollectionofVATrevenueandthe

availabilitytotheEUbudgetofthecorrespondingVAT

resources.Hence,theCourtheldthatthetaxpenalties

andcriminalproceedingstowhichMrÅkerbergwas

subjectconstitutedimplementationofArticles2,250(1)

and273oftheVATDirectiveandofArticle325TFEU,

andthus,EUlaw.Therefore,contrarytowhatthe

AdvocateGeneralproposed(seeEUTaxAlertedition

no.107,July2012),theCJconsideredthatthecondition

underArticle51(1)oftheCharterwasfulfilledanditthus

hadjurisdictiontoanswerthequestionsreferredbythe

DistrictCourt.

Asregardsthesubstantivequestion,theCJpointedout

thatthene bis in idemprinciplewouldonlyprecludea

prosecutionfortaxevasionsubsequenttoadministrative

proceedingsconcerningthesameactifthetaxpenalties

whichhadbeenimposedonthedefendantinthe

administrativeproceedingsbymeansofafinaldecision

areofacriminalnature.Whetherthetaxpenaltiesat

issuearecriminalinnatureneedstobedeterminedby

thereferringcourtinthelightofthreecriterianamely

(i)thelegalclassificationoftheoffenceundernational

law,(ii)theverynatureoftheoffence,and(iii)thenature

anddegreeofseverityofthepenaltythattheperson

concernedisliabletoincur.

heorshehasalreadybeenfinallyacquittedorconvicted

withintheUnioninaccordancewiththelaw’.

MrÅkerberg,aself-employedfishermanresidingand

workinginSweden,providedfalseinformationinhis

taxreturnsforthefiscalyears2004and2005which

resultedinalossoftaxrevenue,includingVAT,forthe

Swedishtreasury.In2007,theTaxBoard(Skatteverket)

imposedtaxpenaltiesonthetaxpayerapartofwhich

relatedtotheevasionofVAT.Noproceedingswere

broughttochallengethesepenaltieswhich,thus,

becamefinal.In2009,thePublicProsecutorinitiated

criminalproceedingsagainstthetaxpayerbeforethe

HaparandaDistrictCourtbasedonthesameactof

providingfalseinformationashadbeenthebasisofthe

decisionimposingtaxpenalties.Thequestionarose

beforetheDistrictCourtwhetherthene bis in idem

principlesetoutinArticle50oftheCharteraswellasin

Article4ofProtocolNo7oftheEuropeanConvention

onHumanRights(‘ECHR’)istobeinterpretedinaway

thatitrequiresthecriminalchargestobedismissedon

thegroundthatthetaxpayerhasalreadybeenpunished

forthesameactinadministrativeproceedings.The

DistrictCourtstayedtheproceedingsandreferred

severalquestionstotheCJforapreliminaryruling.

First,theCJaddressedthequestionwhetherithad

jurisdictiontointerpretinthecaseatissuethene

bis in idemprinciple,asoneofthefundamental

rightslaiddownintheCharter,havingregardtothe

scopeofapplicationofthosefundamentalrights.In

particular,Article51(1)oftheCharterprovidesthatthe

fundamentalrightscontainedthereinbindtheMember

States‘onlywhentheyareimplementing Union law’.

AccordingtotheCJ,thisprovisionconfirmsthecase

lawwhichstatesthatthefundamentalrightsguaranteed

intheEU’slegalorderareapplicabletotheactsofthe

MemberStateswhenthelatterfall within the scope

of EU law.TheexplanationsrelatingtoArticle51of

theCharterreinforcesuchinterpretation.Thus,the

CJexaminedwhethertheimpositionoftaxpenalties

andtheinitiationofcriminalproceedingsagainstMr

ÅkerbergcouldberegardedasimplementingEU

lawintheabovesense.Inthisregard,itreferredto

16

Turningtotheanalysisofthepossiblejustifications,

theCJconfirmedthatsuchrestrictionwas,inprinciple,

justifiedbasedonthreejustificationstakentogether:

balancedallocationofthepowerstotax,preventthe

doubleuseoflosses,andtaxavoidance.However,the

Courtcontinuedbyexaminingwhetherthelegislation

atstakegoesbeyondwhatisnecessarytoattain

thoseobjectives.Inthatregard,theCJrecalledthat

itispreviouscaselawwhichheldthatlegislationis

notconsideredproportionalincasethenon-resident

subsidiaryhasexhaustedthepossibilitiesavailablein

itsStateofresidenceofhavingthelossestakeninto

account.Inthatevent,itisfortheparentcompanyto

demonstratethatthesubsidiaryhasexhaustedallthe

possibilitiesoftakingaccountofthelosseswhichithad

incurredinSweden.Therefore,theCourtconcluded

thattheFinnishlegislationisincompatiblewithEUlaw

totheextentthatitdoesnotallowtheparentcompany

thepossibilityofshowingthatitsnon-residentsubsidiary

hasexhaustedthepossibilitiesoftakingthoselosses

intoaccountandthatthereisnopossibilityoftheirbeing

takenintoaccountinitsStateofresidenceinrespectof

futureyears,eitherbyitselforbyathirdparty.

TheotherquestiondealtwithbyCJconcernedthe

calculationofthelossandwhetheritshouldbe

calculatedinaccordancewiththerulesoftheState

ofresidenceoftheparentcompanyorthatofthe

subsidiary.AccordingtotheCourt,inthepresentstate

ofEULaw,thefreedomofestablishmentinprinciple

doesnotimplytheapplicationofaparticularlawtothe

calculationofthelosses.Nevertheless,theCJstated

thattheappliedmethodmustnotleadtounequal

treatmentcomparedwiththecalculationwhichwould

havebeenmadeinasimilarcaseforthetakingoverof

thelossesofaresidentsubsidiary.

CJholdsthatinsurancepremiumtaxistobepaidintheMemberStatewherethepolicyholderresidesatthetimeofthepaymentofthepremium(RVS Levensverzekeringen)On21February2013,theCJrendereditsjudgment

inthecaseofRVS Levensverzekeringen(C-243/11)

regardingtheinterpretationofDirective2002/83/EC

FinnishrulesondeductibilityoflossesuponmergerofcompaniesofdifferentMemberStatesinbreachofthefreedomofestablishment(A Oy) On21February2013,theCJdelivereditsjudgment

inthecaseA Oy(C-123/11).Thecasedealswiththe

compatibilityofFinnishrulesonthedeductibilityof

lossesuponacross-bordermergerwiththefreedomof

establishmentsetoutunderArticles49and54TFEU.

AOyisaFinnishresidentcompanywhichholdsallthe

sharesintheSwedishcompanyBAB.Thissubsidiary

companyhadceaseditstradingactivitiesandincurred

lossesfortheperiodfrom2001to2007.TheFinnish

companyplannedamergerwithitsSwedishsubsidiary,

whichwouldresultinthedissolutionofsuchsubsidiary

andtheacquisitionofallitsassetsbytheFinnishparent

company.

UnderFinnishlegislation,uponamergerofcompanies,

thereceivingcompanyshallhavetherighttodeduct

fromitstaxableincomeanylossmadebythemerged

entity,providedcertainconditionsaremet.Such

possibilityisexcluded,however,withregardtolosses

frombusinessactivitywhichisnotsubjecttoFinnish

taxation(foreignaccumulatedlosses).

ThefirstquestiondealtwithbytheCJwaswhetherthe

abovementionedlimitationincross-bordersituations

constitutedabreachofthefreedomofestablishment.

TheCJconsideredthatthepossibilitygrantedby

Finnishlawtoaresidentparentcompanyoftakinginto

accountaresidentsubsidiary’slosseswhenitmerges

withthatsubsidiaryconstitutesataxadvantageforthe

parentcompany.Thefactthatisnotpossibletotake

overthelossesofaforeignsubsidiarymakesitless

attractivetosetupsubsidiariesinanotherMember

State.TheCJconsideredthat,lookingtotheaim

pursuedbythenationalprovisionsatstake–allow

theparentcompanytobenefitfromataxadvantage

consistingofbeingabletodeductfromtaxthelosses

incurredbythesubsidiary–makesdomesticandcross-

bordersituationsobjectivelycomparable.Thedifference

intreatmentbytheFinnishtaxlegislationconstitutesa

restrictiontothefreedomofestablishment.

17

thefreedomtoprovideservices,tomakeiteasierfor

assuranceundertakingswithheadofficesintheEU

tocovercommitmentssituatedwithintheEU.Indirect

taxationoflifeassurancetransactionshasnotbeen

harmonisedatEUlevel.SomeMemberStatesdo

notsubjectassurancetransactionstoanyformof

indirecttaxationwhileothersapplyspecialtaxesand

otherformsofcontribution,thestructureandrateof

whichvaryconsiderably.TheEUlegislaturesoughtto

preventexistingdifferencesfromleadingtodistortions

ofcompetitioninassuranceservicesbetweenMember

Statesbydesignatingthe‘MemberStateofcommitment’

astheMemberStatewhichhastherighttotax

assurancecontracts.

TheCJfoundthataninterpretationbasedonthe

wordingoftherelevantprovisionsoftheDirective

permitsboththestaticandthedynamicapproaches.

Therefore,ithadregardtotheobjectivespursuedby

bothArticle50(1)andtheDirectiveasawhole.First,

Article50(1)oftheDirectiveaimsateliminatingdouble

taxationasregardsindirecttaxationoflifeassurance

premiums.TheCJfoundthatthecriterionchosenbythe

EUlegislatureentailedthataconnectionshouldexist

betweentheterritoryoftheMemberStatecompetent

tolevythetaxandthepolicyholder.Asthechargeable

eventisthepaymentofthepremiumsandnotthe

conclusionofthecontract,itfollowsthattheMember

Statecompetenttolevytheindirecttaxshouldbe

theMemberStatewithwhichthepolicyholderhasa

connectionatthetimeofthepaymentofthepremium.

Second,theDirectiveaimstopreventdistortionof

competitionbetweenassuranceundertakingsbylinking

thecompetenceovertaxationofassurancepremiumsto

thehabitualresidenceofthepolicyholder.TheCJfound

thatonlythedynamicinterpretationcanensurethatthe

sametaxtreatmentwillbeappliedtoexistingandnew

contracts.Indeed,iftheDirectiveallowedapolicyholder

toretain,afterachangeinhishabitualresidence,the

morefavourabletaxtreatmentoftheMemberStatein

whichthecontractwasconcluded,thiswoulddeterthe

policyholderfromchangingassuranceundertaking.

Therefore,theobjectivepursuedbyArticle50(1)of

theDirectivecallsforthedynamicinterpretation.Then

theCJexaminedwhethersuchaninterpretationis

(‘LifeAssuranceDirective’)–inthemeantimerepealed

byDirective2009/138/ECwitheffectfrom1November

2012–asregardsthequestionwheretheassurance

premiumtaxistobepaidinthecaseofchangeof

residenceofthepolicyholderaftertheconclusionof

alifeassurancecontract.TheCJdidnotfollowthe

interpretationproposedbyAdvocateGeneralKokott

inherOpinionof6September2012(seeEUTaxAlert

editionno.109,October2012).

Belgiantaxlawimposesanannualtaxoninsurance

transactions,iftheinsuredriskislocatedinBelgium.

Thatisdeemedthecaseifthepolicyholderhashis

orherhabitualresidenceinBelgium.Inthecase

atissue,aNetherlandsinsurancecompany,RVS

Levensverzekeringen,enteredintolifeassurance

contractswithNetherlandsresidentswhohave

sincemovedtoBelgium.HavingpaidtotheBelgian

Statethetaxoninsurancetransactionswhichwas

dueduringtheBelgianresidencyofitsclients,RVS

Levensverzekeringensoughtarefundofthetax.

BelgianlawmirrorsthewordingoftheLifeAssurance

Directiveconcerningtheallocationoftaxationrightsover

lifeassurancecontracts.TheDirectiveprovides,under

Article50(1),thateveryassurancecontractshallbe

subjectexclusivelytotheindirecttaxesandparafiscal

chargesonassurancepremiumsintheMemberState

ofthecommitment.The’MemberStateofcommitment’

isdefinedinArticle1(1)(g)oftheDirectiveasthe

Stateinwhichthepolicyholderhashisorherhabitual

residence.AccordingtoRVSLevensverzekeringen,the

Directivemustbeinterpretedasgivingtaxationrights

totheMemberStateofwhichthepolicyholderisa

residentatthetimeoftheconclusionoftheassurance

contract.Belgium,ontheotherhand,appliesadynamic

interpretationoftheprovisiontotheeffectthatthe

attributionoftaxationrightsmayvaryovertimeifthe

policyholderchangeshisorherresidenceduringthe

termofthecontract.

First,theCJnotedthattheLifeAssuranceDirective

wasadoptedhavingregardtotheneedtocomplete

theinternalmarketindirectlifeassurance,fromthe

pointofviewbothoftherightofestablishmentandof

18

rulingtotheCJontheinterpretationoftherelevant

provisionsoftheEC-SwitzerlandAgreement.

AdvocateGeneralJääskinendeliveredhisOpinionin

thiscaseon18October2012,concludingthatMrsand

MrEttwein,astheypursueaself-employedactivityin

theMemberStateofwhichtheyarenationals,donot

deriverightsfromtheprovisionsoftheEC-Switzerland

Agreement(fordetailsseeEUTaxAlerteditionno.110,

November2012).

TheCJdidnotfollowtheOpinionoftheAdvocate

Generalinsofarasitconcludedthatthesituationof

MrsandMrEttweindoesfallwithinthescopeofthe

EC-SwitzerlandAgreement.Itrejectedtheargumentof

theGermanGovernmentandtheCommissionthatthe

EC-SwitzerlandAgreementappliessolelywherethere

isdiscriminationongroundsofnationality,thatis,where

nationalsofonecontractingpartyaretreatedunequally

intheterritoryoftheothercontractingpartycomparedto

itsownnationals.TheCJreferredtotheBergström case

(C-257/10),inwhichitwasclarifiedthatundercertain

circumstancesandinaccordancewiththeprovisions

applicable,nationalsofacontractingpartymayalso

claimrightsundertheEC-SwitzerlandAgreement

againsttheirowncountry.

Thereafter,the CJ statedthat MrsandMrEttweinqualify

as‘self-employedfrontierworkers’underthe termsof

the EC-SwitzerlandAgreement.Itpointedoutthatthe

conceptof‘self-employedfrontierworker’differsfrom

theconceptof‘self-employedperson’andtherefore,

theconditionunderthelatterconceptaccordingto

whichanationalofacontractingpartyshouldestablish

himselfintheterritoryoftheothercontractingpartyin

ordertopursueself-employedactivitytheredoesnot

applytoself-employedfrontierworkers.Thedifference

isreinforcedbythefactthatself-employedfrontier

workers,unlikeself-employedpersons,arenotrequired

toobtainaresidencepermitinordertopursueaself-

employedactivity.Further,itisofrelevancethatthe

Agreementgrantstherightofresidenceregardless

ofthepursuitofaneconomicactivity.Accordingto

theCJ,itisfrontierworkerswhoinparticularmustbe

abletobenefitfullyfromthatrightofresidence,while

compatiblewiththegeneralobjectiveoftheDirective,

namely,thecompletionoftheinternalmarketindirect

lifeassurance,inparticular,fromthepointofviewofthe

freedomtoprovideservices.TheCJconsideredthat,

althoughassuranceundertakingsmayfaceanadditional

administrativeburdenduetothechangeofthetax

rulesapplicabletotheassurancecontractuponthe

policyholder’schangeofresidenceortheneedtofollow-

upthehabitualresidenceofthepolicyholderthroughout

thetermofthecontract,thisdoesnotmakethedynamic

interpretationoftheDirectiveincompatiblewiththe

freedomtoprovideservices.

CJholdsthattherefusaloftheGerman‘splittingmethod’tofrontierworkersviolatestheEC-SwitzerlandAgreementonthefreemovementofpersons(Ettwein) On28February2013,theCJrendereditsjudgment

inthecaseEttwein(C-425/11)regardingthefree

movementof(self-employed)personsunderthe

AgreementconcludedbetweentheEuropean

CommunityanditsMemberStates,ontheonehand,

andSwitzerland,ontheother(‘EC-Switzerland

Agreement’).

TheunderlyingcaseconcernsMrsEttweinandher

husband,bothofwhomareGermannationalsand

pursueaself-employedprofessionalactivityinGermany.

MrsandMrEttweinmovedtheirplaceofresidence

toSwitzerlandon1August2007.Theycontinuedto

pursuetheirprofessionalactivityinGermanyearning

almostalltheirincomeinGermany.Intheir2008

personalincometaxreturn,theyapplied,astheyhad

doneinthepreviousyears,forjointtaxationunderthe

splittingmethod.

TheGermantaxauthoritiesrejectedthisontheground

thatthesplittingmethodwasnotapplicabletoMrsand

MrEttwein,astheirresidencewasneitherinGermany,

norinoneoftheMemberStatesoftheEuropean

Union,norinaStatewhichisapartytotheEuropean

EconomicArea(‘EEA’).MrsandMrEttweinchallenged

therejectionbeforetheFinanceCourtofBaden

Württembergwhichreferredaquestionforapreliminary

19

derivingincomefromabroadwithEUlaw.Inparticular,

thequestionraisedinthiscaseisinwhichwaythe

MemberStateofresidencehastotakeintoaccount

theallowancesthatitgrantswithrespecttothe

taxpayer’spersonalandfamilycircumstances(‘personal

allowances’)whencalculatingtheamountoftaxpaidin

anotherStatewhichcanbecreditedagainstthetaxdue

inthatState.

InGermany,themaximumtaxcreditfornaturalpersons

iscalculatedasfollows.First,theamountoftaxwhich

wouldhavebeendueifalltheincomeweregenerated

inGermanyiscalculatedbytakingintoaccountthe

aggregateincomeofthetaxpayerreducedbythe

personalallowancesdue.Then,theamountoftax

creditiscalculated.TheincomefromtheforeignState

isdividedbythetotalincomeofthetaxpayerwithout

takingintoaccountthepersonalallowancesofthe

taxpayer.Subsequently,thisfractionismultipliedbythe

amountoftheGermantaxwhichwouldhavebeendue

ifalltheincomeweregeneratedinGermany.Thisisthe

maximumamountofforeigntaxwhichcanbecredited

againsttheGermantaxdue.

Thetaxpayersinthiscase,MrBekerandMrsBeker,are

liabletounlimitedtaxationinGermany.Theyearnthe

greaterpartoftheirincomeinGermany,buthavesome

smallinvestmentsintheformofsharesincompanies

residentinotherMemberStatesandthirdStates.Upon

theseshares,dividendwasdistributedanddividend

withholdingtaxwaswithheldinthesourceStates.In

themainproceedings,thetaxpayersarguedthatthe

calculationbyGermanyofthemaximumtaxcredit

grantedwithregardtotheforeigndividendwithholding

taxisinconflictwiththefreemovementofcapitalaslaid

downinArticle63TFEU.

Asregardsthequestionofwhichfreedomisapplicable

tothecase,theCJruled,makingreferencetotheTest

Claimants in the FII Group Litigation case (C-35/11),

thatthepurposeofthelegislationconcernedmustbe

takenintoconsideration.TheGermanrulesatissue

applyregardlessoftheamountofshareholdingina

company.Insofarasthoserulesrelatetodividends

whichoriginateinaMemberState,itcannot,having

maintainingtheireconomicactivityintheircountryof

origin.

Asself-employedfrontierworkers,MrsandMrEttwein

areentitled,accordingtotheprovisionsoftheEC-

SwitzerlandAgreement,toequaltreatmentinthehost

country,i.e.Germany,alsoasregardstaxconcessions.

TheCJthenruledonwhethersuchconclusionwas

affectedbyArticle21(2)oftheAgreement.Thelatter

providesthatnoprovisionoftheAgreementmaybe

interpretedinsuchawayastopreventthecontracting

partiesfromdistinguishing,whenapplyingtherelevant

provisionsoftheirfiscallegislation,betweentaxpayers

whosesituationsarenotcomparable,especiallyas

regardstheirplaceofresidence.TheCJemphasised

thatthisprovisionallowsadifferenttreatmentof

residentsandnon-residentsonlyinthecasewhenthey

arenotcomparable.TheCJruledthatbasedonthe

Schumacker case(C-279/93)andtheAsscher case

(C-107/94),thesituationofMrsandMrEttweinwas

comparabletothesituationofaGermanresidentperson

pursuingaself-employedactivityinGermany,asthey

bothearnedalmostalltheirincomeinGermanyandhad

electedforunlimitedtaxliabilityinGermanywhiletheir

personalandfamilycircumstancescouldnotbetaken

intoaccountintheirStateofresidence,astheydidnot

receiveincomethere.

Consequently,theCJruledthattheEC-Switzerland

AgreementprecludeslegislationofaMemberState

whichrefusesthebenefitofjointtaxationwiththeuse

ofthe‘splitting’methodtospouseswhoarenationals

ofthatStateandsubjecttoincometaxinthatState

ontheirentiretaxableincome,onthesolegroundthat

theirresidenceissituatedintheterritoryoftheSwiss

Confederation.

CJrulesthatthemethodusedbyGermanyforcalculatingforeigntaxcreditiscontrarytothefreemovementofcapital(Beker and Beker) On28February2013,theCJrendereditsjudgmentin

thecaseBeker and Beker(C-168/11)concerningthe

compatibilityofGermanrulesonthecomputationof

themaximumtaxcreditgrantedtoresidenttaxpayers

20

similartothecalculationunderthecreditmethodat

issueinthepresentcase.

Thus,duetothecalculationofthemaximumcreditby

Germany,taxpayerswhoearnsomeoftheirincome

abroadaredisadvantagedcomparedwithtaxpayers

whoearnalloftheirincomeintheStateofresidence.

Thisdifferenceintreatmentconstitutesarestrictionon

thefreemovementofcapital.

Thisrestrictioncannotbejustified,accordingtothe

CJ,bythepreservationoftheallocationofthepower

toimposetaxbetweenMemberStates.TheGerman

governmentarguedthatforthepurposesofcrediting

foreignwithholdingtax,thatprincipleimpliesthatitis

possibletodeductexpensesorcostsonlywhenthey

aredirectlylinkedtothetaxrevenuecomingundera

MemberState’spowertoimposetaxesandthus,the

Stateofresidenceisnotobligedtocompensatefor

disadvantageslinkedtothefailuretotakeintoaccount

thetaxpayers’personalcircumstancesbytheState

ofsourceoftheincome.TheCJ,however,heldthat

suchjustificationcannotbeinvokedbyataxpayer’s

Stateofresidenceinordertoevadeitsresponsibilityin

principletogranttothetaxpayerthepersonalandfamily

allowancestowhichheisentitled,unless,oftheirown

accordorasaconsequenceofspecificinternational

agreements,theStatesinwhichonepartofthe

incomeisreceivedgrantsuchallowances.Moreover,

ifGermanyfullygrantsthebenefitofthepersonal

allowancestothetaxpayersitwillnotforgopartofits

taxjurisdictiontootherMemberStates.Accordingtothe

CJ,theincomereceivedinGermanybythetaxpayers

isnottaxedlessthanifitconstitutedtheonlyincome

receivedbythepersonsconcernedandthelatterhad

notreceivedforeignincome.

Finally,theCJstatedthatthefactthatGerman

lawgrantsanoptiontothetaxpayertochoosethe

deductionoftheforeigntaxfromthetaxbaseasan

expenseinsteadofaforeigntaxcreditdoesnotrectify

theinfringementofEUlawentailedbytheGerman

mechanismofapplyingthecreditmethod.

regardtothepurposeoftherule,bedeterminedifthe

rulesfallunderthefreedomofcapitalorthefreedomof

establishment.Therefore,theCJtookintoaccountthe

factsoftheunderlyingcase.Theshareholdingsheldby

theBekercoupleamounttolessthan10%ofthecapital

inthecompanies.Consequently,theydonothavea

definiteinfluencewithinthemeaningofthecaselaw,

therefore,thefreemovementofcapitalisapplicable.

Asregardsthedividendsfromthirdcountrycompanies,

whenthenationalrulesatissuedonotapplyexclusively

tosituationsinwhichtheshareholderexercisesdecisive

influenceoverthecompanypayingthedividendssuch

rulesmustbeassessedundertheprovisionsofthe

freemovementofcapital.Thus,theCJheldthatthe

contestedruleshadtobeconsideredexclusivelyinthe

lightofthefreemovementofcapital.

InexaminingwhetherthecalculationbyGermanyof

themaximumtaxcreditrestrictsthefreemovementof

capital,theCJpointedoutthatsuchcalculationhas

theresultthattheStateofresidencegrantspersonal

allowancestotaxpayerswhoearnforeignincomeonly

inproportiontotheirdomesticincome.Aproportion

ofthoseallowancesisthusnottakenintoaccountby

Germanyincalculatingthosetaxpayers’incometax.

AccordingtotheDe Grootcase(C-385/00),itisamatter

fortheStateofresidence,inprinciple,tograntthe

taxpayerallthetaxallowancesrelatingtohispersonal

andfamilycircumstances.TheMemberStateinwhich

theincomeoriginatedisrequiredtotakeintoaccount

personalandfamilycircumstancesonlywherethe

taxpayerreceivesalmostallorallofhistaxableincome

inthatStateandwherehehasnosignificantincome

inhisStateofresidence,sothatthelatterisnotina

positiontogranthimtherelatedadvantages.TheCJ

ruledthattheseprinciplesarefullytransposabletothe

presentcase,despitethefactthattheDe Groot case

concernedthefreemovementofworkersinsteadof

capitalanditsfactsdifferedfromthoseofthepresent

case.ItisalsonotrelevantinthisrespectthatDe Groot

concernedthetaxexemptionmethodgiventhatthe

calculationundertheversionoftheexemptionmethod

appliedbytheNetherlandsinthatcaseissubstantially

21

toundertakingsforcollectiveinvestmentintransferable

securitiesdidnotauthorizemanagementcompanies

todelegatetothirdparties.AccordingtotheCJ,a

distinctionbetweenlawfulandunlawfultransactionsis

precludedbytheprincipleoffiscalneutrality.

CJrulesonscopeofexemptionformanagementofspecialinvestmentfunds(Wheels and others)On7March2013,theCJdelivereditsjudgmentinthe

case Wheels Common Investment Fund Trustees Ltd

and others(C-424/11).Thecaseconcerns‘Wheels’,a

trusteeofafundpoolingforinvestmentpurposesthe

assetsofoccupationalpensionschemes.Theschemes

providepensionstoacategoryofformeremployees.

CapitalInternationalLimited(‘CIL’)providedfund

managementservicestoWheels.Inaccordancewith

UKVATprovisions,CILchargedVATtoWheelson

thoseservices.CILclaimedrepaymentoftheVATon

thegroundsthattheserviceswereVATexemptedunder

Article135(1)(g)oftheEUVATDirective.However,

theCommissionersforHerMajesty’sRevenueand

Customsrejectedtheclaim.Wheelsappealedtothe

First-tierTribunal,whichcourtwasuncertainwhether

thefundheldbyWheelswastobeclassifiedasa

‘specialinvestmentfund’withinthemeaningoftheVAT

exemption.

TheCJruledthataninvestmentfundinwhichthe

assetsofaretirementpensionschemearepooled

cannotberegardedasa‘specialinvestmentfund’within

themeaningofArticle135(1)(g)oftheEUVATDirective,

wherethemembersoftheschemedonotbeartherisk

arisingfromthemanagementofthefundandwherethe

contributionswhichtheemployerpaysintothescheme

areameansbywhichhecomplieswithhislegal

obligationstowardshisemployees.AccordingtotheCJ,

itisrelevantinthisregardthatsuchaninvestmentfund

isnotopentothepublicandthatitisnotsufficiently

comparablewithcollectiveinvestmentundertakingsto

beincompetitionwiththem.

CJrulesonscopeofexemptionformanagementofspecialinvestmentfunds(GfBk)On7March2013,theCJdelivereditsjudgment

inthecaseGfBk(C-275/11).Gesellschaft

fürBörsenkommunikationmbh(‘GfBk’)isa

Germancompanythatprovidesinformationand

recommendationsrelatingtothestockmarket,advice

relatingtofinancialinstrumentsandmarketingof

financialinvestments.GfBkrenderedservicestoan

investmentmanagementcompany.Inparticular,GfBk

advisedtheinvestmentmanagementcompanyonthe

managementofthefund,constantlymonitoredthefund

andmaderecommendationsforthepurchaseorsale

ofassets.Moreover,GfBkwasrequiredtopayheedto

riskdiversification,statutoryinvestmentrestrictionsand

investmentconditions.Fortheseservices,GfBkwas

paidaremunerationcalculatedasapercentageofthe

valueofthespecialinvestmentfund.

TheGermantaxauthoritiestookthepositionthat

theservicesrenderedbyGfBkdidnotconstitutethe

‘managementofspecialinvestmentfunds’withinthe

meaningoftheVATexemptionofArticle13(B)(d)(6)

oftheSixthEUVATDirective.GfBkdidnotagreewith

thisunderstandingandwenttocourt.Eventuallythe

caseendedupbeforetheFederalFinanceCourtwhich

decidedtoreferpreliminaryquestionstotheCJ.

TheCJruledthattheservicesrenderedbyathird

party(GfBk)consistingofgivingrecommendations

toaninvestmentmanagementcompanytopurchase

andsellassetsareintrinsicallyconnectedtothe

activitycharacteristicoftheinvestmentmanagement

company,sothatithastheeffectofperformingthe

specificandessentialfunctionsofmanagementofa

specialinvestmentfundwithinthemeaningoftheVAT

exemptionofArticle13(B)(d)(6)oftheSixthEUVAT

Directive.

Furthermore,theCJruledinthisregardthatitisnot

relevantthatDirective85/611onthecoordinationof

laws,regulationsandadministrativeprovisionsrelating

22

DistrictCourtofTheHagueruledthatthepossibilitytoformafiscalunityunderNetherlandslawisnotinconflictwiththefreedomofestablishmentInsixcases,theDistrictCourtofTheHagueruledthat

thefiscalunityrules,aslaiddowninNetherlandstax

law,arenotinbreachwiththefreedomofestablishment.

Intheunderlyingcases,thetopparentcompanyof

thegroupwasnotresidingintheNetherlands.This

parentcompanyhelddirectlyandindirectlytheshares

inseveralsubsidiariesresidingintheNetherlandsand

othersubsidiariesnotresidingintheNetherlandsbut

withapermanentestablishmentintheNetherlands.The

NetherlandssubsidiariesandNetherlandspermanent

establishmentsweresistercompanies.Thesixcases

couldbedividedintotwogroups,onegroupinwhich

therequestforthefiscalunitywasonlyfiledforthe

NetherlandscompaniesandNetherlandspermanent

establishments,andtheotherinwhichthenon-

Netherlandsresidenttopparentcompanywasalso

included.

UnderNetherlandslaw,itispossibleforaNetherlands

parentcompanytoformafiscalunitywithNetherlands

subsidiariesifthesesubsidiariesareresidentinthe

NetherlandsandiftheNetherlandsparentcompany

holds95%ormoreofthesharesinthese(sub)

subsidiaries.Ifthesubsidiarydoesnotresideinthe

Netherlands,itispossibletoformafiscalunitybetween

theNetherlandsparentcompanyandtheNetherlands

sub-subsidiaryifthesharesintheNetherlands

sub-subsidiarycanbeallocatedtoapermanent

establishmentoftheforeignsubsidiarywhichissituated

intheNetherlands.Furthermore,itisalsopossible

toformafiscalunitybetweentwoNetherlandssister

companieswhichareheldbyaforeignparentcompany

ifthesharesinthesesistercompaniescanbeallocated

toapermanentestablishmentoftheforeignparent

companysituatedintheNetherlands.

TheDistrictCourtoftheHagueruledthatthereis

accesstotheTFEU,astheunderlyingcasesdonot

reflectatotallyinternalsituation.Withreferencetothe

case Papillon(C-418/07),thecourtheldthatadomestic

ruleleadstoaprohibiteddiscriminationifanintraEU

Spanishrulesonexittaxesuponchangeofcorporateresidenceortransferofassetsofapermanentestablishmentinbreachofthefreedomofestablishment(Commission v Spain)On25April2013,theCJdelivereditsjudgmentin

thecaseEuropean Commission v Kingdom of Spain

(C-64/11).Thecasedealswiththecompatibilityof

theSpanishruleswhichtriggerimmediatetaxationof

unrealizedcapitalgainsuponthechangeofcorporate

residenceorthetransfer(totalorpartial)oftheassets

allocatedtoapermanentestablishment(PE)toanother

MemberStatewiththefreedomofestablishment

providedinArticle49TFEU.

TheCJstartedbyrecallingthatthedifferencein

treatmentbetweencross-bordersituationsandpure

internalsituations–whichdonottriggeranyimmediate

taxationofunrealizedcapitalgains–constitutesa

restrictiontothefreedomofestablishment.

Asregardspossiblejustifications,theCJre-called

thatthepurposeofthelegislationatstakeistotax

thecapitalgainsarisingwithinthescopeofthetax

jurisdictionoftheMemberStateoforigin.Inthatregard,

thepurposeofsuchtaxationistopreservetheallocation

oftaxingrightsofthatMemberState.

However,intermsoftheproportionalityofthe

measure,theCJreferredtotheexistenceofless

restrictivemeasuresthantheimmediatetaxationofthe

unrealizedcapitalgains.Inparticular,theCJreferred

totheexistenceofmechanismsforcooperationand

assistancebetweentheauthoritiesoftheMember

StatesCouncilDirective(2008/55/ECof26May2008

onmutualassistancefortherecoveryofclaimsrelating

tocertainlevies,duties,taxesandothermeasures)

whicharesufficienttoallowtheoptionforthedeferralof

thepayment.

Therefore,theCJconcludedthattheSpanishexit

taxprovisionswhichimplytheimmediatetaxationof

unrealizedcapitalgainsuponthechangeofcorporate

residenceoruponthetransferofthePEassetsto

anotherMemberStateareinbreachofthefreedomof

establishment.

23

ofHungary(applicationno.66529/11).Thecaserefers

totheHungarianruleswhichimposea98%taxonthe

upperbracketofseverancepaymentsforemployees

dismissedfromthepublicsector.

MsN.K.M.wasacivilservantforthirtyyears.OnMay

2011,shewasdismissedwitheffectfrom28July2011.

Ondismissal,shereceivedtwomonths’salaryforJune

andJuly2011,duringwhichtimeshewasexempted

fromwork.Inaddition,shewastoreceiveseverance

payamountingtoeightmonths’salaryaswellasto

anunspecifiedsumcorrespondingtounusedleave

ofabsence.Thosebenefitsweresubsequentlytaxed

at98%intheirpartexceeding3.5millionHungarian

forints.Thisrepresentedanoveralltaxburdenof

approximately52%ontheentiretyoftheseverance,as

opposedtothegeneralpersonalincometaxrateof16%

intherelevantperiod.

MsN.K.M.complainedunderArticle1ofProtocolNo.1

-readaloneandinconjunctionwithArticle13-that

theimpositionofa98%taxontheupperbracketof

herseveranceconstitutedanunjustifieddeprivation

ofproperty,orelsetaxationatanexcessively

disproportionaterate,withnoremedyavailable.She

alsoconsideredthatArticle14oftheConventionreadin

conjunctionArticle1ofProtocolNo.1hadbeenviolated

becauseonlythosedismissedfromthepublicsector

weresubjectedtothetaxandbecauseapreferential

thresholdwasapplicabletoonlyagroupofthose

concerned.

Article1ofProtocolno.1oftheConventionprovides

that:

‘Everynaturalorlegalpersonisentitledtothepeaceful

enjoymentofhispossessions.Nooneshallbedeprived

ofhispossessionsexceptinthepublicinterestand

subjecttotheconditionsprovidedforbylawandbythe

generalprinciplesofinternationallaw.

Theprecedingprovisionsshallnot,however,inany

wayimpairtherightofaStatetoenforcesuchlawsas

itdeemsnecessarytocontroltheuseofpropertyin

accordancewiththegeneralinterestortosecurethe

paymentoftaxesorothercontributionsorpenalties.’

situationandanentirelyinternalsituationaretreatedin

adifferentwayforwhichnojustificationexists.

Regardingthefirstgroupofcases,theDistrictCourtof

TheHaguearguedthatitisanessentialcharacteristic

ofthefiscalunitythatoneofthecompanieswhichare

requestingtoformafiscalunitycouldbeconsidered

astheparentcompanyoftheothercompaniesfor

whichthefiscalunityisrequested.AstheNetherlands

companiesandtheNetherlandspermanent

establishmentaresistercompanies,thefiscalunity

couldnotberequested.Therefore,theclaimantargued

thatoneofthesistercompaniesmustbeconsidered

andactasanotionalparentcompany.Thecourtheld

thattherewasnolegalbasisforsuchnotionalparent

company.Therefore,thecourtruledthatthiswasnota

prohibiteddiscriminationasalsoinanentirelyinternal

situationitisnotpossibletoformafiscalunitywithout

aparentcompany.Furthermore,thecourtheldthatthe

fiscalunityjudgmentinPapillonwasnotapplicablein

theunderlyingcase,asthefactsintheunderlyingcase

werenotsimilartothefactsinPapillon.

Regardingthesecondgroup,theCourtruledthat

aparentcompanywhichdoesnotresideinthe

Netherlandscannotformpartofafiscalunityaccording

toNetherlandslaw.Furthermore,theDistrictCourt

oftheHagueremindedthatinthecaseX-holding

(C-337/08),theCJhadruledthatthisimpossibilitywas

notinconflictwiththefreedomofestablishment.

Toconclude,thecourtruledinthecasesofbothgroups

thatthenon-discriminationprovisionsintheapplicable

taxtreatiesarenotapplicableastherejectionofthe

fiscalunitydoesnotleadtoadiscriminationasis

referredtointhenon-discriminationprovisions.

ECHRfindsHungarianlegislationprovidingfora98%taxoverpaymentstoemployeesofthepublicsectorforterminationofemploymentinbreachoftherighttoprivateproperty(N.K.M. v Republic of Hungary)On14May2013,theEuropeanCourtofHumanRights

(ECHR)issueditsjudgmentincaseN.K.M.vRepublic

24

ThefourthelementundertheECHRscrutinywas

whethertherewasanexceptionofpublicinterestthat

couldjustifythetaxmeasureatstake.TheECHR

startedbyobservingthatwhiletheimpugnedmeasure

wasintendedtoprotectthepublicpurseagainst

excessiveseverancepayments,itwasnotconvinced

thatthisgoalwasprimarilyservedbytaxation.There

wasapossibilitytochangeseverancerulesandreduce

theamountswhichwerecontrarytopublicinterest,

buttheauthoritiesdidnotoptforthiscourseofaction.

However,itwasoftheviewthatitwasnotnecessary

todecideontheadequacyofameasurethatformally

servesasocialgoal,sincethismeasureisinanyevent

subjecttotheproportionalitytest.

Finallyasregardstheproportionalitytest,theECHR

analysedwhethera‘fairbalance’betweenthe

demandsofthegeneralinterestofthecommunityand

therequirementsoftheprotectionoftheindividual’s

fundamentalrights.TheECHRreferredtothefactthat

thetaxrateappliedexceedsconsiderablytherate

applicabletoallotherrevenues,includingseverance

paidintheprivatesector,withoutdetermining

inabstractowhetherornotthetaxburdenwas,

quantitativelyspeaking,confiscatoryinnature.

AccordingtotheECHR,thisentailedanexcessiveand

individualburdentoMsN.K.M..Thisisallthemore

evidentwhenconsideringthefactthatthemeasure

targetedonlyacertaingroupofindividuals,whowere

apparentlysingledoutbythepublicadministrationin

itscapacityasemployer.Assumingthattheimpugned

measureservedtheinterestoftheStatebudgetata

timeofeconomichardship,theECHRnotedthatthe

majorityofcitizenswerenotobligedtocontribute,toa

comparableextent,tothepublicburden.

ItfurthernotedthatMs.N.K.M.hadtosuffera

substantialdeprivationofincomeinaperiodof

considerablepersonaldifficulty,namelythatof

unemployment.Inthisregard,itwasrelevantfor

theECHRthatthetaxwasdirectlydeductedbythe

employerfromtheseverancewithoutanyindividualised

assessmentoftheMsN.K.M.situation.Inaddition,the

ECHRrecalledthatthetaxwasdeterminedinastatute

thathadbeenenactedandenteredintoforcesome

tenweeksbeforetheterminationofthecivilservice

TheECHRwentontoanalysetheseveralelements

ofArticle1ofProtocol1.Itfirststartedbyanalysing

whethertheseverancepayreceivedconstituted

‘possessions’withinthemeaningofthereferredArticle,

asMsN.K.M.hadactuallyneverpossessedtheentire

paymentinquestionsincethespecialtaxapplicable

hadbeendirectlywithheldbythetaxauthorities.The

ECHRobservedthattheconceptof‘possessions’in

thefirstparagraphofArticle1ofProtocolNo.1has

anautonomousmeaningwhichisnotlimitedtothe

ownershipofmaterialgoodsandisindependentfrom

theformalclassificationindomesticlaw.Itstatedthat

‘possessions’withinthemeaningofArticle1ofProtocol

No.1canbeeither‘existingpossessions’orassets,

includingclaims,inrespectofwhichanapplicantcan

arguethathehasatleasta‘legitimateexpectation’

thattheywillberealised.Thus,itconsideredthata

‘legitimateexpectation’ofobtaininganassetmayalso

enjoytheprotectionofArticle1ofProtocolNo.1.

ThesecondelementanalysedbytheECHRwas

whethertherewasaninterferencewiththepossessions

oftheindividual.Itconcludedthatalegislative

amendmentwhichremovesalegitimateexpectation

mayamountinitsownrighttoaninterferencewith

‘possessions’.Inotherwords,thetaxationatstake

representedaninterferencewiththerighttopeaceful

enjoymentofpossessionsbyMsN.K.M.

Thethirdelementwaswhethersuchpublicinterference

waslawful.TheECHRstartedbyrecallingthatArticle

1ofProtocolNo.1requiresthatanyinterference

byapublicauthoritywiththepeacefulenjoymentof

possessionsshouldbelawful:indeed,thesecond

sentenceofthefirstparagraphofthatArticleauthorises

thedeprivationofpossessions‘subjecttotheconditions

providedforbylaw’.However,theexistenceofa

legalbasisindomesticlawdoesnotsuffice,initself,

tosatisfytheprincipleoflawfulness.Inaddition,the

legalbasismusthaveacertainquality,namelyitmust

becompatiblewiththeruleoflawandmustprovide

guaranteesagainstarbitrariness.However,inwhat

referstotaxation,theECHRreferredtoitsprevious

caselawinordertoconsiderthatsomedegreeof

additionaldeferenceandlatitudeintheexerciseoftheir

fiscalfunctionsunderthelawfulnesstest.

25

hasatitsdisposalaneffectiveinstrumenttoensure

propertaxationofthattypeofincome.Belgiumfurther

invokedtheneedtopreventdoubleexemptionandthus

theobjectiveofpreventingtaxevasionandavoidance

ifaBelgianresidenthasseveralsavingsaccounts,

theCourtheldthatthisriskisinherentinthenational

systemanddoesnotrequireacross-borderelement.

Moreover,theprovisionsaretoorestrictive,asby

precludingforeigninterestincomefromtheexemption,

theprovisionsnotonlypreventtaxavoidanceand

evasionbutalsothelegitimateexerciseofthefreedom

toprovideserviceswheretaxpayersprovethattheir

objectiveisnotoneoftaxevasion.

TheCourtfurtherheldthatthenationalprovisions

areprecludedunderthefreedomtoprovideservices

containedintheEEAAgreement.Despitethe

Commission’srequest,theCourtrefusedtoexaminean

infringementofthefreemovementofcapitalunderboth

theTFEUandtheEEAtreatiesgiventhatthenational

provisionsareprecludedunderthefreedomtoprovide

services.

CJrulesthatnon-applicationofthenotionalinterestdeductionrulesincaseofBelgiancompanieswithforeignpermanentestablishmentsisinbreachofthefreedomofestablishment(Argenta)On4July2013,theCJgaveitsjudgmentinthecase

Argenta v Belgium(C-350/11).Inthiscase,theCourt

ofFirstInstanceofAntwerpsubmittedarequestfora

preliminaryrulingtotheCJregardingtheapplicationof

Belgiannotionalinterestdeductionontaxpayershaving

aforeignpermanentestablishment.Abankestablished

inBelgium,Argenta,wasdeniedthenotionalinterest

deductiononitsequitytotheextentofthenetasset

valueofitsNetherlandspermanentestablishment.

Thenotionalinterestdeduction(‘NID’)referstothe

deemedinterestexpensesthatBelgiancompanies

andestablishmentsareentitledtocalculateannually

ontheamountoftheirtotalequityanddeductfortax

purposes,thusreducingtheirtaxbases.Thededuction

isbasedontheamountofacompany’stotalequity

asdeterminedinaccordancewithBelgianGAAP,and

relationship,anditwasnotintendedtoremedytechnical

deficienciesofthepre-existinglaw,norhadMsN.K.M.

enjoyedthebenefitofawindfallinachangeovertoa

newtax-paymentregime.Alltheseelementsconsidered

ledtheECHRtoconcludethattherewasaviolationof

Article1ofProtocolno.1oftheConvention.

CJrulesthatBelgianlegislationontaxationofinterestincomederivedfromsavingdepositsheldinforeignbanksareinbreachofthefreemovementofservices (Commission v Belgium) On6June2013,theCJissueditsjudgmentincase

Commission v Belgium(C-383/10) regardingthe

taxationofinterestincomederivedfromsavings

depositsheldinforeignbanks.

Belgiantaxlawexoneratesfromincometaxinterest

intheamountofEUR1,250(tobeindexedannually)

derivedfromsavingsdeposits.Tobenefitfromthe

exemption,thesavingsaccountsmustbeopenedwith

abankestablishedinBelgium.Moreover,thedeposits

mustsatisfycertaincriteriasuchascurrency,methods

ofwithdrawalanddeductions,structure,leveland

calculationofremuneration.

TheCourtfoundthattheprovisionshavetheeffectof

discouragingBelgianresidentsfromusingtheservices

ofbanksestablishedinotherMemberStates,as

interestpaymentsbythosebanksarenoteligibleforthe

exemptionanddiscourageholdersofBelgiansavings

accountsfromtransferringtheiraccountstobanks

establishedinotherMemberStates.

Thejustificationsoftherestrictionputforwardby

BelgiumwerenotacceptedbytheCourt.Belgium

invokedtheneedtoguaranteetheeffectiveness

offiscalsupervisionandtheineffectivenessofthe

Directive77/799onmutualassistance.TheCourt

heldthatMemberStatesshouldnotbeabletorely

onthepossibledifficultiesinobtainingtheinformation

requiredorontheshortcomingsofcooperationbetween

theirtaxauthoritiesinordertojustifyarestrictionofa

fundamentalfreedom.Moreover,incomefromforeign

savingsaccountsissubjecttoexchangeofinformation

intheframeworkofDirective2003/48.Belgiumthus

26

Asregardsthesecondjustification,theCourtheldthat

grantingtheadvantage(i.e.takingintoaccountthe

permanentestablishmentassetsforthenotionalinterest

deduction)wouldjeopardiseneithertherightofthe

MemberStateinwhoseterritorythecompanytowhich

thepermanentestablishmentbelongsisestablished

northatoftheMemberStateinwhoseterritorythe

permanentestablishmentissituatedtoexercisethe

powertotaxinrelationtoactivitiescarriedoutinits

territory,andwouldnotresultintheshiftingofincome

normallytaxableinoneofthoseMemberStatestothe

other.

CJrulesthatDanishexittaxrulesoncross-bordertransfersofassetswithinacompanyareinbreachofthefreedomofestablishment(Commission v Denmark)On18July2013,theCJissueditsjudgmentincase

Commission v Denmark(C-261/11)concerningthe

Danishexittaxrulesapplicableoncross-border

transfersofassetswithinacompany.Accordingto

Danishtaxlaw,transfersofassetswithinDenmarkdo

nottriggertaxationwhileassetstransferredoutside

Denmark(andtherefore,arenolongersubjecttoDanish

taxlaw),aretreatedassale-triggeringtaxationasthose

assetshadbeensoldintheyearofthetransfer.

TheCJstartedbyconsideringthatthedifferent

treatmentbetweendomestictransfersandtransfers

toanotherMemberStatemakeitlessattractivefor

aDanishcompanytotransferitsassetstoanother

MemberState.Therefore,itconsideredthatthe

legislationatstakeconstitutesabreachofthefreedom

ofestablishmentasprovidedinArticle49TFEUand

Article31EEA.

Asregardspossiblejustifications,theCJrejectedthe

argumentsthattheDanishmeasurescouldbejustified

bytheneedtopreservethecoherenceofthetaxsystem

orthebalancedallocationofthepowerstotax.

Therefore,itconfirmedthattheDanishlegislation,by

providingadifferenttreatmentbetweentransfersof

assetsbetweenMemberStatesanddomestictransfers

comprisesthesharecapitalandsharepremiumaswell

asthevariousretainedearnings.

Whatamountstototalequity,isdeterminedbyreference

tothecompany’sequitypositionattheendofthe

precedingfinancialyear.Oncethisbaseamountis

established,certainadjustmentshavetobemade.If

thecompanyhasaforeignestablishmentofwhichthe

incomeistaxexemptbyvirtueofataxtreaty,oneof

theseadjustmentsconsistsofreducingthebaseamount

byanypositivedifferencebetween(i)thenetbookvalue

ofassetsallocatedtosuchforeignestablishment,and

(ii)theliabilitiesallocatedtosuchestablishment.

ItwasonthislimitationoftheNIDcalculationbasis

forforeignestablishmentsthattheAntwerpCourtof

FirstInstancereferredaquestionforapreliminary

rulingtotheCJon24June2011.TheCourtofFirst

Instanceaskedwhetherthefreedomofestablishment

isinfringedbyexcludingthenetassetsofapermanent

establishmentlocatedinanotherEUMemberStateand

ofwhichtheincomeisexemptinBelgiumbyvirtueofa

taxtreaty,fromtheNIDcalculationbasis.

TheCourtfoundthatthislimitationdoesconstitutea

restrictionofthefreedomofestablishmentasitmay

causeBelgiancompaniestorefrainfrompursuing

theiractivitiesthroughapermanentestablishmentina

MemberStateotherthanBelgium.Itwasfurtherstated

thatthisrestrictioncannotbejustifiedeitherbytheneed

topreservethecoherenceofthefiscalsystem,orby

thebalancedallocationoftaxingpowersbetweenEU

MemberStates.

Asregardsthefirstjustification,theCourtheldthat

thereisnodirectlinkbetweenthetaxadvantage(i.e.

takingintoaccountthepermanentestablishmentassets

forthededuction)andtheoffsettingofthatadvantage

byaparticulartaxlevy(i.e.taxationoftherevenue

generatedbythepermanentestablishmentassets).

Thisisbecausethelegislationdoesnotrequirethatan

actualtaxableincomeisgeneratedbythepermanent

establishmentassetsinordertobenefitfromthe

notionalinterestdeductioncalculatedontheseassets,

butonlythatthepotentialincomefromtheassetsis

taxableinBelgium.

27

executionattachingtheapplicant’ssite-leaseholdright

andthehouseonthesitewheretheapplicantandhis

wifelived.On28July2003,MrRousksubmittedtothe

TaxAuthorityarequesttogranthimarespitefromthe

paymentofhistaxesuntilanewassessmenthasbeen

made,asheintendedtosubmithistaxreturnshortly.

Apparently,thissubmissionwassortedwronglyinthe

incomingmailtotheTaxAuthorityandthus,itwasnot

untiltheapplicantrenewedhisrequestonemonthlater,

on28August2003,thattheTaxAuthoritydealtwith

it.On3September2003,theTaxAuthoritygranted

himrespitefrompaymentoftaxes.However,theTax

AuthoritydidnotinformtheEnforcementAuthority

aboutsuchrespite.Inthemeantime,on23June2003,

theEnforcementAuthoritydecidedthattheapplicant’s

propertyshouldbesoldatpublicauctiontopayhis

debtsandhewasinformedofthisdecisionbyletterof

4July2003.Moreover,inaletterof31July2003,he

wasinformedthatthepublicauctionwouldtakeplace

on3September2003.On3September2003,thepublic

auctiontoselltheapplicant’spropertytookplaceand

thehousewassold.MrRouskwasinformedthathe

hadtovacatehishomebefore1October2003.On

17September2003,MrRouskappealedagainstthe

saletotheCourtdemandingthatitbedeclarednull

andvoidgiventhat,onthesamedateoftheauction,

theTaxAuthorityhadgrantedhimrespitefromthe

paymentofhistaxdebtwiththeconsequencethatthe

enforceabledebtwasonlyaroundSEK6,721attheday

ofthesale.Therefore,thewritofexecutionshouldhave

beenrevoked.AsMrRouskdidnotmoveoutofhis

houseby1October2003,attherequestofthebuyerof

thepropertytheEnforcementAuthoritydecidedtoevict

MrRouskon6October2003.

MrRouskappealed,invokingArticle1ofProtocol

No.1totheECHR,andclaimingthatitwasclearly

disproportionatetosellhispropertyforadebtofsuch

aloweramount.Heconsideredthatthemeasure

constitutedanirrevocableanddefinitedeprivationof

hispropertyandwascompletelydisproportionateto

theaimspursued,inparticular,asthedecisiontosell

thepropertyhadnotgainedlegalforceatthetime

thepropertywassoldandwhenhewasevicted.The

SwedishGovernmentsubmittedinturnthatthesale

atpublicauctionoftheapplicant’spropertyandthe

ofassets,isinbreachofthefreedomofestablishment

asprovidedinarticles49TFEUand31EEA.

ECHRfindsthatSwedenviolatedArticle 1 of Protocol 1 and Article 8 oftheConventionfortheProtectionofHumanRightsandFundamentalFreedoms(Rousk v Sweden) On25July2013,theEuropeanCourtofHumanRights

(ECHR)issueditsjudgmentincaseRousk v Sweden

(Applicationno.27183/04).Thecasedealswiththe

allegedviolationoftherighttopeacefulenjoymentof

propertyaswellastherighttorespectforprivateand

familylifeandhomeconcerningthesaleofpropertyat

publicauctionandtheensuingevictionderivingfrom

unpaidtaxes.

MrRousk,theownerofaclosecompanyandwas

underastatutoryobligationtosubmitaspecialincome

taxreturneveryyear.Forthetaxassessmentyear

2002(incomeearnedduring2001),hewasobliged

tosubmitthetaxreturnnolaterthan31March2002.

However,havingfailedthat,inJuly2002,theTax

AuthorityinStockholmorderedhimtosubmithistax

returnwithintwoweeksfromreceivingtheorder.As

hedidnotcomplywiththatorder,theTaxAuthority

informedhimthatitwouldmakeadiscretionary

assessmentofhisincomeand,inOctober2002,sent

himaproposalforadiscretionaryassessment.The

applicantwasgiventwoweekstocommentonthis,

butdidnotdoso.InNovember2002,theTaxAuthority

decidedtomaintaintheproposaland,asitfound

nogroundsforexemption,imposedtaxsurcharges

onhim.Theapplicantwasinformedthatthetaxes,

taxsurchargesandadelaychargeamountedto,in

total,SEK232,572(approximatelyEUR27,000).This

amountwastobepaidby26February2003.TheTax

Authority’sdecisionincludedinformationabouthowto

requestreconsiderationorlodgeappeal.However,at

thattime,theapplicantdidneither,nordidherequest

respitefrompayingthetaxes.Sincetaxdebtstothe

SwedishStateareimmediatelyenforceable,theTax

Authority,afterhavingremindedtheapplicantofhis

obligationtopaythetaxdebt,passedtheclaimfor

collectiontotheEnforcementAuthority.On28May

2003,theEnforcementAuthorityissuedawritof

28

proportionalitybetweenthemeansemployedandthe

aimsoughttoberealized.

TheECHRreferredtothecircumstancesofthecase,

notablythatitwasreasonabletoexpectthatboth

departmentsoftheSwedishauthoritiesinvolvedwould

haveinformedeachotheraboutrelevantdevelopments

withdirectrelevancetothecase.Andinanyevent,the

EnforcementAuthoritycouldhavebeenexpectedto

verifyitsstateofproceedingsand/oroutcomedirectly

withtheTaxAuthoritybeforesellingtheMrRousk’s

property.Therefore,andhavingregardtoallofthe

circumstancessetoutabove,theECHRconsideredthat

thesaleoftheapplicant’spropertyatpublicauction,and

theensuingevictionoftheapplicantfromhishome,for

anenforceabledebtthatamountedtoonlySEK6,721

onthedayofthepublicauction,imposedanindividual

andexcessiveburdenontheapplicant.Accordingly,it

concludedthattherewasbeenaviolationofArticle1of

ProtocolNo.1totheConvention.

MrRouskalsoinvokedthatthesaleofhishomeand

theensuingevictionhadviolatedhisrighttorespect

forhisprivateandfamilylifeandconsequently,itwasa

breachofArticle8oftheConvention.TheECHRnoted

thatthesaleofMrRousk’spropertyandtheensuing

evictioninterferedwithhisrighttorespectforhisprivate

andfamilylifeanddeprivedhimofhishomewithinthe

meaningofArticle8.TheECHRre-calledthatalthough

theinterferencewasinaccordancewiththelawand

hadthelegitimateaimsofprotectingtherightsand

freedomsofothers,namelythatofthepurchaserof

theproperty,aswellastheeconomicwell-beingofthe

country,byensuringthecollectionoftaxesitneedsto

beproportionatetothelegitimateaimspursued.Inthis

respect,theECHRheldthatthelossofone’shomeis

amostextremeformofinterferencewiththerightto

respectforthehome.Asregardstheinterestsofthe

purchaser,theECHRacknowledgedthathehada

legitimateinterestinhavingaccesstothepurchased

propertywithinareasonabletimeandgaininglegal

certaintythatthepurchasewasfinal.However,as

notedabove,thepurchasercouldoftenbuyaproperty

atpublicauctionatasomewhatlowerpricecompared

tobuyingontheopenmarket,partlybecauseofthe

ensuingeviction,hadbeenjustifiedinthepublicinterest

tosecurethepaymentoftaxesandproportionatetothe

aimpursued.However,inviewofthefactthattheTax

Authority,erroneously,hadnotdealtwiththeapplicant’s

firstrequestforrespiteandconsideringthattherewas

achancethatadecisionbasedonthatapplicationand

takeninduetimecouldhaveledtothepostponement

ofthesale,theGovernmentpreferredtoleaveittothe

Court’sdiscretionastowhetherthiscomplaintrevealed

aviolationofArticle1ofProtocolNo.1totheECHR.

TheECHRstartedbyrecallingthatArticle1ofProtocol

No.1guarantees,insubstance,therighttoproperty.

Itcontainsthreedistinctruleswhicharefrequently

repeatedintheCourt’scaselaw:

‘...Thefirstrule,whichisofageneralnature,enounces

theprincipleofpeacefulenjoymentofproperty;itis

setoutinthefirstsentenceofthefirstparagraph.

Thesecondrulecoversdeprivationofpossessions

andsubjectsittocertainconditions;itappearsinthe

secondsentenceofthesameparagraph.Thethirdrule

recognisesthattheStatesareentitled,amongstother

things,tocontroltheuseofpropertyinaccordancewith

thegeneralinterest,byenforcingsuchlawsasthey

deemnecessaryforthepurpose;itiscontainedinthe

secondparagraph.’

Inthisregard,theECHRstartedbyconsideringthat

measurestakeninordertofacilitatetheenforcementof

taxdebtsandsecuretaxrevenuetotheState,areinthe

generalinterest.Moreover,themeasurestakenbythe

EnforcementAuthoritywereinaccordancewithnational

legislation,asspecifiedabove.

HowevertheECHRalsoremindedthatinterferencewith

thepeacefulenjoymentofpossessionsmuststrikeafair

balancebetweenthedemandsofthegeneralinterests

ofthecommunityandtherequirementsoftheprotection

oftheindividual’sfundamentalrights.Theconcern

toachievethisbalanceisreflectedinthestructureof

Article1ofProtocolNo.1asawhole.Therequisite

balancewillnotbefoundifthepersonconcernedhas

hadtobearanindividualandexcessiveburden.In

otherwords,theremustbeareasonablerelationshipof

29

andtakingintoaccounttheobjectiveofthefiscalunity

legislation,thataNetherlandsparentcompanywhich

wantedtoformafiscalunitywithitsNetherlandssub-

subsidiaryviaitsNetherlandssubsidiaryisobjectively

comparabletoaNetherlandsparentcompanywhich

wantstoformafiscalunitywithitsNetherlandssub-

subsidiaryviaitsforeignsubsidiary.Consequently,

accordingtothelowercourtofTheHague,the

NetherlandsparentcompanyhadaccesstotheTFEU.

TheDistrictCourtofTheHague,however,ruledthat

astheparentcompanyandthesub-subsidiaries

bothresidedintheNetherlands,theunderlyingcase

concernedapurelyinternalsituation,wherebythere

isnoaccesstotheTFEU.TheCourtalsorejectedthe

appealbasedonthepossiblebreachofthetaxtreaty

non-discriminationarticle.

CJrulesthatPortuguesethin-capitalizationlegislationapplicabletothirdcountriesisinbreachofthefreemovementofcapital(Itelcar)On3October2013,theCJgaveitsjudgementincase

Itelcar – Automóveis de Aluguer Lda, v Fazenda Pública

(C-282/12).Thecasedealswiththecompatibilityofthe

Portuguesethin-capitalizationrulesinthecontextof

fundslentbycompaniesestablishedinthirdcountries

withthefreemovementofcapitalprovidedinArticle63

TFEU.

AccordingtotheapplicablePortuguesecorporate

incometaxrulesinforceatthetimeofthefacts,interest

paidbyaPortuguesetaxpayertoanentityresidentin

athird-countrywithwhichsuchtaxpayerhadspecial

relations(asdeterminedunderthecorporateincome

tax)wouldnotbedeductiblefortaxpurposesforthe

partregardedasexcessive.Theoveralldebtwouldbe

regardedasexcessivewhenitexceededa2:1debt-to-

equityratio.Theconceptofspecialrelationsunderthe

Portuguesecorporateincometaxcode(CIRC)isquite

broad,involvingsituationsinwhichthereisevenno

participationbythelendingcompany.

ItelcarisaPortuguesecompanywhosesharecapital,

until2005,washeldentirelybyaBelgiancompany

increasedrisksinvolved,ofwhichheorsheshould

clearlybeaware.Overall,theECHRconcludedthat

neitherthepurchaser’sinterestsnortheState’sgeneral

interestsoutweighthoseoftheapplicantinthepresent

caseandconcludedthattherewasaviolationofArticle

8oftheConvention.

CourtofAppealsofTheHaguerulesthata‘Papillion’fiscalunityconcernsapurelyinternalsituation,wherebythereisnoaccesstotheTFEUTheCourtofAppealsofTheHagueruledthatthefiscal

unityrules,aslaiddowninNetherlandstaxlaw,are

notinconflictwiththefreedomofestablishment.The

caseconcernedaNetherlandsparentcompanywitha

SpanishandaGreeksubsidiary,bothofwhichheldall

thesharesoftwoNetherlandssub-subsidiaries.

UnderNetherlandstaxlaw,itispossiblefora

Netherlandsparentcompanytoformafiscalunitywith

Netherlandssubsidiariesifthesesubsidiariesresidein

theNetherlandsandiftheNetherlandsparentcompany


subsidiaries.Ifthesubsidiarydoesnotresideinthe

Netherlands,itispossibletoformafiscalunitybetween

theNetherlandsparentcompanyandtheNetherlands

sub-subsidiaryifthesharesintheNetherlands

sub-subsidiarycanbeallocatedtoapermanent

establishmentoftheforeignsubsidiarywhichissituated

intheNetherlands.

Intheunderlyingcase,theNetherlandsparentcompany

requestedtoformafiscalunitywithitsNetherlandssub-

subsidiaries.TheNetherlandsTaxAuthoritiesrefused

toissuesuchfiscalunityrulingasthesubsidiariesdid

notresideintheNetherlandsandasthesharesofthe

Netherlandssub-subsidiarywerenotallocabletoa

permanentestablishmentoftheforeignsubsidiaries

intheNetherlands.TheNetherlandsparentcompany

argued,withreferencetothecasePapillion(C-418/07),

thatnotissuingsuchrulingwasinconflictwiththefree

movementofestablishment(Article49TFEU).

PrecedingtherulingoftheDistrictCourtofTheHague,

thelowercourtofTheHaguehadruled,withreference

tocasesXHolding(C-337/08)andPapillion(C-418/07),

30

ofthecompanyofwhichitisashareholder.Therefore,

itconcludedthatthelegislationinthiscasecouldbe

analysedinlightofthefreemovementofcapital.

TheCJthenwentontoanalysetheexistenceofa

restrictionandpossiblejustifications.Itstartedby

observingthatthelimitationpursuantthePortuguese

thin-capitalizationruleswasapplicableonlyinthecase

ofinterestpaidtocompaniesresidentinthirdcountries

whereassuchdeductionwasalwayspermittedifthe

lendingcompanywasresidentinPortugal.Therefore,it

concludedthatsuchdifferenceintreatmentconstituted

arestrictiontothefreemovementofcapital.Asregards

possiblejustifications,thePortuguesegovernment

arguedthattherulesatstakewereintendedtocombat

taxevasionthroughtheerosionofthePortuguesetax

basearisingfromthedeductionofthepaidinterest.The

CJrecalledthataccordingtosettledcaselaw,anational

measurerestrictingthefreemovementofcapitalmay

bejustifiedwhereitspecificallytargetswhollyartificial

arrangementswhichdonotreflecteconomicrealityand

thesolepurposeofwhichistoavoidthetaxnormally

payableontheprofitsgeneratedbyactivitiescarried

outonthenationalterritory.Inthatregard,theCJ

consideredthatbyprovidingthatcertaininterestpaid

byaresidentcompanytoacompanyestablishedina

non-Membercountry,withwhichithasspecialrelations,

isnotdeductibleforthepurposesofdeterminingthe

taxableprofitofthatresidentcompany,rulessuchas

thoseatissueinthemainproceedingsarecapableof

preventingpracticesthesolepurposeofwhichisto

avoidthetaxthatwouldnormallybepayableonprofits

generatedbyactivitiesundertakeninthenational

territory.

Finally,theCJanalysedwhethertheexisting

Portugueserulesareproportional.Inthisregard,it

referredtothefactthattheterm‘specialrelations’,

asdefinedinArticle58(4)oftheCIRC,encompasses

situationsthatdonotnecessarilyinvolvethelending

companyofanon-Membercountryholdingsharesin

theresidentborrowingcompany.Wherethereisnosuch

shareholding,theeffectofthemethodforcalculatingthe

excessindebtednesslaiddowninArticle61(3)ofthe

(whosecapitalinturnwasheldformorethan10%by

theUScompany,GECapital)andasof2006,99.98%

washeldbytheBelgiancompany,whereas0.02%

belongedtoGECapital.On23July2001,aloan

agreementbetweenItelcarandGECapitalenteredinto

forceforaperiodof10years.Fortheyears2004to

2007,thePortuguesetaxauthoritiesconsideredthat

thethin-capitalizationprovisionswereapplicableto

Itelcarregardingthisloan,andmadeadjustmentstothe

company’sbasisfortaxassessment.Itelcarfiledaclaim

arguingthatsuchprovisionswereinbreachofthefree

movementofcapital.

TheCJstartedbyanalysingtheapplicablefreedom

tothiscase,consideringthefactthatonlythefree

movementofcapitalwasapplicablewithinanon-

Membercountrycontext.Itrecalledthatwhereitis

apparentfromthepurposeofthenationallegislation

thatitcanapplyonlytothoseshareholdingswhich

enabletheholdertoexertadefiniteinfluenceonthe

decisionsofthecompanyconcernedandtodetermine

itsactivities,onlythefreedomofestablishmentis

applicable.Asregardstherulesatissueinthemain

proceedings,theterm‘specialrelations’,asdefined

inArticle58(4)oftheCIRC,doesnotrelateonlyto

situationsinwhichthelendingcompanyofanon-

Membercountryexertsadefiniteinfluence,within

themeaningoftheCJ’scaselaw,overtheresident

borrowingcompanybyreasonofitsshareholdingin

thatcompany.Inparticular,thesituationslistedinArticle

58(4)(g)oftheCIRC,whichrelatetothecommercial,

financial,businessorlegalrelationshipsbetweenthe

companiesinquestion,donotnecessarilyinvolve

thelendingcompanyholdingsharesintheborrowing

company.TheCJfurtherobservedthat,evenifthe

applicationoftherulesatissueinthemainproceedings

isconfinedtosituationsconcerningdealingsbetweena

borrowingcompanyandalendingcompanyholdingat

least10%ofthesharesorvotingrightsintheborrowing

company,orbetweencompaniesinwhichthesame

shareholdershavesuchaholding,ascontemplatedin

Article58(4)(a)and(b)oftheCIRC,itisclearthata

holdingofsuchasizedoesnotnecessarilyimplythat

theholderexertsadefiniteinfluenceoverthedecisions

31

CJrulesthatexchangeofinformationpursuanttotheMutualAssistanceDirectivedoesnotrequiretheobligationtopreviouslyinformthetaxpayeroftherequestforassistanceortheobligationtoinvitethetaxpayertotakepartintheexaminationofwitnesses(Sabou) On22October2013,theCJissueditsdecisionin

case Jiří Sabou v Finanční ředitelství pro hlavní

město Prahu(C-276/12).Thecaseconcernsthe

interpretationofCouncilDirective77/799/EECof

19December1977concerningmutualassistanceby

thecompetentauthoritiesoftheMemberStatesin

thefieldofdirecttaxationandtaxationofinsurance

premiums,asamendedbyCouncilDirective2006/98/

ECof20November2006,consideredinthelightof

fundamentalrightsoftaxpayers.

Inhisincometaxreturnfor2004intheCzechRepublic,

MrSabouclaimedtohaveincurredexpenditurein

severalMemberStateswithaviewtoapossibletransfer

tooneofthefootballclubsinthoseMemberStates.That

expenditurewouldhavereducedhistaxableincomeby

thecorrespondingamount.TheCzechtaxauthorities,

however,raiseddoubtsoverthetruthfulnessofthat

expenditureandcarriedoutaninspectioninvolving

requestsforinformationfromthetaxauthoritiesofthe

MemberStatesconcerned.Theysoughtassistance

fromtheSpanish,FrenchandUnitedKingdomtax

authorities,askingtheminparticularfortheviewsof

thefootballclubsconcerned.Itfollowsfromthereplies

ofthoseauthoritiesthatnoneoftheclubsallegedly

approachedkneweitherMrSabouorhisagent.The

CzechtaxauthoritiesalsocontactedtheHungariantax

authoritiesaboutanumberofinvoicessubmittedby

MrSabouconcerningservicesallegedlyprovidedby

acompanyestablishedinHungary.On28May2009,

theCzechtaxauthoritiesissuedanadditionalnoticeof

assessmentsettingtheamountoftheincometaxowed

byMrSaboufor2004atCZK251604(approximately

EUR9,800).MrSabouchallengedthatnoticeof

assessment.Beforethecourt,MrSabouclaimedthat

theCzechtaxauthoritieshadobtainedinformation

abouthimillegally.First,theyhadnotinformedhimof

CIRCisthatanycreditarrangementbetweenthosetwo

companiesfallstoberegardedasexcessive.Therefore,

theCJconcludedthatinthecircumstancesdescribed,

Portugueserulesalsoaffectconduct,theeconomic

realityofwhichcannotbedisputed.Inpresuming

that,insuchcircumstances,thebasisofassessment

forcorporationtaxpayablebytheresidentborrowing

companyisbeingeroded,thoserulesgobeyondwhatis

necessarytoattaintheirobjective.

CJrulesthatturnoverofpermanentestablishmentabroadmaynotbetakenintoaccountforthecalculationoftheprorataoftheheadoffice(Le Crédit Lyonnais)On12September2013,theCJdelivereditsjudgment

in case Le Crédit Lyonnais v Ministre du Budget, des

Comptes publics et de la Réforme de l’État(C-388/11).

ThebankLeCréditLyonnais(‘LCL’),domiciledin

France,hasbranchofficesinanumberofother

countries.Thesebranchofficeswereregardedas

permanentestablishmentsforVATpurposes.Adispute

hadarisenbetweenLCLandtheFrenchTaxAuthorities

abouttheprorataappliedbyLCLinordertodetermine

theentitlementtodeductVAT.ThisbecauseLCLhad

takentheturnoverofforeignbranchofficesintoaccount

inthecalculationoftheprorata,causingalargerpart

oftheVATchargedtoLCLtobedeductible.TheFrench

TaxAuthorities,however,tookthepositionthatthe

turnoveroftheforeignbranchofficescouldnotbetaken

intoaccountinthecalculationoftheprorata.

AccordingtotheCJ,Article17(2)and(3)aswellas

Article19(1)oftheSixthEUVATDirectivehaveto

beinterpretedasnotpermittingaheadofficetotake

theturnoverofitspermanentestablishmentsinother

MemberStatesintoaccountfordeterminingthepro

rata.Inthisregard,theCJruledthatitdoesnotmatter

whetherthepermanentsestablishmentsarelocated

insideoroutsidetheEU.

32

however,thatitisnecessarytoconsiderwhetherthe

taxpayermayneverthelessderivefromtherightsof

thedefencearighttoparticipateintheexchangeof

informationbetweenthecompetentauthorities.

TheCJmadereferencetoitspreviouscaselaw,in

whichithadruledthattheobservanceoftherights

ofthedefenceisageneralprincipleofEUlawwhich

applieswheretheauthoritiesaremindedtoadopt

ameasurewhichwilladverselyaffectanindividual.

Inaccordancewiththatprinciple,theaddresseesof

decisionswhichsignificantlyaffecttheirinterestsmust

thereforebeplacedinapositioninwhichtheycan

effectivelymakeknowntheirviewsasregardsthe

informationonwhichtheauthoritiesintendtobasetheir

decision.Thequestionarisesofcourseastowhether

thedecisionofacompetentauthorityofaMember

Statetorequestassistancefromacompetentauthority

ofanotherMemberStateandthelatter’sdecisionto

examinewitnessesforthepurposesofrespondingto

thatrequestconstituteactswhich,becauseoftheir

consequencesforthetaxpayer,makeitnecessary

forhimtobeheard.Inthisregard,theCJmadea

fundamentaldistinctionbetween:(i)thetaxinspection

procedureswhichconstituteaninvestigationstage,

duringwhichinformationiscollectedandwhichincludes

therequestforinformationbyonetaxauthorityto

another,and(ii)thecontentiousstage,betweenthetax

authoritiesandthetaxpayer,whichbeginswhenthe

taxpayerissenttheproposedadjustment.

TheCJconsideredthatarequestforassistancemade

bythetaxauthoritiesunderDirective77/799ispart

oftheprocessofcollectinginformation.Therefore,

wheretheauthoritiesgatherinformation,theyarenot

requiredtonotifythetaxpayerofthisortoobtainhis

pointofview.Thesameappliestothereplymadebythe

requestedtaxauthoritiesandtheinquiriescarriedoutto

thatendbythoseauthorities,includingtheexamination

ofwitnesses.Therefore,theCJconcludedthatinthat

respect,therightsofthedefenceofthetaxpayerdo

notrequirethatthetaxpayershouldtakepartinthe

requestforinformationsentbytherequestingMember

StatetotherequestedMemberState.Nordoesit

requirethatthetaxpayershouldbeheardatthepoint

theirrequestforassistancetootherauthorities,sothat

hehadnotbeenabletotakepartinformulatingthe

questionsaddressedtothoseauthorities.Secondly,he

hadnotbeeninvitedtotakepartintheexaminationof

witnessesinotherMemberStates,incontrasttothe

rightsheenjoysunderCzechlawinsimilardomestic

proceedings.

Thedomesticcourtwasunsurewhetherataxpayer

hasarighttotakepartinexchangesofinformation

betweentheauthoritiesunderDirective77/799,andto

whatextentfundamentalrights,asguaranteedbythe

CharterofFundamentalRightsoftheEuropeanUnion

(‘theCharter’),haveanybearingontheexistenceofthat

right.Inparticular,itconsideredthatifsucharightwere

deniedtothetaxpayer,thatwouldresultinareduction

ofhisproceduralrightscomparedwiththoseguaranteed

byCzechlawinnationaltaxproceedings.Considering

thesedoubts,thedomesticcourtreferredquestions

totheCJwhichaim,fundamentallyatascertaining:

(i)whetherEUlaw,asitresultsinparticularfrom

Directive77/799andthefundamentalrighttobeheard,

confersonataxpayerfromaMemberStatetheright

tobeinformedofarequestforassistancefromthat

MemberStateaddressedtoanotherMemberState,

totakepartinformulatingtherequestaddressedto

therequestedMemberState,andtotakepartinan

examinationofwitnessesorganisedbytherequested

MemberState,and(ii)whetherDirective77/799must

beinterpretedasmeaningthat,first,thetaxpayermay

challengetheinformationconcerninghimconveyed

tothetaxauthoritiesoftherequestingMemberState,

and,second,whenthetaxauthoritiesoftherequested

MemberStateconveytheinformationgathered,they

areboundtomentionthesourcesoftheinformationand

howthatinformationwasobtained

Asregardsthefirstissue,theCJstartedbyrecalling

thatthepurposeofDirective77/799,istogovern

cooperationbetweenthetaxauthoritiesofMember

States,byimposingcertainobligationsontheMember

States.Thedirectivedoesnotconferspecificrightson

thetaxpayer,and,inparticular,itdoesnotlaydownany

obligationforthecompetentauthoritiesoftheMember

Statestoconsultthetaxpayer.TheCJobserved,

33

TheCJstartedbyanalyzingwhetherthereferred

situationconstitutedarestrictiontothefreemovement

ofcapital.Inthatregarditrecalledthatmeasureswhich

areliabletodiscouragenon-residentsfrommaking

investmentsinaMemberStateortodiscouragethat

MemberState’sresidentsfromdoingsoinother

States-suchasmeasuresliabletopreventorlimit

theacquisitionofimmovablepropertysituatedin

anotherMemberState-maybedeemedtoconstitute

arestrictiontothefreemovementofcapital.Inthe

specificcase,Finlandhaschosen,ontheonehand,to

allowresidenttaxpayerstodeductlossesmadeonthe

transferofoneassetfromgainsmadeonthetransfer

ofanotherassetand,ontheother,tolimittheextent

towhichsuchlossesmaybetakenintoaccount,and

inparticular,nottoallowlossesincurredinanother

MemberStatetobeoffsetagainstgainswhichare

taxableinFinland.Suchadifferenceintreatmenton

thebasisoftheplacewheretheimmovableproperty

issituatedisliabletodeterataxpayerfrominvesting

inimmovablepropertyinanotherMemberState.

Therefore,theCJconcludedthatsuchdifferent

treatmentconstitutedarestrictiononthefreemovement

ofcapital,prohibitedinprinciplebyArticle63TFEU.

TheCJwentthentoanalyzewhethersucharestriction

onthefreemovementofcapitalcouldbejustifiedinthe

lightoftheprovisionsoftheTFEU.

Asafirstjustification,theFinnishandGerman

GovernmentsaswellastheCommissionsubmitted

thatthesituationofataxpayerwhohasinvested

inimmovablepropertyinanotherMemberStateis

objectivelydifferentfromthatofataxpayerwhohas

madesuchaninvestmentinhisStateofresidence.

However,theCJrejectedsuchargumentand

consideredthatthedifferenceintreatment,insofaras

concernsthepossibilityofdeductinglossessustained

onthesaleofimmovableproperty,cannotbejustifiedby

adifferenceinsituationrelatedtotheplacewherethe

propertyconcernedissituated.

TheCJthenanalysedwhetherthelegislationatstake

couldbejustifiedbytheneedtosafeguardthebalanced

allocationofthepowertoimposetaxesbetweenthe

wheninquiries,whichmayincludetheexaminationof

witnesses,arecarriedoutintherequestedMember

State,orbeforethatMemberStatesendsthe

informationtotherequestingMemberState.

CJrulesthatFinnishlegislationwhichdeniesthedeductionofcapitallossesfromthesaleofrealestatelocatedinanotherMemberStateinnotinbreachofthefreemovementofcapital(K) On7November2013,theCJissueditsjudgmentinthe

Kcase(C-322/11).Thiscasedealswithcompatibility

oftheFinnishlegislationwhichdeniesthedeductionof

capitallossesfromthesaleofrealestatewiththefree

movementofcapitalprovidedforinArticle63and65

TFEU.

AccordingtoFinnishlegislation,acapitallossarising

fromthesaleofanasset(includingrealestate)canbe

deductedagainstcapitalgainsarisingfromthesaleof

otherassets.However,inthecaseofrealestatelocated

inFrance,thecombinedapplicationoftheDoubleTax

Treaty(DTT)enteredintobetweenFinlandandFrance

aswellastheFinnishlegislationtorelieveinternational

doubletaxation,providesthattheincomefromreal

estateisonlytaxedintheContractingStatewhereit

islocated.Therefore,undertheprincipleofsymmetry,

alsothelossesfromthesaleofrealestatelocatedin

FrancearenotdeductibleinFinland.AFinnishresident

individual(K)claimeddeductionofthecapitallosses

fromthesaleofrealestateinFrance.Thelocaltax

officetooktheviewthatKwasnotentitledtodeductthe

lossesarisingfromthesaleoftheimmovableproperty

inFrancefromtheincomehereceivedinFinland

fromhismoveableassets.Followingtherejection,

Kappealed,consideringthatifhisactionwerenot

upheld,thenon-deductibilityofthelosssustainedwould

becomedefinitive,giventhathewasfullyliableto

incometaxinFinlandanddidnothadanyotherincome

orassetsinFrance.Thenon-deductibilitywouldthen

amounttoaninfringementoftheprinciplesoffreedom

ofestablishmentandofthefreemovementofcapital,

whichcouldnotbejustifiedbytheallocationofthe

powertoimposetaxesbetweentheMemberStates.

34

bedeductedeitherfromoverallincomeorfromagain

realisedonthesaleofanotherasset.

Inthethirdplace,accordingtotheSwedishandUnited

KingdomGovernments,theFinnishlegislationatissue

inthemainproceedingsisintendedtoguardagainst

theriskoftaxavoidancewhichwouldbecreatedby

thepossibilityoftransferringbetweentwoMember

Stateslossesinincomeincurredbyanaturalperson,

giventhatsuchapossibilitycouldresultinsuchlosses

beingtransferredtotheMemberStateinwhichtheir

deductibilityfortaxpurposesisthemostadvantageous.

Inthatregard,theCJobservedthatthemerefactthat

aresidenttaxpayerpurchasesapropertysituatedin

anotherMemberState,whichhesubsequentlysells

ataloss,cannotprovideasoundbasisforageneral

presumptionoftaxevasionandjustifyameasurewhich

compromisestheexerciseofafundamentalfreedom

guaranteedbytheTreaty.Inorderforanational

measurerestrictingafreedomofmovementguaranteed

bytheTreatytobejustifiedbytheneedtocombattax

evasionandavoidance,thespecificobjectiveofthat

restrictionmustbetopreventconductconsistingof

thecreationofwhollyartificialarrangementswhichdo

notreflecteconomicreality,withaviewtoescaping

thetaxnormallydueontheprofitsgeneratedby

activitiescarriedoutonthenationalterritory.Asregards

therelevanceofsuchjustificationwithregardto

circumstancessuchasthoseinissueinthecasebefore

thereferringcourt,theCJmerelyobservedthatthe

Finnishtaxlegislationwhichisapplicableinthatcase

isnotspecificallyintendedtopreventwhollyartificial

arrangementsfrombenefittingfromataxadvantagebut

isdirected,generally,atanysituationinwhichthelosses

derivefromimmovablepropertyinanotherMember

State.Consequently,theCJconcludedthattheneedto

preventtaxavoidanceandevasioncannotjustifythetax

legislationatissueinthemainproceedings.

Inthefourthplace,theFinnishandGerman

GovernmentssubmittedthattheFinnishlegislationat

issueinthemainproceedingsisjustifiedbytheneedto

ensurethecohesionofthetaxsystem,afundamental

principleofwhichisthesymmetricaltaxtreatmentof

profitsandlosses.InFinland,employmentincomeand

RepublicofFinlandandtheFrenchRepublic,theneed

topreventlossesbeingtakenintoaccounttwice,the

needtopreventtaxevasionandtheneedtoensurethe

cohesionoftheFinnishtaxsystem.

TheCJstartedbyrecallingthatthebalancedallocation

ofthepowertoimposetaxesisalegitimateobjective

recognisedbytheCourtwhichmaymakeitnecessary

toapplytotheeconomicactivitiesoftaxpayers

establishedinoneofthoseMemberStatesonlythetax

rulesofthatStateinrespectofbothprofitsandlosses.

Suchobjective,accordingtotheCourt,isdesigned,

interalia,tosafeguardthesymmetrybetweenthe

righttotaxprofitsandtherighttodeductlosses,in

particular,inordertopreventtaxpayersfromchoosing

freelytheMemberStateinwhichprofitsaretobetaxed

orlossesaretobededucted,Astheresultofapplying

theDTTFrance/FinlandinconjunctionwiththeFinnish

taxlegislationisthattheRepublicofFinlanddoesnot

exerciseanytaxpowersovertheprofitsderivingfrom

thetransferofimmovablepropertysituatedinFrance,

asthoseprofitsareneithertaxednorotherwisetaken

intoaccountinFinland.Therefore,ifitwereaccepted

thatlossesincurredonthesaleofimmovableproperty

situatedinanotherMemberStatemustbedeductible

intheMemberStateinwhichthetaxpayerresides,

regardlessoftheallocationoftaxingpowersagreed

betweentheMemberStates,thatwouldeffectively

allowthetaxpayertochoosefreelytheMemberState

inwhichthetakingintoaccountofthoselossesismost

advantageousfromthetaxperspective.Therefore,

theCJconsideredthattherefusaltoallowdeduction

oflossesarisingfromthesaleofimmovableproperty

situatedinFrancepermitsthesymmetrybetweenthe

righttotaxprofitsandtherighttodeductlossesto

besafeguarded.Themeasurealsocontributestothe

objectiveofensuringabalancedallocationofthepower

toimposetaxesbetweentheMemberStates.

Inthesecondplace,asregardsthejustificationrelating

totheneedtopreventlossesbeingtakenintoaccount

twice,whichwasputforwardbytheGermanand

SwedishGovernments,theCJconsideredthatsuch

riskdoesnotseemtoexistsincethelossesincurredin

Franceonanimmovablepropertysituatedtherecannot

35

neverthelessallowlossesonimmovablepropertytobe

deductedfromtaxableprofitsinthatMemberState,that

wouldeffectivelyobligethelattertobeartheadverse

consequencesarisingfromtheapplicationofthetax

legislationadoptedbytheMemberStateinwhichthe

propertyissituated.

Consequently,theCJruledthatArticles63TFEUand

65TFEUdonotprecludenationaltaxlegislationsuch

asthatatissueinthemainproceedings,whichdoes

notallowataxpayerwhoresidesintheMemberState

concernedandisfullyliabletoincometaxthereto

deductthelossesarisingfromthetransferofimmovable

propertysituatedinanotherMemberStatefromthe

incomefrommoveableassetswhichistaxableinthe

firstMemberState,althoughthatwouldhavebeen

possible,undercertainconditions,iftheimmovable

propertyhadbeensituatedinthefirstMemberState.

AdvocateGeneralopinesthatinterestonrepaymentoftaxchargedcontrarytoEUlawisduefromthedateofpaymentofthetaxandnotfromthedateofclaimforrepayment(Irimie) On13December2012,AdvocateGeneralWathelet

deliveredhisOpinionintheIrimie case(C-565/11)

concerningthequestionwhetherornotRomanian

legislation,whichprovidesforthepaymentofintereston

taxtoberepaidfromthedayfollowingthedateofthe

claimforrepaymentandnotfromthedateofpaymentof

thetax,iscompatiblewithEUlaw.

Inthecaseathand,theapplicant,MsIrimie,hadtopay

apollutiontaxupontheregistrationofamotorvehicle

fromanotherMemberState.AftertheCourthadheld

in Tatu(C-402/09)thatsuchtaxwascontrarytoArticle

110TFEU,theapplicantsoughttherepaymentofthe

taxtogetherwiththestatutoryinterestfromthedate

ofpaymentofthetaxtothedateofactualrepayment.

Romanianlawprovides,however,thatinterestonsums

toberepaidfrompublicfundscanbepaidonlyfrom

thedayfollowingthedateoftheclaimforrepayment.

Inthiscontext,thenationalcourtbeforewhichthe

claimforrepaymentwasfiledreferredaquestion

totheCJforpreliminaryrulingaskingwhethersuch

capitalincomearedealtwithseparately.According

tosettledcaselaw,foranargumentbasedonsucha

justificationtosucceed,adirectlinkmustbeestablished

betweenthetaxadvantageconcernedandtheoffsetting

ofthatadvantagebyaparticulartaxlevy.Inthepresent

case,theresultofapplyingtheDTTFrance/Finland

inconjunctionwiththeFinnishtaxlegislationisthat

gainsderivingfromthetransferofimmovableproperty

situatedinFranceescapeallformoftaxationinFinland,

astheyareneithertaxednorotherwisetakeninto

accountthere.

Havingregardtotheobjectivepursuedbytherulesat

issueinthemainproceedings,adirectlinkthusexists,

inthecaseofthesametaxpayerandthesametax,

between,ontheonehand,thetaxadvantagegranted,

namelythetakingintoaccountoflossesgeneratedby

acapitalinvestment,and,ontheother,thetaxationof

returnsonthatinvestment.Inthatcontext,itshouldbe

borneinmindthatthosetwoconditions–specifically,

thesametaxpayerandthesametax–havebeen

consideredsufficientbytheCourttoestablishthat

suchalinkexists.Therefore,theCJconcludedthat

theFinnishlegislationcouldbejustifiedbytotheneed

tosafeguardthebalancedallocationofthepower

toimposetaxesbetweentheMemberStatesandto

ensurethecohesionoftheFinnishtaxsystem.

Finally,theCJwentontoascertainwhethersuch

legislationgoesbeyondwhatisnecessaryinorder

toattainthoseobjectives.Inthatregard,Kargued

beforethereferringcourtthattherequirementsofthe

principleofproportionalitywerenotmetwherealoss

becomesdefinitive.However,theCJconsideredthat

inthemainproceedings,ataxpayersuchasKcannot

beregarded,irrespectiveoftheconsiderationsoffact

setoutbythereferringcourt,tohaveexhaustedthe

possibilitiesavailableintheMemberStateinwhich

thepropertyissituatedofhavingthelossestakeninto

account.AccordingtotheCJ,sincetheMemberState

inwhichthepropertyissituateddoesnotprovideforthe

possibilityoflossesincurredonthesaleoftheproperty

beingtakenintoaccount,suchapossibilityhasnever

existed.Insuchcircumstances,ifitwereacceptedthat

theMemberStateinwhichthetaxpayerresidesmust

36

thatdatethatthetaxpayersufferedlossduetothe

unavailabilityofthesumsinquestion.

Finally,theAdvocateGeneralpointedoutthathis

conclusion,whichconsiderstherighttointeresthaving

thesamestatusastherighttorepaymentoftaxunduly

paid,isnotbasedontheprinciplesofeffectivenessand

proportionalityortherighttopropertylaiddowninthe

Charter.

EuropeanEconomicandSocialCommitteeissuesOpiniononCommissionActionPlantostrengthenthefightagainsttaxfraudandtaxevasionOn17April2013,theEuropeanEconomicand

SocialCommittee(EESC)issueditsOpiniononthe

CommunicationfromtheCommissiontotheEuropean

ParliamentandtheCouncil,anactionplantostrengthen

thefightagainsttaxfraudandtaxevasion.

TheEESCendorsedtheCommission’splanand

supporteditseffortstofindpracticalsolutionsasregards

reducingtaxfraudandtaxevasion.Inparticular,it

welcomedtheCommission’sproposaltoblacklist

jurisdictionsthatoperateastaxhavens,indisregardof

standardsofgoodgovernanceintaxmatters,andcalled

forcommoncriteriatobeestablishedatEUlevelfor

identifyingsuchjurisdictions.AccordingtotheEESC,

suchlistshouldnotbelimitedtothirdcountriesbutit

mayalsocoverjurisdictionsbelongingtoMemberStates

andcompaniesoperatinginthosejurisdictions.The

EESCbelievesthattheproposalofablacklistmaybe

complementedwithsanctionsforcompaniessuchas

exclusionfrompubliccontracts,EUfundingandState

aid.

Regardingtheproposalofageneralanti-abuseclause

andthedefinitionofanartificialbilateralarrangement,

theEESCconsidersthattheseshouldbesufficiently

clearinordertoallowproperimplementationbyall

MemberStates.Atthesametime,theEESCsupports

theCommission’sdecisiontoreviewtheParent-

SubsidiaryDirectiveandanti-abuseprovisionsofother

directives.

nationallegislationwascompatiblewiththeprinciples

ofequivalence,effectivenessandproportionalityand

withtherighttopropertyguaranteedbyArticle17ofthe

CharterofFundamentalRightsoftheEuropeanUnion

(‘Charter’).

TheAdvocateGeneralobservedthatitwasnotclear

whethertheactioninthemainproceedingswasan

actionforrestitutionorforcompensationfordamages.

Inanyevent,itisnotfortheCJtoclassifythelegal

actioninthemainproceedings.First,assumingthatthe

actionwasaclaimforrestitutionherecalledthatthe

righttoobtainrepaymentoftaxesthatareincompatible

withEUlawistheconsequenceandcomplementofthe

rightsconferredonindividualsbytheprovisionsofEU

law.Therighttorepaymentisasubjectiverightderived

fromthelegalorderoftheEU.Hereferredtothe

principleofproceduralautonomyoftheMemberStates

anditslimits,thatis,theprincipleofequivalenceand

effectiveness.AsregardstheobligationoftheMember

Statestopayinterestontheprincipalsumwhichistobe

repaidinthecaseofcollectingtaxinbreachofEUlaw,

theAdvocateGeneralobservedthatthiswasuncertain.

Thereafter,herecalledthepreviouscaselawonthe

question,specificallyAnsaldo Energia(C-279/96to

C-281/96),Metallgesellschaft(C-397/98andC-410/98)

and FII Group Litigation(C-446/04).Onthebasisof

thelatestcaseinthelineofthecaselaw,Littlewoods

Retail(C-591/10),hetookthepositionthattherightto

interestrepresentinganadequateindemnityfortheloss

occasionedthroughtheunduepaymentoftaxcontrary

toEUlaw–insteadofbeingancillary–ranksequally

withtherighttorepaymentofthetaxandisthereforea

subjectiverightderivedfromthelegalorderoftheEU.

Inhisview,thatsubjectiverightnecessarilyentailsthe

paymentofinterestfromthedateofpaymentofthetax,

asitisobviousthatitisfromthatdate,andnotfromany

othersubsequentdate,thatthetaxpayersuffersaloss

arisingfromtheunavailabilityofthesumsinquestion.

Iftheclaiminthemainproceedingsweretobean

actionforcompensationfordamagestheresultwould

bethesame,asanawardofinterestfromthedateof

paymentofthetaxinquestionseemstobeessential

foradequatereparationforthelosscausedbythe

infringementofArticle110TFEUgiventhatitwasfrom

37

amountofEUR2,000.Inthatregard,hefiledaclaim

beforetheGermantaxauthoritiesinordertobenefit

fromtheotherwiseapplicableamountofEUR500,000.

TheGermantaxauthoritiesrejectedthecomplaint

lodgedbyMrWeltewithaviewtoobtainingatax-

freeallowanceofEUR500,000.MrWeltecontested

thatdecisionarguingthattheunequaltreatmentof

residentandnon-residentpayersofinheritancetax

isincompatiblewiththefreemovementofcapital

guaranteedbytheECTreaty.

AGMengozzistartedbyclarifyingthatthereferredcase

doesnotfallwithinthescopeoftheAgreementbetween

theEuropeanCommunityanditsMemberStates,on

theoneside,andtheSwissConfederation,ontheother,

onthefreemovementofpersons,whichwassigned

atLuxembourgon21June1999andcameintoforce

on1June2002.Intheproceedings,Mr.Weltewasnot

seekingtoworkortoestablishhimselfintheterritoryof

aMemberStateoftheEuropeanUnioninanycapacity,

ortoenjoytheprovisionofservices,forthepurposes

ofArticle1(a)to(c)oftheAgreementonfreedomof

movementforpersons.

Hethenwentontoanalysewhetherthelegislationat

stakeconstitutedabreachofthefreemovementof

capital.Inthatregard,heconcludedthatthemeasure

atissuehastheeffectofimposingahigheroverall

taxburdenontheinheritanceofnon-residentsinthe

mainproceedingsconstitutesarestrictiononthefree

movementofcapital,whichcanbepermittedonlyifitis

coveredbythe‘standstill’provisionprovidedforinArticle

57(1)EC,orifitcanbejustifiedbyanoverridingreason

inthepublicinterest.AsregardswhethertheGerman

rulesatissuefallwithinmaterialscopeofthestandstill

clause,AGMengozziconcludedthattheydonotfall

withinArticle57(1)EC.Inthatregard,AGMengozzi

opinedthatthisprovisioncoversonlysituations

involving‘directinvestment–includinginrealestate’.

AGMengozzi’smainargumentwasthatthereferencein

Article57(1)ECto‘directinvestment–includinginreal

estate’shouldbeconstruedascoveringinvestments

inrealestatewhichconstitutedirectinvestments,

thatistosay–toparaphrasetheexplanatorynotes–

investmentsinrealestateofsuchakindastoestablish

ortomaintaindirectlinkswithanentrepreneuroran

TheEESCrecommendedtheCommissiontocontinue

itsworkonthesimplificationsandharmonisationof

existinglegalframeworkatbothEUandnational

level.Togetherwithapropercontrolandexchangeof

information,thatwillalsoallowthereductionoftaxfraud

andtaxevasion.Forthatpurpose,effortsshouldbe

madetostandardisetheexchangeofinformationinthe

fieldoftaxation.Atthesametime,theadoptionofone-

stop-shopscontributestosimplificationandmayremove

someoftheobstaclesfacedbytaxpayersengagedin

cross-borderoperations.

Moreover,theEESCsuggestsintroducinglegislation

onthetaxationofcorporateprofits,basedonasetof

commontaxrules.

TheEESCfurthersupportedtheCommission’sdecision

toexplorethepossibilityofintroducingaEuropeanTIN

(taxidentificationnumber)andreiteratedtheneedto

harmoniseindirecttaxationwiththeaimofreducing

carouselfraud.Furthermore,itsharedthethoughtof

aligningthedefinitionofcertaintypesoftaxoffences

(bothcriminalandadministrativesanctions).According

totheEESC,suchalignmentmayhavetheeffectof

discouragingcompaniesfromtakingadvantageofthe

MemberStatewiththeweakestresponseforconducting

theiroperations.

AGMengozziconsidersGermaninheritancetaxlegislationinbreachofthefreemovementofcapital(Yvon Welte)On12June2013,AGMengozzideliveredhisOpinionin

case Yvon Welte v Finanzamt Velbert(CaseC-181/12).

ThiscasedealswiththelegislationinGermany

regardingthetaxfreeamountoninheritancetax.

AccordingtoGermanlaw,inthecasealandsituated

inGermanyisacquiredthroughinheritancebyanon-

residentperson,thatpersonisentitledtoatax-free

amountofEUR2,000,whereasatax-freeamount

ofEUR500,000isapplicableif,atthetimeofthe

inheritance,thedeceasedpersonortheacquirerhas

apermanentresidenceinGermany.MrWelte,aSwiss

nationalandresidentinheritedfromhisdeceasedwife

landsituatedinDusseldorf.Ashiswife,althoughborn

inGermany,hadalsoacquiredSwissnationalityand

residence,MrWelteonlybenefitedfromthetax-free

38

anyevent,evenifthatwouldbethecase,themeasure

shouldbeconsideredmanifestlydisproportionateinthe

lightofeachofthepublicinterestsrelieduponbythe

GermanGovernment.

AGVillalónopinesthatBelgiantaxruleswhichdenytaxdeductionforachildincaseofafamilyestablishedinBelgiumbutderivingitsincomeinanotherMemberStateisinbreachofthefreedomofestablishment(Imfeld and Garcet)On13June2013,AdvocateGeneralCruzVillalón

deliveredhisOpinioninthecaseM. Imfeld and Garcet

v Belgium(C-303-12).Inthiscase,theCourtofFirst

InstanceofLiegesubmittedarequestforapreliminary

rulingtotheCJregardingthedenialofataxdeduction

forachildtoafamilyestablishedinBelgiumbutderiving

itsincomefromanotherMemberState.

UnderBelgiantaxlaw,severaltaxdeductionsare

availableforchildrenstillincareofparents.Inthe

caseparentsaremarried,taxlawprovidesthata

single,commontaxreturnmustbefiledandthese

taxdeductionsaredistributedbetweentheparents

accordingtocomplexrulesthattakeintoaccount,

amongstothers,theparentwiththehighestprofessional

income.

Thetaxpayersinthemainproceedingsaremarried,

havetwochildrenandliveinBelgium.M.Infeldworks

solelyinGermanyasalawyer.MrsGarcetworksas

anemployeeinBelgium.M.Infeldwasdeniedthefull

taxdeductionforfamilychargesinGermanybecause

hisGermanincomerepresentedlessthan90%ofthe

familyincomeandhiswife’sincomewashigherthan

boththe10%thresholdandtheEUR12,372threshold

aslaiddownintheGermanlegislation.Forthetaxyears

considered,MrsGarcetfiledtaxreturnsinBelgium

asasinglemotherclaimingtaxdeductionsgrantedto

parents,M.InfeldfiledtaxreturnsinBelgiumasasingle

man,solelyindicatinghisexemptGermanincomeand

didnotclaimanydeductionforchildren.TheBelgiantax

administrationcorrectedtheirtaxreturn.Asaresultof

thiscommonreturn,lowerdeductionsweregrantedto

thefamily.Thetaxpayersobjectedthatthismannerof

undertakinginordertoengageinaneconomicactivity.

Bycontrast,investmentsinrealestateofafinancial

nature,whichareunconnectedwiththepursuitofan

economicactivity,donotfallwithinthescopeofArticle

57(1)EC.Thisunderstandingissupportedbythefact

that,asanexceptiontothefreemovement,Article57(1)

ECshouldbeinterpretednarrowly.

AGMengozzithenanalysedthetwojustifications

broughtforwardbytheGermangovernmentregarding

themeasureatstake:theneedtoensurethecoherence

ofthetaxsystemandeffectivenessoffiscalsupervision.

Asregardsthefirstjustification,AGMengozzireferredto

thefactthatthereappearedtobenologicalsymmetrical

linkbetweenthetaxadvantageandaparticulartax

levyinordertorejectsuchjustification.Theallowance

ofEUR500,000isgrantedtoGermanresidents

irrespectiveofthevalueoftheestate.Accordingly,there

isnodirectlinkbetweenthatallowanceandthelevy.

Furthermore,theallowanceofEUR500,000wouldalso

begrantedtoaGermanresidentinheritingasingleitem

ofimmoveablepropertyeventhough,onaccountofthe

deceased’splaceofresidenceonthedateofdeath,the

estatewaslocatedabroad,withoutGermanybeingable,

forvariousreasons,totaxthatestate.Inanalysingthe

secondjustification,AGMengozzireferred,inparticular,

tothefactthatalthoughCouncilDirective77/799/EECof

19December1977concerningmutualassistancebythe

competentauthoritiesoftheMemberStatesinthefield

ofdirecttaxationdoesnotapplytorelationsbetween

MemberStatesandthecompetentauthoritiesofthird

countries.Eveninthecontextofrelationsbetween

thetaxauthoritiesofMemberStates,thecooperation

arrangementsestablishedbythedirectivecover,not

informationonthepaymentofinheritanceandtransfer

duties,butonlyinformationonincomeandwealthtax,

and–since2004–thetaxationofinsurancepremiums.

Inanyevent,itcouldbepossibletorelyonArticle

13oftheAgreementof30November1978between

theFederalRepublicofGermanyandtheSwiss

Confederationfortheavoidanceofdoubletaxationwith

respecttoinheritancetax.

AGMengozziconcludedthereforethat,uponthe

rejectionofthetwojustificationstherewouldbenoneed

toanalyzetheproportionalityofthemeasureatstake.In

39

theEnglishcourtsforreimbursementoftaxeswhich

theCJhaddeclaredincompatiblewiththefundamental

freedoms.AccordingtotheUKrules,twocausesof

actionwereavailableat“commonlaw”toclaimants

seekingrestitutionofcorporatetaxleviedinbreach

ofEULaw.Thefirstonewhichallowedtherecovery

ofsumspaidtoapublicauthorityinresponsetoan

apparentstatutoryrequirementtopaytaxwhich(infact

andinlaw)wasnotlawfullydue.Theseclaimswere

time-barredaftersixyearshadelapsedfromthedate

onwhichthecauseofactionarose,whichwasnormally

thedateonwhichthetaxwaspaid.Thesecondcause

ofactionpermittedtherestitutionoftaxespaidbyerror

eitheroffactoroflawonthepartofthetaxpayer.In

thesecases,theperiodoflimitationwouldnotbegin

torununtiltheplaintiffhaddiscoveredtheerroror,

withreasonablediligence,couldhavediscoveredit.In

2004,theUKParliamentadoptedanamendmentto

thissecondcauseofactionwhichlaiddownthatthe

extendedperiodforbringinganactionincaseoferror

wasnotapplicableinrelationtoanerroroflawrelating

totaxationunderthecaseoftheCommissionersof

InlandRevenue.Thisamendmentledtoaretroactive

curtailmentwithoutnoticeofthelimitationperiodfora

claimforthereimbursementofthetaxpaidbutnotdue.

Thiscasedealspreciselywithwhethersuchcurtailment

iscompatiblewiththeprinciplesofeffectiveness,legal

certaintyandtheprotectionoflegitimateexpectations.

AGWatheletstartedbyremindingthattheprinciple

ofeffectivenessdoesnotrequireMemberStates

toestablishmorethanonelegalremedytoenable

individualstosafeguardtherightswhichtheyderive

fromEUlaw.AccordingtoArticle19(1)TEU,Member

Statesarerequiredtoestablish‘remediessufficientto

ensureeffectivelegalprotectioninthefieldscovered

byUnionlaw’.ThatobligationleavesMemberStates

ameasureofdiscretionintheexerciseoftheir

proceduralautonomyandallowsthemtodefinethe

detailedproceduralrulesgoverningactionsforthe

safeguardingofrightswhichindividualsderivefrom

EUlaw.If,however,inapplicationoftheprincipleof

proceduralautonomy,aMemberStatemakesanumber

oflegalremediesavailabletoindividuals,thesecond

subparagraphofArticle19(1)TEUrequiresthateachof

thoseremediesensureeffectivelegalprotection,anda

proceedingresultedinlowerdeductionsthaniftheyhad

bothworkedinBelgium,therebyimpedingtheirfreedom

ofestablishment.

TheAGfoundthatthelegislationathandrestrictedthe

freedomofestablishmentincaseswhereoneparent,

withthehighestincome,deriveshisincomeinanother

MemberState.Accordingtosettledcaselaw,itis

usuallyfortheMemberStateofresidencethatgrants

thefulltaxadvantageslinkedtothefamilyandpersonal

situationofthetaxpayer.Citingpreviouscaselawwhere

theCourtfoundthataMemberStatecannotjustifya

restrictionofafundamentalfreedombytheexistenceof

anothertaxadvantage,theAGisoftheopinionthatthe

factthatGermanygrantsapartialtaxadvantagetothe

taxpayerdoesnotexonerateBelgiumfromensuringthat

allitsresidentsinsimilarsituationsgiventheirpersonal

andfamilysituation,aretreatedsimilarly.

TheAGwasoftheopinionthattherestrictionisnot

justifiedbytheneedtopreservethebalancedallocation

ofthetaxpowersbetweenMemberStatesorbythe

needtopreventdoubledeductions.Indeed,theabsence

ofdeductionisnotduetotheexistenceofaGerman

deduction,butduesolelytoBelgianimputationrules.

AGWatheletconsidersthatUKtaxruleswhichretroactivelycurtailtheperiodforreimbursementofunduetaxpaidarenotcompatiblewiththeprinciplesofeffectiveness,legalcertaintyandtheprotectionoflegitimateexpectations(Test Claimants in the FII Group Litigation) On5September2013,AdvocateGeneralWathelet

deliveredhisOpinioninthecaseTest Claimants in

the FII Group Litigation v Commissioners of Inland

Revenue, Commissioners for Her Majesty’s Revenue

and Customs(C-362/12).Thecasedealswiththe

compatibilityoftheUKruleswhichretroactivelycurtail

theperiodforreimbursementofunduetaxpaidarenot

compatiblewiththeprinciplesofeffectiveness,legal

certaintyandtheprotectionoflegitimateexpectations.

On8September2003,Aegis–amultinationalgroup

withaUKholdingcompany–introducedaclaimbefore

40

ThegrouprelieftaxschemeinforceintheUKallows

lossestobesurrenderedbetweendifferentcompanies

withinagroupand/oraconsortium,therebyallowing

theoptimaluseofthoselossesfortaxpurposes.

However,accordingtotherequirementssetforthinthe

UKlegislation,thelinkcompanyforthepurposesof

consortiumreliefhastobeacompanyresidentinthe

UKoranon-residentcompanycarryingonatradein

theUKthroughapermanentestablishment.Inother

words,thelinkcompanyaswellasthesurrenderingand

claimantcompaniesmustbeliabletoUnitedKingdom

corporatetax.Inthis,FelixstoweDockandRailway

CompanyLtdandothers(the‘claimantcompanies’)

wereallmembersoftheHutchisonWhampoaGroup,

whoseultimateparentisHutchisonWhampoaLtd,a

companyincorporatedandresidentinHongKong,

whichindirectlyowns100%ofthesharesintheclaimant

companies.Hutchison3GUKLtdwasthe‘surrendering

company’.Itwas100%ownedbyHutchison3GUK

HoldingsLtd,whichwastheconsortium company.

Duringtherelevantperiod,Hutchison3GUKHoldings

LtdwasownedbyaconsortiumcomposedofHutchison

3GUKInvestmentsSàrl,aHutchisonWhampoaGroup

companyincorporatedandresidentinLuxembourg

(50.1%),threeotherHutchisonWhampoaGroup

companiesincorporatedandresidentintheBritishVirgin

Islands(foratotalof14.9%),andtwoothercompanies

unrelatedtotheHutchisonWhampoaGroup(20%and

15%,respectively).Hutchison3GUKInvestmentsSàrl

wasthe‘link company’,actingasconnectorbetween

thegroupandtheconsortium.Itwaswhollyowned

byHutchisonEuropeTelecommunicationsSàrl,a

companyincorporatedandresidentinLuxembourg.

Bothcompaniesareindirect100%subsidiariesof

HutchisonWhampoaLtd.Furthertiesconnectingthe

linkcompanytoHutchisonWhampoaLtdpassthrough

variousintermediateholdingcompaniesincorporatedin

LuxembourgandoutsidetheEU/EEA(HongKong,the

BritishVirginIslandsandtheCaymanIslands.

Theclaimantcompaniessoughttousethelossesof

thesurrenderingcompany.Suchrequestwasdenied

consideringthatthelinkcompany(whichwasinnoway

directlyinvolvedintheseproceedings),wasnotresident

intheUK,butinLuxembourg.Theclaimantcompanies

legalremedycannotoffer‘effective’protectionunless

theconditionsinaccordancewithwhichitmaybeused

andachieveapositiveoutcomeareknowninadvance.

Therefore,assoonastaxpayerschooseoneofthe

nationallegalremediesavailableundernationallaw

orhaverecoursetotheonlynationallegalremedy

available,theymustcomeundertheprotectionoffered

bythegeneralprinciplesofEUlaw.Accordingly,AG

Watheletconsideredthatthattheamendmentmadeby

theFinanceAct2004,withretroactiveeffectbutwithout

transitionalarrangements,totherulesgoverningthe

time-barringofclaimsbasedonacauseofactionwhich

hadbeenopentothelitigantsmakesitimpossibleto

exerciserightsconferreduponthembyEUlawandisin

contraventiontotheprincipleofeffectiveness.

Subsequently,AGWatheletconsideredthecasefrom

theperspectiveoftheprinciplesoflegalcertaintyand

theprotectionoflegitimateexpectations.Alsohere,

theAGobservedthattheAegisgroupwasentitled

toexpect,inaccordancewiththeprinciplesoflegal

certaintyandtheprotectionoflegitimateexpectations,

thattheywouldnotbedeprivedofthatrightbyastatute

which,afewmonthsaftertheirclaimwaslodged,

amendedtherelatedtimelimitswithoutnoticeandwith

retroactiveeffect.Therefore,theAGconcludedthat

theretroactiveamendmentwasalsocontrarytothese

principles.

AGJääskinenconsidersthatUKlegislationwhichprecludeslossreliefbetweendomesticcompanieswhichhaveaforeignlinkmaybeinbreachofthefreedomofestablishment(Felixstowe Dock)On24October2013,AGJääskinendeliveredhis

Opinioninthecase Felixstowe Dock and Railway

Company and others v The Commissioners for Her

Majesty’s Revenue and Customs(C-80/12).Thecase

dealswiththefactthatUKlegislationprecludesthe

surrenderingoflossesbetweendomesticcompaniesin

whichthecompanywhichactsasthelinkbetweenthem

isaforeignresident.

41

TheAGmadeafurtherdistinctioninordertocombine

thepreviousjudgmentoftheCJintheThin Cap GLO

case,inacasewheretheprotectionundertheTFEU

wasdeniedduetothefactthatthelinkcompanywas

residentinathirdStateinthecontextoftheapplication

ofthefreedomofestablishment.Inthatregard,theAG

proposesaninterpretationaccordingtowhich,onthe

onehand,freedomofestablishmentisinfringedwhere

thepossibilityofsurrenderinglossesisprecludedifthe

linkcompanyisanEU/EEAcompanybutwhere,onthe

other,thereisnoinfringementwhenthelinkcompany

isathirdcountry.Inaddition,theAGreferredtothefact

thatinasystemsuchastheUnitedKingdomconsortium

reliefscheme,nationalrulesregulatingthelinkthatis

requiredbetweenthelinkcompanyandtheclaimant

companymayaffectthefreedomofestablishmentof

theirlowestcommonparent,whichenjoysthefinancial

advantagecreatedbytheopportunityofsettingoffthe

lossesofonecompanyagainstthetaxableprofitof

anothercompany,therebyreducingthejointtaxliability

ofthe(sub)groupunderit.Therefore,heconsidered

that,ifthatlowestcommonparentisanEU/EEA

company,nationalrulesregulatingthelinkmaycreate

prohibitedrestrictionsofthefreedomofestablishment.

Ifthatlowestcommonparentisathirdcountry

undertaking,thesituation,would,inhisopinion,fall

outsidethescopeofthefreedomofestablishment.

AGMengozzifindsthatdenialoftaxexemptiontoinvestmentfundresidentinthirdcountryunderPolishlawiscompatiblewithEUlaw(Emerging Markets Series of DFA Investment Trust Company)On6November2013,AGMengozzideliveredhis

OpinioninthecaseofEmerging Markets Series of DFA

Investment Trust Company v. Dyrektor Izby Skarbowej

w Bydgoszczy(C-190/12).Thecasedealswithdifferent

treatmentprovidedunderPolishtaxlawtodividends

paidtoinvestmentfundsresidentinthirdcountriesas

comparedwithinvestmentfundsresidentinPoland.

Concretely,itconcernsarefundofwithholdingtaxes

submittedbyaUSinvestmentfundbasedonthe

differenttreatmentprovidedfordomesticinvestment

funds.

appealedagainstthisdecisiontotheUKFirst-Tier

Tribunalwhich,inturn,referredthecasetotheCJ.In

essence,thequestionraisediswhethertherequirement

underUKlegislationofhavingalinkcompany

liabletotaxintheUKisinbreachofthefreedomof

establishment.

AGJääskinenconsideredfromtheoutsetthat,this

differenceintreatmentcouldconstitutearestrictionto

thefundamentalfreedoms.Hethenstartedbyanalyzing

whichfundamentalfreedomwasapplicabletothiscase.

Inthatregard,hestartedbyrecallingsettledcaselaw,

thatthepurposeofthelegislationconcernedmust

betakenintoconsideration.Further,thatinsituations

whereitcannotbedeterminedfromitspurposewhether

thenationallegislationfallspredominantlywithinthe

scopeofthefreedomofestablishmentorthefree

movementofcapital,theCJtakesaccountofthefacts

of the caseinpointinordertodeterminewhetherthe

situationtowhichthedisputeinthemainproceedings

relatesfallswithinthescopeofoneorotherofthose

provisions.Inthepresentcaseandfromtheoutset,the

consortiumrelief,contrarytothegroupreliefsystem,is

notlimitedtomajorshareholdingsand,inthatregard,

bothfundamentalfreedomsmayapply.However,the

AG,consideringthefactsofthecase,concludedthat

thefreedomofestablishmentwasapplicable.The

subsequentquestiontobedealtbytheAGwaswhether

therighttorelyontheTFEUwouldbeaffectedbythe

factthattheultimateparentcompanywaslocatedin

athirdcountry–HongKong–consideringthefact

thatthefreedomofestablishment(contrarytothefree

movementofcapital)islimitedtointra-Community

situations.TheOpinionoftheAGwasinthenegative.

HeconsideredthatthereisnothingintheTreatiesor

thecaselawoftheCourttosupporttheviewthatthe

freedomofestablishmentgrantedbyEUlawtothe

companiesorfirmscouldbelimitedoraffectedby

theirbeingunderthecontrolofthirdcountrylegalor

naturalpersons.Inotherwords:inthiscase,thelink

company,whichisregisteredinLuxembourg,andits

immediateparentcompany,whichisalsoregistered

inLuxembourg,enjoyfreedomofestablishment,

regardlessofthefactthattheyareultimatelycontrolled

bytheparentcompanyestablishedinHongKong.

42

forUCITSestablishedinEUMemberStates.Inthis

regard,theAGhighlightedtheexistenceofmechanisms

ofsupervisionandexchangeofinformationbetween

theauthoritiesofthedifferentMemberStates.TheAG

observedthat,althoughitcouldbeconceivedthatfunds

residentinthirdStatescouldbesubjecttosimilarrules,

therewerenosimilarmechanismsinplaceintermsof

exchangeofinformationthatcouldenableverification

oftheaccuracyoftheinformation.Therefore,theAG

concludedthatsuchfactwasanadmissiblejustification

fornotgrantingasimilartaxexemptiontoinvestment

fundsinthirdStatesinsimilartermsgrantedtoPolish

investmentfunds.

EntryintoforceofstrongerEUrulestohelpfighttaxevasionNewEUruleswhichwillimproveMemberStates’

abilitytoassessandcollectthetaxesthattheyaredue

enteredintoforceon1January2013.TheDirective

onadministrativecooperationinthefieldoftaxation

(CouncilDirective2011/16/EUof15February2011)

laysthebasisforstrongercooperationandgreater

informationexchangebetweentaxauthoritiesintheEU.

OneofthekeyaspectsoftheDirectiveisthatitbrings

anendtobanksecrecy:oneMemberStatecannot

refusetogiveinformationtoanothersimplybecauseitis

heldbyafinancialinstitution.

TheDirectivesetsoutpracticalandeffective

measurestoimproveadministrativecooperation

ontaxmatters.Commonformsandproceduresfor

exchanginginformationareprovided,whichwillmake

thetransmissionofdatabetweennationalauthorities

quickerandmoreefficient.Taxofficialsmaybe

authorisedtoparticipateinadministrativeenquiriesin

anotherMemberState.Theywillalsobeabletorequest

thattheirtaxdocumentsanddecisionsbenotified

elsewhereintheEU.ThescopeoftheDirectiveiswide,

coveringalltaxesexceptthosealreadycoveredunder

specificEUlegislation(i.e.VATandexciseduties).

Asapreliminaryquestion,theAGstartedbyanalysing

whetherthelegislationatstakefellwithinthescope

ofthefreemovementofcapitalsinceonlyArticle63

TFEUprovidesprotectionasregardsthirdcountries.

Inthatregard,hestartedbyrecallingthatinthecase

oflegislationondividends,whichappliesirrespective

ofthesizeoftheparticipation,boththefreedomof

establishmentandthefreemovementofcapitalmay

apply.Previously,theCJhadconsideredthat,iffromthe

factsofthecaseitisdemonstratedthattheshareholder

hasaparticipationwhichallowshimtoexercisea

definiteinfluenceoverthecompany,thefreemovement

ofcapitalisnotapplicablebutonlythefreedomof

establishment.Therefore,suchshareholderifresident

inathirdState,couldnotinvoketheprotectionofthe

TFEU.Followingthedecisioninthecase FII 2 GLO,

theCJconsideredthatinthecaseoflegislationon

dividendswhichappliesirrespectiveofthesizeofthe

participation,ashareholdermayinvoketheprotection

ofthefreemovementofcapital,irrespectiveofthesize

ofparticipationintheconcretecase.Inaccordancewith

andconsideringthePolishlegislationapplicableinthis

case,theAGconcludedthattheUSfundcouldbenefit

fromthefreemovementofcapital.

TheAGwentthentoanalyzewhetherthelegislationat

stakeconstitutedarestrictiontosuchfreedom.Inthat

regard,itconsideredthatthefactthatthelegislation

inPolandgrantedanexemptiononlyforPolishfunds

whiletaxingfundsresidentinthirdStatesconstituted

adifferentiationinthetreatmentbasedontheplace

ofresidenceofthefund,whichislikelytodissuade

foreigninvestmentfundsfrominvestingincompanies

inPolandaswellasPolishinvestorsfrominvestingin

foreigninvestmentfunds.Therefore,theAGconcluded

thatsuchlegislationconstitutesanobstacletothefree

movementofcapital.

Asregardspossiblejustifications,theAGcentred

hisanalysisessentiallyonthedifferentlegalcontext

whichistheexistenceofDirective85/611/EECof20

December1985,whichisapplicableonlywithintheEU.

ThisDirective,onthecoordinationoflaws,regulations

andadministrativeprovisionsrelatingtoundertakings

forcollectiveinvestmentintransferablesecurities

(UCITS),setsforthaminimumcommonlegalframework

43

cooperationforanFTT,theimplementationofwhich

willinevitablycausecoststobeincurredbytheNon-

ParticipatingStates

NetherlandsSupremeCourtreferspreliminaryquestionstotheCJregardingtheamendmentstotheNetherlands30%ruling,effectiveasper1January2012TheSupremeCourtoftheNetherlandshasreferred

preliminaryquestionstotheCJregardingthequestion

ifthe150kilometresrequirementoftheNetherlands

30%rulingisinaccordancewiththefreemovementof

workerssetoutinArticle45TFEU.

Underthe30%ruling,theemployermaypaythe

employees,whohavebeenpostedtotheNetherlands

orrecruitedfromabroadtoworkintheNetherlands,

ataxfreeallowanceof30%oftheemployee’swage.

This30%taxfreeallowanceisintendedtocover

extraterritorialexpenseswhichtheemployeehasto

makeasaconsequenceofthefactthattheemployee

worksoutsidehishomecountry.On1January2012,an

amendmenttothe30%rulingcameintoforceinorder

topreventtheimproperuseofthe30%ruling.Under

thisamendment,the30%rulingbecameapplicable

onlytoemployeeswhohavelivedatadistanceofmore

than150kilometresfromtheNetherlandsborderfora

periodofmorethantwothirdsofthetwenty-fourmonths

priortothecommencementofemploymentinthe

Netherlands(‘150kilometresrequirement’).Employees

whodonotmeetthesecriteriamayonlyreceivea

taxfreereimbursementfortheactualextraterritorial

expenses.

Intheunderlyingcase,anemployeewhodidnotmet

the150kilometresrequirementrequesteda30%ruling.

TheNetherlandstaxinspectorrejectedthisrequest.The

employeearguedthatthe150kilometresrequirement

wasinconflictwiththefreemovementofworkers,

aslaiddowninArticle45TFEU,andtheprincipleof

equality.Therefore,accordingtotheemployee,the30%

rulingshouldhavebeengranted.

DanishHighCourtreferspreliminaryquestiontotheCJregardingrulesonrecaptureoflossesfromPermanentEstablishmentsofacompany(Nordea Bank)On28January2013,theHighCourtofDenmark

referredaquestionforapreliminaryrulingtotheCJin

thecaseNordea Bank Danmark A/S v. Skatteministeriet

(Nordea Bank)C-48/13.Thequestionconcernsthe

compatibilitywiththefreedomofestablishmentofthe

Danishlegislationwhichallowsaresidentcompanyto

deductfromitstaxableprofitsthelossesincurredbya

permanentestablishmentinanotherMemberStatebut

appliesare-capturemechanismonthelossesincurred

byitspermanentestablishmentintheeventoftotalor

partialtransferofthebranch’sactivitiestoacompany

belongingtothesamegroupandestablishedinthe

sameStateasthepermanentestablishment.

UKchallengesthelegalityofCouncilDecisiontoauthoriseenhancedcooperationonacommonframeworkofFTTandthescopeandobjectivesoftheinitialCommissionproposal(UK v Council)On18April2013,theUKchallengedthelegality

oftheDecisionof22January2013oftheCouncil

(CouncilDecision2013/52/EU)toauthoriseenhanced

cooperationonacommonframeworkoftheFinancial

TransactionsTax(‘FTT’)andthescopeandobjectives

oftheinitialcommissionproposalwhichisnowpending

as Case UK v Council(C-209/13).

ThemainargumentsoftheUKare:

• thatCouncilDecision2013/52/EUiscontraryto

Article327TFEUbecauseitauthorizestheadoption

oftheFTTwithextraterritorialeffectswhichwillfail

torespectthecompetences,rightsandobligations

oftheNon-ParticipatingStates.

• thatCouncilDecision2013/52/EUisunlawful

becauseitauthorizestheadoptionofanFTT

withextraterritorialeffectsforwhichthereisno

justificationincustomaryinternationallaw.

• thatCouncilDecision2013/52/EUiscontraryto

Article332TFEUbecauseitauthorizesenhanced

44

1. Doesthe150kilometresrequirementmakean

indirectdistinctionbetweennationalityofemployees

orotherwiseconstituteanobstacletothefree

movementofworkers?

2. Mustthe150kilometresrequirementbeconsidered

acompellingreasonofthepublicinterest?

3. Isthe150kilometresrequirementproportional?

CommissionrefersBelgiumtotheCJregardingitsprovisionsoninheritancetaxTheCommissionhasdecidedtoreferBelgiumtothe

CJregardingthetaxrulesintheWalloonRegionon

inheritancetax.TheWalloonlegislationprovidesfor

achoicebetweenseveralsharequotationsinorder

todeterminethetaxablebaseforinheritancetax

purposes.Thisprovisionallowsheirstochoosethe

mostfavourabletaxablebaseforthem,whichisusually

thelowestone.Suchchoice,however,isonlyofferedfor

shareslistedonaBelgianstockexchange.Shareslisted

onstockexchangesofotherEUMemberStatesorEEA

Statesmayonlybevaluedatthestockmarketpriceat

thetimeofdeathwithoutanypossiblechoicebetween

quotations.

TheCommissionconsidersthattheabsenceofchoice

whilevaluingshareslistedonstockmarketsoutside

BelgiumdissuadesBelgianresidentsfrominvestingin

foreignshares(astheirinheritancemightbesubject

tohighertaxation)andisthereforediscriminatory,as

itrestrictsthefreemovementofcapitalassetoutin

Article63TFEU.

CommissionetributariaprovincialdiRomareferstwocasestotheCJregardingthecompatibilityofItalianRulesontaxationofwinningsobtainedfromcasinosOn24Juneand1July2013,theCommissionetributaria

provincialdiRomareferredtwocasestotheCJ

regardingthecompatibilityoftheItalianrulesontaxation

ofwinningsobtainedfromcasinoswiththefreedomof

TheDistrictCourtofBredaarguedthatevenifthere

isanunequaltreatmentunderequalcircumstances

inthiscaseanobjectivejustificationisapplicable.

TheSupremeCourt,however,argued,withreference

tothecasesOrange European Smallcap Fund(C-

194/06) and D(C-376/03),thatthecaselawofthe

CJisnotclearonthepointwhetherintheunderlying

caseapersonlivingwithinthe150kilometresborderis

comparabletoapersonlivingoutsidethe150kilometres

border.Furthermore,regardingthecomparison,the

legislaturehadassumedthatapersonlivingwithinthe

150kilometresborderhasnoorfewextraterritorial

expenses.Inthisrespect,theSupremeCourtargued

thatthisassumptionwasnotbasedonempirical

researchandforthatreason,itisdoubtfulwhetherthe

assumptioniscorrect.

Inthecasethatthereisnoequaltreatmentunder

equalcircumstances,ithastobedeterminedifthe

150kilometresrequirementisinbreachofthefree

movementofworkers.TheSupremeCourtarguedthat

anemployeefromaMemberStatetowhomthe30%

rulingisapplicabledoesnothavetokeepaccounts

oftheextraterritorialexpensesandmostlikely,will

receiveahighertaxfreeallowanceincomparisonto

anemployeefromanotherMemberStatetowhomthe

30%rulingisnotapplicable.Bywhich,accordingtothe

SupremeCourt,the150kilometresrequirementcould

constituteanobstacletothefreemovementofworkers.

IntheviewoftheSupremeCourt,the150kilometres

requirementisjustified,asitshouldbeconsidered

acompellingreasonofthepublicinterest.However,

accordingtotheSupremeCourt,thereisnocaselaw

oftheCJwhichprovidescertaintyonthispoint.Also,

theanswertothequestionwhetherthe150kilometres

requirementisproportionalwasnotentirelycleartothe

SupremeCourt.

Therefore,theSupremeCourthasreferredthefollowing

questionstotheCJ1:

1 Pleasenotethattheabovequestionsarenottheliteral

questionsreferredbytheSupremeCourt.

45

ormorerestrictionsonthefreedomofestablishment

ortherighttofreemovementofcapital?

5. Ifthefourthmainquestionisansweredinthe

affirmative:Cantherestrictionbedeemedtobe

justifiedonthegroundsofoverridingpublicinterests,

andistherestrictionproportionate?

CourtofAppealofAntwerpreferscasetotheCJregardingBelgianrulesontaxationofimmovablepropertyOn10September2013,theCourtofAppealAntwerp

referredacasetotheCJregardingtheBelgianrules

ontaxationofimmovableproperty.Thecaseisnow

pendingascaseRonny Verest, Gaby Gerards v.

Belgische Staat(CaseC-489/13).

Thequestionreferredisasfollows:

DoesArticle63TFEUprecludethetaxationinone

MemberState,onabasisotherthanitslocalcadastral

income,ofimmovablepropertysituatedinanother

MemberStatewhichisnotrentedout,assumingin

particularinthatcasethatthelocalcadastralincome

isdeterminedinasimilarwaytotheBelgiancadastral

incomefromBelgianimmovableproperty?

SupremeCourtoftheNetherlandsreferscasetotheCJregardingNetherlandslegislationonthe30%ruling(X)On25September2013,theNetherlandsSupreme

Courtmadeareferenceforapreliminaryrulinginthe

case X v. Staatssecretaris van Financiën,whichisnow

pendingascaseC-512/13.

Thequestionsreferredare:

1) Cananindirectdistinctiononthebasisofnationality

oranimpedimenttothefreemovementofworkers

–requiringjustification–besaidtoexistifthe

legislationofaMemberStateallowsthetax-free

reimbursementofextraterritorialexpensesfor

incomingworkersandaworkerwho,intheperiod

priortohisemploymentinthatMemberState,lived

outsidethatMemberStateatadistanceofmore

than150kilometresfromtheborderofthatMember

Statemay,withouttheprovisionoffurtherproof,

establishment.Inbothcases,thefollowingidentical

questionwassubmitted:

IsitincompatiblewithArticle49oftheECTreatyfor

personsresidentinItalytoberequiredtodeclarefortax

purposes,andbeliablefortaxon,winningsobtained

fromcasinosinMemberStatesoftheEuropeanUnion,

asprovidedforbyArticle67(1)(d)ofPresidentialDecree

No917of22.12.1986(‘theTUIR’),ormustthisbe

regardedasjustifiedongroundsofpublicpolicy,public

securityorpublichealth,pursuanttoArticle46oftheEC

Treaty?

ThecasesarenowpendingascaseChristiano Blanco

v. Agenzia delle Entrate(C-344/13) and case Pier Paolo

Fabretti v. Agenzia delle Entrate(C-367/13)respectively.

NorwegianAppealsBoardoftheCentralTaxationOfficeforLarge-SizedEnterprisesrequestsAdvisoryOpiniontoEFTACourtregardingcompatibilityofCFCruleswiththeEEAAgreementOn20September2013,theEFTACourtissuedanotice

concerningarequestforanAdvisoryOpinionsubmitted

bytheAppealsBoardoftheCentralTaxationOffice

forLarge-SizedEnterprisesonthecompatibilityofthe

NorwegianCFCruleswiththefreedomofestablishment

asprovidedbyArticle31EEAAgreement.Thecaseis

nowpendingascaseFred Olsen and Others v Staten v/

Sentralskattekontoret for storbedrifter(E-3/13).

Thefollowingquestionshavebeensubmittedtothe

EFTACourt:

1. Dotrustsasaformofestablishmentfallwithinthe

scopeofthefreedomofestablishmentprovidedfor

inArticle31EEA?Supplementaryquestion:Ifso,

whoholdsrightspursuanttotheprovisionsofthe

EEAAgreement?

2. Ifthefirstmainquestionisansweredinthe

affirmative:Doesatrustmeettherequirementof

economicactivityprovidedforinArticle31EEA?

3. Ifthefirstmainquestionisansweredinthenegative:

Doesatrustfallwithinthescopeoftherighttofree

movementofcapitalprovidedforinArticle40EEA?

4. Ifthefirstorthirdmainquestionisansweredinthe

affirmative:DotheNorwegianCFCrulesinvolveone

46

CommissionissuesproposedDirectiveonFinancialTransactionsTaxtobeimplementedunderenhancedcooperationOn14February2013,theCommissionpublisheda

proposalforaDirectiveonacommonsystemofa

FinancialTransactionTax(‘FTT’).ThisDirectivewould

beintroducedby11MemberStates(Germany,France,

Austria,Belgium,Greece,Italy,Portugal,Slovakia,

Slovenia,SpainandEstonia)underthe‘enhanced

cooperation’mechanism.TheproposedDirective

mirrorsthescopeandobjectivesoftheoriginalFTT

proposalputforwardbytheCommissioninSeptember

2011(seeEUTaxAlerteditionno.97,October2011).

AccordingtotheproposedDirective,theFTTwillapply

toallfinancialtransactionsontheconditionthatatleast

onepartytothetransactionisa‘financialinstitution’

establishedinoneoftheparticipatingMemberStates.

Thisfinancialinstitutionshouldeitheractforitsown

account,fortheaccountofanotherpersonoractin

thenameofapartytothetransaction.Thedefinitionof

financialinstitutionintheproposalisbroad,including

banks,investmentfirms,organisedmarkets,credit

institutions,insuranceandreinsuranceundertakings,

collectiveinvestmentundertakingsandtheirmanagers,

pensionfundsandtheirmanagersaswellasother

undertakingswherefinancialtransactionsconstitute

asignificantpartoftheiractivities.Furthermore,

certainintra-grouptransactionsmaybeliabletoFTT.

Inaddition,FTTwillalsobedueifthetradedfinancial

instrumentisissuedinoneoftheparticipatingMember

States.

Forthedefinition of the financial transactions, a

referenceismadetootherEUdirectives.Itisintended

tocoverthepurchaseandsaleoffinancialinstruments

suchascompanyshares,bonds,money-market

instruments,unitsofundertakingsforcollective

investment(UCITs)andalternativeinvestmentfunds

(AIFs),structuredproductsandderivativesaswell

astheconclusionormodificationofderivatives

agreements.Accordingtotheproposal,some

transactionswillbeexcluded,suchasprimarymarket

transactionsforraisingcapitalthroughtheissuanceof

begrantedtax-freereimbursementofexpenses

calculatedonaflat-ratebasis,evenifthatamount

exceedstheextraterritorialexpensesactually

incurred,whereas,inthecaseofaworkerwho,

duringthatperiod,livedwithinashorterdistance

ofthatMemberState,theextentofthetax-free

reimbursementislimitedtothedemonstrableactual

amountoftheextraterritorialexpenses?

2) IfQuestion1istobeansweredintheaffirmative:is

therelevantNetherlandsrule,aslaiddowninthe

1965 Uitvoeringsbesluit loonbelasting (Payroll Tax

ImplementingDecree),basedonoverridingreasons

inthepublicinterest?

3) IfQuestion2isalsotobeansweredinthe

affirmative:doesthe150-kilometrecriterionin

thatrulegofurtherthanisnecessarytoattainthe

objectivepursued?

Forfurtheranalysisofthisdecision,seecommentsin

EUTAedition121.

CommissionasksDenmarktoamenditsrulesregardingexittaxationofindividualsOn24January2013,theCommissionrequested

Denmarktoamenditsruleswhichlevyanexittaxon

capitalgainsaccruedonsharesheldbyindividualsupon

theindividual’schangeofresidence.Therequesttakes

theformofareasonedopinion(thesecondstageofthe

infringementprocedureunderArticle258TFEU).

WhenapersonleavesDenmarktotakeupresidence

inanotherMemberState,thegainmadeonhis/her

portfolioofsharesiscalculatedandtaxed.Thistaxis

thencollectedfromtheindividualeitherwhentheshares

fromhis/herportfolioaresold,orwhenhe/shereceives

dividendsorothertypesofincomefromtheseshares.

TheCommissionconsidersthattheDanishlegislation

breachesthefreemovementofpersonsandcapitalset

outintheTFEUandgoesbeyondwhatisnecessary

topreventtaxavoidance.Consequently,Denmarkis

requestedtochangeitslegislationwithintwomonthsto

bringitinlinewithEUlaw.Failingthis,theCommission

mayreferthecasetotheCJ.

47

CommissionasksBelgiumtochangeitstaxationofpaidinterestOn21February2013,theCommissionrequested

Belgiumtoamenditslegislationontaxationofpaid

interest.Therequesttakestheformofareasoned

opinion(secondstageoftheinfringementprocedure

underArticle258TFEU).

TheCommissionconsidersthatthepropertytax

imposedontheinterestpaidtoforeigninvestment

companiesandthetaxationofinterestrelatingto

securitiesdepositedorcreditedtotheaccountsof

financialinstitutionsestablishedoutsideBelgiumis

discriminatory,havingregardtothefactthatthesame

interestpaidtoBelgianinvestmentcompaniesor

relatingtosecuritiesdepositedorcreditedtofinancial

bodiesestablishedinBelgiumisexemptfromproperty

tax.

AccordingtotheCommission,theaboveprovisions

createunjustifiedrestrictionsonthefreedomtoprovide

servicesandthefreemovementofcapital.IfBelgium

doesnotcomplywiththereasonedopinionwithintwo

months,theCommissionmayreferthecasetotheCJ.

PublicconsultationsonEUTaxpayer’sCodeandEUTaxIdentificationNumberOn25February2013,theCommissionlaunchedtwo

publicconsultationsonspecificmeasureswhichcould

improvetaxcollectionandensurebettertaxcompliance

acrosstheEU.

Thefirstconsultationisonthedevelopmentofa

EuropeanTaxpayer’sCode,whichwouldclarifythe

rightsandobligationsofbothtaxpayersandtax

authorities.MostMemberStateshaveestablished

taxpayer’scodes,which,however,varyconsiderably

fromoneMemberStatetoanother.Thismakesit

difficultforcitizensandcompaniestounderstandtheir

rightsindifferentMemberStatesandcomplywiththeir

taxobligationsincross-bordersituations.

ThesecondconsultationisonaEuropeanTax

IdentificationNumber(EUTIN),whichwouldfacilitate

theproperidentificationoftaxpayersintheEU.Given

sharesorbonds,spotcurrencytransactionsandthe

issuingofgovernmentbonds.Consumertransactions

wouldalsobeexcluded,suchasthegrantingof

mortgageloans,consumercredits,enteringinto

insurancecontractsetc.

Theproposed minimum tax rateis0.1%forallfinancial

transactionsotherthanthoseconcerningderivatives.

Thetaxableamountconsistsofthe(arm’slength)

considerationpaidorowedinreturnforthefinancial

instrument.For derivatives, the minimum proposed tax

rateis0.01%.Fortransactionsconcerningderivatives,

thetaxableamountisthenotionalamountofthe

agreementatthetimeitisconcluded.Thenotional

amountistheunderlyingnominalamountthatisusedto

calculatethepaymentstobemade.

Accordingtotheproposal,eachfinancialinstitution

thatispartytothetransactionorwhichisinvolved

inthetransactionisliabletoFTT.Asinglefinancial

transactionisthus,inprinciple,taxedtwiceunder

theproposedFTT(i.e.withbothcontractingparties).

Financialinstitutionswhicharenotresidentinone

oftheparticipatingMemberStatesmaynonetheless

comeunderthescopeofFTT,giventhatundercertain

conditions,suchafinancialinstitutionwhichispartyto

afinancialtransactionwithacounterpartyestablished

intheterritoryofaparticipatingMemberState,shallbe

deemedtoberesidentinthatMemberState.Thesame

mayapplytofinancialinstitutionsnotestablishedinthe

territoryofparticipatingMemberStatesiftheytradea

financialinstrumentissuedbyanentitythatisresidentin

theparticipatingterritory.

TheNetherlandsgovernmentexpresseditsintentionto

accedetotheenhancecooperationproceduresubjectto

thefollowingconditions:

• NetherlandspensionfundswillbeexemptfromFTT;

• TheFTTshouldnotcoincidedisproportionatelywith

thecurrentNetherlandsbankingtax;and

• TheFTTcollectedcontributestothebudgetofthe

MemberStates.

48

legislation,dividendsdistributedtofundsregistered

as‘investmentinstituteswithminimumtaxation’are

exemptedfromtax,butonlyinthecasewherethe

instituteisDanish.

TheCommissionconsidersthattheDanishtaxrules

discriminateagainst‘investmentinstituteswithminimum

taxation’fromotherMemberStates.Suchdiscriminatory

treatmentbreachesthefreedomtoprovideservices

andthefreemovementofcapital.TheCommission

requestedDenmarktochangeitslegislationwithintwo

monthstobringitinlinewithEUlaw.IfDenmarkdoes

notcomplywiththisrequest,theCommissionmay

decidetoreferthecasetotheCJ.

CommissiondecidestosetupanExpertGroupknownas‘PlatformforTaxGoodGovernance,AggressiveTaxPlanningandDoubleTaxation’On23April2013,theCommissiondecidedtosetup

anExpertGrouptobeknownasthe‘PlatformforTax

GoodGovernance,AggressiveTaxPlanningandDouble

Taxation’.Thetasksofthisgroupwillbe:

• toencouragediscussionbetweenbusiness,civil

societyandnationaltaxauthorities’expertson

issuesinthefieldofgoodgovernanceintaxmatters,

aggressivetaxplanninganddoubletaxation.

Thetermgoodgovernanceintaxmatterscovers

transparency,exchangeofinformationandfairtax

competition;

• toprovidetheCommissionwithinformationrelevant

totheidentificationofprioritiesintheseareasandto

selectingtheappropriatemeansandinstrumentsto

achieveprogressintheseareas;

• tocontributetothebestpossibleapplicationand

implementationoftheabovementionedCommission

Recommendations,byidentifyingtechnicaland

practicalissuespotentiallyrelevantinthisarea,as

wellaspossiblesolutions;

• toprovidetheCommissionwithinformationrelevant

tothepreparationofitsreportontheapplicationof

itsRecommendationsregardingmeasuresintended

toencouragethirdcountriestoapplyminimum

standardsofgoodgovernanceintaxmattersandon

aggressivetaxplanning;

theincreasedmobilityofpeopleandmorecross-border

natureofeconomicactivity,MemberStatesalsofindit

increasinglydifficulttoidentifytaxpayersproperly.This

canunderminenationaleffortstocollecttaxesproperly,

leadtosituationsofdoublenon-taxation,andeven

facilitatetaxfraudandevasion.

TheCommissionindicatedthattheaimofthepublic

consultationsistogatherexamplesofbestpractices

intheMemberStatesoncollectingdataontaxpayers’

identitiesaswellastaxpayercomplianceand

transparency.Theconsultationsrununtil17May2013.

Theresultsoftheconsultationswillbeusedtoidentify

anddeveloptheappropriatepolicyresponsesbythe

endof2013.

BoththeTaxpayer’sCodeandtheEUTINwere

amongthemeasuresproposedbytheCommissionin

December2012initsActionPlantotackletaxfraudand

evasion(seeEUTaxAlerteditionno.111,December

2012).

CommissionrefersSpaintotheCJregardingdiscriminatoryrealestatetaxation On25April2013,theCommissionhasdecidedtorefer

SpaintotheCJconcerningtherealestatetaxlegislation

whichpreventsnon-residentsfromenjoyingthesame

taxbenefitsasresidents.AccordingtotheSpanish

rules,capitalgainsfromthesaleofapermanent

residenceareexemptfromtaxifthemoneyisused

tobuyanotherpermanentresidence.However,this

provisiononlyappliestoSpanishresidents,therefore

discriminatingagainstnon-residentswhocanendup

payingmuchhighertaxes.

TheCommissionconsidersthatthisprovision

constitutesabreachtothefreemovementofpersons.

CommissionrequestsDenmarktochangetaxrulesonforeigninvestmentinstitutesOn25April2013,theCommissionformallyrequested

Denmarktochangeitslegislationconcerningthe

taxationofdividendsdistributedtoforeigninvestment

instituteswithminimumtaxation.AccordingtoDanish

49

forFrenchinvestmentsvis-à-visforeigninvestments

astaxpayersinvestingthesameamountinimmovable

goodsabroadwouldfaceahighertaxliability.

TheCommissionconsiderssuchprovisions

incompatiblewiththefreemovementofcapital.

CommissionproposestoextendthescopeofautomaticexchangeofinformationwithintheEUOn12June2013,theCommissionhasproposed

extendingtheautomaticexchangeofinformation

betweenEUtaxadministrations,aspartofthe

intensifiedfightagainsttaxevasion.Forthatpurpose,

itsubmittedaproposalamendingDirective2011/16/

EUof12February2013(‘Directiveonadministrative

cooperation’)asregardsmandatoryautomaticexchange

ofinformationinthefieldoftaxation.ThisDirective

foreseestheautomaticexchangeofinformationon

otherformsofincomesuchasemployment,directors’

fees,lifeinsurance,pensionsandproperty.Underthe

proposal,dividends,capitalgains,allotherformsof

financialincomeandaccountbalances,wouldbeadded

tothelistofcategoriesthataresubjecttoautomatic

informationexchangewithintheEU.Suchinclusion

wouldallowensuringequalityoftreatmentbetween

differenttypesofassetsandtoavoidingundesirable

reallocationofportfolios.TheamendedDirectivewould

allowMemberStatestoshareasmuchinformation

amongstthemselvesastheyhavecommittedtodoing

withtheUSundertheForeignAccountTaxCompliance

Act(FATCA)andtherefore,complywithArticle19of

theDirectivewhichstatesthataMemberStatethat

provideswidercooperationtoathirdcountrymaynot

refusetoprovidesuchwidercooperationtoanyother

MemberStatewishingtoenterintosuchmutualwider

cooperationwiththatMemberState.

TheCommissionisoftheviewthattheadoptionof

suchproposalwillcontributetothecoherent,consistent

andcomprehensiveEU-wideapproachtoautomatic

exchangeofinformationintheinternalmarket.Itwould

meanasinglereportingapproachacrossMember

States,whichwouldleadtocostssavingsbothfortax

administrationsandforeconomicoperators.Inaddition,

itmayuseITplatformsalreadyavailable,forinstance,

ThePlatformwillbecomposedofamaximumof45

members,comprisingMemberStates’taxauthorities

andupto15business,civilsocietyandtaxpractitioner

organisations.

EFTASurveillanceAuthoritydecidestobringIcelandbeforetheEFTACourtfortaxingcompaniesonunrealisedcapitalgainsoncross-bordermergersOn29May2013,theEFTASurveillanceAuthority

decidedtobringIcelandbeforetheEFTACourtfor

taxingcompaniesonunrealisedcapitalgainswhenthey

carryoutcross-bordermergers.AccordingtoIcelandic

domestictaxlegislation,companiesinIcelandthat

undertakecross-bordermergerswithintheEEAare

requiredtopaytaxonallcapitalgainsrelatingtotheir

assetsandsharesuponthemomenttheyexitIceland,

eventhoughthesegainshavenotbeenrealised.

Contrarytothis,Icelandiccompaniesmergingwithother

companieswithinIcelandareundernosuchobligation.

TheEFTASurveillanceAuthorityisoftheviewthat

thoserulesconstituteabreachtothefreedomof

establishmentandthefreemovementofcapitalas

providedintheEEAAgreementastheyrenderitless

attractiveforcompaniestomakeuseoftheirrightto

establishthemselvesinotherEEAStates.

TheAuthoritydoesnotcontestthatIcelandmay

protectitsrighttotaxgainsaccruedwhileacompany

wasestablishedinIceland.However,itconsidersthat

Icelandshouldapplylessrestrictivemeasurestoprotect

thisrightsuchasofferingcompaniesthepossibilityof

deferringtheirpaymentofthetax.

CommissionrefersFrancetotheCJregardingdiscriminatorypropertytaxrulesOn30May2013,theEuropeanCommissiondecided

toreferFrancetotheCJconcerningitsdiscriminatory

taxrulesonnewresidentialproperty.Frenchrulesallow

investmentsinnewresidentialpropertyinFrance,which

isintendedforlettingforaminimumofnineyears,to

benefitfromaccelerateddepreciation,whereassuch

benefitisnotavailableforsimilarinvestmentsmade

abroad.Thisresultsinamorefavourabletaxtreatment

50

Thisrequesttakestheformofareasonedopinion.

Intheabsenceofasatisfactoryresponsewithintwo

months,theCommissionmayreferPortugaltotheCJ

CommissionrequestsSpaintoenddiscriminatorytaxationofinvestmentsinnon-residentcompaniesTheCommissionhasrequestedSpaintoamendits

discriminatorytaxrulesfordividendsdistributedbya

non-residentcompanytoaSpanishcompany.According

toitsdomesticlegislation,aSpanishcompanywhich

investsinanon-residentcompanymustfulfilmore

conditions(forexample,relatedtovolumeofincome

andlevelofshareholderparticipation)thanadomestic

investmentifitwantstobenefitfromthetaxbreak.In

othercases,thetaxadvantageforeseenfordomestic

dividendsisnotavailableforforeigndividends.

TheCommissionconsidersthatthisregimeisinbreach

withthefreedomofestablishment,thefreedomto

provideservices,thecross-bordersupplyofgoodsand

thefreemovementofcapitalassetoutintheTFEU.

Therequesttakestheformofareasonedopinion.Inthe

absenceofasatisfactoryresponsewithintwomonths,

theCommissionmayreferthemattertotheCJ.

EuropeanParliamentCommitteeonEconomicandMonetaryAffairsissuesreportontheproposalforaCouncildirectiveimplementingenhancedcooperationintheareaoffinancialtransaction tax On24June2013,theEuropeanParliament

CommitteeonEconomicandMonetaryAffairsissued

areportontheproposalforaCouncildirective

implementingenhancedcooperationintheareaof

financialtransactiontax.Thisreportapprovesthe

Commissionproposalforthefinancialtransactiontax

butrecommendsintroducingsomeamendmentsto

theexistingproposal.Inparticular,itaimsatclosing

someloopholesandreinforcingmechanismstoprevent

taxevasionandtaxavoidance.Themainsuggested

amendmentsintheproposalare:

undertheEUSavingsDirective.Itwillalsorepresent

asteptowardstheinternalstandardofautomatic

exchangeofinformation.

CommissionasksfiveMemberStatestoimplementtheDirectiveonadministrativecooperationintotheirdomesticlawsOn20June2013,theCommissionsentReasoned

OpinionstoBelgium,Greece,Finland(Province

ofÅland),ItalyandPolandaskingthemtonotify

thetranspositionoftheDirectiveonadministrative

cooperationintonationallaw.MemberStateshada

legalobligationtostartapplyingthisDirectivefrom

1January2013.Belgium,Finland(concerningthe

ProvinceofÅland),Greece,ItalyandPolandhave

notnotifiedtheCommissionofthetranspositionofthe

Directiveintotheirnationallegislation.

Intheabsenceofasatisfactoryresponsewithintwo

months,theCommissionmayreferthesefiveMember

StatestotheCourtofJustice.

CommissionrequestsPortugaltoenddiscriminatorytaxationofnon-residentcompaniesTheCommissionhasrequestedPortugaltoamend

itstaxrulesfornon-residentcompaniesownedby

Portugueseresidents.AccordingtoPortuguese

legislation,companieswhichdonothavetheir

registeredofficeoreffectiveplaceofmanagementin

Portugalaresubjecttocorporateincometaxonthe

incomeobtainedinPortugal.Thesecompanies,as

othertaxpayers,mayenjoyanumberoftaxbenefits.

However,thesebenefitsaredeniedifmorethan25%

ofthecapitalofthenonresidentcompanyisownedby

Portugueseresidents.

TheCommissionconsidersthatadifferenttax

treatmentofnon-residentcompaniesonthebasisof

theirshareholders’residenceisinbreachofthefree

movementofcapital.

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:064:0001:0012:EN:PDF

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:064:0001:0012:EN:PDF

51

aftertheend’ofthetaxyearinwhichthelosswas

suffered.Asaconsequence,theCommission

considersthatthelegislationprecludesanyrelief

atallforthelossesofanon-residentsubsidiary,

contrarytothefreedomofestablishmentas

interpretedinMarks&Spencer.

ii. Inaddition,thenewrulesongroupreliefforforeign

lossesapplyonlytolossessufferedafter1April

2006,thedateofentryintoforceofthoserules.That

temporallimitation,accordingtotheCommission,is

alsocontrarytothefreedomofestablishment.

EFTASurveillanceAuthoritysendsreasonedopiniononLiechtensteintaxrulesonnotionalinterestdeductionOn6November2013,theEFTASurveillanceAuthority

sentaReasonedOpiniontoLiechtenstein,requesting

theamendmentofitstaxrulesonthenotionalinterest

deduction.AccordingtotheLiechtensteinrules,a

notionalinterestdeductionisgrantedforLiechtenstein

realestateandpermanentestablishments,whereasno

suchdeductionisgrantedforrealestateandpermanent

establishmentsinotherEEAStates.

TheEFTASurveillanceAuthorityconsidersthatthe

Liechtensteinrulesconstitutearestrictioncontrarytothe

EEArulesonthefreedomofestablishmentandthefree

movementofcapitalastheydiscourageLiechtenstein

companiesfromsettinguppermanentestablishments

inotherEEAStatesanditdiscouragesresidentsin

LiechtensteinfrominvestinginotherEEAStates.

IfLiechtensteindoesnotcomplywiththeReasoned

Opinionwithintwomonths,theEFTASurveillance

AuthoritymaybringthematterbeforetheEFTACourt.

CommissionrequestsBelgiumtoamendtherulesapplicabletotaxationofforeigncollectiveinvestmentundertakingsTheCommissionhasrequestedBelgiumtoamend

therulesapplicabletotheannualtaxationofforeign

collectiveinvestmentundertakings(CIUs).Belgian

legislationgrantsareducedrateoftheannualtaxonly

toCIUsgovernedbyBelgianlaw.Thisresultsinless

favourabletreatmentforsimilarCIUsgovernedbythe

lawofotherEUMemberStatesorEEAcountries.These

1. Closingtheloopholeoftheissuanceprinciplearising

fromtheexemptionapplicabletoOTCderivatives.

2. Introductionoftheownershipprincipleaccording

towhichafinancialtransactioninrelationtowhich

noFTThasbeenleviedisnotlegallyenforceable

anddoesnotresultinatransferoflegaltitleofthe

underlyinginstrument.

3. Clarificationoftheresidenceprinciplebystatingthat

branchesofEUinstitutionsregisteredwithintheFTT

jurisdictionwouldfallwithinthescopeoftheFTT.

4. CreationofanFTTCommitteecomposedby

representativesfromparticipatingMemberStates,

theCommission,ESMAandtheECB.Themandate

ofthisCommitteewillbetomonitoreffective

implementationoftheDirectiveacrossparticipating

MemberStates,todetectavoidanceschemesand

proposecountermeasures

CommissionrefersUKtotheCJregardingitslegislationoncross-bordergrouprelief(Commission v UK)On5April2013,theCommissiondecidedtoreferthe

UKtotheCJregardingitslegislationoncross-border

lossrelief,whichisnowpendingascaseCommission

v UK (C-172/13).AccordingtotheCommission,by

imposingconditionsoncross-bordergroupreliefthat

makeitvirtuallyimpossibleinpracticetoobtainsuch

reliefandbyrestrictingsuchrelieftoperiodsafter1April

2006,theUnitedKingdomhasfailedtocomplywithits

obligationsunderArticle49oftheTFEUandArticle31

oftheEEAAgreement.

FollowingthejudgmentinthecaseMarks & Spencer

(C-446/03),theUKamendeditslegislationoncross-

bordergrouprelief.Underthelegislationnowinforce,

agroupcompanymayobtainataxcreditforthelosses

ofanon-residentgroupmemberonlyifthelatterhas

nopossibilityofreliefinitsStateofresidence.The

Commissionconsidersthattherearetwoissuesofthe

UKlegislationwhichdonotcomplywiththefreedomof

establishment:

i. Inrelationtothepossibilityoffuturerelief,the

CommissionisoftheviewthattheUKlegislation

makesitvirtuallyimpossibletodemonstrate

compliancewiththatcondition,sincethatpossibility

fallstobedetermined‘asatthetimeimmediately

52

incomeinRomaniatobenefitfrompersonaland

familydeductions.Thismayresultinahighertaxation

inRomania,asthetaxpayer’spersonalandfamily

situationrisksaredisregardedinbothhiscountryof

residencewherehedoesnothavesufficienttaxable

income,andinRomaniaasthecountryofemployment.

AccordingtotheCommission,theseRomanian

provisionsareinbreachofthefreemovementof

workersassetoutintheEUTreatiesandEUcase

law,notablytheSchumackercase,(C-279/93)which

hasestablishedthatnon-residenttaxpayersearningall

ormostoftheirincomeinanEUMemberStatemust

receivethesametreatmentasresidenttaxpayers.The

Commission’srequesttakestheformofareasoned

opinion.Intheabsenceofasatisfactoryresponsewithin

twomonths,theCommissionmayreferRomaniatothe

CJ.

CommissiondecidestoreferBelgiumtotheCJregardingtheapplicationoftaxexemptionsgrantedtoUnioninstitutionsOn17October2013,theCommissiondecidedtorefer

BelgiumtotheCJasitconsidersthatthisMemberState

isnotcomplyingfullywiththeprovisionsintheUnion’s

ProtocolonPrivilegesandImmunities.

SincetheadoptionoftheOrdersontheorganisationof

theelectricityandgasmarketintheBrusselsCapital

Region,invoicesforelectricityandgasconsumptionin

thebuildingsoccupiedbytheinstitutionsinBrussels

haveincludedthetaxeslaiddownintheseOrders.

IntheCommission’sview,undertheprovisions

governingthetaxexemptionssetoutintheProtocol,

theinstitutionscannotberequiredtopaythesetaxes.

Article3,secondparagraph,oftheProtocolstatesthat

theinstitutionsareexemptedfromindirecttaxesor

salestaxesbythegovernmentsoftheMemberStatesin

whichtheyareestablishedwhentheymakesubstantial

purchasesfortheirofficialuse.TheCommissiondoes

notagreewiththeBelgianGovernmentonthismatter

andconsidersthattheseregionaltaxesareindirect

taxescoveredbythisexemption.Thepurposeofthe

exemptionistopreventaMemberStatehostingan

institutiononitsterritoryfrombenefitingfromthisand

CIUsrefertoCIUsgovernedbyforeignlawofwhichone

ormoresectionsorclassesofsecuritiesarecollected

exclusivelyfrominstitutionalorprofessionalinvestors

actingontheirownbehalfandwhosesecuritiesmaybe

purchasedonlybytheseinvestors.

TheCommissionconsidersthattheBelgiantaxrules

areinbreachofthefreedomofestablishmentandthe

freemovementofcapitalprovidedforArticles56and63

TFEU.

TheCommission’srequesttakestheformofareasoned

opinion.IfBelgiumfailstocomplywithintwomonths,the

CommissionmayreferthemattertotheCJ.

CommissionrequestsBelgiumtoamenditstaxationoncertainsettlementsTheCommissionhasrequestedBelgiumtoamendthe

taxregimeappliedbytheWalloonregiontodonationsof

certainunitsinundertakingsforcollectiveinvestmentin

transferablesecurities(UCITS)fromotherEUMember

StatesorfromanotherEEAcountry.

Belgianlegislationprovidesforareducedtaxationrate

onlyfordonationsofunitsinclosed-endBelgianUCITS

andprivateBelgianUCITS(whichcollectcapitalwithout

promotingthesaleoftheirsharestothepublic),butnot

fordonationsofunitsinsimilarUCITSelsewhereinthe

EU.

TheCommissionconsidersthatBelgiantaxrulesarein

breachofthefreemovementofcapitalprovidedforby

Article63TFEU.TheCommission’srequesttakesthe

formofareasonedopinion.IfBelgiumfailstocomply

withintwomonths,theCommissionmayreferthematter

totheCJ.

CommissionrequestsRomaniatoamenditstaxrulesonnon-residents’employmentincomeTheCommissionhasrequestedRomaniatoamendits

legislationonthetaxtreatmentofemploymentincome

ofnon-residents.

Romanianlegislationdoesnotallownon-resident

individualswhoworkandearnallormostoftheir

53

identifyingthekeyproblemswithdigitaltaxationfrom

anEUperspective,andpresentingarangeofpossible

solutions.TheCommissionwillthendevelopany

necessaryEUinitiativestoimprovethetaxframework

forthedigitalsectorinEurope.

Theexpertgroupwillcompriseduptosevenmembers,

whowillbeinternationallyrenownedexpertsonthe

digitaleconomyandontaxation.Itwillbechairedbya

personofpoliticalprofilewithrelevantbackgroundon

suchissues.

Giventhepaceatwhichthedigitaleconomyis

developing,rapidprogressindevelopingataxation

responseisnecessary.Therefore,theexpertgroup

shouldstartitsworkbeforetheendoftheyear,and

reportbacktotheCommissioninthefirsthalfof2014.

Atthesametime,andconsideringthatthetaxationof

digitaleconomyconstitutesoneofthehorizontalactions

oftheOECDBEPSactionplan,theCommissionaims

toensureacoherentandcomplementaryapproachto

digitaltaxationatEUandatinternationallevel.

CommissionproposesamendmentstoParent-SubsidiaryDirective,inordertotackletaxavoidanceinEuropeOn25November2013,theCommissionsubmitteda

Proposal(COM2013(834)final)foraCouncilDirective

amendingDirective2011/96/EUonthecommonsystem

oftaxationapplicableinthecaseofparentcompanies

andsubsidiariesofdifferentMemberStates(Parent-

SubsidiaryDirective).

Initially,theParent-SubsidiaryDirectivewasconceived

topreventsame-groupcompanies,basedindifferent

MemberStates,frombeingtaxedtwiceonthesame

income(doubletaxation).However,certaincompanies

haveexploitedprovisionsintheDirectiveand

mismatchesbetweennationaltaxrulestoavoidbeing

taxedinanyMemberStateatall(doublenon-taxation).

Today’sproposalaimstoclosetheseloopholes.

OneoftherequiredamendmentsidentifiedintheAction

Plantostrengthenthefightagainsttaxfraudandtax

evasionadoptedbytheCommissionof6December

obtainingataxadvantagebyimposingtaxesthatare

financedbyalltheMemberStates’contributionsto

theEUbudget,whichisnotjustifiableintheeyesof

Europeantaxpayers.

CommissionrequestsFrancetoamenditslegislationontaxationofcapitalgainsonpreciousmetalsOn17October2013,theCommissionrequestedFrance

toamenditslegislationconcerningtaxationonthesale

ofpreciousmetals.Accordingtothecurrentlegislation,

taxpayersresidentinFranceareentitledtochoose

betweentwotaxoptions.Thefirstoptionistopaytaxon

theamountofcapitalgainsrealisedattheprogressive

personalincometaxrate,inaccordancewiththe

standardrules.Thesecondistopayaflat-ratetaxof

16%onthetotalamountofthesale.Non-residents,

however,areobligedtopaytheflat-ratetax.Incertain

cases,thiscanleadtohighertaxation,particularlywhen

nocapitalgainisrealised.

IntheCommission’sview,adistinctionofthisnature

constitutesanunwarrantedrestrictiononthefree

movementofcapitalaslaiddownbyArticle63TFEU

andArticle40EEA.

TheCommission’srequesttakestheformofareasoned

opinion(whichconstitutesthesecondstageinthe

infringementprocedure).Inresponsetoaformalnotice

sentinApril2011(thefirststageoftheprocedure),

Francecommittedtochangingthecurrenttaxregime,

however,todate,theCommissionhasreceivedno

notificationthatanymeasureshavebeentaken.

Ifthereisnosatisfactoryresponsewithintwomonths,

theCommissionmaydecidetoreferFrancetotheCJ.

CommissioncreatesExpertGrouptoguideEUapproachonthetaxationofdigitaleconomyOn22October2013,theCommissionadopteda

DecisiontocreateaHighLevelExpertGroupon

TaxationoftheDigitalEconomy.Thetaskofthisgroup

willbetoexaminethebestwaysoftaxingthedigital

economyintheEU,weighingupboththebenefits

andrisksofvariousapproaches.Itsfocuswillbeon

54

TheproposedamendmenttotheParent-Subsidiary

DirectiveincludesaGAARwhichfollowsthe

approachtakeninArticle13oftheproposedDirective

implementingenhancedcooperationintheareaofthe

financialtransactiontax(‘FTT’).Underthisproposal,

MemberStatesmustwithdrawthebenefitofthe

directiveinthecaseofanartificialarrangementoran

artificialseriesofarrangementswhichhasbeenputin

placefortheessentialpurposeofobtaininganimproper

taxadvantageunderthisdirectiveandwhichdefeatsthe

object,spiritandpurposeofthetaxprovisionsinvoked.

Inaddition,theDirectiveprovidesforcertaincriteriain

ordertodetermineifanarrangementisartificial:

Indeterminingwhetheranarrangementorseries

ofarrangementsisartificial,MemberStatesshall

ascertain,inparticular,whethertheyinvolveoneor

moreofthefollowingsituations:

(a) thelegalcharacterisationoftheindividualsteps

whichanarrangementconsistsofisinconsistent

withthelegalsubstanceofthearrangementasa

whole;

(b)thearrangementiscarriedoutinamannerwhich

wouldnotordinarilybeusedinareasonable

businessconduct;

(c) thearrangementincludeselementswhichhavethe

effectofoffsettingorcancellingeachother;

(d) thetransactionsconcludedarecircularinnature;

(e) thearrangementresultsinasignificanttax

benefitwhichisnotreflectedinthebusinessrisks

undertakenbythetaxpayeroritscashflows.

Finally,theamendedDirectiveclarifiesthatitdoesnot

precludetheapplicationofMemberState’sdomesticor

agreement-basedanti-abuseprovisionsrequiredforthe

preventionoftaxevasion.

CommissionpublishesreportsoftheEUJointTransferPricingForumTheCommissionhaspublishedtworeportsconcerning

theEUJointTransferPricingForummeetingheld

on5November2013.Oneofthereportsconcernsa

discussionpaperontheimprovementofthefunctioning

oftheArbitrationConvention,theotherisadraftreport

onCompensatoryAdjustments.

2012(COM(2012)722)wastoclosetheloopholesto

theParent-SubsidiaryDirectiveinordertodealwith

themismatchesfromhybridformsofdebtbetween

associatedcompanies,calledprofitparticipating

loans.Theissuearisesbecausepaymentsundera

cross-borderprofitparticipatingloanaretreatedas

taxdeductibleinthesourceMSandasataxexempt

distributionofprofit(dividend)intherecipientMS

resultingindoublenon-taxation.Twooptionswere

consideredinordertodealwiththisissue:underone

option,profitdistributionpaymentsdeductibleinthe

sourceMemberStatewouldbeexcludedfromthe

Directive,whereasundertheother,thetaxexemption

benefitsintheDirectivewouldbedeniedtoprofit

distributionpaymentsdeductibleinthesourceMember

State.

Thefindingsoftheimpactassessmentcarriedoutby

theCommission(CommissionStaffWorkingpaper

2013(474)final),werethatthebestoptionistodeny

thetaxexemptiontoprofitdistributionpaymentswhich

aredeductibleinthesourceMemberState.Accordingly,

theMemberStateofthereceivingcompany(parent

companyorpermanentestablishmentoftheparent

company)musttaxtheportionoftheprofitdistribution

paymentswhichisdeductibleintheMemberState

ofthepayingsubsidiary.Thisoptionwasfoundtobe

themosteffectiveincounteractinghybridfinancial

arrangements,asitwillensureconsistencyoftreatment

acrossEU.

TheActionPlanalsocommitstheCommissionto

reviewtheanti-abuseprovisionsoftheCorporateTax

Directives(includingnotonlytheParent-Subsidiary

DirectivebutalsotheInterestandRoyaltiesDirective

andtheMergerDirective)withaviewtoimplementing

theprinciplesunderlyingtheRecommendationon

aggressivetaxplanning.TheRecommendation

proposedthatMemberStatesshouldadoptaGeneral

Anti-AbuseRule(‘GAAR’)tocounteractaggressive

taxplanningwhichfallsoutsidethescopeofexisting

specificanti-avoidancerules.However,giventhatthe

Recommendationspecificallycarvesoutcorporatetax

directives,itsunderlyingprinciplescannotberelied

uponinwithoutlegislativeaction.

55

foreigncooperativesocietiesandthosepursuinga

socialobjectiveand(i)certaininterestpaidtoforeign

companies.

(i) Authorised cooperative societies and those pursuing

a social objective

Belgiumgrantsanexemptionfromwithholdingtax

onthefirsttrancheofdividendspaidbycooperative

societiesandonthefirsttrancheofdividends(or

interest)allocatedorattributedbysocietiespursuing

asocialobjective.Thisfirsttrancheisexemptonlyin

thecaseofcooperativesestablishedunderBelgian

lawandsocietiespursuingasocialobjectivewhichare

authorisedinBelgium.

AccordingtotheCommission,thistaxationis

discriminatoryasitdiscouragesinvestmentin

foreigncooperativesocietiesandinforeignsocieties

pursuingasocialobjective.Therefore,itconstitutesan

unjustifiedrestrictiononthefreemovementofcapitalas

establishedbyArticle63TFEUandbyArticle40EEA.

(ii) Interest paid

Inaddition,Belgianlegislationchargeswithholding

taxoninterestfromdebtclaimsnotrepresentedby

securitiesandpaidtoforeigninvestmentcompanies,

andoninterestrelatingtosecuritiesdepositedor

registeredinanaccountwithfinancialinstitutions

establishedoutsideBelgium.Ontheotherhand,the

sameinterestpaidtoBelgianinvestmentcompanies

orrelatingtosecuritiesdepositedorregisteredwith

financialinstitutionsestablishedinBelgiumistax

exempt.AccordingtotheCommission,thisrulecould

discouragecross-borderinvestmentandtherefore,

constitutesanunjustifiedrestrictiononthefreedomto

provideservicesandonthefreemovementofcapitalas

establishedbyArticles56and63TFEUandArticles36

and40EEA,respectively.

TheCommissiondecidedtoreferthemattertotheCourt

ofJustice,giventheabsenceofaresponsefromthe

BelgianauthoritiestotheReasonedOpinionsentto

BelgiuminFebruary2013.

CommissionrequestsGreecetostopdiscriminatoryinheritancetaxprovisionsOn20November2013,theCommissionsentrequests

toGreece tochangetwodiscriminatoryinheritance

taxrules.Thefirstrelatestoataxexemptionwhich

Greeklawallowsonrealestateinheritances.The

exemptionisonlygrantedtoEUnationalswhoreside

inGreeceandwhodonotownaprimaryresidence.

TheCommissionconsidersthistodiscriminateagainst

EUandEEAnationalsresidingoutsideGreece,andan

obstacletothefreemovementofcapitalsetoutinthe

Treaties.Thesecondrequestrelatestoadiscriminatory

provisionwherebyGreeceallowsapreferentialtax

rateforbequeststonon-profitorganisationsinother

EU/EEAStates,solelyontheconditionofreciprocity.

TheCommissionconsidersthatapplyingacondition

ofreciprocityresultsindiscriminatorytreatmentthat

isanobstacletothefreemovementofcapital.The

Commission’srequeststaketheformofReasoned

Opinions.IfGreecefailstocomplywithintwomonths,

theCommissionmayreferthemattertotheCJ.

CommissionrequestsFranceandLatviatoimplementEUrulesagainsttax evasion On20November2013,theCommissionrequested

FranceandLatviatotransposeinfulltheDirective

onadministrativecooperationintonationallaw.This

DirectiveisfundamentaltotheEUfightagainst

taxevasion,asitcontainsmeasurestoincrease

transparency,improveinformationexchangeandtighten

cross-bordercooperation.

MemberStateswerelegallyobligedtoapplythis

Directivefrom1January2013,butFranceandLatvia

havenotyetnotifiedtheircompletetranspositionofthe

newrules.Intheabsenceofasatisfactoryresponse

withintwomonths,theCommissionmayreferthetwo

countriestotheCJ.

CommissionbringsBelgiumtotheCJregardingtwodiscriminatoryprovisionsinBelgianlawOn20November2013,theCommissiondecided

tobringanactionagainstBelgiumbeforetheCJ

concerningitslegislation:(i)oncertainincomeof

56

UnderNetherlandslawitispossibleforaNetherlands

parentcompanytoformafiscalunitywithNetherlands

subsidiariesifthesesubsidiariesresideinthe

NetherlandsandiftheNetherlandsparentcompany


subsidiaries.Ifthesubsidiarydoesnotresidein

theNetherlands,itispossibletoformafiscalunity

betweentheNetherlandsparentcompanyandthe

Netherlandssub-subsidiaryifthesharesinthe

Netherlandssub-subsidiarycanbeallocatedtoa

permanentestablishmentoftheforeignsubsidiarywhich

issituatedintheNetherlands.Furthermore,itisalso

possibletoformafiscalunitybetweentwoNetherlands

sistercompanieswhichareheldbyaforeignparent

companyifthesharesinthesesistercompaniescan

beallocatedtoapermanentestablishmentsituated

intheNetherlandsoftheforeignparentcompany.

Consequently,theNetherlandstaxinspectorrefused

inallthreecasestoapprovethefiscalunitiesasthe

sub-subsidiarywasheldviaaforeignsubsidiaryandthe

sharesinthesistercompaniescouldnotbeallocatedto

aNetherlandspermanentestablishment.

Thetaxpayersarguedthattheserequirementsarein

conflictwiththefreedomofestablishmentunderArticle

49TFEU,asitispossibleforaNetherlandsparent

companytoformafiscalunitywithitsNetherlandssub-

subsidiaryiftheinterposedsubsidiaryalsoresidesin

theNetherlandsandformspartofthefiscalunity(case

1and2).Withrespecttocase3,theargumentisthatit

shouldbecomparedtoasituationwhereaNetherlands

parentcompanyformsafiscalunitywithitsNetherlands

subsidiariesthroughwhichafiscalunitybetweenthe

sistercompaniescanbecreated.

TheCourtofAppealruledthatthereisaccesstothe

TFEUasthecompaniesmadeuseoftheirrightunder

thefreedomofestablishment,asinallthethreecases

thecompaniesconductedonapermanentbasis

economicactivitiesinanotherMemberState.The

factthatitisnotpossibleintheunderlyingcasesto

formafiscalunitybetweentheNetherlandsentitiesis,

accordingtotheCourtofAppeal,anobviousobstacle.

However,itisnotcompletelycleartotheCourtof

Appeal(i)whichdomesticsituationmustbecompared

tothesituationintheunderlyingcases,(ii)whether

CommissionappointsthemembersoftheexpertgrouponthetaxationofthedigitaleconomyOn25November2013,theCommissionappointedthe

membersoftheHighLevelexpertgrouponTaxationof

theDigitalEconomycreatedlastmonth.Thisgroupisto

bechairedbyVítorGaspar,formerFinanceMinisterof

Portugal,andwillcompriseofafurthersixexpertsfrom

acrossEuropewithdifferentbackgroundsandexpertise

relevanttothesubject.

Thetaskofthisgroupistoidentifyimprovementsin

thecurrentwayoftaxingthedigitaleconomyinthe

EU,weighingupboththebenefitsandrisksofvarious

approaches.

Itsfocuswillbeonidentifyingthekeyproblemswith

taxingthedigitaleconomyfromanEUperspective,

andpresentingarangeofpossiblesolutions.The

CommissionwillthendevelopanynecessaryEU

initiativestoimprovethetaxframeworkforthedigital

sectorinEurope,whichhasthepotentialtocontribute

significantlytogrowthandinnovationintheEU.The

firstmeetingofthegroupisscheduledtotakeplaceon

12December2013.Thegroupmustreportbacktothe

Commissioninthefirsthalfof2014.

DevelopmentsintheNetherlands:CourtofAppealofAmsterdamreferspreliminaryquestionstotheCJinthreecasesregardingthecompatibilityoftheNetherlandsfiscalunityregimewiththefreedomofestablishmentTheCourtofAppealofAmsterdamreferredinthree

casespreliminaryquestionstotheCJregardingthe

limitsonthepossibilitiesofformingafiscalunityunder

Netherlandslaws.Twocasesconcern,insimplified

terms,asituationinwhichaNetherlandsparent

companyholdsviaaforeignsubsidiaryaNetherlands

sub-subsidiaryandthetwoDutchcompanieshave

requestedtoformafiscalunity(case1and2).The

othercaseconcerns,insimplifiedterms,aforeign

parentcompanywhichholdsNetherlandssister

companies.Thesesistercompanieshavealso

requestedtoformafiscalunity(case3).

57

- TheFTTshouldnotcoincidedisproportionatelywith

thecurrentNetherlandsbankingtax;and

- TheFTTcollectedcontributestothebudgetofthe

MemberStates.

BasedonthecurrentwordingoftheDirective,

pensionfundsareincludedinthedefinitionoffinancial

institutionswhicharesubjecttoFTT.Therefore,at

present,itwouldseemthattheNetherlandsdemand

hasnotbeenaccepted.Furthermore,itisproposedthat

atleastpartoftheproceedsraisedundertheFTTwill

contributetowardstheEUbudget.Thisdoesnotseem

tobeinlinewiththethirdconditionoftheNetherlands.

VAT CommissionproposesastandardVATreturnOnOctober2013,theCommissionproposedastandard

VATreturnformforbusinesses.Everyyear,150million

VATreturnsaresubmittedtoEUtaxadministrations.

However,thereportingobligationsvaryinall28Member

States,makingitverydifficultforcompaniesthatdo

businessinmorethanoneMemberStatetocomplywith

somanydifferentrules.TheCommissionexpectsthat

standardizedVATreportingobligationsacrossall28EU

MemberStateswillliftoneofthebiggestobstaclesfor

companiestoexpandtheirbusinessopportunitiesinthe

singlemarket,especiallysmallEuropeanbusinesses.

Duringitsmeetingon15November2013,theCouncil

tooknoteofthepresentationbytheCommissionof

aproposalforastandardVATreturnthroughoutthe

EU.TheCouncil’sworkinggroupisexpectedtostart

examiningtheproposalinDecember.

Councilholdspolicydebateon‘quickreactionmechanism’againstVATfraudInitsmeetingof4December2012,theEconomic

andFinancialAffairs(ECOFIN)Councilheldapolicy

debateontheCommission’sproposalforadirective

aimedatenablingimmediatemeasurestobetaken

incasesofsuddenandmassiveVATfraud.The

Commission’sproposalisaimedatspeedingupthe

procedureforauthorizingMemberStatestoderogate

fromtheprovisionsoftheVATDirectivebyproviding

thepotentiallyconflictingprovisionisjustifiedand

(ii)whetherthepotentiallyconflictingprovisionis

proportional.

ThereforetheCourtofAppealreferredseveralquestions

totheCJwhichcouldbecombinedandsummarizedas

follows:

1. Istherearestrictiontothefreedomofestablishment

intheunderlyingcase?Withwhichdomestic

situationmustthesituationofthecaseathandbe

compared?

2. DoesthefactthattheNetherlandssub-subsidiaryis

heldbyoneormoreforeignsubsidiariesaffectthe

answertoquestionone?(case1)

Doesitaffecttheanswertoquestiononethatit

wouldhavebeenpossiblefortheforeignsubsidiary

toholdthesharesinthesub-subsidiaryviaa

Netherlandspermanentestablishmentbutithasnot

doneso?(case2)

Doesitaffecttheanswertoquestiononethatthe

sistercompaniesdonothaveacommondirect

foreignparentcompanybutneverthelesshavea

commonindirectforeignparentcompany?(case3)

3. Ifquestiononeisansweredaffirmative,isthe

restrictiononthefreedomofestablishmentjustified?

4. Ifquestionthreeisansweredaffirmative,is

therestrictiononthefreedomofestablishment

proportional?

FinancialTransactionTax:wheretheNetherlandsstandTheEuropeanParliamenthasrecentlyapprovedthe

DirectiveforaFinancialTransactionTax(“FTT”)tobe

introducedby11MemberStatesundertheso-called

mechanismfor‘enhancedcooperation’.Thisproposal

isbasedontheCommission’soriginalFTTproposalfor

anEU-wideFTTofSeptember2011.Theparticipating

MemberStatesoftheenhancedcooperationare:

Germany,France,Austria,Belgium,Greece,Italy,

Portugal,Slovakia,Slovenia,SpainandEstonia.The

Netherlandsgovernmentexpresseditsintentionto

accedetotheenhancecooperationproceduresubjectto

thefollowingconditions:

- NetherlandspensionfundswillbeexemptfromFTT;

58

outthedemolitionworkswithaviewtodevelopinga

residentialcomplexontheland.GVMdeductedtheVAT

relatingtoallofthelandandbuildingspurchased.The

Romaniantaxauthoritiesdecided,however,thatGVM

hadunlawfullydeductedVATforthepurchaseofthe

demolishedbuildings,becauseithadnotpurchased

themforthepurposesoftaxtransactions,ithad

onlydonesoinordertodemolishthem.Eventually,

thematterendedupbeforetheCourtofAppealsof

Bucharest,whichdecidedtoreferpreliminaryquestions

totheCJinordertofindoutwhethertheVATpaidon

thebuildingsbyGVMisdeductible.

AccordingtotheCJ,itisclearthatGVMpurchased

thelandandthebuildingswiththeintentionofthe

constructionoftheresidentialcomplexonthelandinthe

courseofGVM’spropertydevelopmentactivities.The

CJruledthatinsuchcircumstances,acompanyhasthe

righttodeductVATontheacquisitionofthebuildings

onthebasisofArticles167and168oftheEUVAT

Directive.

Moreover,thefactthatthebuildingshadbeen

demolishedwithaviewtodevelopingtheresidential

complexinplaceofthosebuildingsdoesnot,according

totheCJ,resultinanobligationtoadjusttheinitial

deductionofVATrelatingtotheacquisitionofthe

buildingsonthebasisofArticle185oftheEUVAT

Directive.

CJrulesthatrighttodeductionmaybedeniedifthetaxablepersonkneworshouldhaveknownthathewasinvolvedinVATfraud(Bonik) On6December2012,theCJdelivereditsjudgment

intheBonikcase(C-284/11).BonikEEOD(‘Bonik’)is

aBulgariancompanythatdeclaredintra-Community

suppliesofwheatandsunflower.Followingatax

investigation,theBulgariantaxauthoritiesfoundthat

therewasnoevidenceoftheseintra-Community

supplies.Consideringthatthequantitiesofwheatand

sunflowerquotedontheinvoicesissuedbyBonikhad

beentakenoutofitsstockandwerenotthereatthe

timeoftheinvestigation,theBulgariantaxauthorities

concludedthattaxablesuppliesofthosequantitieshad

beenmadeonBulgarianterritory.

forimplementingpowerstobeconferredonthe

Commissionundera‘quickreactionmechanism’.

TheCouncildebatefocusedonwhetherimplementing

powersundertheDirectiveshouldbeconferredonthe

CommissionorontheCouncil.TheCouncilaskedthe

PermanentRepresentativesCommitteetooversee

furtherworkontheproposal,exploringbothalternatives,

withaviewtoenablingittoreachanagreementassoon

aspossible.

EntryintoeffectofnewVATrulesOn1January2013,newinvoicingrulesandacash

accountingoptionforsmallbusinessesenteredinto

force,theCommissionremindedinapressreleaseof

17December2012.

TheCommissionindicatedthatthenewinvoicingrules,

onthebasisofwhichelectronicinvoicingwillhavetobe

treatedthesameaspaperinvoicing,enablescompanies

tochoosewhatworksbestforthem.Accordingtothe

Commission,thishasthepotentialtosavebusinesses

uptoEUR18billionayearinreducedadministration

costs.

Moreover,theCommissionreferstothenewrules,on

thebasisofwhichMemberStatesareallowedtooffer

acashaccountingoptiontosmallbusinesseswitha

turnoveroflessthanEUR2millionayear.According

totheCommission,thiswillprovidecompanieswith

reliefintermsofcashflow,becauseunderthecash

accountingschemebusinessesareallowedtodeclare

andpayVATwhentheyreceiveormakepayments,

ratherthanatthetimeoftheinvoices.

CJrulesthatVATonacquiredbuildingsthataredemolishedwithaviewtoconstructionofaresidentialcomplexisdeductible(SC Gran Via Moineşti) On29November2012,theCJdelivereditsjudgmentin

theSC Gran Via Moineşticase(C-257/11).

SCGranViaMoineştiSRL(‘GVM’)acquiredaplotof

landandthebuildingsconstructedonitinBulgaria.

Inthecontractofsale,ademolitionpermitforthose

buildingswasalsotransferredtoGVM.GVMcarried

59

supply,thesupplyisconsiderednottohaveactually

takenplace,whenithasnotbeenestablishedonthe

basisofobjectiveevidencethatthetaxablepersonknew

orshouldhaveknownthatthetransactionreliedonasa

basisfortherightofdeductionwasconnectedwithVAT

fraudcommittedupstreamordownstreaminthechain

ofsupply.

CJclarifiesmeaningoftheterm‘constructionwork’inderogatingmeasure(BLV) On13December2012,theCJdelivereditsjudgmentin

theBLV case(C-395/11).

BLVWohn-undGewerbebauGmbH(‘BLV’)engaged

acontractortobuildaresidentialblockofsixflatsata

fixedpriceonlandownedbyBLV.Thecontractorissued

aninvoicetoBLVwithoutVATandreferredtoBLVas

liablefortheVATasrecipientforthesupply.BLVpaid

theVATtothetaxauthorities.Subsequently,BLVasked

forreimbursementoftheVATtakingthepositionthat

GermanywasnotpermittedunderEUVATlawtoapply

thereversechargemechanismtosuchasupply.

Theapplicationofthereversechargemechanismwas

basedonameasurederogatingfromArticle21(1)(a)of

theSixthEUVATDirective,whichallowedGermanyto

applythereversechargemechanism,amongstothers,

tothesupplyofconstructionworktoataxableperson.

TheFederalFinanceCourtwasnotsure,however,

whetherthereversechargemechanismshouldhave

beenappliedanddecidedtoreferpreliminaryquestions

totheCJ.

Themainquestionintheproceedingswaswhether

theterm‘constructionwork’withinthemeaningofthe

derogatingmeasureencompassednotonlythesupply

ofservicesbutalsothesupplyofgoods.Accordingto

theCJ,theSixthEUVATDirectiveissilentastothe

meaningoftheterm‘worksofconstruction’andthat

themeaningandscopeofthattermmust,therefore,be

determinedbyreferencetothegeneralcontextinwhich

itisusedanditsusualmeaningineverydaylanguage.

Inthisregard,theCJindicatedthattheobjectivesand

effectivenessofthelegislationinquestionshouldbe

takenintoaccount.TheCJconcludedthat,onthebasis

Moreover,thetaxauthoritiesalsocarriedoutchecks

inconnectionwithBonik’swheatpurchases.Inthis

regard,itfoundthatBonik’ssuppliersdidnothavea

sufficientquantityofgoodstomakethesuppliesto

Bonikandthatnoactualsupplieshadbeenmadeby

thosesuppliers.Consequently,thetaxauthoritiesissued

aVATassessmentinwhichtheydeniedBoniktheright

todeductVATonthepurchasesofthewheat.

BonikcontestedtheVATassessmentbeforethe

AdministrativeCourtofVarna.Thiscourtnotedthat

theBulgariantaxauthoritiesdidnotdisputethatBonik

carriedoutsuppliesofgoodsofthesametypeandin

thesamequantity,orthatBonikacquiredthosegoods

fromothersuppliers.Furthermore,thecourtnoted

thattherewassomeevidencethatdirectsupplies

werecarriedoutandthatthelackofevidenceofthe

precedingsuppliescouldnotsupporttheconclusionthat

thosedirectsupplieswerenotcarriedout.Underthose

circumstances,thecourtdecidedtoreferpreliminary

questionstotheCJinordertofindoutwhetherBonik

wasentitledtodeducttheVAT.

AccordingtotheCJ,itisnecessarytocheckwhether

thesuppliesbyBonikhadactuallybeencarriedoutand

whetherthegoodsinquestionswereusedbyBonikfor

thepurposesoftaxedtransactionsinordertobeable

toestablishwhetherthereisarighttodeduction.Inthis

regard,theCJindicatedthatitisforthenationalcourt

tocheckandestablishthefactualcircumstancesofthe

case.Intheeventthenationalcourtshouldfindthat

thesupplieshadactuallybeencarriedoutandthatthe

goodshadbeenusedforBonik’staxedtransactions,the

CJruledthatBonikcannot,inprinciple,berefusedthe

righttodeduction.

Inthecaseitwouldconcernfraudulenttransactions,

theCJremindedthereferringcourtthattheprevention

oftaxevasion,avoidanceandabuseisanobjective

recognizedandencouragedbytheEUVATDirective.

AccordingtotheCJ,itisfornationalcourtsandjudicial

authoritiestorefusetherightofdeductionifthatright

isbeingreliedonforfraudulentorabusiveends.In

thisregard,theCJruledthattherighttodeductmay

notberefusedonthegroundthat,inviewoffraudor

irregularitiescommittedupstreamordownstreamofthat

60

Article8(a)oftheSecondEUVATDirective,whichwas

inforceatthetimeofthesupplies,didnotpermitfor

alterationofthetaxableamount,ortheoutputtax,after

thesupplyhadtakenplace.Therefore,theCJruled

thattaxablepersonsarenotentitledonthebasisof

thisprovisiontotreatthetaxableamountofasupply

ofgoodsasretrospectivelyreducedwhere,afterthe

timeofthatsupply,anagentreceivedacreditfromthe

supplierwhichtheagentelectedtotakeeitherasa

paymentofmoneyorasacreditagainstamountsowed

tothesupplierinrespectofsuppliesofgoodsthathad

alreadytakenplace.AccordingtotheCJ,theprincipleof

fiscalneutralityandthecontinuationoftheVATsystem

(theSixthEUVATDirectivedoescontainaprovision

thatinprinciplerequiresMemberStatestoreducethe

taxableamountincaseallorpartoftheconsideration

hasnotbeenreceived)donotchangethisconclusion.

CJrulesonchargeableeventinthecaseofsupplyofconstructionserviceswhereconsiderationisprovidedinkindintheformofbuildingright(Orfey) On19December2012,theCJdelivereditsjudgment

intheOrfeycase(C-549/11).Thecaseconcerns

aBulgariancompany,OrfeyBalgariaEOOD

(‘Orfey’),whichhadobtainedabuildingrightfromfour

naturalpersons(‘theowners’).Inthisregard,Orfeywas

entitledtoconstructabuildingonthelandbelonging

totheownersandbecomesoleownerofsomeofthe

realpropertyithadbuilt.Bywayofconsiderationfor

thebuildingright,Orfeyundertooktodesigntheplans

forthebuilding,tobuilditentirelyatitsowncostandto

delivercertainrealpropertyinthatbuildingonaturn-key

basistotheownerswithoutanypaymentsbeingmade

bytheowners.Foritsactivities,Orfeysentaninvoice

withVATtoeachoftheowners.

Inthecourseofataxaudit,theBulgariantaxauthorities

foundthatthetaxableamountofthetransaction

hadbeendeterminedbasedonthetaxvalueofthe

buildingrightandnotontheopenmarketvalueofthe

realpropertygrantedtotheowners.Takingtheview

thatOrfeywassupplyingconstructionservicestothe

owners,thetaxauthoritiesissuedaVATassessmentto

Orfeyinwhichtheopenmarketvalueoftheconstruction

servicesofthebuildingwastakenintoaccountas

ofthesefactors,theterm‘constructionwork’shouldbe

interpretedascoveringnotonlythesupplyofservices

butalsothesupplyofgoods.

Finally,theCJruledthatGermanywasallowedto

availitselfonlypartiallyoftheauthorizationgranted

bythederogatingmeasurebyusingitonlyforcertain

subcategories(suchasparticulartypesofconstruction

work)andinrespectofsuppliestocertainrecipients.

AccordingtotheCJ,Germanywasrequiredinthis

regardtorespecttheprincipleoffiscalneutralityand

thegeneralprinciplesofEUlawand,inparticular,the

principlesofproportionalityandlegalcertaintywhen

establishingthosesubcategories.TheCJruledthatit

isforthereferringcourttodeterminewhetherthose

principleshavebeenrespectedinthiscase.

CJrulesonretrospectivereductionoftaxableamountundertheSecondVATDirective(Grattan) On19December2012,theCJdelivereditsjudgmentin

theGrattancase(C-310/11).

Grattan,aUKcompany,putforwardclaimsagainstthe

UKtaxauthoritiesforrepaymentofVATrelatingtothe

years1973to1977inrespectoftheactivitiesofseveral

mailordercompanies.Themailordercompanies

operatedaspecialsalessystemthatincluded‘agents’

whoheldanaccountwiththemailordercompany.The

agentsreceivedacreditamountof10%inrelation

totheirownpurchasesofgoodsfromthemailorder

catalogueandinrelationtopurchasesmadebythird

partiesthroughthem.Theagentscouldclaimthecredit

amountsasachequepaymentoroffsetthoseamounts

againsttheiroutstandingdebtstothemailorder

companies.

TheUKtaxauthoritiestreatedtheamountscredited

forthird-partycustomersaspaymentfortheagent’s

servicesinmanagingthird-partycustomers.Grattan

objectedtothisVATtreatmentonthegroundthatit

merelyreducedthetaxableamountforthesupplies

madebythemailordercompanytotheagentsand,

therefore,thatthemailordercompaniesoverpaidVAT.

61

leasingcompany.Accordingtothegeneralconditionsof

thecontractsconcludedbetweenBGZanditsclients,

BGZremainedowneroftheleaseditemsthroughout

thedurationofthelease.BGZrequiredthattheleased

itemswereinsured.Inthisregard,BGZofferedto

provideitsclientswithinsurance.Forclientsthatwished

totakeupthatoffer,BGZsubscribedthecorresponding

insurancewithaninsurerandre-invoicedthecostof

thatinsurancetotheclient.

BGZtooktheviewthatthere-invoicingofthecostofthe

insurancewasexemptfromVAT.AccordingtothePolish

taxauthorities,however,theinsuranceserviceswere

ancillarytotheleasingservicesandassuch,subjectto

VATatthesamerateastheprincipalservice,namely

theleasingtransaction.Eventuallythematterendedup

beforetheSupremeAdministrativeCourt,whichdecided

toreferpreliminaryquestionstotheCJ.

TheCJruledthatanyinsurancetransactionnecessarily

hasaconnectionwiththeitemitcovers,butthatsucha

connectioninitselfisnotsufficienttodeterminewhether

thereisasingletransactionforVATpurposes.According

totheCJ,theaimoftheexemptionforinsurance

transactionswouldotherwisebecalledintoquestion.

Moreover,theCJruledthatthesupplyofinsurance

servicesforaleaseditemandthesupplyoftheleasing

services,inprinciple,mustberegardedasdistinctand

independentsuppliesofservices.AccordingtotheCJ,

thisisonlydifferentifthetransactionsaresoclosely

linkedthattheymustberegardedasonesupply.In

thisregard,theCJruledthatwhenalessorinsuresthe

leaseditemitselfandre-invoicestheexactcostsofthat

insurancetothelessee,suchtransactionfallsunder

theVATexemptionforinsuranceserviceswithinthe

meaningofArticle135(1)(a)oftheEUVATDirective.

CJrulesthatSpainhasincorrectlyappliedthereducedVATrateoncertainpharmaceuticalandmedicalsupplies(Commission v Spain)On17January2013,theCJdelivereditsjudgment

inthecaseofCommission v Spain(C-360/11).This

infringementprocedureconcernstheapplicationof

thereducedVATrateonpharmaceuticalproductsand

taxableamount.Inthisrespect,theBulgariantax

authoritiesconcludedonthebasisofaprovisionin

nationalVATlawthatthetaxableeventhadtakenplace

onthedatethebuildingrightwasobtainedeventhough,

atthatdate,theconstructionofthebuildinghadnot

beencompletedandthebuildinghadnotbeenputinto

use.

Eventually,thematterendedupbeforetheBulgarian

SupremeAdministrativeCourtwhichdecidedtorefer

preliminaryquestionstotheCJ.Inparticular,the

referringcourtinquiredwhetherthenationalprovision,

onthebasisofwhichthechargeableeventisregarded

totakeplacebeforecompletionofthetransaction,is

compatiblewiththeEUVATDirectiveandwhetherthe

openmarketvalueoftheconstructionservicesshould

beusedtodeterminethetaxableamount.

AccordingtotheCJ,Article65oftheEUVATDirective

makesclearthatVATonservicesbecomeschargeable

atthetimeapaymentonaccountismadeprovided

that,atthattime,alltherelevantinformationconcerning

thatfuturesupplyofservicesisalreadyknownand,

therefore,theservicesinquestionareprecisely

identified.Inthisregard,theCJruledthat,basedon

theprincipleofequaltreatment,thisalsoappliesifthe

paymentonaccountismadeinkindaslongasthat

paymentonaccountmaybeexpressedinmonetary

terms,whichisforthereferringcourttoidentify.

Furthermore,theCJruledthatArticle80(1)oftheEU

VATDirective,whichallowsMemberStatesunder

certaincircumstancestotaketheopenmarketvalue

intoaccountastaxableamount,mayonlybeapplied

inthecaseofsuppliesinvolvingfamilyorotherclose

personal,management,ownership,membershiporlegal

ties.AccordingtotheCJ,MemberStates,therefore,are

notpermittedtoapplytheopenmarketvalueasbasisof

assessmentiftransactionsarenotcompletedbetween

partieshavingsuchties.

CJrulesthatre-invoicedcostsofinsurancefallunderVATexemption(BGZ Leasing)On17January2013,theCJdelivereditsjudgment

intheBGŻ Leasingcase(C-224/11).BGZisaPolish

62

ThefourthandfinalcomplaintoftheCommission

relatedtotheusebySpainofthereducedVATrate

onaidsandequipmentessentiallyorprimarilyusedto

treathumandisabilities,butwhicharenotintendedfor

theexclusivepersonaluseofthe‘disabled’.According

toCJ,itisapparentfromtheverymeaningofthe

words‘personal’and‘exclusive’inpoint4ofAnnexIII

thatthatpointdoesnotrelatetodevicesforgeneral

use.AccordingtotheCJ,amoregeneraluseis

thereforeexcluded.Consequently,theCJruledthata

reducedVATratemaynotbeappliedtoapparatusand

accessoriesusedessentiallyorprimarilytoalleviate

physicaldisabilityinhumans,butwhicharenotintended

fortheexclusivepersonaluseofthedisabled.

CJclarifiesthedefinitionof‘buildingland’forVATpurposes(Woningstichting Maasdriel)On17January2013,theCJdelivereditsjudgment

inthecaseofWoningstichting Maasdriel(C-543/11).

WoningstichtingMaasdrielpurchasedlandfromthe

municipalityofMaasdriel.Atthattime,therewasa

buildingonthelandwhichhadbeenusedasalibrary.

Nexttothebuildingwasapublic,surfacedcarpark.

WoningstichtingMaasdrielintendedtohavehomes

builtontheland,possiblycombinedwithofficeswith

parkingfacilities.Itwasagreedthatthevendorwouldbe

responsibleforthedemolitionofthebuildingaswellas

fortheremovalofthesurfaceofthecarpark.

Afterthebuildinghadbeendemolishedandthe

resultingrubbleremoved,thelandwassuppliedto

WoningstichtingMaasdriel.Atthattime,thecarpark

wasstillinuse,asthesurfacehadyettoberemoved

andWoningstichtingMaasdrielhadnotyetobtainedthe

necessaryplanningpermissionforitsconstructionplans

fortheland,whichwasstillattheplanninganddesign

stage.

Thepartiestooktheviewthatitconcernedasupplyof

buildinglandandthatthesupply,therefore,wassubject

toVAT.Asaresult,noNetherlandstransferdutywould

bedueontherealestate.Thetaxinspector,however,

consideredthatthesupplyatissueconcernedland

medicaldevices.AccordingtotheCommission,Spain

appliesthereducedVATrateonabroadercategoryof

goodsthanthatprovidedforinpoints3and4ofAnnex

IIItotheEUVATDirective.Spain,ontheotherhand,

takestheviewthattheactionoftheCommissionshould

bedismissedbytheCJ.

ThefirstcomplaintoftheCommissionrelatestotheuse

ofthereducedVATrateonmedicalsubstanceswhich

arehabituallyandsuitablyusedinthemanufacturing

ofmedicalproducts.TheCJruledthatpoint3ofAnnex

IIItoDirective2006/112permitsareducedVATratefor

medicinalsubstancesonlyiftheyarelikelytobeused

directlybyfinalconsumersforhealthcare,prevention

ofillnessesandastreatmentformedicalandveterinary

purposes.Asaresult,theCJfoundthecomplaintofthe

Commissionwellfounded.

Secondly,theCommissionclaimedthatSpain

incorrectlyappliesthereducedVATrateonthesupply

ofmedicaldevices,material,equipmentandappliances

usedonlytoprevent,diagnose,treat,alleviateorcure

humanoranimalillnessesorailments.TheCJagreed

withtheCommissionthatpoint4ofAnnexIIItotheEU

VATDirectivewouldberenderedmeaninglessif,based

onpoint3ofAnnexIII,areducedVATratecouldbe

appliedtoanymedicaldeviceorappliance,irrespective

oftheintendedusagethereof.Therefore,theCJruled

thatpoints3and4ofAnnexIIItotheEUVATDirective

donotallowforareducedVATrateformedicaldevices,

material,equipmentandappliancesusedonlyto

prevent,diagnose,treat,alleviateorcurehumanor

animalillnessesorailments,butwhicharenotnormally

intendedtoalleviateortreatdisability,fortheexclusive

personaluseofthedisabled.

Thirdly,theCommissionclaimedthatSpainincorrectly

appliesthereducedVATrateonaidsandequipment

whichmaybeusedessentiallyorprimarilytotreat

physicaldisabilitiesinanimals.Inthisregard,theCJ

ruledthatthecomplaintoftheCommissionshouldalso

beupheld,becauseitisnotinlinewiththeEUVAT

DirectivetoapplythereducedVATratetosuchgoods

usedforthetreatmentofanimals.

63

consistedofroadfreighttransportandtheprovision

ofmechanizedserviceswithspecialequipment.Stroy

TranspurchaseddieselfuelanddeductedtheVAT

enteredontheinvoicesissuedforthosepurchases.

Followinganauditofthesuppliersofthedieselfuel,the

Bulgariantaxauthoritiesdeniedthedeductionofthe

VATonthegroundsthatitcouldnotbeestablishedhow

thesuppliershadpurchasedthedieselfuelandthat

therewerenoactualsuppliesofthedieselfueltoStroy

Trans.

IncaseC-643/11,theBulgariancompanyLVK–56

EOOD(‘LVK’),anagriculturalproducer,purchased

goodsfromsuppliers.LVKdeductedtheVATonthe

invoices.TheBulgariantaxauthoritiesdidacrosscheck

onthetwosuppliersduringwhichtheyrequiredthe

submissionofanumberofdocuments.Thesuppliersdid

notreplywithintheprescribedtimelimit.Moreover,LVK

wasrequestedtoprovideevidencethatthesupplies

hadactuallybeencarriedout,buttheprovidedevidence

containederrors.Consequently,thetaxauthoritiestook

theviewthatnosupplieshadactuallybeencarriedout

andthatVAThad,therefore,improperlybeenenteredon

theinvoices.Inthisregard,theyrefusedLVKtodeduct

theVAT.

StroyTransandLVKbothmaintainedthattherewere

actualsuppliesandthattherewasassuchnobasis

forrefusingtherighttodeduction.Inthisregard,both

taxpayersreferredtotaxadjustmentnoticesissued

totheirsuppliers.Inthesetaxadjustmentnotices,the

outputVATdeclaredbythesuppliersonthesales,as

enteredontheinvoicesissuedtoStroyTransandLVK

respectively,wasnotadjusted.AccordingtoStroyTrans

andLVK,thefactthattheoutputVATwasnotadjusted,

provedthatthesuppliesbythesupplierstoStroyTrans

andLVKrespectivelyhadactuallytakenplace.

Eventuallythecasesendedupbeforethe

AdministrativenCourtofVarna,whichdecidedtorefer

preliminaryquestionstotheCJinbothproceedingsin

ordertofindout,basedonArticle203oftheEUVAT

Directive,whatthesignificanceisofthetaxadjustment

noticesaddressedtoStroyTrans’andLVK’ssuppliers

whichhadnotbeenbuilton,notbeingbuildingland,

andtherefore,tookthepositionthatthesupplywasVAT

exemptandthatitwastaxablewiththetransferduty.

WoningstichtingMaasdrielwenttocourt.Inthefollowing

proceedings,theNetherlandsSupremeCourtwasnot

surewhethertheNetherlandsconditionsonthebasis

ofwhichitwasdeterminedwhetherlandqualifiesas

buildinglandwerecompatiblewithEUVATlaw.Based

ontheseconditions,thedemolitionworkbyitselfdidnot

havetheeffectofallowingthatlandtobeclassifiedas

‘buildingland’despitetheintentionofthepartiestouse

thelandfortheconstructionofnewbuildings.

TheCJruledthattheconditionssetoutinthenational

legislationweretoostrict.AccordingtotheCJ,the

definitionofbuildinglandcoversalllandwhichhas

notbeenbuilton,andwhichisintendedtosupport

abuildingand,therefore,intendedtobebuilton.

AccordingtotheCJ,thedeclaredintentionoftheparties

thereforehastobetakenintoconsideration,provided

thatitissupportedbyobjectiveevidence.Inthisregard,

theCJindicatedthatitwasclearfromtheorderfor

referencethatatthetimeofsupply,thedemolition

workofthebuildinghadbeencarriedoutor,asregards

thecarpark,wouldbecarriedout,forthepurposes

ofreconstruction.Shouldthereferringcourtcometo

theconclusion,basedonthefactualcircumstances

andobjectiveevidence,thatthelandwasintendedto

bebuilton,theCJconcludedthattheVATexemption

ofArticle135(1)(k)oftheEUVATDirectivewouldnot

apply.

CJrulesondeductionofVAT(improperly)enteredoninvoices(Stroy Trans and LVK – 56) On31January2013,theCJdelivereditsjudgments

intheStroy Trans and LVK – 56cases(C-642/11and

C-643/11).Thesecases,whichwerenotjoinedinthe

proceedings,bothrevolvedaroundthequestionwhether

VAT(improperly)enteredonaninvoicewasdeductible

bytherecipientoftheinvoice.

CaseC-642/11concernedtheBulgariancompany,

StroyTransEOOD(‘StroyTrans’),whoseactivities

64

CJrulesthatgrantingaccesstoaquaticparkmayconstituteservicescloselylinkedtosports(Město Žamberk)On21February2013,theCJdelivereditsjudgmentin

thecaseMěsto Žamberk(C-18/12).MěstoŽamberk

runsamunicipalaquaticparkintheCzechRepublic.In

returnforanentrancefee,thevisitorscanmakeuseofa

swimmingpooldividedintoseverallanesandequipped

withdivingboards,apaddlingpoolforchildren,water

slides,amassagepool,anaturalriverforswimming,a

beach-volleyballcourt,areasfortabletennisandsports

equipmentforhire.Thereferringcourtnotedthat,toits

knowledge,nosportsclubororganizationcarriesoutits

activitiesonthesiteandnoschoolorotherbodyused

thesiteforphysicaleducation.

InitsVATreturn,MěstoŽamberkrequestedaVAT

refund.Thetaxauthoritiesconsidered,however,that

theservicessuppliedbythemunicipalaquaticparkof

MěstoŽamberkconstitutedexemptserviceswithout

arighttodeductVATand,therefore,onlygranteda

partialVATrefund.Eventually,thecasecamebefore

theSupremeAdministrativeCourt,whichreferred

preliminaryquestionstotheCJaskingwhethernon-

organizedandunsystematicsportingactivitiesmaybe

categorizedas‘takingpartinsport’withinthemeaning

oftheVATexemptionofArticle132(1)(m)oftheEU

VATDirective.Inthisregard,italsoraisedthequestion

whetherthefactthatanaquaticparksuchthatatissue

inthemainproceedingsoffersitsvisitorsnotonlythe

opportunitytotakepartincertainsportingactivities

butalsoamusementorrest,andwhetherthefactthat

theintentionofallvisitorsisnotnecessarilytotake

partinsportingactivities,mayhaveaneffectonthe

applicabilityofArticle132(1)(m)oftheEUVATDirective.

AccordingtotheCJ,theprovisionofArticle132(1)(m)of

theEUVATDirectivehastheobjectiveofencouraging

certainactivitiesinthepublicinterest.Asregards

sportingactivities,itwouldbecountertothatobject,

accordingtotheCJ,tolimitthescopeoftheapplication

oftheexemptiontosportingactivitieswhichare

engagedinanorganizedorsystematicmanneroraimed

atparticipationinsportscompetitions.Consequently,the

CJruledthatnon-organizedandunsystematicsporting

activitieswhicharenotaimedatparticipationinsports

andwhetheritispossibletoinferfromthemthatthe

taxauthoritiesacknowledgedthattheinvoicesatissue

correspondedtotaxabletransactionswhichwere

actuallycarriedout.

Basedonsettledcaselaw,theCJpointedoutthat

theissuerofaninvoicecan,undercertainconditions,

correctimproperlyinvoicedVAT.Ifsuchcorrectionhas

nottakenplace,theCJruledthatthetaxauthoritiesare

notobligedinthecontextofataxaudittodetermine

whethertheVATinvoicedanddeclaredcorresponded

totaxabletransactionsactuallycarriedout.According

totheCJ,themerefactthatthetaxauthoritiesdidnot

correcttheoutputVATdeclaredbytheissuerofan

invoicedoesnotimplythattheyacknowledgedthatthe

invoicecorrespondedtoactualtaxabletransactions.

However,theCJalsoruledthatEUVATlawdoesnot

precludethecompetentauthorityfromcheckingwhether

actualtaxabletransactionshavetakenplaceand

rectifying,wherenecessary,theoutputVATdeclared.

AccordingtotheCJ,theoutcomeofsuchacheckis

afactortobetakenintoaccountbythenationalcourt

inordertodeterminewhetherataxabletransaction

conferringtherighttodeductinputVATbytherecipient

ofaninvoiceexists.

Finally,theCJruledthattheprinciplesoffiscal

neutrality,proportionalityandtheprotectionoflegitimate

expectationsdonotprecludetherecipientofaninvoice

frombeingrefusedtherighttodeductinputVATon

thegroundsthatthereisnotaxabletransaction,even

iftheVATdeclaredbytheissueroftheinvoicewas

notadjustedinataxadjustmentnotice.However,if

thetransactionisconsideredtohavebeencarriedout

inthelightofVATfraudorirregularitiescommittedby

theissueroftheinvoiceorupstreamofthetransaction

reliedonfordeduction,theCJruledthatitshouldbe

establishedbythereferringcourtwhether,basedon

objectivefactorsandwithoutrequiringtherecipientof

theinvoiceofcheckswhicharenothisresponsibility,

thattherecipientkneworshouldhaveknownthatthat

transactionwasconnectedwithVATfraud.

65

MrBecker,asthecontrollingentity,tookresponsibility

forthefiscalobligationsoftheVATfiscalunity.

AfterA-GmbHhadwonandperformedaconstruction

contract,criminalproceedingswerebroughtagainst

MrBeckerandP,becauseA-GmbHwassuspectedof

havingwontheconstructioncontractduetobribery.

However,thecriminalproceedingsagainstMrBecker

andPwerediscontinuedafterpaymentsofamounts

pursuanttotheGermanCodeofCriminalProcedure.

Inthecontextofthecriminalinvestigationproceedings,

MrBeckerandPwereeachrepresentedbytheir

respectivelawyers.Theagreementswiththelawyers

weresignedbyA-GmbH,representedbyMrBeckerand

P.TheinvoicesfortheservicesweresenttoA-GmbH.

MrBecker,ascontrollingentityintheVATfiscalunity,

deductedtheVATchargedontheinvoices.TheFederal

FinanceCourthaddoubtsastowhethertheVATon

theserviceswasdeductiblebyA-GmbHanddecidedto

referpreliminaryquestionstotheCJ.

TheCJruledthattheservicesbythelawyerssought

directlyandimmediatelytoprotecttheprivateinterests

ofthetwoaccusedmanagingdirectors,whowere

chargedwithoffencesrelatingtotheirpersonal

behaviour.Inthisregard,theCJtookintoaccountthat

thecriminalproceedingshadbeenbroughtagainstthem

intheirpersonalcapacityandnotagainstA-GmbH,

althoughproceedingsagainstA-GmbHwouldhave

alsobeenlegallypossible.Assuch,thecostsrelating

tothoseservicescouldnot,accordingtotheCJ,be

consideredashavingbeenincurredforthepurposesof

theeconomicactivitiesofA-GmbHasawhole.

Moreover,theCJacknowledgedthattheservicesby

thelawyerswouldnothavebeenperformedifA-GmbH

hadnotexercisedtheVATtaxableconstructionactivities

andthat,therefore,therewasacausallinkbetweenthe

two.However,accordingtotheCJ,itdidnotconcerna

directandimmediatelink.Consequently,theCJruled

thattheservicesbythelawyerswerenotusedforthe

purposesoftaxabletransactionswithinthemeaning

ofArticle17(2)(a)oftheSixthEUVATDirectiveand

theVATonthecostsincurredwas,therefore,not

deductiblebyA-GmbH.Inthisregard,thefactthat

competitionsmaybecategorizedastakingpartinsport

withinthemeaningofArticle132(1)(m)oftheEUVAT

Directive.

Inthecaseofanaquaticparkthatoffersvisitorsnot

onlyfacilitiesforengaginginsportingactivitiesbutalso

othertypesofamusementorrest,theCJruledthatthe

referringcourtshouldfirstestablishwhetherasingle

supplyforVATpurposeshastobetakenintoaccount

ormultiplesupplieseachwiththeirownVATtreatment.

Thefactthatthereisonlyonetypeofentranceticket

offeredfortheaquaticparkthatgivesaccesstoallof

thefacilitiesconstitutes,accordingtotheCJ,astrong

indicationoftheexistenceofasinglesupply.

Ifthereferringcourtestablishedthatthereisasingle

supplyforVATpurposes,theCJruledthatthereferring

courtshouldsubsequentlyestablishwhichelement

ofthatsupplyispredominantfromthepointofview

ofthetypicalcustomer.Inthisregard,accordingto

theCJ,itisnecessarytotakeaccountofthedesign

andcharacteristicsoftheaquaticparkandasregards

theaquaticareas,inparticular,whetherthoseareas

lendthemselvestoswimmingofasportingnatureor

whethertheyarearrangedsothattheylendthemselves

essentiallytorecreationaluse.Shouldthesporting

activitiesformthepredominantelementofthesupply

fromthepointofviewofthecustomer,theaccessto

theaquaticpark,whichoffersvisitorsnotonlyfacilities

forengaginginsportingactivitiesbutalsoothertypes

ofamusementorrest,constitutesasupplyofservices

closelylinkedtosportwithinthemeaningoftheVAT

exemptionofArticle132(1)(m)oftheEUVATDirective.

CJrulesthatVATonlegalcostsforcriminalproceedingsbroughtagainstmanagingdirectorsintheirpersonalcapacityisnotdeductiblebythecompany(Wolfram Becker)On21February2013,theCJdelivereditsjudgment

intheWolfram Beckercase(C-104/12).MrBecker

wasthemajorityshareholderintheGermancompany

A-GmbH,whichcarriedoutconstructionworks.A-GmbH

hadthreemanagingdirectorsamongstwhichMrBecker

andP,theauthorizedrepresentativeofA-GmbH.Mr

BeckerandA-GmbHformedaVATfiscalunityinwhich

66

financialcapacitytocarryoutthedeclaredeconomic

activityofprovidingconstructionservices.Inthe

followingproceedings,Latviancourtsruledinfirst

instanceandinappealthattheVATregistrationcould

notberefused.TheLatviantaxauthoritiesappealed

onapointoflawtotheAugstākāstiesasSenāts,which

courtdecidedtoreferpreliminaryquestionstotheCJ.

AccordingtotheCJ,MemberStateshaveacertain

discretiononthebasisofArticle213oftheEUVAT

Directivewhentheyadoptmeasurestoensurethe

identificationoftaxablepersonsforVAT.TheCJruled,

however,thatsuchregistrationcannotberefused

withoutlegitimategrounds.Inthisregard,theCJ

indicatedthatthosewhoplantostarteconomicactivities

forVATpurposesandwhoincurtheinitialinvestment

expenditureare,inprinciple,alsoconsideredasVAT

taxablepersonseventhoughtheymightnotyethave

thematerial,technicalandfinancialresourcesto

carryouttheactivities.Consequently,theCJruled

thatArticles213and214oftheEUVATDirective,in

principle,donotprecludeMemberStatesfromrefusing

toassignaVATnumbersolelyonthegroundsthatthey

arenotinthepositiontoshowthattheyhaveattheir

disposalthematerial,technicalandfinancialresources

requiredfortheeconomicactivity.However,theCJ

ruledthattheVATregistrationmayberefusedinorder

topreventVATevasionifthereissoundevidencegiving

objectivegroundsforconsideringthatitisprobablethat

theVATnumberwillbeusedfraudulently.

CJrulesonscopeofexemptionformedicalservices(PFC Clinic)On21March2013,theCJdelivereditsjudgmentin

thecasePFC Clinic(C-91/12).PFCClinicAB(‘PFC’)

offersmedicalservicesinthefieldofplasticsurgery

andcosmetictreatments.TheSwedishtaxauthorities

deniedaclaimforaVATrefundbyPFConthegrounds

thatitrelatedtoVATexempttransactions.PFCwent

tocourttakingtheviewthattheservicesofferedin

respectofplasticsurgeryandcosmetictreatmentsdid

notconstitutemedicalcarewithinthemeaningofthe

VATexemptionofArticle132(1)(b)and(c)oftheEU

VATDirective.Eventuallythecaseendedupbefore

theSupremeAdministrativeCourt,whichcourtreferred

preliminaryquestionstotheCJ.

domesticcivillawobligedacompanytoincurthecosts

relatingtocriminalproceedingsofitsrepresentative’s

interestswas,accordingtotheCJ,irrelevantasonlythe

objectiverelationshipbetweentheservicesperformed

andthetaxableeconomicactivitywasdecisiveforVAT

purposes.

CJrulesthatIrelandincorrectlyappliesareducedVATrateoncertainsuppliesofhorsesandgreyhounds(Commission v Ireland)On14March2013,theCJdelivereditsjudgmentin

thecaseCommission v Ireland(C-108/11).In2007,

theCommissionstartedaninfringementprocedure

againstIrelandbecauseofthefactthatIrelandapplieda

reducedVATratetosuppliesofgreyhoundsandhorses

whicharenotnormallyintendedforthepreparation

offoodstuffs,tothehireofhorsesandtocertain

inseminationservices.AccordingtotheCommission,

thiswasnotinlinewiththeEUVATDirective.Eventually

thematterwasbroughtbeforetheCJ.

TheCJexaminedwhether,basedonArticle110ofthe

EUVATDirective,thereducedVATrateinquestionhad

beenadoptedforclearlydefinedsocialreasonsand

forthebenefitofthefinalconsumer.Inthisregard,the

CJruledthatIrelandhadnotproducedtherequired

evidencethatthereducedVATrateinquestionhad

beenadoptedforreasonsofexclusivelysocialinterest

or,atleast,forreasonsofprincipallysocialinterest.

AccordingtotheCJ,itappearedthatthatthemeasures

inquestionhadbeenadoptedmainlyforeconomic

reasons.Moreover,theCJruledthatthereduced

VATratedidnotmainlybenefitthefinalconsumer.

Consequently,itdeclaredthattheclaimofthe

Commissionwaswellfounded.

CJrulesthatVATregistrationmaynotberefusedwithoutsoundlegitimategrounds(Ablessio)On14March2013,theCJdelivereditsjudgmentin

thecaseValsts ieņēmumu dienests v Ablessio SIA

(C-527/11).AblessioisaLatviancompanythatapplied

totheLatviantaxauthoritiesforaVATregistration.

Theregistrationwasrefused,however,onthegrounds

thatAblessiodidnothavethematerial,technicaland

67

Netherlands‘holdingdecree’wasnotinlinewiththeEU

VATDirective,becausecertainholdingcompaniesthat

donotqualifyasaVATentrepreneur,areabletoforma

VATgroupwiththeirNetherlandsshareholding(s).

BasedonaliteralinterpretationofArticle11oftheEU

VATDirective,theCJruledthatnon-VATentrepreneurs

may,inprinciple,alsoformpartofaVATgroup,because

thatarticledoesnotmakeadistinctionbetween

‘persons’and‘taxablepersons’.Moreover,theCJruled

thatthecontextandobjectiveofArticle11oftheEUVAT

Directive,contrarytotheclaimsoftheCommission,do

notleadtoadifferentconclusion.

TheCJ,therefore,concludedthatnon-VAT

entrepreneursmayformpartofaVATgroupifthe

customaryrequirementsoffinancial,organisational

andeconomiclinksaremet.Consequently,theactions

broughtbytheCommissionweredismissedbytheCJ.

CJclarifiesrulesonrefundofimproperlyinvoicedVAT(Rusedespred) On11April2013,theCJdelivereditsjudgementin

thecaseRusedespred(C-138/12).Rusedespred,a

Bulgariancompany,hadissuedaninvoicetoacustomer

onwhichVAThadimproperlybeencharged.Inthe

courseofanaudit,theBulgariantaxauthoritiesrefused

thecustomerthedeductionoftheVATmentionedonthe

invoiceconsideringthattheVAThadimproperlybeen

charged.

Subsequently,Rusedespredappliedforarefundofthe

improperlyinvoicedVAT,whichithadremittedtothetax

authorities.ThetaxauthoritiesdeniedtheVATrefund

onthegroundthatthepaymentofVAThadnotbeen

wronglymadeastheVAThasbeenenteredonthe

invoice.Accordingtothetaxauthorities,Rusedespred

hadtofollowaspecificprocedureinordertocorrect

theerror,whichprocedurerequiredacorrectionofthe

incorrectinvoice.However,suchcorrectionwasno

longerpossibleundernationallawduetothefactthat

thesupplyhadalreadybeenthesubjectofataxaudit

andthatthecustomerofthesupplyhadbeenrefused

deductionbasedonafinaltaxadjustmentnotice.

EventuallythecaseendedupbeforetheAdministrativen

TheCJindicatedthatserviceswiththepurposeof

treatingorprovidingcareforpersonswho,asaresultof

anillness,injuryorcongenitalphysicalimpairment,are

inneedofplasticsurgeryorothercosmetictreatment

mayfallwithintheconceptof‘medicalcare’and‘the

provisionofmedicalcare’ofArticle132(1)(b)and(c)

oftheEUVATDirective,whereassurgeryforpurely

cosmeticreasonscannotbecoveredbytheVAT

exemption.The‘purpose’oftheservice,therefore,isof

relevance.Inthisregard,theCJruledthatthesubjective

understandingofthepersonwhoundergoesplastic

surgeryoracosmetictreatmentisinitselfnotdecisive

inordertodeterminewhethertheinterventionhasa

therapeuticpurpose.AccordingtotheCJ,itdependson

amedicalassessment,whichmustbebasedonfindings

ofamedicalnaturemadebyapersonqualifiedforthat

purpose.

Moreover,theCJruledthatthefactthattheservices

arerenderedbyalicensedmemberofthemedical

professionorthatthepurposeofsuchinterventionsis

determinedbysuchaprofessional,mayinfluencethe

assessmentofwhethertheinterventionsfallwithinthe

scopeoftheVATexemption.

Finally,inorderthegiveacompleteanswer,theCJalso

ruledthatitshouldnotonlybedeterminedwhetherthe

servicesfallwithintheconceptof‘medicalcare’and‘the

provisionofmedicalcare’,butthataccountmustalsobe

takenofalltherequirementslaiddowninArticle132(1)

(b)and(c)oftheEUVATDirectiveandoftheother

relevantprovisionsofTitleIX,Chapters1and2thereof.

CJrulesthatnon-VATentrepreneursmayparticipateinaVATgroup(Commission v Ireland and others)On9April2013and25April2013,theCJdeliveredits

judgmentsinanumberofinfringementproceedingsthat

theCommissionhadstartedagainstvariousMember

States.TheyconcernedthecasesvIreland(C-85/11),

theNetherlands(C-65/11),Finland(C-74/11),theUK(C-

86/11),Denmark(C-95/11),andtheCzechRepublic(C-

109/11).AccordingtotheCommission,theseMember

Statesincorrectlyallowednon-VATentrepreneurstobe

partofaVATgroup.WithrespecttotheNetherlands,for

example,theCommissionwasoftheopinionthatthe

68

placed,directlyorindirectly,underthesupervisionof

theFinanceInspectorateandwhicharecoveredby

apublicmonitoringsystem.AccordingtotheCJ,the

Commissionhadfailedtoshowconvincinglythat,inthe

lightoftheneedtocombattaxevasionandavoidance,

themeasureisnotwellfounded.Therefore,theCJ

dismissedtheCommission’saction.

CJrulesthatdeductionofVATmayinprincipleberefusedincaseofincompleteinvoices(Petroma Transport SA)On8May2013,theCJdelivereditsjudgmentincase

C-271/12.ThecaseconcernsaBelgiangroupof

companies,‘theMartensGroup’.Petroma Transports

SA(‘Petroma’)wasthemaincompanyintheMartens

Groupintermsofstaffandprovidednumerousservices

toothercompanieswithinthatgroup.Fortheintra-group

services,Petromareceivedremunerationonthebasisof

hoursworkedbythestaff.

TheBelgiantaxauthoritiesquestionedtheintercompany

invoicesandresultingdeductionsofinputVAT,because

theinvoiceswereincompleteandcouldnotbeshown

tocorrespondtoactualservices.Mostinvoicesincluded

anoverallamountwithnoindicationofunitpriceor

hoursworkedbythestaff.Asaconsequence,the

taxauthoritiesdeniedthedeductionsofinputVAT.

Subsequently,Petromaprovidedadditionalinformation,

butthetaxauthoritiestookthepositionthatthis

informationlackedanyprobativevalue.

EventuallythecasewasbroughtbeforetheCourtof

Appeal,whichdecidedtoreferquestionstotheCJ.The

referringcourtinessencewantedtoknowwhetherthe

righttodeductVATcouldberefusedbecauseofthefact

thattheinvoiceswereincomplete,ifthoseinvoiceswere

supplementedafterwardstoproveoccurrence,nature

andamountofthetransactionsinvoiced.

TheCJruledthatMemberStatesmay,inprinciple,

refusethedeductionofVATiftaxablepersons,as

recipientsofservices,exercisethatrighttodeduct

basedoninvoiceswhichareincomplete.Accordingto

theCJ,thisalsoappliesiftheinvoicesarecorrected

SadVarna,whichcourthaddoubtsastowhetherthis

wasinlinewithEUVATlaw.

TheCJruledthatinsuchcircumstances,thecondition

thattheinvoiceiscorrected,whichconditionis

impossibleforRusedespredtosatisfy,goesfurther

thannecessarytoachievetheobjectivepursuedby

Article203oftheEUVATDirectiveofeliminatingthe

riskoflossoftaxrevenue.Consequently,theCJruled

thattheprincipleofneutralityprecludesataxauthority

fromrefusingtherefundofimproperlyinvoicedVAT

onthegroundthatthesupplierhadnotcorrectedthe

erroneousinvoice,incircumstanceswherethatauthority

haddefinitivelyrefusedthecustomertherighttodeduct

thatVATandsuchdefinitiverefusalresultsinthesystem

forcorrectionprovidedforundernationallawnolonger

beingapplicable.AccordingtotheCJ,ataxableperson

mayinsuchcircumstancesalsorelyontheprinciple

offiscalneutralitytocontestthedecisionofthetax

authorities.

CJrulesonrestrictionofVATgroupingtospecificsectors(Commission v Sweden) On25April2013,theCJdelivereditsjudgementinthe

infringementprocedureoftheCommission v Sweden

(C-480/10).TheCommissiontooktheviewthatSweden

incorrectlyrestrictedtheirVATgroupingschemeto

suppliersoffinancialservicesandinsuranceservices.

AccordingtotheCommission,onceaMemberState

hasdecidedtoimplementtheVATgroupingscheme,it

shouldbeopentoallundertakingsintheMemberState

regardlessoftheirtypeofactivity.

AccordingtotheCJ,Article11oftheEUVATDirective

doesnotprovidethatMemberStatesareableto

imposeotherconditionsoneconomicoperatorsin

ordertoformaVATgroup,suchascarryingouta

certaintypeofactivityorbeingpartofaparticular

sectorofactivity.However,theCJruledthatbasedon

thesecondparagraphoftheprovision,MemberStates

mayadoptmeasuresthatarerequiredtopreventtax

evasionoravoidance.Forthisreason,Swedenhad

submittedthatithaddecidedtorestrictthepossibility

ofVATgroupingtothoseundertakingswhichare

69

Regardingthevalueoftheassetstobetakeninto

account,theCJruledthatthevalueisdeterminedatthe

timeofthecessation,whichthereforetakesintoaccount

thechangeinthevalueofthoseassetsbetweentheir

acquisitionandthecessation.AccordingtotheCJ,

depreciationshouldthereforebetakenintoaccount.

Finally,theCJruledthatArticle74oftheEUVAT

Directivehasdirecteffect.

CJrulesonPolishprovisiononhowtoestablishthetimeacompanybecomesliabletopayVAT(TNT Express Worldwide) On16May2013,theCJdelivereditsjudgmentincase

C-169/12.ThecaseconcernsTNT Express Worldwide

(Poland) so. Z o.o.(‘TNT’),acompanyestablishedin

Poland,thatcarriesoutcourier,postal,transportand

shippingservices.TNTaskedthePolishtaxauthorities

foraninterpretationofthenationalVATprovisionson

howtoestablishthetimeatwhichTNTwasliableto

payVATonitsservices.ThePolishtaxauthoritiestook

theviewthatadistinctionhadtobemadebetweenthe

courierandpostalservicesontheonehandandthe

transportandshippingservicesontheother.Regarding

thetransportandshippingservices,thetaxauthorities

wereoftheopinionthatreceiptofthepaymentgaverise

toliabilityofpaymentofVAT,butthatsuchliabilityarose

atthelatest30daysfromthedateonwhichtheservices

weresupplied.TNTclaimedthatthiswasnotinlinewith

Article66oftheEUVATDirectiveandwenttocourt.In

thefollowingproceedingsthematterendedupbefore

theSupremeAdministrativeCourt,whichcourtdecided

toreferpreliminaryquestionstotheCJ.

BasedonArticle63oftheEUVATDirective,VAT

becomesdue,inprinciple,onthedateonwhichgoods

orserviceshavebeensupplied.However,Article66

oftheEUVATDirectiveauthorizesMemberStatesto

providethatVATbecomesdueatcertainotherspecific

times.Inthisregard,theCJruledthatthePolish

implementationwasnotcoveredbyArticle66ofthe

EUVATDirective.AccordingtotheCJ,EUVATlaw

thereforeprecludesnationallegislationwhichprovides

that,inrespectoftransportandshippingservices,VAT

afterthedecisiontorefusetherighttodeducthasbeen

adopted.Moreover,theCJruledthattheprincipalof

fiscalneutralityinsuchcircumstancesdoesnothave

abearingonthisconclusion,astheVATwasdueand

correctlyremittedtothetaxauthorities.

CJrulesonbasisofassessmentforassetsheldaftercessationoftaxableactivities (Hristomir Marinov) On8May2013,theCJdelivereditsjudgmentincase

C-142/12.Thecaseconcernsthenon-complianceby

Mr. Hristomir Marinov(‘Marinov’)ofhisVATobligations.

Inparticular,hedidnotpaytheamountofVATdue

basedontheVATdeclarations.Asaresult,the

BulgariantaxauthoritiesremovedMr.Marinovfromthe

VATregister.ThetaxauthoritiesalsoindicatedthatVAT

wasdueonsomeroadvehicles,whichhadbeenhired

byMr.Marinovunderleasingcontractsandforwhich

hehaddeductedVAToneachlease.Thetaxauthorities

assessedthetaxableamountofVATdueinrespectof

thosevehiclesbasedontheopenmarketvalueofthe

vehicles.

Mr.Marinovdidnotagreewiththetaxassessment

noticeandbroughtanactionbeforetheAdministrative

CourtofVarna.Mr.Marinovclaimedthattheassets

shouldnothavebeenassessedbasedontheiropen

marketvalueandthatdepreciationshouldhavebeen

takenintoaccount.TheAdministrativeCourtofVarna

decidedtoreferpreliminaryquestionstotheCJ,asking

whethertheBulgariannationalprovisionswereinline

withArticle74oftheEUVATDirectiveandwhetherthat

Articlehasdirecteffect.

TheCJfirstansweredthequestionwhetherthe

cessationofthetaxableeconomicactivityresultingfrom

theremovalofthetaxablepersonfromtheVATregister

isalsocoveredbyArticle18(c)oftheEUVATDirective.

AccordingtotheCJ,Article18(c)oftheEUVAT

Directivecoversthecessationofataxableeconomic

activityingeneral,withoutdifferentiatingbetweenthe

causesorthecircumstancesofthatcessation,and

excludingonlytheparticularcasesreferredtoinArticle

19oftheEUVATDirective.

70

waspreventedfromdeductinginbreachofEUVAT

law.However,theCJruledthataMemberStatemay

refusetorepaypartoftheVATonthegroundthatsuch

repaymentwouldgiverisetounjustenrichmentforthe

benefitofthetaxableperson.Inordertoneutralize

theeconomicburdenrelatingtotheprohibitionon

deductingVAT,theCJruledthattheamountofthe

repaymentwhichAlakormayclaimmustcorrespondto

thedifferencebetweentheamountofVATwhichAlakor

wasunabletodeductduetothenationallegislation

incompatiblewithEUVATlaw,andtheamountofaid

grantedtoAlakorthatexceededtheaidwhichwould

havebeengrantedhadAlakornotbeenpreventedfrom

exercisingitsrighttodeduct.

CJrulesonthequalificationaseconomicactivityofexploitingaprivatephotovoltaicinstallationwhichisconnectedtothenetwork(Fuchs) On20June2013,theCJdelivereditsjudgement

in case Finanzamt Freistadt Rohrbach Urfahr

v Unabhängiger Finanzsenat Außenstelle Linz

(C-219/12).ThecaseconcernsMr. Fuchswho

installedaphotovoltaic(solarpanel)systemwhich

produceselectricitybuthasnostoragecapacity.

Itsannualproductionislessthanthehousehold’s

annualconsumption.Mr.Fuchshasacontractwithan

electricityproviderunderwhichhesellselectricityto

thatprovider,whoalsosupplieselectricitytoMr.Fuchs.

Sinceheconsidersthathissaleofelectricityconstitutes

aneconomicactivityMr.Fuchsseekstorecoverthe

inputVATpaidonhissystemanditsinstallation.

TheAustrianFinanzamtrefusetoreimburseMr.Fuchs’s

inputtaxonthegroundthathehasnotcarriedoutany

economicactivitybyoperatinghisphotovoltaicsystem.

Therefore,theHigherAdministrativeCourtwantedto

knowwhethertheoperationofanetwork-connected

photovoltaicinstallationwithnoindependentpower

storagecapabilityonoradjacenttoaprivatelyowned

houseusedforprivateresidentialpurposes,whichis

technicallydesignedsuchthatthepowergeneratedby

theinstallationis,onacontinuingbasis,belowthetotal

quantityofpowerprivatelyconsumedbytheinstallation

operatorintheprivatelyownedhouse,constitutesan

‘economicactivity’oftheinstallationoperator.

istobecomechargeableonthedateonwhichpayment

isreceivedinfullorinpart,butnolaterthan30days

fromthedateonwhichthoseservicesaresupplied,

evenwheretheinvoicehasbeenissuedearlierand

specifiesalaterdeadlineforpayment.

CJclarifiesrulesonrepaymentofinputVATforwhichthedeductionwaspreventedinbreachofEUVATlaw(Alakor) On16May2013,theCJdelivereditsjudgmentin

theAlakorcase(C-191/12).Thecaseconcerns

theHungariancompanyAlakorGabonatermelőés

ForgalmazóKft(‘Alakor’),whichconcludedasubsidy

contractwiththeMinistryofAgricultureandRural

Development.Basedonanationalprovision,Alakor

wasnotentitledtodeductinputVATonthesubsidised

projectinsofarasitwasfinancedwiththesubsidy.

However,thenon-deductibleVATduetothesubsidy

couldbeclaimedas‘eligibleexpenditure’underMinistry

ofFinanceguidelines.

InthePARATAutomotiveCabriocase(C-74/08)the

CJheldthatnationallegislationwhich,inthecaseof

acquisitionofgoodssubsidizedbypublicfunds,allows

thedeductionofrelatedVATonlyuptothelimitofthe

non-subsidizedpartofthecostsofthatacquisition,is

precludedbyEUVATlaw.Therefore,Alakorconsidered

thatitcoulddeducttheentiretyoftheinputVATpaidfor

itstaxableoperationsandthattheinputVATpreviously

consideredasnon-deductiblecouldnotcontinuetoform

partofthe‘eligibleexpenditure’oftheproject.Alakor

appliedforarefundoftheVATwithinterestforlate

payment.ThetaxauthoritiesgrantedtheVATrefund,

butsetthesumataloweramountinviewofthefactthat

AlakorhadalreadyreceivedpartoftheVATas‘eligible

expenditure’fromtheMinistryofAgricultureandRural

Development.Alakorclaimedthatthetaxauthorities

hadincorrectlyrestrictedtherighttodeductandwent

tocourt.Inthesubsequentproceedings,theCourtof

Cassationdecidedtoreferpreliminaryquestionstothe

CJ.

AccordingtotheCJ,aMemberState,inprinciple,must

repaytheentiretyoftheVATwhichataxableperson

71

totransferownershipinthosepropertiestoBonMarin

intheeventofasuccessfulbid.Mr.Kostovreceiveda

remunerationofEUR25,500.

TheBulgariantaxinspectorstatedthatMr.Kostovhad

receivedthisremunerationinconsiderationforataxable

supplyofservicesandhadmadethesupplyasa

taxablepersonforVATpurposes.Therefore,heshould

havepaidVATontheremuneration.

Mr.Kostovclaimedthathehadprovidedtheservice

onanoccasionalbasisandnotinconnectionwithhis

economicactivityasaself-employedprivatebailiff.

Inthosecircumstances,thenationaljudgedecided

toasktheCJ,inessence,whetherArticle9(1)ofthe

VATDirectiveistobeinterpretedasmeaningthata

personwhoistaxableforVATpurposesinrespectof

hisactivitiesasaself-employedbailiffmustberegarded

asa‘taxableperson’inrespectofanyothereconomic

activitycarriedoutoccasionally.

Byitsjudgement,theCJansweredthequestioninthe

affirmative:theanswertothequestionreferredisthat

Article9(1)oftheVATDirectiveistobeinterpretedas

meaningthatanaturalpersonwhoisalreadyataxable

personforVATpurposesinrespectofhisactivitiesas

aself-employedbailiffmustberegardedasa‘taxable

person’inrespectofanyothereconomicactivity

carriedoutoccasionally,providedthatthatactivity

constitutesanactivitywithinthemeaningofthesecond

subparagraphofArticle9(1)oftheVATDirective.

CJrulesonsupplyofimmovablepropertysoldbyajudgmentdebtorinacompulsorysaleprocedure(Promociones y Construcciones) On13June2013,theCJrendereditsjudgmentincase

Promociones y Construcciones BJ 200 SL(C-125/12).

PromocionesyConstruccioneswasdeclaredinsolvent

byorderof22February2010.Duringtheinsolvency

proceedings,anopportunitytoselltwoofthecompany’s

propertiesarose.Onthebasisofafavourablereport

fromtheinsolvencyadministrator,theSpanish

judgeauthorisedtherequesttocarryoutthatsaleto

purchaserBanestoS.A.

On7March2013,AdvocateGeneralSharpston

deliveredheropinion.Sheconcludedthattheoperation

ofanetwork-connectedphotovoltaicinstallationonor

adjacenttoaprivatelyownedhouseusedforprivate

residentialpurposesconstitutesaneconomicactivity

totheextentthatelectricityproducedbytheinstallation

issuppliedtothenetworkforconsideration.Insuch

circumstances,inputtaxpaidontheacquisitionofthe

installationmaybedeductedfromoutputtaxchargedon

thesupplyofelectricitytothenetwork,subjecttoallthe

provisionsofthatdirectivewhichgovernsuchdeduction.

On20June2013,theCJruledthattheoperationofa

photovoltaicsystemconstitutesan‘economicactivity’

ifitisdesignedsuchthattheelectricityproducedisa)

alwayslessthantheelectricityprivatelyconsumedby

itsoperatorandb)suppliedtothenetworkinexchange

forincomeonacontinuingbasis.Itfollowsthat,fora

findingthattheexploitationofpropertyiscarriedout

forthepurposeofobtainingincometherefrom,itis

irrelevantwhetherornotthatexploitationisintendedto

makeaprofit.

CJrulesonVATdutyforprivateservicefromVAT-registeredprivatebailiff(Kostov) On13June2013,theCJgaveitsjudgmentincase

Galin Kostov v Direktor na Direktsia «Obzhalvane I

upravlenie na izpalnenieto» - Varna pri Tsentralno

upravlenie na Natsionalnata agentsia za prihodite

(C-62/12),onwhetheraVATregisteredpersonistobe

treatedasataxablepersoninrelationtootheractivities.

Inthiscase,Mr.Kostovisaself-employedprivatebailiff

whoisregisteredforthepurposesofVAT.However,he

alsoprovidedotherservices,onanoccasionalbasis,

notinconnectionwithhisactivityasaprivatebailiff.

Theseotheractivitiesinvolvedthepurchaseandsaleof

land.

In2008,Mr.Kostovconcludedacontractofagencywith

BonMarin.Underthatcontract,MrKostovundertook,

asagentforBonMarin,tomakebidsinthecontextof

threeauctionsofthreeplotsofpartiallybuilt-uponland

whichwereownedbytheStateunderprivatelaw,were

managedbytheMinistryofDefenceandcoveredan

areaofapproximately40,000m2.Healsoundertook

72

managementactivitiescarriedoutforthatparticipation

ceasesimultaneously.

Xheld30%ofthesharesinA,acompanycarryingon

businessinthefieldofautomation.Asamemberofthe

‘ManagementBoard’,Xcarriedoutmanagementwork

forAinreturnforacontractuallyagreedremuneration.

XandtheotherholdersofsharesinAsoldtheirshares

toDPlc.Inconnectionwiththatsale,themanagement

workforAcametoanendandXresignedfromA’s

ManagementBoard.Anumberofserviceswere

suppliedtoXinconjunctionwiththatsaleofshares,and

theinvoicesprovidedforVATtobecharged.Xdeducted

thatVATinitsVATreturns,onthebasisthatthedisposal

ofitsshareholdingconstitutedthetransferofatotalityof

assetsandofservicesandthatthecostsincurredbyX

inconnectionwiththattransactionhadtobeconsidered

partofthegeneralcostsassociatedwithitsentire

economicactivityandwere,therefore,fullydeductible.

Accordingtotheregionalcourtofappeal,thetransfer

ofX’sshareholdingwasnotwithinthescopeofVAT

becauseitwasnotaneconomicactivity.Itconsidered,

however,thattheinputVATcouldbededucted,

sincetheshareshadbeensoldandtransferredin

conjunctionwithactscarriedoutbyXasatrader.The

StaatssecretarisvanFinanciënappealedincassation

againstthisjudgement.

TheCJruledthatthesaleofa30%participationisnot

toberegardedasatransferofagoingconcernwhereby

theassetsandliabilitiesarecontinued.Eachtransaction

mustbeassessedindividuallyandindependently.

Therefore,thefactthatalltheshareholdersareselling

theirsharestothesamepurchaseratpracticallythe

sametime,asaresultofwhichthepurchaserbecomes

theownerof100%ofthesharesintheundertaking

concerned,isofnoimportance.Furthermore,thefact

thatthesharesweretransferredatthesametimeasthe

managementactivitiesceasedhasnobearingonthe

answergiventothequestionsreferredforapreliminary

ruling.

Theauthorisationofthatsale,whichisanintegralpart

ofPromocionesyConstrucciones’scommercialactivity,

gaverisetoachargeableeventforVATpurposes.The

referringcourtexpresseddoubtsastotheidentityof

thedebtorliableforpaymentofthattaxdebt,namely

whetheritwasPromocionesyConstruccionesorthe

purchaseroftheproperties.

Thereferringcourtwantedtoknow,inessence,whether

Article199(1)(g)oftheVATDirectiveistobeinterpreted

asmeaningthateverysaleofimmovableproperty

carriedoutbythedebtorinthecourseofinsolvency

proceedingscomeswithintheconceptof‘compulsory

saleprocedure’,includingwherethesaleiscarriedout

inthecourseofthefirstphasewhichdoesnotform

partoftheliquidationproceedingsandiscarriedout

pursuanttoavoluntaryagreementbetweentheparties.

TheCJruledthatArticle199(1)(g)oftheDirectivemust

beinterpretedasmeaningthateverysaleofimmovable

propertybyajudgementdebtorcarriedoutnotonlyin

thecourseoftheliquidationofthedebtor’sassetsbut

alsointhecourseofinsolvencyproceedingsoccurring

beforesuchliquidationcomeswithintheconceptofa

compulsorysaleprocedure,providedthatsuchasale

isnecessaryinordereithertosettlecreditors’claims

ortoenablethedebtortore-establishitseconomicor

professionalactivities.

CJholdsthatforVATpurposes,thesaleofa30%participationisnottoberegardedasatransferofagoingconcernwherebytheassetsandliabilitiesarecontinued(X BV)On30May2013,theCJruledoncaseStaatssecretaris

van Financiën v X BV(C-651/11).Themainquestionin

thiscasewaswhetherthedisposalof30%oftheshares

inacompany–towhichthetransferorsuppliesservices

thataresubjecttoVAT–constitutesthetransferofa

totalityofassetsorservicesorpartthereofwithinthe

meaningofthoseprovisions.Thesecondquestion

waswhatwouldhappenifalltheminorityshareholders

(whohadallbeensupplyingservicestothecompany)

soldtheirsharesinthecompanytothesameperson

atroughlythesametime.Thethirdquestionwas

whatwouldhappenifthesharesaresoldandthe

73

AccordingtotheCJ,thenationalcourtinthisrespect

hastoassesswhetherinthecircumstancesofthecase

athandthefinegoesfurtherthannecessarytoensure

thecorrectcollectionoftaxandtopreventevasion.

CJrulescontractualtermsarenotdecisivetodeterminethesupplierandrecipientofservices(Paul Newey)On20June2013,theCJdelivereditsjudgmentinthe

case Paul Newey(C-653/11).MrNeweyrenderedVAT

exemptloanbrokerservicesintheUK.Inthecourseof

hisbusiness,MrNeweypurchasedadvertisingservices.

Inordertoavoidbeingconfrontedwithnon-deductible

VATontheadvertisingservices,MrNeweysetup

acompanycalledAlabasterinJersey.Thebroking

contractswereconcludeddirectlybetweenthelenders

andAlabaster.However,Alabasterdidnotitselfprocess

theloanapplications,butusedMrNewey’sservices

forthatpurpose,whichwereprovidedunderaservices

agreement.Inpractice,potentialborrowerscontacted

MrNeweyorhisemployeesdirectlyintheUK.

TheadvertisingserviceswererenderedbyWallace

Barnaby,acompanynotconnectedwithAlabaster

andalsoestablishedinJersey.WallaceBarnabyin

turnacquiredtheadvertisingservicesfromadvertising

agenciesestablishedintheUK.Underthelawsin

Jersey,thepaymentsmadebyAlabastertoWallace

Barnabyfortheadvertisementserviceswerenotsubject

toVAT.MrNewey(indirectly)hadthepowertoapprove

thecontentoftheadvertisements.

HerMajesty’sCommissionersofRevenueandCustoms

(‘HMRC’)tooktheviewthattheadvertisementservices

hadbeenrenderedtoMrNeweyintheUKandthat

thoseserviceswere,therefore,taxableintheUK.

Furthermore,HMRCwasoftheopinionthattheloan

brokingservicesweresuppliedintheUKbyMrNewey.

Inthealternative,ifAlabasterhadtoberegardedasthe

recipientoftheadvertisementservicesandthesupplier

oftheloanbrokerservices,HMRCtooktheviewthat

therewasabuseofrights.Eventually,thecaseended

upbeforetheUpperTribunal,whichcourtdecidedto

referpreliminaryquestionstotheCJ.

AccordingtotheCJ,therelevantcontractualterms

constituteafactortobetakenintoaccountforidentifying

thesupplierandrecipientofservices.However,theCJ

CJclarifieswhetherfineforbelatedrectificationiscontrarytotheprincipleofneutralityandproportionality(Rodopi) On20June2013,theCJdelivereditsjudgmentin

case Rodopi(C-259/12).ThecaseinvolvedaBulgarian

companywhichincludedapurchaseinvoiceonwhich

VAThadbeenchargedinitsVATreturnforDecember

2009.Astheinvoiceshouldnothavebeenissued,

theinvoicewascreditedinOctober2010.Rodopi

includedthecreditinvoicebelatedlyititsVATreturnfor

December2010andrepaidtheamountofVATdeducted

inrelationtothecancelledinvoiceandtheinterest

thereon.

InFebruary2011,theBulgariantaxauthorities

establishedthattherewasanadministrativeoffence,

becauseRodopididnottakethecreditinvoiceinto

accountintheperiodprescribedbythenational

legislation.Inthisregard,thetaxauthoritiesimposed

afineuponRodopiequaltotheVATstatedonthe

invoiceatissue.Rodopiwenttocourt.Inthefollowing

proceedings,themattereventuallyendedupbeforethe

AdministrativeCourtofPlovdiv,whichcourtdecided

toreferpreliminaryquestionstotheCJ.Inessence

thecourt,wantedtofindoutwhethertheprinciplesof

fiscalneutralityandproportionalityprecludedthetax

authoritiesfromimposingafineinthecaseathand.

AccordingtotheCJ,thefinedidnotconcernacharge

resultingindoubletaxationcontrarytotheprincipleof

fiscalneutrality,asthefinehadnotbeenimposedfora

transactionbutforthebelatedrectificationbyRodopi.As

aresult,theCJruledthattheprincipleoffiscalneutrality

doesnotprecludeafineforabelatedrectificationfrom

beingimposedevenwhenthetaxablepersonhas

subsequentlyremediedtheomissionandpaidallVAT

duetogetherwithinterest.

Furthermore,theCJruledthatitisforthenationalcourt

todecidewhetherthefineisconsistentwiththeprinciple

ofproportionalitytakingintoaccount,inparticular,the

periodwithinwhichtheirregularitywasrectified,the

seriousnessofthatirregularity,andthepresenceof

anyevasionoranycircumventionoftheapplicable

legislationthatisattributabletothetaxableperson.

74

Court,whichcourtdecidedtoreferpreliminaryquestions

totheCJ.

TheCJfirstestablishedthattheservicesrendered

byRRDonnelleyconsistedofseveralelementsof

whichthestorageofthegoodsshould,inprinciple,be

regardedastheprincipalsupply,andtheotherelements

oftheservicesasancillarytothatsupply.Accordingto

theCJ,itwasthereforenecessarytodeterminewhere

thecomplexstorageservicesweredeemedtobe

carriedout.

TheCJruledthatforasupplyofstorageservicesto

haveasufficientlydirectconnectionwithimmovable

property,withinthemeaningofArticle47oftheEU

VATDirective,theserviceshavetobeconnected

toexpresslyspecificimmovableproperty.Asforthe

storageservicesbyRRDonnelley,theservicescould

onlyberegardedtobesufficientlyconnectedtothe

immovablepropertyif,accordingtotheCJ,therecipient

oftheserviceisgivenarighttouseallorpartof

expresslyspecificimmovableproperty.Ontheother

hand,iftherecipientofthestorageserviceshad,for

example,norighttoaccessthepartoftheproperty

wheretheirgoodsarestoredoriftheimmovable

propertyonwhichorinwhichthosegoodsarestored

doesnotconstituteacentralandessentialelementof

thesupplyofservices,theCJruledthattheservicesdo

notcomewithinthescopeofArticle47oftheEUVAT

Directive.

VATonservicesrelatingtopensionfundisdeductibleifitislinkedtoVATtaxableactivitiesofemployer(PPG Holdings)On18July2013,theCJdelivereditsjudgmentin

thecasePPG Holdings(C-26/12).PPGHoldings,a

Netherlandstaxgroup,setupapensionfundforits

employeesintowhichPPGHoldingspaidcontributions.

Asrequiredbylaw,thefundwasaseparatelegalentity

andcouldnotformpartofthePPGHoldingstaxgroup.

PPGIndustriesFiberGlassBV(acompanyinthe

PPGHoldingsgroup)contractedandpaidforcertain

administration,management,auditandconsultancy

servicesinrelationtothefundonwhichVATwas

invoiced.

ruledthatthecontractualtermsmaynotwhollyreflect

theeconomicandcommercialrealityoftransactions,for

example,whenitbecomesclearthatthosecontractual

termsconstituteapurelyartificialarrangement.Taking

intoaccountthecircumstancesinthecaseathand,

theCJruledthatitisconceivablethattheeffectiveuse

andenjoymentoftheservicestookplaceintheUKand

thatMrNeweyprofitedtherefrom.However,according

totheCJ,itisforthenationalcourttoascertain

whetherthecontractualtermsdonotgenuinelyreflect

economicrealityandwhetheritisMrNewey,andnot

Alabaster,whowasactuallythesupplieroftheloan

brokingservicesandtherecipientoftheadvertisement

services.Inthatcase,thecontractualtermswouldhave

toberedefinedsuchtore-establishthesituationthat

wouldhaveprevailedintheabsenceoftransactions

constitutingtheabusivepractice.

CJrulesonplaceoftaxabilityofstorageservices (RR Donnelley) On27June2013,theCJdelivereditsjudgmentin

theRR Donnelley case(C-155/12).RRDonnelley,a

Polishcompany,providesservicestonon-Polishtraders

relatingtothestorageofgoods.Theservicescoverthe

admissionofgoodstoawarehouse,placingthegoods

onshelves,storingthegoods,packagingthegoodsfor

customersandissuing,unloadingandloadingofthe

goods.Inaddition,forsomecustomers,RRDonnelley

alsorepackagesgoodssuppliedincollectivepackaging

intoindividualsets.

RRDonnelleyappliedtothePolishtaxauthoritiesfor

aninterpretationoftheplaceofsupplyoftheservices

forVATpurposes.RRDonnelleywasoftheview

thattheservicesweretaxableinthecountryofthe

recipientoftheservices,andtherefore,notinPoland.

Thetaxauthoritieswereoftheopinion,however,that

itconcernedservicesrelatedtoimmovableproperty,

whichweretaxableinthecountrywheretheimmovable

propertyusedforthewarehousingserviceswaslocated.

AstheimmovablepropertywaslocatedinPoland,the

taxauthoritiesarguedthatPolishVATwasdueonthe

services.RRDonnelleybroughtanactionagainstthis

interpretationbythetaxauthoritiesandeventuallythe

casewasbroughtbeforetheSupremeAdministrative

75

theviewthatthesupplieshadnotbeencarriedoutand

deniedEvita-KthedeductionoftheVATchargedonthe

invoices.

Evita-KappealedthisdecisiontotheAdministrative

CourtfortheCityofSofia.Inturn,theCourtdecided

toreferpreliminaryquestionstotheCJregardingthe

requiredevidencetoprovethatthesupplieshadtaken

place.TheCJfirstansweredthequestionwhetherthe

evidenceforasupplyofgoodsrequiresthataright

ofownershipisestablishedformallyorwhetherthe

acquisitionofarightofownershipofthosegoodsby

bonafidepossessionissufficient.Inthisregard,the

CJruledthattheconceptof‘supplyofgoods’underEU

VATlaw,inthecontextoftherighttodeductVAT,and

theevidencethatsuchsupplyhasactuallytakenplace

arenotlinkedtotheformoftheacquisitionoftherightof

ownershipofthegoodsconcerned.

Moreover,theCJruledthatArticle242oftheEUVAT

Directivemerelyrequirestaxablepersonstokeep

accountsinsufficientdetailforVATtobeapplied

andforthoseaccountstobecheckedbythetax

authorities.AccordingtotheCJ,theprovisiondoes

notrequireataxablepersonwhomakessuppliesof

goodsconcerninganimalswhicharesubjecttothe

identificationandregistrationsystemofRegulationNo

1760/2000toshowintheiraccountsthesubjectmatter

ofthesuppliesandtoprovethatthoseanimalswere

subjecttocontrolinaccordancewithStandardIAS41.

RegardingtheinvoicingrequirementstheCJruled,

basedonArticle226(6)oftheEUVATDirective,thatthe

quantityandnatureofthegoodssuppliedortheextent

andnatureoftheservicesrenderedmustappearonthe

invoiceforVATpurposes,butthatitdoesnotrequire

taxablepersonstomentiontheeartagsofanimals

supplied.

CJrulesondeductionofVAToncostsincurredinrelationtohiredstaff(AES) On18July2013,theCJdelivereditsjudgmentincase

AES(C-124/12).AESownedandoperatedapower

stationinBulgaria.AEShiredthestaffrequiredfor

theoperationofthepowerstationunderaservices

contractconcludedwithAESServices.AESpaidforthe

PPGHoldingsdeductedtheVATinitsVATreturns.The

Netherlandstaxauthoritiestooktheview,however,that

theVATwasnotdeductible.Eventuallythecaseended

upbeforeaNetherlandsCourtofAppeals,whichcourt

decidedtoreferpreliminaryquestionstotheCJ.The

court,inessence,wantedtoknowwhethertheVAT

ontheinvoicesisdeductiblebyPPGHoldingsdueto

theservicesbeingdirectlylinkedtoitstaxableactivity

and,alternatively,whetherthepensionfundisaspecial

investmentfundthemanagementofwhichwouldbe

exemptfromVAT.

AccordingtotheCJ,bysettingupthepensionfund,

PPGHoldingscompliedwithalegalobligationimposed

onitasanemployer.Inthisregard,theCJruledthat

thereferringcourtshoulddeterminewhetherthecosts

oftheservicesacquiredbyPPGHoldingsformedpart

ofitsgeneralcoststhatarecalculatedintheprice

ofitsproducts.Insuchcase,theCJindicatedthat

therewouldbeadirectandimmediatelinkwithits

taxableactivitiesandPPGHoldingswouldbeentitled

todeducttheinputVATontheservicesrelatingtothe

managementandoperationofthefund.

InviewoftheaboveandreferringtothecaseWheels

Common Investment Fund Trustees and Others(C-

424/11),theCJruledthattherewasnoneedtoanswer

thequestionwhetherthepensionfundqualifiedas

aspecialinvestmentfundthemanagementofwhich

wouldbeexemptfromVAT.

CJclarifieswhatevidenceisrequiredtoprovethatsupplieshavetakenplace(Evita-K) On18July2013,theCJdelivereditsjudgmentinthe

case Evita-K (C-78/12).Evita-KisaBulgariancompany

thatisinvolvedinthetradeofanimals.InitsVAT

return,Evita-KdeductedVATonsuppliesmadetoitby

Ekspertis-7.InthecourseofaVATinquiryintoEvita-K,

theBulgariantaxauthoritiesrequestedEkspertis-7to

provideinformationonthesuppliesmadetoEvita-K.

Accordingtothetaxauthorities,theinformationprovided

byEkspertis-7revealedgapsinitsaccountingandin

itscompliancewiththeveterinaryformalitiesrelating,

inparticular,totitlesofownershipoftheanimalsand

totheireartags.Consequently,thetaxauthoritiestook

76

companies,theBelgiantaxauthoritiestooktheviewthat

theVATontheconstructioncostsofthebuildingwas

notdeductibleinsofarasthebuildingwasusedforthe

residentialpurposes.

MedicomandMPAdidnotagreewiththetaxauthorities

andwenttocourt.TheÉtatBelgeeventuallydecidedto

referpreliminaryquestionstotheCJinwhichitinquired

whethertheVATexemptionfortheleaseofimmovable

propertywasapplicable.

TheCJconsideredthatthemakingavailableofpart

oftheimmovablepropertybelongingtoalegalperson

toitsmanagerforhisprivateuse,withoutarentbeing

paid,cannotqualifyasaVATexemptlease.According

totheCJ,itdoesnotmatterinthisregardthatthe

makingavailableofthatpropertyisdeemedtobea

benefitinkindunderthenationalincometaxlegislation.

Moreover,theCJruledthatitisnotrelevantwhether

ornotthemakingavailableofallorpartoftheproperty

wasdirectlylinkedtotheoperationofthebusiness.

CJrulesonconceptofcivilandcommercialmattersinrespectofjudicialcooperationbetweenMemberStates (Sunico) On12September2013,theCJdelivereditsjudgmentin

case The Commissioners for Her Majesty’s Revenue &

Customs v Sunico ApS and Others (C-49/12).Following

anallegedVATcarouselfraud,theCommissionersfor

herMajesty’sRevenueandCustoms(HMRC)brought

proceedingsintheUKandDenmarkagainstanumber

ofnaturalandlegalpersonsestablishedinDenmark.In

essence,HMRCclaimedfromnon-residentsdamages

correspondingtotheamountofVATnotpaidintheUK

duetoVATcarouselfraud,whenthosenon-residents

werenotsubjecttoVATintheUK,buthadbeenthe

realbeneficiariesoftheVATcarrouselfraud.Inthe

proceedingsinDenmark,thequestionarosebefore

theØstreLandsretwhetherthecourtshouldstaythe

proceedingsbeforeituntiltheproceedingspending

beforetheHighCourtofJusticeintheUKhadbeen

finalised.Inparticular,theØstreLandsretwasnotsure

whetherajudgmentbeforetheUKcourtsfellwithinthe

scopeofRegulation44/2001suchthatajudgement

transportation,workclothing,personalprotectivegear

andservicesinconnectionwithbusinesstripsdirectly.

Asthepowerplantwasinaremoteareawhereno

publictransportationwasavailable,AESalsoprovided

foratransportservice.

TheBulgariantaxauthoritiesdeniedthedeductionof

VATonthecostsinrelationtothehiredstaffonthe

groundsthatthegoodsandservicesreceivedwere

intendedforsuppliesfreeofchargetostaffofAES

Services.Eventuallythematterwasbroughtbeforean

AdministrativeCourtinBulgaria.Thiscourtdecided

toreferpreliminaryquestionstotheCJregardingthe

deductibilityofVATonthecosts.

AccordingtotheCJ,thequestionwhetherthesupply

freeofchargeofgoodsorservicestopersonsworking

forthetaxablepersoniscarriedoutfortheneedsofthe

businessdoesnotdependonthenatureoftheexisting

legalrelationbetweenthetaxablepersonandthose

persons.Inthisregard,theCJruledthatitisnotinline

withtheprincipleoffiscalneutralitytomakeataxable

personbeartheburdenofVAToncostsontheground

thatthetaxablepersonisnottheemployerofthestaff,

ifitisclearthatthecostshavebeenincurredforan

economicactivitysubjecttoVAT.

Moreover,theCJruledthatArticle176oftheEUVAT

DirectiveprecludesaMemberState,onitsaccessionto

theEU,fromintroducinganationalprovisionthatlimits

therighttodeductVATforgoodsandservicesintended

tobesuppliedfreeofchargeorforactivitiesoutsidethe

scopeofthetaxableperson’seconomicactivity,when

suchanexclusionwasnotprovidedforinthenational

legislationinforceuntilthedateofthataccession.

CJclarifiesscopeofVATexemptionforleaseofimmovableproperty(Medicom) On18July2013,theCJdelivereditsjudgmentinjoined

cases Medicom and MPA(C-210/11andC-211/11).

MedicomandMPAareBelgiancompanieswhich

incurredVAToncostsrelatingtorealproperty,which

realpropertywaspartlyusedforprivateusebythe

managersofthosecompanies,andinthecaseof

Medicom,alsobythefamilyofthemanager.Norent

waschargedfortheresidentialuse.Inrespectofboth

77

forconsiderationcouldbesubjecttoVAT.Eventually,the

casewasbroughtbeforetheAdministrativensadVarna,

whichcourtdecidedtoreferpreliminaryquestionstothe

CJ.

TheCJruledthatArticle2(1)(c)oftheEUVATDirective

hastobeinterpretedasmeaningthatasupplyof

servicestofitoutandfurnishanapartmentmustbe

regardedashavingbeencarriedoutforconsideration

if,underacontractconcludedwiththeownerof

thatapartment,thesupplierofthoseservices,first,

undertakestocarryoutthatsupplyofservicesatits

ownexpenseand,secondly,obtainstherighttohave

thatapartmentatitsdisposalinordertouseitforits

businessactivitiesduringthetermofthatcontract,

withoutbeingrequiredtopayrent,whereastheowner

recoverstheimprovedapartmentattheendofthe

contract.

CJrulesonapplicationoftraveloperatormarginschemeinvariousMemberStatesOn26September2013,theCJdelivereditsjudgement

inaseriesofinfringementproceedingsthatthe

CommissionhadstartedagainstPoland,Italy,the

CzechRepublic,Greece,France,Finland,Portugaland

Spainovertheapplicationofthetraveloperatingmargin

schemeinthoseMemberStates.Itconcernscases

C-189/11,C-193/11,C-236/11,C-269/11,C-293/11,

C-296/11,C-309/11andC-450/11.

Intheproceedings,theCommissiontooktheview

thatthespecialschemefortravelagentsissolely

applicabletosalesoftravelservicestotravellersand

not,asissomeMemberStates,toanytypeofcustomer

regardlessofwhetherthatcustomerisactuallya

traveller.Afterconsideringthattherearedifferences

betweenthelanguageversionsoftheDirective,the

CJruledthatthespecialschemefortravelagentsis

notlimitedtosalesoftravelservicestotravellersand

extendstosalesoftravelservicestoanycustomer.

Therefore,theCJdismissedtheCommission’sactions

againstPoland,Italy,theCzechRepublic,Greece,

France,FinlandandPortugalandinpartagainstSpain.

deliveredinthosecourtsmightberecognisedand

enforcedinDenmark.Therefore,theØstreLandsret

decidedtoreferpreliminaryquestionstotheCJ.

TheCJruledthattheconceptof‘civilandcommercial

matters’withinthemeaningofArticle1(1)ofRegulation

44/2001hastobeinterpretedasmeaningthatit

includesanactionwherebyapublicauthorityofone

MemberStateclaimsfromanon-residentdamages

forlosscausedbyatortiousconspiracytocommitVAT

fraudinthatMemberState.

CJrulesthatsuppliesfornoconsiderationmustundercircumstancesberegardedashavingbeencarriedoutforconsideration(Serebryannay) On26September2013,theCJdelivereditsjudgment

in case Serebryannay vek EOOD v Direktor na Direktsia

«Obzhalvane i upravlenie na izpalnenieto» -Varna

pri Tsentralno upravlenie na Natsionalna agentsia

za prihodite(C-283/12).SerebryannayvekEEOOD

(‘Serebryannay’)wasaone-manbusinessbelonging

toMrBodzuliak.Serebryannaywasestablishedin

Bulgariaandengagedinthelettingofproperty,tourism

andthehotelbusiness.In2009,MrBodzuliakand

hiswifeboughtapartmentsinVarna.Subsequently,

heconcludedcontractswithSerebryannayunder

whichhegrantedthatundertakingarighttousethe

immovablepropertyforfiveyearswithouthavingtopay

rent.Serebryannaycarriedoutinitsownname,atits

ownexpenseandaccordingtoitsownassessment,

fitting-outandassemblyworkinordertocompletethe

apartmentsandputthemintoserviceforthepurposeof

use.Itwasenvisagedthatafterexpiryofthecontracts,

theownerswouldrecovertheapartmentswiththe

fixturestobefoundthere.

TheBulgariantaxauthoritiesfoundthattherehad

beenanexchangeofservices,namely,fitting-outand

furnishingservicesonthepartofSerebryannay,anda

lettingserviceonthepartoftheowners.Serebryannay

maintained,however,thattherehadbeennoexchange

ofservicesforVATpurposes,butthatithadprovideda

supplyofservicesfreeofchargeandthatonlysupplies

78

duefollowingadjustmentoftheVATdeductionapplied

bythesupplierontheacquisitionoftheimmovable

property.

PactorVastgoedlodgedobjectionagainstthatVAT

assessment.Eventually,thecaseendedupbeforethe

NetherlandsSupremeCourt,whichcourtdecidedto

referpreliminaryquestionstotheCJ.Inessence,the

courtwantedtoknowwhetherEUVATlawprecludeda

nationalprovisionwhich,inthecaseofanadjustment

ofVATinitiallydeducted,providedfortherecoveryof

theamountfromataxablepersonotherthantheperson

whohadactuallyappliedthatdeduction.

AccordingtotheCJ,whenaninitialdeductionmade

byataxablepersonistobeadjustedbasedonArticle

20(1)(a)oftheSixthEUVATDirective,theamountdue

inthatregardmustbepaidbythattaxableperson.The

CJ,therefore,ruledthattheSixthEUVATDirective

precludestherecoveryfromamountsduefollowingthe

adjustmentofaVATdeductionfromataxableperson

otherthanthepersonwhoappliedthatdeduction.

CJclarifiesrulesonpaymentofdefaultinterestincaseofalateVATrefund(Steaua Română)On24October2013,theCJdelivereditsjudgement

inthecaseSC Rafinăria Steaua Română SA(C-

431/12).SteauaRomână,aRomaniancompany,

filedVATreturnsinDecember2007andJanuary

2008,whichresultedinarefundableamountofVAT.

Afteraninspection,theVATrefundswereapproved

bytheRomaniantaxauthorities.However,following

theinspection,theRomaniantaxauthoritiesimposed

twosupplementarytaxchargesonSteauaRomână

inrespectofVATandbywayofpenaltyfordefault.

Moreover,thetaxauthoritiesissuednoticestoSteaua

RomânăinwhichtheVATrefundsweresetoffagainst

thetwotaxcharges.

Inthefollowingproceedings,thenoticesofassessment

andthenoticesofset-offweresetasidebythenational

courts.Ongroundoftheunlawfulnessofthenoticeof

set-offandthedelayedVATrefund,SteauaRomână

madeafurtherclaimagainstthetaxauthoritiesforthe

paymentofinterestontheamountoftheVATrefund,

TheactionbroughtbytheCommissionagainst

SpainwasupheldinpartbytheCJ.Accordingtothe

CJ,theSpanishlegislationwasincompatiblewith

EUVATlawinsofarasitexcludedfromthespecial

schemefortravelagentsthesaleoftravelservices

organisedbywholesaleagentsbutcarriedoutby

retailagents.Moreover,theCJruledthattheSpanish

legislationincorrectlyallowedtravelagentsunder

certaincircumstancestochargeintheinvoicean

overallamountofVATthatisnotrelatedtotheVAT

actuallychargedtothecustomerandbyauthorising

thecustomertodeductthisVAT.Finally,theCJruled

thattheSpanishprovisionsincorrectlyprovidedforthe

possibilityofmakinganoveralldeterminationofthe

taxableamountofthetravelagent’smargin.According

totheCJ,thetaxableamountmustbedeterminedby

referencetoeachsingleservicesuppliedbythetravel

agentandnotonanoverallbasis.

CJrulesthatamountdueincaseofadjustmentofVATinitiallydeductedbyataxpayershouldbeleviedfromthatsametaxpayer(Pactor Vastgoed)On10October2013,theCJdelivereditsjudgment

in case Pactor Vastgoed(C-622/11).Thecasedeals

withanimmovablepropertywhichwassuppliedtothe

NetherlandscompanyPactor Vastgoed inJanuary2000.

AstheNetherlandshasexercisedtheoptionprovided

forinArticle13C(1)(b)oftheSixthEUVATDirective,the

partiesoptedforaVATtaxablesupplyoftheimmovable

property.Thesupplierhadacquiredtheimmovable

propertyseveralyearspreviously,alsooptingfor

taxationforthatacquisition.Therefore,thesupplierhad

deductedtheVAThehadincurred.

AsofApril2000,PactorVastgoedleasedthe

immovablepropertytoanotherpartyexemptfrom

VAT.Subsequently,PactorVastgoedsoldtheproperty

atthebeginningofJuly2000exemptfromVAT.The

Netherlandstaxauthorities,therefore,tooktheposition

thatthesupplymadetoPactorVastgoeddidnot

satisfytheconditionsforaVATtaxablesupply,asthe

immovablepropertywasusedbyPactorVastgoedfor

VATexemptactivities.Pursuanttoanationalprovision,

thetaxauthoritiesissuedaVATassessmenttoPactor

Vastgoedforanamountcorrespondingtotheamount

79

totaxgamingmachineturnoverwascontrarytoEU

VATlawand,inparticular,contrarytotheprinciplesof

proportionality,pass-throughandneutrality.Eventually,

thecasewasbroughtbeforetheFinanzgericht

Hamburg,whichcourtdecidedtoreferpreliminary

questionstotheCJ.

ThereferringCourtinquired,amongstothers,whether

Article401oftheEUVATDirectiveimpliesthatVAT

andaspecialnationaltaxongamesofchancemay

beleviedonlyasalternatives,andnotcumulatively.

Inthisregard,theCJruledthattheymaybelevied

cumulatively,providedthatthespecialnationaltax

cannotbecharacterizedasataxonturnover.

Moreover,theCJruledthatbasedonArticle1(2)and

Article73oftheEUVATDirective,anationalprovision

orpracticewherebytheamountofthecashreceipts

fromgamingmachines,afterasetinterval,isusedas

thebasisofassessmentforVATpurposesisallowed.

Finally,theCJconsideredthatArticle1(2)oftheEUVAT

Directivedoesnotprecludeanationalsystemregulating

aharmonisedtax,underwhichtheVATowedcanbeset

offinfullagainstthattax.

CJclarifieswhentheconcludedpricemustberegardedtobeinclusiveofVAT (Corina-Hrisi Tulică and Călin Ion Plavoşin)On7November2013,theCJdelivereditsjudgment

inthejoinedcasesCorina-Hrisi Tulică and Călin Ion

Plavoşin(C-249/12andC-250/12).MrTulicăandMs

Plavoşinconcludednumerouscontractsforthesaleof

land.TheywerenotVATregisteredandthecontracts

didnotmentionanythingaboutVAT.TheRomanian

taxauthoritiestookthepositionthatMrTulicăandMs

PlavoşinqualifiedasVATentrepreneursandissued

VATassessmentsinwhichtheycalculatedtheamounts

ofVATduebasedontheamountsconcludedbythe

contractingparties.However,MrTulicăandMsPlavoşin

didnotagreewiththiscalculationmethodandtookthe

viewthattheamountsconcludedshouldberegarded

tobeinclusiveofVAT.Inthefollowingproceedings,

preliminaryquestionswerereferredtotheCJ.

whichresultedinadisputethatwaseventuallyalso

broughtbeforethenationalcourts.Inthisregard,

preliminaryquestionswerereferredtotheCJ.The

referringcourtinquiredwhetherarticle183oftheEU

VATDirectiveprecludedasituationinwhichataxable

personunderthecircumstancesinthecaseathand

cannotobtainfromthetaxauthoritiesdefaultintereston

alateVATrefund.

ReferringtotheEnel Maritsa Iztok 3case(C-107/10),

theCJconsideredthattheconditionsfortherefundof

excessVATcannotunderminetheprincipleoffiscal

neutralityoftheVATsystembymakingthetaxable

person(partly)beartheburdenofVAT.Accordingto

theCJ,thisimpliesthattherefundismadewithina

reasonableperiodoftime.Inthisregard,theCJruled

thattheprincipleoffiscalneutralityrequiresthatthe

financiallossesincurredbythetaxablepersonowing

totheunavailabilityofthesumsofmoneyatissueare

compensatedthroughthepaymentofdefaultinterest.

Consequently,theCJruledthatArticle183oftheEU

VATDirectiveprecludesasituationinwhichataxable

person,havingmadeaclaimofexcessinputVAT,

cannotobtainfromthetaxauthoritiesdefaultintereston

arefundmadelatebythoseauthoritiesinrespectofa

periodduringwhichadministrativemeasuresprecluding

therefund,whichweresubsequentlyannulledbyacourt

ruling,wereinforce.

CJrulesonmethodtotaxgamingmachineturnover(Metropol)On24October2013,theCJdelivereditsjudgementin

case Metropol Spielstätten Unternehmergesellschaft(C-

440/12).MetropolSpielstättenUnternehmergesellschaft

(‘Metropol’)isaGermancompanywhichoperated

gamingmachinesingaminghalls.Pursuanttolocal

legislationofthemunicipalitieswherethegaminghalls

werelocated,theoperationofthegamingmachineswas

subjecttoanentertainmenttaxwhichwascalculated

usingratesandbasesofassessmentwhichdiffered

frommunicipalitytomunicipality.

TheamountofVATduewithrespecttotheoperation

ofthegamingmachineswascalculatedbasedonthe

totalyearlycashreceiptsfromallgamingmachines.

Metropoltooktheview,however,thatthismethodused

80

betweenitandthesupplierofthosegoodsbywhich

thethirdpartyhasundertakentopaythesupplierfor

thegoodssoldbythelattertopurchasersusingsucha

cardasameansofpayment,constitutes‘consideration’

withinthemeaningofArticle73oftheEUVATDirective.

AdvocateGeneralopinesthatnon-taxablepersonsmaybeamemberofaVATgroup(Commission v Ireland) On27November2012,AdvocateGeneralJääskinen

deliveredhisOpinioninthecaseofCommission v

Ireland(C-85/11).Thecaseconcernsaninfringement

procedurethattheCommissionhasinstitutedagainst

Ireland.AccordingtotheCommission,Irelandincorrectly

permitsnon-taxablepersonstobemembersofaVAT

group.Ireland,ontheotherhand,claimsthatnon-

taxablepersonsmaybemembersofaVATgroup.

TheAdvocateGeneralhasindicatedthatthewordingof

Article11oftheEUVATDirective,ashasbeenpointed

outbyIreland,referstoa‘person’andnottoa‘taxable

person’.ThiscontrarytootherprovisionsintheEU

VATDirectivewhichclearlyrefertoa‘taxableperson’.

Consequently,theAdvocateGeneralhasopinedthat

basedonthewordingofArticle11oftheEUVAT

Directive,non-taxablepersonsmaybeamemberofa

VATgroupaslongastheymeettherequirementsof

havingafinancial,economicandorganizationallinkwith

theothermembersoftheVATgroup.

Finally,accordingtotheAdvocateGeneral,thepurpose

ofVATgroupingwithintheVATregimeandtheprinciple

offiscalneutralitydonotsupportthepositionthatnon-

taxablepersoncannotbeincludedinaVATgroup.Asa

result,theAdvocateGeneralhasproposedthattheCJ

shoulddismisstheactionbroughtbytheCommission

againstIreland.

AdvocateGeneralopinesthataVATgroupingsystemmaynotbelimitedtospecificsectors(Commission v Sweden) On27November2012,AdvocateGeneralJääskinen

issuedhisOpinioninthecaseofCommission v Sweden

(C-480/10).

AccordingtotheCJ,inasituationwhenthepriceof

goodshasbeenestablishedwithoutanyreferenceto

VATandthesupplierowesVATonthetransaction,

thenationalcourtshouldfirstdeterminewhetherthe

supplierhasthepossibilityundernationalrulesof

reclaimingtheVATfromthepurchaser.Ifthatisnotthe

case,theCJruledthatthepricemustberegardedtobe

inclusiveofVAT.

CJrulesonVATconsequencesofpaymentsmadewithcreditcardsusedinafraudulentmanner(Dixons Retail Plc) On21November2013,theCJdelivereditsjudgement

in case Dixons Retail Plc(C-494/12).Dixons Retail Plc

(‘Dixons’)soldelectricalitemsintheUK.Thecompany

hadagreementswithcreditcardcompaniesbasedon

whichDixonswasobligedtoacceptpaymentsmade

withcreditcardsissuedbythosecompanies.When

suchpaymentwasmade,thecreditcardcompanies

paidthepriceofthegoodspurchasedwiththecredit

cardtoDixonsafterdeductionofacharge.Somecredit

cardsappearedtohavebeenusedinafraudulent

manner.Insuchsituation,Dixonsretainedthepayments

madebythecreditcardcompanywhichincludedaVAT

element.

DixonsdeclaredandpaidtheVATrelatingtothe

fraudulenttransactions.Subsequently,itclaimed

repaymentofthisVATonthegroundsthattheVATwas

notdue.Thetaxauthorities,however,didnotagreeto

repayment.Eventuallythematterwasbroughtbefore

theFirst-tierTribunalwhichcourtdecidedtorefer

preliminaryquestionstotheCJ.Thereferringcourt,in

essence,wantedtoknowwhetherthephysicaltransfer

ofgoodstoapurchaserwhofraudulentlyusesabank

cardasameansofpaymentconstitutesa‘supplyof

goods’andwhetherinsuchcircumstancesthepayment

constitutesa‘consideration’.

TheCJruledthatthephysicaltransferofgoodsto

apurchaserwhofraudulentlyusesabankcardasa

meansofpaymentconstitutesa‘supplyofgoods’within

themeaningofArticles2(1)(a)and14(1)oftheEU

VATDirective.Moreover,theCJruledthatthepayment

madebyathirdparty,underanagreementconcluded

81

electricitytothatprovider.Thepurchaseandsalesprice

wereexactlythesame,andbothincluded20%VAT.

ThehouseholdersoughttorecovertheVATpaidon

thesolarpanelsystemanditsinstallation,takingthe

positionthathequalifiedasanentrepreneurforVAT

purposesforthesaleoftheelectricity.Whentherefund

wasdeniedbytheAustriantaxauthorities,thecasewas

broughtbeforetheAustrianHighAdministrativeCourt,

whichcourtdecidedtoreferpreliminaryquestionstothe

CJ.

AccordingtotheAdvocateGeneral,thehouseholder

performsaneconomicactivityforVATpurposesby

producingandsellingtheelectricityforremuneration.In

thisregard,theCJfoundthatitshouldnotberelevant

thatthesolarpanelsystemonlycoveredpartofthe

household’sneedsanddidnotgenerateasystematic

surpluswhichwouldalwaysbeforsaleregardless

ofhouseholdconsumption.Asfortherighttodeduct

inputVAT,theAdvocateGeneralopinedthattheinput

VATpaidontheacquisitionoftheinstallationmaybe

deductedsubjecttothenormalrulesofdeduction.In

thisregard,theAdvocateGeneralindicatedthatitis,for

example,ofimportancewhetherthegoodsareallocated

toprivateand/orbusinesspurposes.

AdvocateGeneralfindsthatitisforthenationaljudgetodeterminewhatisthecorrectunderstandingtotreatcommercialadvertisingscreeningtaxaccordingtothenationallaw(TVI) On11June2013,AdvocateGeneralCruzVillalón

deliveredhisopinioninthejoinedcasesTVI(C-618/11,

C-637/11andC-659/11).Inthecourseofitsactivities

inthetelevisionmarket,TVIprovidescommercial

advertisingservicestovariousadvertisers.Theinvoices

itissuedfortheseservicesincludedthescreening

taxof4%ofthepriceoftheservices.TVIappliedthe

VATtothetotalamountinvoiced.Itthusincludedthe

screeningtaxinthetaxableamount.TheVATwaspaid

andincludedintherespectiveperiodicdeclaration

accordingly.TVIpaidthescreeningtax.

Doubtingwhetherthescreeningtaxshouldreallybe

includedinthetaxableamount,TVIchallengedtax

Initsnationallegislation,Swedenhasoptedtointroduce

aVATgroupingsystemthatislimitedtothefinancial

andinsurancesectors.AccordingtotheCommission,

MemberStatesarenotpermittedtolimitVATgrouping

tospecificsectorsand,therefore,requestedSweden

tochangeitsnationallegislation.Swedenmaintained,

however,thatthenationallegislationisinlinewiththe

EUVATDirective.Eventually,theCommissiondecided

toreferthemattertotheCJ.

BasedonaliteralinterpretationofArticle11ofthe

EUVATDirective,whichrefersto‘anypersons’

independentlyofthesectorofeconomicactivityinwhich

theyareinvolved,theAdvocateGeneralhasopined

thattheprovisionexcludesanyrestrictionofitsscope

todefinedeconomicsectors.AccordingtotheAdvocate

General,aMemberStatethathasoptedtointroduce

aVATgroupingsystemmay,therefore,notlimitthat

systemtospecificsectors.

Inthisregard,theAdvocateGeneralwasoftheopinion

thatthepurposeofVATgroupingdoesnotsupportthe

conclusionthatMemberStateswouldnevertheless

havediscretionwithrespecttotheeconomicsectors

towhichVATgroupingisavailable.Accordingtothe

AdvocateGeneral,limitationsareonlyjustifiedifthere

isneedtotakeactionagainstpotentialabuseforclearly

identifiedtransactions.TheAdvocateGeneral,therefore,

proposedtodeclarethatSwedenhasfailedtofulfilits

obligationsunderArticle11oftheEUVATDirectiveby

restrictingtheavailabilityofVATgroupingtothefinancial

andinsurancesectors.

AdvocateGeneralopinesthathouseholderqualifiesasVATentrepreneurforsupplyofelectricityproducedbysolarpanelsystem(Urfahr) On7March2013,AdvocateGeneralSharpston

deliveredherOpinioninthecaseUrfahr(C219/12).

ThecaseconcernsanAustrianhouseholderthathas

installedasolarpanelsystemwhichproduceselectricity

buthasnostoragecapacity.Basedonacontract

withhiselectricityprovider,thehouseholdernotonly

purchaseselectricityfromthatproviderbutalsosells

82

AdministrativeCourtdecidedtoreferpreliminary

questionstotheCJinordertofindoutwhether,based

onEUVATlaw,theserviceswereVATexemptorVAT

taxable.Furthermore,intheeventtheVATexemption

wouldbeincompatiblewithEUVATlaw,thereferring

courtinquiredwhetherArticle168oftheEUVAT

DirectivewouldgrantMMDPtherightbothtoapplyfor

theVATexemptionandtodeductinputVAToncosts.

AccordingtotheAG,Articles132(1)(i),133and134of

theEUVATDirective,inprinciple,allowMemberStates

toapplytheVATexemptionalsotoprivateorganizations

iftheyprovideeducationalservicesforcommercial

purposes.However,theAdvocateGeneralopinedthat

theseprovisionsdoprecludenationallegislationthat

incorrectlydoesnotimposeanyconditionsatallforthe

recognitionofsuchprivateorganizations.Furthermore,

theAdvocateGeneralopinedthatataxableperson,

whereaVATexemptionisincompatiblewithEUVAT

law,isnotentitledbothtotakeadvantageoftheVAT

exemptionandalsotoexerciseitsrighttodeductinput

VAToncosts.

AdvocateGeneralopinesthatsupplyofdrugscloselyrelatedtooutpatientcareisnotVATexempt(Klinikum Dortmund) On26September2013,AdvocateGeneralSharpston

deliveredherOpinionincaseFinanzamt Dortmund-

West v Klinikum Dortmund gGmbH(C-366/12).Klinikum

Dortmund GmbH(‘KDG’)isanon-profitcompanythat

managesahospital.KDGprovideschemotherapy

treatmentforcancerpatients.Thedrugsadministered

wereproducedinthehospitalpharmacyonthebasisof

adoctor’sprescription.Whenthedrugswereusedfor

in-patienthospitalandmedicalcareitwasnotcontested

thattheirsupplywasVATexemptbasedonarticle

13A(1)(b)oftheSixthEUVATDirective.However,

thetaxauthoritiestooktheviewthatthedispensing

ofdrugsforconsiderationinthecourseofoutpatient

carewasVATtaxable.Inthisregard,theGerman

Bundesfinanzhofdecidedtoreferpreliminaryquestions

totheCJ.

TheAdvocateGeneralfirstconsideredthatthe

expression‘closelyrelatedactivities’inArticle13a(1)

(b)oftheSixthEUVATDirective,inherview,includes

suppliesofgoodsaswellassuppliesofservices.

returnsconcerningadvertisingservicesprovidedto

variousadvertisers.Thetaxauthoritiesrejectedthe

appeals.

Withthisrequestforapreliminaryruling,thePortuguese

courtaskedwhethera‘screeningtax’imposedonthe

screeningandbroadcastingofadvertisingcharged

totheadvertisersbutpaidtotheStatebytheservice

providers(‘fiscalsubstitute’)hastobeincludedinthe

taxableamountforthepurposesofcalculatingtheVAT.

TheAdvocateGeneralconcludedthattheanswerto

whetherthescreeningtaxshouldreallybeincludedin

thetaxableamountdependsonthefiscalrelationship

ofpubliclaw.Thescreeningtaxshouldbeincludedin

thetaxableamountifthedecisivefiscalrelationship

betweenthetaxauthoritiesandthetelevisionoperators

isofpubliclawcharacter.

However,ifthedecisivefiscalrelationshipofpublic

lawcharacterrunsbetweentheadvertisersandthe

taxauthorities,theVATDirectivemustbeinterpreted

asprohibitingtheinclusionofsaidtaxinthetaxable

amount,accordingtotheAdvocateGeneral.

Itisforthenationaljudgetodeterminewhichofthese

twounderstandingsofthenatureoffiscalsubstitution

intheprecisecontextofthescreeningtaxisthecorrect

oneaccordingtonationallaw.

AGKokottdeliversOpiniononscopeofVATexemptionforeducationalservices(MMDP)On20June2013,AdvocateGeneralKokottdelivered

herOpinionincaseMMDP(C-319/12).MMDPprovided

traininginPolandonsubjectsincludingtaxationand

humanresources.Asthesolepurposeofrenderingthe

serviceswastheregulargenerationofprofit,MMDP

tooktheviewthattheseserviceswereincorrectly

treatedasVATexemptunderPolishVATlaw,asaresult

ofwhich,MMDPwasnotentitledtodeductinputVATon

costs.Inthisregard,MMDPaskedthePolishMinister

ofFinanceforbindinginformationontheVATtreatment

oftheservices.However,theMinisterofFinancedid

notagreethattheservicesrenderedbyMMDPwere

VATtaxable.Inthefollowingproceedings,theSupreme

83

isanelectronicallyprovidedserviceandassuch,cannot

benefitfromareducedratebasedonEUVATlaw.The

Commissionindicatesthatapplicationofthereduced

VATrateone-booksbyFranceandLuxembourghas

resultedinseriousdistortionsofcompetitiontothe

detrimentoftradersinotherEUMemberStates.The

CommissiondecidedtoreferthemattertotheCJ,

becauseFranceandLuxembourgdidnotbringtheir

legislationintolinefollowingtheCommission’sreasoned

opinionof24October2012.

CommissionrefersUKtoCJforitsreducedVATrateonsupplyandinstallationofenergy-savingmaterialsOn21February2013,theCommissionreferredthe

UnitedKingdomtotheCJforitsreducedVATrateon

thesupplyandinstallationofenergy-savingmaterials.

AccordingtotheCommission,MemberStatesmay

applyreducedVATratestothesupplyofgoodsand

servicesusedinthehousingsector,aslongasthis

ispartofsocialpolicy.However,theCommission

indicatesthatthereisnoprovisionintheVATDirective

toallowareducedVATrateon‘energysavingmaterials’

specifically,andthattheuniversalapplicationofa

reducedrateforenergysavingmaterialsisthereforenot

allowed.

ProposalforderogatingmeasureallowingLatviatorestricttherighttodeductVAToncarsArticles168and168aoftheEUVATDirective

providethatataxablepersonisentitledtodeductVAT

chargedonpurchasesmadeforthepurposesoftaxed

transactions.Inthecaseofprivateuse,Article26(1)(a)

providesthatacorrectionshouldbemadeoftheVAT

initiallydeducted.Asthesplitinprivateandbusiness

useisdifficulttoapplytopassengercars,Latviahas

requestedforaderogatingmeasureallowingittolimit

to80%therighttodeductVATonexpenditureon

passengercarsnotwhollyusedforbusinesspurposes.

On12February2013,theCommissionpublisheda

proposalforaCouncilDecisionwithrespecttothis

derogatingmeasure.

Furthermore,accordingtotheAdvocateGeneral,itis

clearthatitisnotrequiredthatthesupplyofmedicines

hastobemadebythesamepersonwhoalsoprovides

thehospitalandmedicalcare.

However,theAdvocateGeneralalsoconsideredthat

theoutpatientcarebyKDGwasVATexemptbasedon

Article13A(1)(c)oftheSixthEUVATDirectiveandnot

basedonArticle13A(1)(b).Inthisregard,theAdvocate

Generalopinedthatthesupplyofdrugsinaccordance

withaprescriptionmadeoutinthecourseofaprovision

ofmedicalcareinprinciplecannotbenefitas‘closely

relatedactivities’fromtheVATexemptionofArticle

13A(1)(b)oftheSixthEUVATDirective,ifthecareto

whichtheyarecloselyrelatedisitselfexemptednot

underthatsameprovisionbutunderArticle13A(1)(c).

Commissionproposalregardingtaxationoftelecommunications,broadcastingandelectronicservicesOn18December2012,theCommissionadoptedthe

finalproposalinthepackageofmeasuresconcerning

thetaxationoftelecommunications,broadcasting

andelectronicservices.Asof1January2015,all


serviceswillbetaxedattheplacewherethecustomer

isestablishedorresides.AccordingtotheCommission,

thiswillresultinafairerandmorebusinessfriendly

system.Byprovidingalevelplayingfieldforallbusiness

inthesectorsconcerned,itisexpectedtocontributeto

thedevelopmentofe-commerceintheSingleMarket.

Thenewrulesincludetheone-stop-shop-regimeonthe

basisofwhichthesuppliersofthetelecommunications,

broadcastingandelectronicserviceswillbeableto

complywiththeirVATobligationsinthewholeoftheEU

bysubmittingasingleVATreturnintheMemberStatein

whichtheyareestablished.

CommissionrefersFranceandLuxembourgtoCJoverVATratesone-booksOn21February2013,theCommissionannounced

thatithaddecidedtoreferFranceandLuxembourgto

theCJforapplyingreducedratesofVATtoe-books.

AccordingtotheCommission,theprovisionofe-books

84

areversalofliabilityforthepaymentofVATonthe

supplyofcertaingoodsandservices(‘reversecharge

mechanism’).

CouncilagreesonrulesforplaceofsupplyofcertainservicesOn21June2013,theCouncilreachedpolitical

agreementonadraftregulationaimedatamending

VATrulesasregardstheplaceofsupplyof


services,realestateservicesandthedistributionof

ticketsforentrytocultural,artistic,sporting,scientific,

educational,entertainmentandsimilarevents.

CouncilreachespoliticalagreementonmeasurestocombatVATfraudOn21July2013,theCouncilreachedpolitical

agreementontwoDirectivesaimedatenablingMember

StatestobettercombatVATfraud.OneDirectiveis

aimedatenablingimmediatemeasurestobetakenin

casesofsuddenandmassiveVATfraud(‘quickreaction

mechanism’),andtheotherallowsMemberStates

toimplement,onanoptionalandtemporarybasis,

areversalofliabilityforthepaymentofVATonthe

supplyofcertaingoodsandservices(‘reversecharge

mechanism’).

StudyonVATGapTheCenterforSocialandEconomicResearchandthe

CPBNetherlandsBureauforEconomicPolicyAnalysis

(asconsortiumleader)havepublishedastudyto

quantifyandanalysetheVATGapintheEUMember

States(excludingCyprusandCroatia)inordertogain

moreunderstandingofthetrendsinthefieldofVAT

fraud.Inthisregard,theVATGapisdefinedasthe

differencebetweenthetheoreticalVATliabilityandthe

collectionsofVAT.

Accordingtothestudy,thetotalVATGapfortheEU

MemberStatesamountedtoapproximatelyEUR193

billionin2011.Moreover,thestudyshows–interalia–

thatVATcomplianceappearstofallwhenVATrates

areincreased,atleastincountrieswithweakertax

enforcement,andthatVATcomplianceappearstofall

duringrecessions.

CouncilmeetingoncombatingVATfraudIn its 3227thCouncilmeetingon5March2013,the

Councilheldanexchangeofviewsonthewayforward

fortwolegislativeproposalsaimedatcombatingVAT

fraudbetterandmorerapidly.Itconcernstheproposed

Directiveaimedatenablingimmediatemeasuresto

betakenincasesofsuddenandmassiveVATfraud

(‘quickreactionmechanism’)andtheproposedDirective

intendedtoallowMemberStatestoimplement,onan

optionalandtemporarybasis,areversalofliabilityfor

thepaymentofVATonthesupplyofcertaingoodsand

services(‘reversechargemechanism’).Abroadmajority

ofMemberStatesindicatedthattheycouldsupportthe

wayforwardsuggestedbythepresidencyintheformof

apackageencompassingbothproposals.

Thepresidencyremainsopentoexploreanyconcrete

proposalsbyMemberStatessupportingtheobjectives

ofthepackage,inparticular,indeliveringtherequisite

speedtotacklesuddenandmassivefraud.Itremains

theaimofthepresidencytoseekadoptionofthe

legislativeproposalsbytheCouncilbeforetheendof

June.

CommissionrequestsPolandtoamenditslegislationonreducedVATratesPolandappliesareducedVATratetofireprotection

goods.AccordingtotheCommission,thisisnot

allowedbasedontheEUVATDirective.Therefore,the

CommissionhassentareasonedopiniontoPoland

inwhichitrequestsPolandtobringitslegislation

incompliancewithEUVATlaw.TheCommission

mayreferthemattertotheCJifthelegislationisnot

amendedwithintwomonths.

CouncilagreesonmeasurestocombatVATfraudOn21June2013,theEuropeanCouncilreached

politicalagreementonapackageofmeasuresaimed

atenablingMemberStatestobettercombatVATfraud.

Themeasureswillbebasedontwodirectives,one

aimedatenablingimmediatemeasurestobetakenin

casesofsuddenandmassiveVATfraud(‘quickreaction

mechanism’)andoneaimedatallowingMemberStates

toimplement,onanoptionalandtemporarybasis,

85

VATDirective,orinaccordancewithArticle114ofthat

Directive.

CommissionrefersSwedentotheCJoverVATonpostalservicesOn20November2013,theCommissionhasdecided

toreferSwedentotheCJoveritsapplicationofVAT

topostalservices.TheEUVATDirectivestatesthat

servicessuppliedby‘publicpostalservices’,andthe

saleofstamps,shouldbeexemptfromVAT.According

totheCommission,Swedendoesnotexemptpostal

servicesfromVAT,becausealloperators,includingthe

onewhichprovidestheuniversalservice,areobligedto

chargeVAT.

CustomsDuties,ExcisesandotherIndirect TaxesAnti-dumpingdutyonimportsofbio-ethanolofUSoriginOn23February2013,CouncilimplementingRegulation

No157/2013cameintoforce.Onthebasisofthis

Regulation,adefinitiveanti-dumpingdutywillbe

imposedonimportsofbio-ethanol,denaturedor

undenatured,ofUSoriginthatwillbeusedasafuel.

Therateofthedefinitiveanti-dumpingdutyshallbe

EUR62.30pertonnet.

Anexemptionappliestobio-ethanolifitisforotheruses

thanasuseforfuel.Theexemptionshallbesubject

totheconditionslaiddownintherelevantprovisions

oftheEuropeanUnionwithaviewtocustomscontrol

oftheuseofsuchgoods(seeArticles291to300of

CommissionRegulation(EEC)No2454/93).

CJrulesonquantitativeassessmentcriteriafortobaccoproductsacquiredinoneMemberStateandtransportedtoanotherMemberState(Commission v France)On14March2013,theCJdelivereditsjudgmentin

thecaseEuropean Commission v the French Republic

CommissionpublishesguidelinesonminiOneStopShopregimeOn29October2013,theCommissionpublished

practicalandinformativeguidelinesontheminiOne

StopShopthatistocomeintoforceon1January2015.

Theguidelineshavebeenpreparedinordertoprovidea

betterunderstandingoftheEUlegislationrelatingtothe

miniOneStopShop.

TheminiOneStopShopwillallowtaxablepersons

supplyingtelecommunicationservices,televisionand

radiobroadcastingservicesandelectronicallysupplied

servicestonon-taxablepersonsinMemberStatesin

whichtheydonothaveanestablishmenttoaccountfor

theVATdueonthosesuppliesviaaweb-portalinthe

MemberStateinwhichtheyareidentified.Thisscheme

allowsthesetaxablepersonstoavoidregisteringin

eachMemberStateofconsumption.

CommissionrefersLuxemburgtotheCJoveritsreducedVATrateondigitalbooksOn18September2013,theCommissionbroughtan

actionbeforetheCJinwhichitrequestedtheCJto

declarethatLuxemburghasfailedtofulfilitsobligations

undertheEUVATDirectivebyapplyingareducedVAT

rateof3%todigitalbooks(orelectronicbooks)asof

1January2012.AccordingtotheCommission,the

applicationofareducedrateofVATisincompatible

withthewordingofArticles96and98oftheEUVAT

Directive,becausedigitalbooksarenotexpressly

mentionedinAnnexIIItothatDirective.Furthermore,

theCommissiontakestheviewthatthisisconfirmed

bythewordingofthesecondsubparagraphofArticle

98(2),whichexplicitlyexcludeselectronicallysupplied

servicesfromthebenefitofreducedratesofVAT,and

bytheadoptionbytheVATCommitteeofguidelines,

accordingtowhich,reducedratesofVATdonotapplyto

thesupplyofdigitalbooks.

TheCommissionconsidersalsothatthereducedrate

of3%,thatistosayaratewhichisbelowtheminimum

rateof5%fixedbyArticle99oftheEUVATDirective,

tothesupplyofdigitalbooks,maynotbecoveredby

theexceptionprovidedforbyArticle110oftheEU

86

anEUresidentperson.Thequestionarosewhetherthe

reliefappliesinthecasethatthepersonwasauthorized,

otherthanbyanemploymentcontractconcludedwith

theuser,tousethecarprivately.

CustomsleviedimportdutyontheHungarianresident

person,Fekete,whowastheuserofthecar,because,

intheirview,Feketedidnotcomplywiththeconditions

fortemporaryimportationwithtotalrelieffromimport

duty.Feketefiledanadministrativeappealagainstthe

levyofimportduty.

FurthertopreliminaryquestionsoftheHungarianTax

Court,theCJruledthatArticle561(2)ofCommission

Regulation(EEC)No2454/93of2July1993mustbe

interpretedasmeaningthatthetotalrelieffromimport

dutiesprovidedforbythatprovisionforameansof

transportusedprivatelybyapersonestablishedinthe

customsterritoryoftheEUmaybegrantedonlyifsuch

useisprovidedforinacontractofemploymentbetween

thatpersonandtheownerofthevehicleestablished

outsidethatterritory.

CJrulesthatRomanianruleslimitingtheinterestpayableonrepaidtaxareinbreachofEULaw(Mariana Irimie) On18April2013,theCJdelivereditsjudgementin

thecaseMariana Irimie v Administratia Finantelor

Publice Sibiu, Administratia Fondului pentru Mediu

(C-565/11).ThecaseconcernstheinterpretationofEU

LawregardingtheRomanianlegislationwhichlimits

theinterestgrantedontherepaymentofataxlevied

inbreachofEULawtothataccruingfromtheday

followingthedateoftheclaimforrepaymentofthattax.

In2007,MsIrimiepurchasedamotorvehicleregistered

inGermany.ToregistersuchvehicleinRomania,she

hadtopaypollutiontaxinordertocomplywiththe

applicablelegislation.On31August2009,MsIrimie

broughtanactionbeforetheRegionalCourtseeking

anorderfortherepaymentofthesumpaidbywayof

pollutiontaxaswellasinterestonthatsumfromthe

dateofpaymentofthetax.TheRegionalCourtrejected

thislatterrequestbecause,undertheRomanian

domesticlaw,interestonsumsrepaidfrompublic

fundsisgrantedonlyfromthedayfollowingthedateof

theclaimforrepayment.TheRegionalCourtdoubted

(C-216/11).Thecasedealswiththequantitativecriteria

thatareappliedbytheFrenchRepublicfortobacco

productsacquiredinoneMemberStateandtransported

toFrance.

Byitsapplication,theEuropeanCommissionrequests

theCourtofJusticetodeclarethat,byusingapurely

quantitativecriteriontoassesswhethertheholding

byprivateindividualsofmanufacturedtobaccofrom

anotherMemberStateisofacommercialnature,by

applyingthatcriterionperindividualvehicle(andnotper

person),andinrespectofallofthetobaccoproductsin

aggregateandbyentirelyprecludingtheimportationof

tobaccoproductsfromanotherMemberStatebyprivate

individualswherethequantityexceedstwokilograms

perindividualvehicle,theFrenchRepublichasfailed

tofulfilitsobligationsunderCouncilDirective92/12/

EECof25February1992onthegeneralarrangements

forproductssubjecttoexcisedutyandontheholding,

movementandmonitoringofsuchproducts,and,

specifically,underArticles8and9oftheDirective,as

wellasunderArticle34TFEU.

TheCJruledthatbyusingapurelyquantitativecriterion

toassesswhethertheholdingbyprivateindividualsof

manufacturedtobaccofromanotherMemberStateisof

acommercialnatureandbyapplyingthatcriterionper

individualvehicle(andnotperperson),andinrespect

ofallofthetobaccoproductsinaggregate,theFrench

RepublichasfailedtofulfilitsobligationsunderCouncil

Directive92/12/EECof25February1992onthegeneral

arrangementsforproductssubjecttoexcisedutyandon

theholding,movementandmonitoringofsuchproducts

and,specifically,underArticles8and9thereof.TheCJ

dismissedtheactionastotheremainder.

CJrulesontheconditionsforreliefofimportdutyforavehiclewhoseownerisregisteredoutsideEUandusedbyanEUresidentperson(Fekete)On7March2013,theCJdelivereditsjudgmentin

thecaseGábor Fekete v Nemzeti Adó- és Vámhivatal

Közép-dunántúli Regionális Vám- és Pénzügyőri

Főigazgatósága(C-182/12).Thecasedealswiththe

totalreliefofimportdutyforacarwhoseowneris

establishedinathirdcountryandisusedprivatelyby

87

retroactivelevyofantidumpingdutyoncertaintypesof

fastenersoriginatinginMalaysia,importedinEU.

On31January2011,Paltrade,whoseregisteredoffice

isinVarna(Bulgaria),filedacustomsdeclarationby

meansofasingleadministrativedocument(the‘SAD’)

forsimultaneousreleaseforfreecirculationandhome

usethefollowinggoods:2,528,800woodscrewsand

634,000self-tappingscrews,whichwereconsigned

fromMalaysiaandwereamongtheproductsonwhich

theanti-dumpingdutywastobeimposedunderanEU

implementingRegulation.Thecustomsdutiesandvalue

addedtaxowedweretakenintoaccounton31January

2011,thatistosay,beforetheanti-dumpingdutyhad

beendefinitivelyextendedtotheimportationofthose

goods.

However,aftertheentryintoforce,on27July2011,of

theEUimplementingRegulation,adoptedonthebasis

ofArticle78oftheCustomsCode,subsequenttothe

releaseofthegoodsinquestion,thecustomsauthority

carriedoutanex post factoreviewofthedeclaration

inordertoverifytheaccuracyofthedatatherein.

FollowingthereviewoftheSADandofthedocuments

attachedtoit,thecustomsauthorityfoundthatthe

singleadministrativedocumenthadbeenregistered

duringtheperiodofinvestigationconductedunder

RegulationNo966/2010.Consequently,thecustoms

authoritycarriedoutarevisionofthedatasetoutinthat

document.

TheBulgariancustomsauthoritiesdidnotadoptany

particularmeasureswithaviewtotheregistration

ofimportsfromMalaysia,nordidtheyregisterthe

TARICadditionalcode–A999setoutinArticle1(2)of

RegulationNo91/2009.Rather,theyappliedtheusual

registrationprocedureofcustomsdeclarationsmade

inaccordancewiththeSADmodel,intheBulgarian

integratedcustomsinformationsystem(Balgarska

integriranamitnicheskainformatsionnasistema,‘the

BIMISsystem’).

BydecisionNo9300-843of10August2011,the

customsauthorityleviedtheadditionalamountofBGN

14,623.75ofanti-dumpingdutiesandBGN2,924.76

ofvalueaddedtaxonPaltrade.Thelatterbroughtan

whetherthisrulewasconsistentwithEUlaw–notably,

theprinciplesofequivalence,effectivenessand

proportionality–andreferredthecasetotheCJ.

TheCJstartedbyre-callingthatintheabsenceof

EUlegislation,itisfortheinternallegalorderofeach

MemberStatetolaydowntheconditionsinwhich

suchinterestmustbepaid,particularlytherateofthat

interestanditsmethodofcalculation.Thoseconditions

mustcomplywiththeprinciplesofequivalenceand

effectiveness;thatistosay,thattheymustnotbeless

favourablethanthoseconcerningsimilarclaimsbased

onprovisionsofnationallaworarrangedinsucha

wayastorendertheexerciseofrightsconferredby

theEuropeanUnionlegalorderimpossibleinpractice

orexcessivelydifficult.Asregardstheprincipleof

equivalence,theCourtdidnotfindanyevidencewhich

mightraisedoubtsastothecomplianceofthesystem

atissueinthemainproceedingswiththatprinciple.

Asregardstheprincipleofeffectiveness,thatprinciple

requires,inasituationofrepaymentofataxleviedbya

MemberStateinbreachofEuropeanUnionlaw,thatthe

nationalrulesreferring,inparticular,tothecalculationof

interestwhichmaybedueshouldnotleadtodepriving

thetaxpayerofadequatecompensationfortheloss

sustainedthroughtheunduepaymentofthetax.Inthis

case,itmustbefoundthatasystemsuchasthatat

issueinthemainproceedings,whichlimitsinterestto

thataccruingfromthedayfollowingthedateoftheclaim

forrepaymentofthetaxundulylevied,doesnotmeet

thatrequirement.Thatlossdepends,interalia,onthe

durationoftheunavailabilityofthesumundulyleviedin

breachofEUlawandthusoccurs,inprinciple,during

theperiodbetweenthedateoftheunduepayment

ofthetaxatissueandthedateofrepaymentthereof.

Therefore,itconcludedthattheRomanianruleswhich

limittheinterestgrantedonrepaymentofataxleviedin

breachofEuropeanUnionlawtothataccruingfromthe

dayfollowingthedateoftheclaimforrepaymentofthat

taxareinbreachofEUlaw.

CJrulesontheretroactiverecoveryofantidumpingdutyonimportsoffasteners (Paltrade)On6June2013,theCJdelivereditsjudgmentinthe

case Paltrade(C-667/11).Thecasedealswiththe

88

intendedforconsumptionintheCzechRepublicandit

paidexcisedutyonthoseproductsinRomania.

BetweenSeptember2009andFebruary2010,Scandic

requestedreimbursementofthatdutyfromtheDirecţia

Generală,onthebasisofArticle22ofDirective

92/12andofArticle192-6oftheTaxCode.The

requestsforreimbursementweredrawnuppursuant

toArticle192-6oftheTaxCodeandParagraph18-4

oftheimplementingrules.Scandicrespectedallthe

requirementslaiddowninAnnex11toTitleVIIofthe

TaxCode,sinceitprovidedinformationaboutthe

nameandtaxidentificationcodeoftheconsignee,

adescriptionoftheproductsdispatched,thedateof

receiptoftheproducts,thequantityreceived,anddata

relatingtothepaymentofexcisedutyintheMember

Stateofdestination.

Therequestsforreimbursementweresubmittedafter

thegoodshadreachedtheCzechRepublic.Scandic

explainedthatthedelaywasduetothefactthatitdid

nothaveinitspossessionallthedocumentslistedin

Annex11toTitleVIIoftheTaxCodebeforethearrival

oftheproductsattheirdestinationandthepayment

oftheexcisedutyintheMemberStateofdestination.

Scandicstatedthatittookthatapproachtoavoidthe

riskofseeingitsrequestsforreimbursementrefused

onthegroundofinadequateproof,evenifthatmeant

beingreimbursedtheamountthatithadpaidinadvance

relativelylate.

AccordingtoScandic,astheinformationreferredtoin

Annex11relates,interalia,tothedateofreceiptofthe

productsandthequantityreceived,thatinformation

andtherelevantdocumentscouldclearlybefurnished

onlyafterthedeliveryoftheproductsintheMember

Stateofdestination.Itarguesthat,therefore,the

lodgingoftherequestforreimbursementwaspossible

onlyaftertheproductatissuehadbeendeliveredand

receivedintheCzechRepublic.Scandicalsonoted

thatitwasclearfromtherequestforreimbursement

specimen,asprovidedinAnnex11,thattherequests

forreimbursementweretobesubmittedmonthly,and

notbeforetheproductssubjecttoexcisedutyhadbeen

dispatchedtoanotherMemberState.

actionagainstthatdecisionbeforetheAdministrativen

sadVarna.

Inthosecircumstances,theAdministrativensadVarna

decidedtostaytheproceedingsandtoreferthe

followingquestionstotheCourtforapreliminaryruling:

‘1. Istheretroactivelevyofananti-dumpingduty

pursuanttoArticle1oftheEUimplementing

Regulationpermissible,withoutacustoms

registration–exceptforthecustomsregistration

ofthesingleadministrativedocumentintheBIMIS

system–takingplacewiththeregistrationofthe

TARICadditionalcodewhichismentionedinArticle

1ofRegulationNo91/2009?

2. Whatis,inaccordancewithrecital18ofRegulation

No966/2010,theappropriateamountforthe

retroactivelevyofananti-dumpingdutypursuantto

theEUimplementingRegulation?’

TheCJruledthat:

- themeansofregistrationsuchasthoseatissue

intheproceedingsareinaccordancewiththat

provision,andsuffice,therefore,fortheretroactive

levyofananti-dumping,and

- therateoftheextendedanti-dumpingdutylevied

retroactivelyongoodsimportedpriortotheentry

intoforceofImplementingRegulationNo723/2011

is85%for‘allothercompanies’.

CJrulesontherefusaltoreimburseexcisesforgoodstransportedtoanotherMemberState(Scandic Distilleries SA) On30May2013,theCJdelivereditsjudgmentinthe

case Scandic Distilleries SA(C-663/11)(hereinafter:

‘Scandic’).Thecasedealswiththerefusaltoreimburse

excisesthathadbeenpaidinRomaniaforproductsthat

weretransportedtotheCzechRepublicandbrought

intoconsumptionintheCzechRepublic.

Scandic,aRomaniancompany,marketsalcoholic

productsinRomaniaandotherMemberStates.In

February,March,May,JuneandJuly2009,Scandic

releasedforconsumptioninRomaniaalcoholicproducts

89

theproductssubjecttoexcisedutyhadbeen

deliveredinanotherMemberState;

(c) Romaniantaxlaw(Article18-4(4)ofthe

implementingprovisions,whichreferstoArticle

135oftheCodeofTaxProcedure)providesfora

generalperiodoffiveyearsforeachrequestfor

refund/reimbursement?

(2)MustArticle22[(2)](a)ofDirective92/12be

interpretedasmeaningthatfailurebyatraderto

requestreimbursementofexcisedutyintheMember

Stateinwhichthatexcisedutywaspaid,before

theproductssubjecttoexcisedutyweredelivered

intheotherMemberStatewheretheproductsare

intendedforconsumption,entailsforfeitureofthe

trader’srighttoobtainreimbursementoftheexcise

dutypaid?

(3) IftheanswertoQuestion2isintheaffirmative,does

thedecisionontheforfeitureofthetrader’srightto

obtainreimbursementofexciseduty,whichinvolves

doubletaxationofthesameproductssubjectto

exciseduty(intheMemberStateinwhichthe

productssubjecttoexcisedutyareinitiallyreleased

forconsumptionandintheMemberStateinwhich

theproductsareintendedforconsumption),comply

withtheprincipleoffiscalneutrality?

(4) IftheanswertoQuestion2isintheaffirmative,

cantheextremelybriefperiodbetweenthedateof

paymentoftheexcisedutyontheproductsreleased

forconsumptioninoneMemberStateandthedate

ofdispatchoftheproductssubjecttoexcisedutyto

anotherMemberStateinwhichtheyareintended

forconsumptionberegardedascomplyingwith

theprinciplesofequivalenceandeffectiveness?Is

itrelevant,inthatregard,thatthegeneralperiod

duringwhichtherefund/reimbursementofatax,duty

orchargecanberequestedintheMemberStatein

questionissignificantlylonger?’

TheCJruledthatArticle22(1)to(3)ofCouncilDirective

92/12/EECof25February1992onthegeneral

arrangementsforproductssubjecttoexcisedutyand

ontheholding,movementandmonitoringofsuch

products,asamendedbyCouncilDirective92/108/EEC

of14December1992,mustbeinterpretedasmeaning

that,whenproducts,whicharesubjecttoexciseduty

thathasbeenpaidandwhichhavebeenreleasedfor

GiventhattheDirecţiaGeneralădidnotgrantits

requestsforreimbursement,Scandicbroughtan

actionbeforetheTribunalulBihor(DistrictCourt,Bihor)

(Romania)requestingthattheDirecţiaGeneralăbe

orderedtoreimbursetheexcisedutiesatissueandpay

theinterestonthatamount.

Initsdefence,theDirecţiaGeneralăpointedoutthatall

thedocumentsrequiredunderArticle192-6oftheTax

Codehadbeensubmitted.However,itexplainedthat

itwasrefusingtogranttherequestforreimbursement

onthegroundthatScandichadnotrequested

reimbursementoftheexcisedutybeforetheproducts

hadbeendispatchedtoanotherMemberState,in

accordancewithArticle22ofDirective92/12.

AstheTribunalulBihordismissedScandic’saction,the

latterbroughtanappealagainstthatcourt’sjudgment

beforethereferringcourt.

Consideringthataninterpretationoftheprovisions

ofDirective92/12isnecessaryforitsdecision,the

CurteadeApelOradea(CourtofAppeal,Oradea)

(Romania)decidedtostaytheproceedingsandtorefer

thefollowingquestionstotheCourtofJusticefora

preliminaryruling:

‘(1)DoestherefusaloftheRomaniantaxauthorities

tograntarequestforreimbursementofexcise

dutyconstituteaninfringementofEuropeanUnion

law(Articles7and22ofDirective92/12,andthe

preamblethereto)inthecasewhere:

(a) thetraderrequestingreimbursementofexcise

dutyfurnishedproofthatallthetechnical

conditionslaiddowninRomanianlawgoverning

theadmissibilityofrequestsforreimbursement

weresatisfied,andinparticularthoserelatingto:

(i) proofofpaymentofexcisedutiesin

Romania,and

(ii) proofthattheproductssubjecttoexciseduty

weredispatchedtoanotherMemberState;

(b) accordingtotherequirementsofRomaniantax

law(Article192-6oftheTaxCode,Paragraph

18-4oftheimplementingprovisions,and

Annex11toTitleVIIoftheTaxCode),certain

documentswhichhadtoaccompanytherequest

forreimbursementcouldbefurnishedonlyafter

90

Thepersonmakingthepurchaseisnotsubjecttoany

requirementtoprovideproofofidentityorofhiscapacity

asatraderorasarepresentativeoftheundertaking

towhichtheMetrocardwasissued.Metrodoesnot

conductchecksatthecheck-outcountertoverify

whetherthegoodsarebeingpurchasedforcommercial

useorwhethergoodsaresolelyoradditionally

purchasedforprivateuse.

ThesaleofspiritsisalwayssubjecttoDanishVATand

Danishexciseduties,regardlessofthecustomer’s

nationality.

Itappearsfromarequestforassistancemadeon

12February2007,justifiedonthebasisoftherisk

offraudinthecateringsector,thattheSkatteverket

(SwedishTaxAgency)hadsoughtinformationfrom

theDanishcustomsandtaxadministrationconcerning

purchasesmadebySwedishcustomersatMetroin

2003and2004.Theinformationreceivedhadbeen

usedininspectionscarriedoutinanumberofSwedish

restaurantsfollowingwhich,inallcases,theoperators

oftherestaurantsreceivednoticesofassessmentand

hadtheirlicencewithdrawn.

TheSkatteministerietsubsequentlyadoptedadecision

underwhichMetrowasrequiredtoreceivecopy1ofthe

simplifiedaccompanyingdocumentatthesaleofspirits

toSwedishcustomers.

TheactionbroughtbyMetroagainstthatdecisionwas

dismissedbytheØstreLandsret(EasternRegional

Court,Denmark)byjudgmentof19March2010.

On11May2010,Metroappealedagainstthatjudgment

totheHøjesteret.TheHøjesteretdecidedtostaythe

proceedingsandtoreferthefollowingquestionstothe

CourtofJusticeforapreliminaryruling:

‘(1)AreDirective92/12andRegulationNo3649/92

tobeinterpretedasmeaningthatatraderina

MemberStatewho,incircumstancessuchas

thosearisinginthemainproceedings,sellsgoods

subjecttoexcisedutywhichhavebeenreleased

forconsumptioninthatMemberStateandwhich

aresuppliedatthevendor’splaceofbusinesstoa

consumptioninoneMemberState,aretransported

toanotherMemberStatewherethoseproductsare

subjecttoexciseduty,whichhasalsobeenpaid,a

requestforreimbursementoftheexcisedutypaidin

theMemberStateofdeparturemaynotberefusedon

thesolegroundthatthatrequestwasnotmadebefore

thosegoodsweredispatched,butmustbeassessed

onthebasisofArticle22(3)ofDirective92/12/EEC.

Bycontrast,iftheexcisedutyhasnotbeenpaidin

theMemberStateofdestinationsucharequestmay

berefusedonthebasisofArticle22(1)and(2)ofthe

Directive.

CJrulesonthelegalrequirementswithregardtoexciseproductsshippedtoanotherEUMemberState(Metro Cash & Carry Denmark)On18July2013,theCJdelivereditsjudgmentinthe

case Metro Cash & Carry Denmark(C-315/12).This

casedealswiththerequirementsthatcanoccurin

thesituationthatexcisegoodsweresoldbyMetroin

Denmarkandthesellerdoesnotknowwhetherthe

buyer,whowillshipthegoodstoanotherEUMember

State,isaprivateindividualornotandwhetherthese

goodsaretobeheldforcommercialpurposesinthe

otherEUMemberState.

MetroconductsabusinessinDenmarksellingabroad

rangeofgoods,includingspirits,toDanishcustomers

orcustomersfromotherMemberStates.Metrousesthe

‘cashandcarry’businessmodel.

PurchasescanbemadeatMetroonlyonpresentation,

atthecheckout-counter,ofamachine-readable

card(‘theMetrocard’)whichisissuedonrequestto

DanishundertakingsregisteredintheDetCentrale

Virksomhedsregister(CentralBusinessRegister).Inthe

caseofSwedishcustomers,Metroissuesthatcardonly

toundertakingswhichareregisteredforVATinSweden.

AcustomertowhomseveralMetrocardsareissued

maymakethosecardsavailabletootherindividuals

whocanusethosecardsfortheirownpurchases.This

appliestobothDanishandSwedishcustomers.Metro

hasover250,000registeredcustomersandhasissued

over700,000Metrocards.

91

TheCJruledthat:

1. Therelevantlegislationmustbeinterpretedas

meaningthatatrader,suchasthetraderatissue

inthemainproceedings,isnotrequiredtocheck

whetherpurchasersfromotherMemberStates

intendtoimportproductssubjecttoexcisedutyinto

anotherMemberStateand,whererelevant,whether

suchimportationisforprivateorcommercialuse.

2. Articles32to34ofCouncilDirective2008/118/

ECof16December2008concerningthegeneral

arrangementsforexcisedutyandrepealing

Directive92/12/EECmustbeinterpretedasnot

substantiallyamendingArticles7to9ofDirective

92/12asamendedbyDirective92/108inamanner

whichwouldwarrant,incircumstancessuchas

thoseatissueinthemainproceedings,adifferent

answertothefirstquestion.

3. Article8ofDirective92/12asamendedbyDirective

92/108mustbeinterpretedasbeingcapableof

coveringthepurchaseofproductssubjecttoexcise

dutyincircumstancessuchasthoseatissuein

themainproceedingswherethoseproductsare

acquiredbyprivateindividuals,fortheirownuseand

aretransportedbythem,whichisforthecompetent

nationalauthoritiestocheckonacase-by-case

basis.

CJrulesontheincurrenceofacustomsdebtforgoodsstolenfromacustomswarehouse(Harry Winston)On11July2013,theCJdelivereditsjudgmentinthe

case Harry Winston(C-273/12).Thiscasedealswiththe

questionwhetheracustomsdebtarisesforgoodsthat

arestolenfromacustomswarehouseorwhetherinthe

situationthatgoodsarestolennocustomsdebtshallbe

deemedtobeincurredbecauseofirretrievablelossof

goodsasaresultofforce majeure.

Followinganarmedrobberywithhostage-takingon

6October2007,inthecourseofwhichitemsofjewellery

placedundercustomswarehousingarrangements

werestolen,thecustomsadministration,byacollection

noticeof16November2007,soughtpaymentfrom

HarryWinstonofthecustomsdutiesandVATapplicable

tothosegoods.HarryWinston,beingthekeeperof

purchaserwhoisresidentinanotherMemberState,

withoutthevendorassistingintheprovisionor

arrangementoftransport,mustcarryout(i)acheck

todeterminewhetherthepurchaseofthegoods

whicharesubjecttodutyismadewithaviewtotheir

importationintothatsecondMemberState,and(ii)a

checktodeterminewhetherthegoodsaretobe

importedforprivateorcommercialuse?

(2) IfQuestion1isansweredintheaffirmative,must

thetrader,atthetimeofthesaleofgoodssubjectto

excisedutyincircumstancessuchasthosearising

inthemainproceedings,whencarryingoutthe

checksreferredto,applyrulesofpresumptionasto

thepurchaser’sintentionwithregardtothegoods

purchased?

(3) IfQuestion1isansweredintheaffirmative,are

Directive92/12andRegulationNo3649/92tobe

interpretedasmeaningthatavendor,asreferred

toinQuestion1,incircumstancessuchasthose

arisinginthemainproceedings,mustrefuseto

accedetoapurchaser’swishtopurchasegoods

subjecttoexcisedutyifthepurchaserdoesnotoffer

topresentcopy1ofthesimplifiedaccompanying

documentreferredtoinArticle4ofRegulation

No3649/92,iftheintentioninmakingthepurchase

istousethedutiablegoodsforcommercialpurposes

inthepurchaser’shomecountry?Ananswertothis

questionisalsorequestedintheeventthatrulesof

presumption,asreferredtoinQuestion2,aretobe

applied.

(4) DotheentryintoforceofDirective2008/118andthe

repealofDirective92/12giverisetoachangeinthe

legalpositionasregardstheimplicationsofDirective

92/12inrelationtotheanswerstoQuestions1to3?

(5) Isthephraseproductsacquiredbyprivate

individualsfortheirownuseinArticle8ofDirective

92/12andArticle32(1)ofDirective2008/118to

beinterpretedasmeaningthatitcovers,orcan

cover,purchasesofgoodssubjecttoexciseduty

incircumstancessuchasthosearisinginthemain

proceedings?Iftheanswertothatquestionisin

thenegative,mustthepurchasesthencomeunder

Article7ofDirective92/12and/orArticle33of

Directive2008/118?’

92

WithregardtotheVAT,theCourd’appeltooktheview

thattheCourtofJusticehadactedcorrectlyinholding,

initsjudgmentincaseC-435/03British American

Tobacco and Newman Shipping,thatthetheftofgoods

doesnotconstitutea‘supplyofgoodsforconsideration’

withinthemeaningofArticle2oftheVATdirectiveand

cannot,therefore,assuch,besubjecttoVAT.

Thecustomsadministrationappealedincassation.It

complainedthattheCourd’appel,first,hadfailedto

investigate,asithadbeenrequestedtodo,whether

theCourthadnotbeencorrecttohold,initsjudgment

in Esercizio Magazzini Generali and Mellina Agosta,

thatthetheftofgoodssubjecttocustomsdutiesdid

notextinguishtheobligationsrelatingtothemand,

secondly,concerningtheVAT,thatitgaveitsrulingin

relianceonthejudgmentinBritish American Tobacco

and Newman Shipping,eventhough,inthepresent

case,thechargeableeventgivingrisetothetaxwasnot

a‘supplyofgoodsforconsideration’,withinthemeaning

ofArticle2(1)(a)oftheVATdirective,butan‘importation’

referredtoinArticle2(1)(d)ofthatdirective.

TheCourdecassationpointedoutthattwonewfactors,

whichhavearisensincethejudgmentinEsercizio

Magazzini Generali and Mellina Agosta, precludea

conclusivefindingthatthatjudgmentisstill,forcertain,

partofpositivelaw.First,theCustomsCode,adoptedin

1992,didnotrepeattherequirementoftheninthrecital

inthepreambletoDirective79/623,referredtointhe

judgmentinEsercizio Magazzini Generali and Mellina

Agosta,whichmadetheextinctionofthecustomsdebt

conditionalonthecircumstance,whetheractualor

presumed,thatthegoodsdidnotfindtheirwayback

totheeconomiccircuitafterthetheft.Secondly,the

CourtheldinitsjudgmentinBritish American Tobacco

and Newman Shippingthatthetheftofgoodsdidnot

constitutea‘supplyofgoodsforconsideration’withinthe

meaningofArticle2oftheVATdirectiveandcouldnot

therefore,assuch,besubjecttoVAT.

Inthosecircumstances,theCourdecassationdecided

tostaytheproceedingsandtoreferthefollowing

questionstotheCourtforapreliminaryruling:

thecustomswarehouse,followinganunsuccessful

administrativecomplaint,broughtproceedingsagainst

thecustomsadministrationwithaviewtohavingthat

noticesetaside.

Bydecisionof3June2009,theTribunald’instancedu

10earrondissementdeParis(DistrictCourtofthe10th

DistrictofParis)setasidethecollectionnoticeinrelation

totheVATand,withregardtothecustomsduties,

stayedtheproceedingspendingarulingbytheCourt

ofJusticeontwoquestionsreferredforapreliminary

rulingconcerningtheinterpretationofArticle206ofthe

CustomsCode.

Thecustomsadministrationappealedagainstthat

decision.

Byjudgmentof7December2010,theCourd’appel

(Courtofappeal)first,upheldthedecisionofthe

Tribunald’instancedu10e arrondissementdeParis

whichhadsetasidethecollectionnoticeinrelationto

theVAT,andsecondly,variedthedecisionrelatingtothe

customsdebt.

Inrelationtothecustomsduties,theCourd’appel

held,basingitselfontheBulletin officiel des douanes

No6551of29May2002,thattheFrenchauthorities

treatedthetheftofgoodsasequivalenttotheir

destructionorirretrievablelosswithinthetermsof

Article206oftheCustomsCode,andthatthatdoctrine

exemptedthetraderifheprovedthattheirretrievable

loss–inthepresentcase,thetheft–wastheresultof

force majeure.

TheCourd’appelthusheldthatHarryWinstoncould

havetakentheview,relyingontheprincipleoflegitimate

expectation,thatitdidnothavetopaycustomsduties

inthiscase,subjecttodemonstratingthatthattheft

wastheresultofforce majeure.Inthatregard,the

Courd’appelheldthatthearmedrobberyatissue,

havingbeenunforeseeableandunavoidablebyreason

ofitsbrutalityandcriminalcharacteristics,fulfilled

theconditionsofforce majeureandhadledtoan

irretrievablelossofthegoods.

93

Intheperiodfrom19May2005to11July2007,Sandler

releasedforfreecirculationintheEuropeanUnion,

byelectronicmeansusingtheATLASsystem,several

consignmentsofsyntheticfibres.TheHauptzollamt

Hamburg-Hafen–ZollamtWaltershof(Principal

CustomsOfficeofthePortofHamburg-Waltershof

(Germany)–WaltershofCustomsOffice)releasedthe

goodsforfreecirculationonthebasisofthedeclared

originofNigeria,applyingthepreferentialcustomsduty

rateofzero.Thecustomsauthoritiesdispensedwiththe

presentationandexaminationoftheEUR.1certificates

referredtointhecustomsdeclarations.

Inapost-clearanceexaminationoftheEUR.1

certificatesin2008pursuanttoArticle78ofthe

CustomsCode,theHZAfoundthaton34oftheEUR.1

certificatestherewasaroundstampwiththetext

‘NIGERIACUSTOMSSERVICE’and‘TINCANISLAND

PORTLAGOS’intheborderareaandwiththetext

‘ASST.COMPTROLLERo/cExportSeatReleasing

Officer’intheinnerarea.IntheHZA’sview,thatstamp

didnotmatchthestampspecimenwhichtheNigerian

authoritieshadnotifiedtotheCommissionpursuant

toArticle31(1)ofProtocolNo1,whichconsistedof

acurvedstampwiththetext‘NIGERIACUSTOMS

SERVICE’and‘EXPORTSEAT’aroundtheedgeand

thetext‘TINCANPORT’intheinnerareaofthestamp

belowthedate:

AccordingtotheinformationprovidedbytheHZA

tothereferringcourt,thestampspecimensnotified

bytheNigerianauthoritieshadbeenineffectsince

1July2003untilexpiryofthepreferentialarrangement

providedforinAnnexVtotheCotonouAgreement,

thatis,31December2007,andnochangestothose

specimenshadbeennotifiedbytheNigerianauthorities

inthemeantime.

TheHZAthereforeinformedSandler,byletterof30April

2008,thattheEUR.1certificatescouldnotbeaccepted

andthat‘Documentnotaccepted’hadtobestampedon

them.TheHZAfurtherstatedthatcustomsimportduties

wouldhavetobecharged,butthatifanewEUR.1

certificatewerepresenteditwouldbepossibletorepay

thedutiescharged.Bytwonoticesofassessmentof

‘1.IsArticle206oftheCustomsCodetobeinterpreted

asmeaningthatthetheft,inthecircumstancesof

thepresentcase,ofgoodsheldundercustoms

warehousingarrangementsconstitutesthe

irretrievablelossofthegoodsandacaseofforce

majeure,withtheconsequencethat,inthatsituation,

nocustomsdebtonimportationisdeemedtohave

beenincurred?

2. Isthetheftofgoodsheldundercustoms

warehousingarrangementssuchastogiverise

tothechargeableeventandtocausetheVATto

becomechargeablepursuanttoArticle71oftheVAT

directive?’

TheCJruledasfollows:

1. Article203(1)ofCouncilRegulation(EEC)

No2913/92of12October1992establishingthe

CommunityCustomsCode,asamendedbyCouncil

Regulation(EC)No1791/2006of20November

2006,mustbeinterpretedasmeaningthatatheft

ofgoodsplacedundercustomswarehousing

arrangementsconstitutesanunlawfulremovalof

thosegoodswithinthemeaningofthatprovision,

givingrisetoacustomsdebtonimportation.Article

206ofthatregulationiscapableofapplyingonly

tosituationsinwhichacustomsdebtisliabletobe

incurredpursuanttoArticles202and204(1)(a)of

thatregulation.

2. ThesecondsubparagraphofArticle71(1)ofCouncil

Directive2006/112/ECof28November2006on

thecommonsystemofvalueaddedtaxmustbe

interpretedasmeaningthatthetheftofgoods

placedundercustomswarehousingarrangements

givesrisetothechargeableeventandcausesvalue

addedtaxtobecomechargeable.

CJrulesonpossibilityofretrospectiveapplicationofpreferentialcustomsdutytariffthatwasnolongerineffectondateofrequestforrepayment(Sandler AG)On24October2013,theCJdelivereditsjudgmentin

thecaseSandler AG(C-175/12).Thecaseconcerned

theretrospectiveapplicationofapreferentialcustoms

dutytariffthatwasnolongerineffectonthedatewhen

therequestforrepaymentwasmade.

94

upcorrectlyfromasubstantiveviewpointandthatonly

thestampusedwasincorrect.Thus,norwasitacase

ofinvalidEUR.1certificates.Inaffixinganincorrect

stamp,theNigerianauthoritieshadmerelymadean

administrativeerror,whichtheyrectifiedbyissuing

subsequent,revised,EUR.1certificates.

Insupportofitsargument,Sandlerstatedthat,inthe

presentcase,insteadofrelyingontheprocedure

providedforinArticle16ofProtocolNo1,apost-

clearanceexaminationoftheEUR.1certificates

underArticle32ofthatprotocoloughttohavebeen

undertaken,sincetheoriginalEUR.1certificatesdrawn

upbythecompetentauthoritiesofaStatepartytothe

CotonouAgreementshouldnothavebeendeclared

invalidunilaterally,withouttheinvolvementofthe

authoritiesofthatState.Intheeventofarefusalofan

EUR.1certificateonthebasisofArticle16ofProtocol

No1,thepreferentialoriginofthegoodswouldbe

incontestableandonlyadueissuanceoftheEUR.1

certificateswould,forinternaladministrativereasons,be

problematic.SincetheHZAhadnotrequestedapost-

clearanceexaminationunderArticle32ofProtocolNo

1,itwasreasonabletoconsiderthattherewasnodoubt

astotheauthenticityofthedocumentusedtoclaimthe

preferentialrate.

TheHZAstated,inessence,thatArticle16ofProtocol

No1wasapplicabletothepresentcasebecausethe

originalEUR.1certificatesboreastampwhichwas

clearlydifferentfromthespecimensnotifiedbythe

Nigerianauthorities.Thetechnicalerrorsreferredto

inArticle16ofProtocolNo1concernmoreserious

deficienciesthanthosereferredtoinArticle32ofthat

protocol.TheHZAaddedthat,inthepresentcase,

thestampusedwascompletelydifferentfromthe

specimensnotifiedandborenosimilaritytothem,

suchthatitwasnotacaseof‘notmatching’anotified

specimen,asreferredtoinpoint17oftheNotes,which

mightreasonablygiverisetodoubtastotheauthenticity

oftheEUR.1certificate.Thedifferencebetweenthe

stampsatissueinthemainproceedingsandthe

specimensnotifiedbytheNigerianauthoritieswasso

considerablethattheapplicationofthepreferential

customsdutyisunthinkable.

importdutiesdated14May2008and3June2008,the

HZAorderedthechargingofcustomsdutiestotalling

EUR65,612.71,applyingthedutyrateof4%appliedto

non-membercountries.

On10September2008,SandlerpresentedEUR.1

certificatesbearingstampsmatchingthespecimen

notifiedtotheCommissionandrequestedrepayment

ofthecustomsdutiespaidfollowingthetwonotices

ofassessment.ThoseEUR.1certificatescontained,

inbox7,entitled‘Remarks’,thewords‘beingissued

inreplacementofEUR.1,togetherwiththedateand

numberoftheEUR.1certificatesrefusedbytheHZA.

Bydecisionof22September2008,theHZArefused

repaymentonthegroundthat,underArticle889(1)of

RegulationNo2454/93,preferentialtreatmentcould

begrantedpost-clearanceonlyifthepreferential

customsdutyrequestedwasstillineffectatthetimethe

requestforrepaymentwasmade.Asthepreferential

arrangementprovidedforundertheCotonouAgreement

hadexpiredon31December2007,preferentialcustoms

dutieshadnolongerbeenprovidedforwithrespectto

goodsimportedfromNigeriaasfrom1January2008.

Sandleralsorequestedtherepaymentofthecustoms

dutiesonequitablegroundsunderArticle239ofthe

CustomsCode.Thatrequestwasalsorefusedbythe

HZAbydecisionof23February2009.

Sandlerlodgedobjectionstothosetwodecisions

oftheHZA,bothofwhichweredismissed.Sandler

subsequentlybroughtactionsagainsteachofthose

dismissaldecisionsbeforethereferringcourt,which

joinedthetwoactions.

Sandlerarguedbeforethereferringcourtthatan

inaccuracyinaEUR.1certificatedrawnupbythe

customsauthoritiesofanon-membercountryinthe

contextofthesystemofadministrativecooperation

wasanerrorwhichtheeconomicoperatorcannot

detect.Theeconomicoperatorisnotresponsiblefor

anyexaminationfunctions,andnorisitpossiblefor

therequiredstampspecimentobeinspectedwiththe

customsauthoritiesoftheStateofimport.Sandler

addedthattheinitialEUR.1certificateshadbeendrawn

95

authoritiesoftheStateofimport,whentheStateof

exporthasplacedonaEUR.1certificateastamp

otherthanthespecimenofthestampnotifiedby

theauthoritiesoftheStateofexport,may,incase

ofdoubt,treatsuchavariationasatechnical

deficiencycoveredbyArticle16(1)(b)ofProtocolNo

1andaccordinglyrefusetoacceptthatcertificate

withouttheinvolvementofthecustomsauthoritiesof

theStateofexport?

3. IftheanswertoQuestion2isintheaffirmative:

(a) ShouldArticle16(1)(b)ofProtocolNo1be

appliedalsowhenthetechnicaldeficiencyis

notdetectedimmediatelyuponimport,butonly

duringasubsequentverificationbythecustoms

authorities?

(b)MustArticle16(4)and(5)ofProtocolNo1

beinterpretedtotheeffectthatatechnical

deficiencyistobeconsideredrectifiedwhere,

inthecaseofaEUR.1certificateissued

retrospectively,oneoftheindicationsprovided

forinArticle16(4)ofProtocolhasnotbeen

entered,initsprecisewording,inthe“Remarks”

box,butonlyaphrasetotheeffectthatthe

EUR.1certificatewasissuedretrospectively?

4. IfQuestion2isansweredinthenegative:IsArticle

236(1)oftheCustomsCodetobeinterpretedtothe

effectthatimportdutieswerenotlegallyowedand

werethereforewronglyrecoveredpursuanttoArticle

220(1)oftheCustomsCodewherethe[EUR.1

certificates]originallyusedcouldnotbedeclared

invalidbythecustomsauthoritiesoftheStateof

importwithouttheinvolvementofthecustoms

authoritiesoftheStateofexport?

5. Similarly,inthecaseofaEUR.1certificateissued

retrospectivelypursuanttoArticle16ofProtocol

No1istherepaymentofalreadyrecoveredand

paidimportdutiesunderArticle889ofRegulation

No2454/93possibleonlyifthepreferentialtariff

rateisstillineffectatthetimeoftherequestfor

repayment?’

TheCJruledasfollows:

1. Thesecondindentofthefirstsubparagraphof

Article889(1)ofCommissionRegulation(EEC)No

2454/93of2July1993layingdownprovisionsfor

theimplementationofCouncilRegulation(EEC)

Thereferringcourttooktheviewthatinordertoruleon

thedisputebeforeit,itisdecisivetoascertainwhether

theHZAmayrefuseSandler’srequestforrepayment

onthegroundthat,underArticle889ofRegulation

No2454/93,repaymentmaybegrantedonlyifthe

preferentialratewhichwasineffectatthetimewhenthe

goodswereplacedinfreecirculationisstillapplicable

whentherequestforrepaymentismade.Although

Article889ofRegulationNo2454/93doesnotpreclude

repaymentinsuchcircumstances,thequestionarises

astowhethertheauthoritiesofaMemberStatemay,

withoutissuingaformalrequestforapost-clearance

examinationunderArticle32ofProtocolNo1,examine

and/orrefuseanEUR.1certificateissuedbyanACP

StatewhenthecustomsauthoritiesofthatState

usedastampwhichisdifferentfromtheonenotified

totheCommissionand,therefore,refusetogranta

preferentialcustomsdutyratetotheimporterontheir

owninitiative.

Inthosecircumstances,theFinanzgerichtMünchen

(FinanceCourt,Munich)decidedtostaythe

proceedingsandtoreferthefollowingquestionstothe

CJforapreliminaryruling:

‘1. Isthesecondindentofthefirstsubparagraphof

Article889(1)ofRegulationNo2454/93tobe

interpretedasonlyregulatingcasesofrequests

forrepaymentwheregoodswerefirstreleasedfor

freecirculationatthedutyrateapplicabletonon-

membercountriesanditsubsequentlytranspires

thatatthetimewhenthecustomsdeclarationwas

acceptedareducedorzerorateofimportduty(in

thiscaseapreferentialrate)actuallyexisted,but

hadalreadyexpiredwhentherequestforrepayment

wasmade,withtheresultthattheexpiryofa

temporarypreferentialtariffarrangementcannot

beinvokedagainstanoperatorinconnectionwith

thesubmissionofarequestforrepaymentwhere

thepreferentialtariffrateisgrantedatthetime

ofplacingintofreecirculationanditisonlyupon

post-clearancerecoverybytheadministrationthat

thepreferentialrateisrefusedandthecustoms

dutyrateapplicabletogoodsoriginatingfromnon-

membercountriesisapplied?

2. AreArticle16(1)(b)and/orArticle32ofProtocolNo

1tobeinterpretedtotheeffectthatthecustoms

96

concerned,thoseauthoritiesarerequiredtoinitiate

thecontrolprocedureprovidedforinArticle32of

thatprotocol.

CJrulesonthedoubletaxationoftheuseandregistrationofacar(X) On21November2013,theCJdelivereditsjudgmentin

case X v Minister van Financiën(C-302/12).Thecase

concernsthequestionwhetheritisallowedtolevya

taxfortheuseofNetherlandspublicroadswithacar

registeredabroadinthesituationthatataxwaspaid

uponregistrationofthatcarinBelgiancarregisters.

XisaBelgiannational.Since1998,shehashadan

orthodonticspracticeintheNetherlandsandhasa

houseinthatMemberStateinwhichsheresideswith

herpartnerduringtheperiodsthatpracticeisopen.

Outsideofthoseperiods,theyresideinanapartmentin

Belgium,rentedbyherpartner.

XhasacarwhichsheboughtinBelgiumin2004,and

whichsheusesinBelgiumandintheNetherlandsfor

bothprivateandprofessionalpurposes.Itisclearfrom

thecasefilethat,eachyear,halfofthedistancecovered

byXusingthatvehicleisinBelgiumandtheotherhalfis

intheNetherlands.

XregisteredhercarinBelgiumandpaidthesumof

EUR4,957owedinrespectofcarregistrationtaxin

Belgium.

On19July2006,theNetherlandstaxauthoritiesfound

thatXwasusinghercarontheroadnetworkinthe

Netherlandswithouthavingpaidthevehicletax.Atax

assessmentnoticeintheamountofEUR17,315was

accordinglysenttoher.

Xbroughtanactionagainstthattaxassessmentnotice,

buttheInspectorofTaxesupheldthattaxassessment

notice,onthegroundthattheinterestedpartywas

residentintheNetherlandsandwasusinghercaron

theNetherlandspublicroadnetwork.

Proceedingswereinitiatedagainsttherejectionof

objectionsagainstthetaxassessment.

No2913/92of12October1992establishing

theCommunityCustomsCode,asamended

mostrecentlybyCommissionRegulation(EC)

No214/2007,mustbeinterpretedasnotprecluding

arequestforrepaymentofcustomsdutieswhere

preferentialcustomstreatmentwasrequestedand

grantedatthetimethegoodswereplacedinfree

circulationanditwasonlysubsequently,inthe

courseofapost-clearanceexaminationafterthe

expiryofthepreferentialcustomsarrangementand

there-establishmentofthecustomsdutiesnormally

due,thattheauthoritiesoftheStateofimport

recoveredthedifferencebetweenthatandthe

customsdutyapplicabletogoodsoriginatingfroma

non-membercountry.

2. Articles16(1)(b)and32ofProtocolNo1ofAnnexV

tothePartnershipagreementbetweenthemembers

oftheAfrican,CaribbeanandPacificGroupof

Statesoftheonepart,andtheEuropeanCommunity

anditsMemberStates,oftheotherpart,signedin

Cotonouon23June2000,andapprovedinbehalfof

theCommunitybyCouncilDecision2003/159/ECof

19December2002,mustbeinterpretedasmeaning

thatifittranspiresinapost-clearanceexamination

thatastampnotmatchingthespecimennotifiedby

theauthoritiesoftheStateofexportwasaffixedto

theEUR.1certificate,thecustomsauthoritiesofthe

Stateofimportmayrefusethatcertificateandreturn

ittotheimporterinordertoallowhimtoobtaina

certificateissuedretrospectivelypursuanttoArticle

16(1)(b)ofProtocolNo1ratherthantriggeringthe

procedureprovidedforinArticle32ofthatprotocol.

3. Articles16(4)and(5)and32ofProtocolNo1must

beinterpretedasprecludingtheauthoritiesofa

Stateofimportfromrefusingtoaccept,asaEUR.1

certificateissuedretrospectivelywithinthemeaning

ofArticle16(1)ofthatprotocol,aEUR.1certificate

which,whilstcomplyinginallotherrespectswith

therequirementsoftheprovisionsofthatprotocol,

doesnotcontain,inthe‘Remarks’box,thewording

specifiedbyArticle16(4)ofProtocolNo1,butan

indicationtotheeffectthattheEUR.1certificate

wasissuedpursuanttoArticle16(1)ofthatprotocol.

Incasesofdoubtastotheauthenticityofthat

documentortheoriginatingstatusoftheproducts

97

thefirstMemberStateonapermanentbasisorwhereit

is,infact,usedinthatmanner.

Inrelationtothevehicletaxspecifically,theCourthas

previouslyheldthatifvehicles,whicharenotregistered

intheNetherlands,areintendedtobeusedessentially

intheNetherlandsonapermanentbasisoriftheyare,

infact,usedinthatway,thereisnodifferenceinthe

treatmentofapersonwhoresidesintheNetherlands

andusessuchavehicleandapersonwhousesa

vehicleregisteredinthatMemberStateunderthe

sameconditions,sincethelattervehicle,whichisalso

intendedtobeusedessentiallyintheNetherlandsona

permanentbasis,wasalreadysubjecttovehicletaxon

itsfirstregistrationintheNetherlands.

Similarly,theCourtheldthat,inthosecircumstances,

requiringthepaymentofthevehicletaxforfirstuseofa

vehicleontheroadnetworkintheNetherlandswhichis

notregisteredintheNetherlands,isjustifiedinthesame

wayasthepaymentofthetaxdueontheregistrationof

thevehicleintheNetherlandsis,providedthatthetax

takesaccount,asappearstoberequiredbythe1992

Law,ofthedepreciationofthevehicleatthetimeofthat

firstuse.

Onbasisofitsconsiderations,theCJruledasfollows:

Article43ECmustbeinterpretedasnotprecluding

legislationofaMemberStateunderwhichamotor

vehicle,whichisregisteredandisalreadythesubjectof

taxationasaresultofitsregistrationinanotherMember

State,isthesubjectofataxwhenitisfirstusedonthe

nationalroadnetwork,wherethatvehicleisintended,

essentially,tobeactuallyusedonalong-termbasisin

boththoseMemberStatesoris,infact,usedinthat

manner,aslongasthattaxisnotdiscriminatory.

AdvocateGeneralopinesoncriteriafordeterminingthelimitsapplicabletothetransportofproductssubjecttoexciseduty(Commission v France)On19December2012,AdvocateGeneralCruzVillalon

(‘AG’)deliveredhisOpinioninthecaseofCommission

v France(C-216/11).Thecasedealswiththecriteria

fordeterminingthelimitsapplicabletothetransportof

TheHogeRaadderNederlanden(DutchSupreme

Court)decidedtostayproceedingsandtoreferthe

followingquestionstotheCourtforapreliminaryruling:

‘(1)IstheexerciseofpowersoftaxationbytwoMember

States,inparticulartheimpositionofaregistration

taxonamotorvehicle,unlimitedincircumstances

inwhichacitizenoftheEuropeanUnionlivesintwo

MemberStates,accordingtothenationallawsof

boththoseMemberStates,andinwhichthatcitizen

actuallyuses–inbothMemberStatesandona

long-termbasis–amotorvehiclethatbelongsto

her?

(2) Ifthefirstquestionisansweredinthenegative,can

theprincipleofproportionalityhavearemedialeffect

ontheimpositionofaregistrationtaxinacasesuch

asthis,and,ifso,doesthatprinciplethenhavethe

effectthatoneorbothoftheMemberStatesisor

arerequiredtorestricttheexerciseoftheirpowers

oftaxation,andhowshouldanysuchrestriction

apply?’

TheCJconsideredthatthequestionsaskedbythe

referringcourtshouldbeexaminedtogether.The

questionsshouldbeunderstoodasaskingwhether,

inessence,Article43ECmustbeinterpretedas

precludinglegislationofaMemberStateunderwhich

amotorvehicle,whichisregisteredandisalready

thesubjectoftaxationasaresultofitsregistrationin

anotherMemberState,isthesubjectofataxwhenit

isfirstusedonthenationalroadnetwork,wherethat

vehicleisintended,essentially,tobeactuallyusedon

along-termbasisinboththoseMemberStatesoris,in

fact,usedinthatmanner.

Inthatregard,itshouldbenotedthat,apartfromcertain

exceptionsnotrelevanttothemainproceedings,

taxationofmotorvehicleshasnotbeenharmonizedat

EuropeanUnionlevel.TheMemberStatesarethusfree

toexercisetheirpowersoftaxationinthatareaprovided

thattheydosoincompliancewithEuropeanUnionlaw.

Asregardsvehicleregistrationtaxes,itissettledcase

lawthataMemberStatemayimposearegistrationtax

onamotorvehicleregisteredinanotherMemberState

wherethatvehicleisintendedtobeusedessentiallyin

98

On20November2006,theCommissionsentFrance

arequestforinformationrelatingtotheprovisionsand

administrativepracticesapplicabletotheimportation

oftobaccofromotherMemberStates.Inthelightof

theinformationprovidedbytheFrenchauthorities,the

Commissionsentthoseauthoritiesaletterofformal

notice,dated23October2007,inwhichitcomplained

thatFrancehadinfringedArticles8and9ofDirective

92/12andwhatwasthenArticle28EC(nowArticle34

TFEU).

On23November2009,theCommissionsenta

reasonedopinion,requestingFrancetotakeallthe

measuresnecessarytoadaptitslegislationandinternal

practiceswithinaperiodoftwomonthsfromthedateof

receiptofthereasonedopinion.Followingtwomeetings

betweentheCommissionandtheFrenchauthorities,

byaletterdated15July2010,theFrenchauthorities

notifiedtotheCommissionofthedraftprovisions

amendingthenationallegislativeframework,which

wereintendedtobringdomesticlawintolinewithEU

law.However,on21December2010,theNational

Assemblyrefusedtoapprovethedraftlawandretained

inforcetheprovisionswhichtheCommissionclaims

areunlawful.Therefore,theCommissionbroughtthe

presentactionforfailuretofulfilobligations.

TheAGproposedthattheCourt:

(1) Declarethat,byimplementingthemeasures

providedforinArticles575Gand575Hofthe

GeneralTaxCode,andasettledadministrative

practice,pursuanttowhichthequantitativecriteria

fordeterminingtheuseoftobacco,whicharethe

solecriteriaprovidedforbythenationalauthorities,

arecalculatedbyvehicleandbygeneralcategories

ofproductsandnotbypersonandbyspecific

categoriesofproducts,theFrenchRepublichas

failedtofulfiltheobligationsincumbentonitunder

CouncilDirective92/12/EECof25February1992

onthegeneralarrangementsforproductssubject

toexcisedutyandontheholding,movementand

monitoringofsuchproducts.

(2) Rulethatthesecondpleaofinfringementis

inadmissible.

productssubjecttoexcisedutyandtherelationship

betweenthefundamentalfreedomsandsecondary

legislation.

InFrance,thefollowingprovisionsappliedwitheffect

from1January2006topurchasesoftobaccobyprivate

individualsinanotherMemberState,withtheexception

ofthe10newMemberStates:

- ‘Fivecartonsofcigarettes(inotherwords,

1kilogramoftobacco)maybetransportedwithout

holdingamovementlicence.

Itistobenotedthatthethresholdappliestoeach

individualmodeoftransportortoeachpersonover

theageof17inthecaseofpublictransport(the

lattermeaninganymodeoftransportcarryingmore

thanninepeople,includingthedriver).

- Wherebetweensixand10cartonsaretransported,

asimplifiedaccompanyingdocument(SAD)mustbe

presented.IntheabsenceofaSAD,atravellerwho

undergoeschecksrisksconfiscationofthetobacco

andapenalty.Thetravellermayrelinquishthe

goods.Inthatcase,nopenaltywillbeimposed.

Toobtainthisdocument,thefirstFrenchcustoms

officenexttotheborderhastobevisited.

- Itisprohibitedtobringinmorethan10cartonsof

cigarettes(or2kilogramsoftobacco)inallother

cases.Atravellerwhoundergoeschecksrisksthe

penalties(confiscationofthetobaccoandapenalty)

referredtoabove.

Inthecaseofpublicmodesoftransport(aircraft,ship,

bus,train),theseprovisionswillapplyindividuallyto

eachpassenger.’

TheCommissionconsideredthattheFrenchprovisions

arenotinlinewiththeDirective92/12/EEConthe

generalarrangementsforproductssubjecttoexcise

dutyandontheholding,movementandmonitoringof

suchproducts(‘Directive92/12’).

99

ThecasearisesfromaclaimmadebyTransportesJordi

Besora,S.L.(‘TJB’),ahaulagecompanyestablished

intheAutonomousCommunityofCatalonia.This

companypurchaseslargequantitiesoffuelforits

vehicles.Between2005and2008,atotalamount

ofEUR45,632.38ofIVMDHwaspassedontoTJB.

ConsideringtheIVMDHtobecontrarytotheExcise

DutyDirective,TJBrequestedreimbursementofthis

amount.TheTribunalSuperiordeJusticiadeCataluña

(HighCourtofJustice,Catalonia)(Spain),whichis

hearingthecaseonappeal,soughtguidanceon

whethertheIVMDHiscompatiblewiththeExciseDuty

Directive.

InhisOpinion,AGWahlconsidersthattheIVMDHis

contrarytotheExciseDutyDirective.Heexaminedthe

IVMDHinlightofthetwoabove-mentionedconditions

whichmustbefulfilledinorderforataxsuchasthe

IVMDHtocomplywiththeExciseDutyDirective.

First,theAGfoundthatataxsuchastheIVMDHdoes

notfulfiltheconditionconcerningtheexistenceofa

specificpurpose.Thisisso,inparticular,becausethe

IVMDHpursuesthesameobjectiveasthealready

harmonizedexcisedutyonmineraloils,whichconsists

ofreducingthesocial(healthandenvironmental)

costsresultingfromtheconsumptionofhydrocarbons.

Accordingtohim,thisoverlaprulesoutthepossibility

ofregardingtheIVMDHascompatiblewiththe

requirementthatthetaxinquestionmustservea

specificpurpose.Findingotherwisewouldcompromise

effortstoharmonizetheexcisedutyregimeandgive

risetoanadditionalexciseduty,contrarytothevery

purposeoftheDirectivetoabolishremainingbarriersin

theinternalmarket.

TheAGfurtherobservedthatwherenosuchoverlap

exists,thestructureor,alternatively,theuseofthetax,

mayhelpidentifyaspecificnon-budgetarypurpose.As

regardsthestructure,anon-budgetarypurposecanbe

identifiedwhereataxissetatalevelwhichdiscourages

orencouragescertainbehaviour.Inthiscase,

however,heconsideredthatthereisnoinformation

suggestingthatthestructureoftheIVMDHisinfact

designedspecificallytodiscouragetheconsumptionof

Withrespecttoanswer(2),theAGreasonedthat

sinceFrancehasinfringedtheexhaustiveharmonising

provisionslaiddowninDirective92/12,itwasnot

necessarytoexaminewhethertherehasalsobeenan

infringementofArticle34TFEU,inviewofthefactthat,

asregardsthefactsandmeasuresspecificallyanalysed

intheproceedingsatissue,itisaprovisionwhichis

supersededbytheoperationofArticles8and9of

Directive92/12.

AccordingtoAGWahl,aSpanishtaxonretailsalesofhydrocarbonsiscontrarytoEUlawOn24October2013,AGWahlissuedhisOpinionina

casethathasregardtoaSpanishtaxonretailsalesof

certainmineraloilproducts.

TheExciseDutyDirectivelaysdownrulesrelatingto

thelevyingofexcisedutiesintheEUinordertoprevent

additionalindirecttaxesfromimproperlyobstructing

trade.Itconcerns,amongstothers,mineraloilssuchas

petrol,diesel,fueloilandparaffin.However,oneofits

provisionsgivesMemberStatestherighttointroduceor

maintainindirectnon-harmonisedtaxesonproductsthat

arealreadysubjecttorulesregardingexciseduty.This

possibilityissubjecttotwoconditions:(i)thatthetaxat

issuepursuesaspecific,non-budgetarypurpose;and

(ii)thatitcomplieswiththerulesapplicabletoexcise

dutyorVATasfarasdeterminationofthetaxbase,

calculationofthetax,chargeabilityandmonitoringofthe

taxareconcerned.

ThiscasereviewsthecompatibilitywithEUlawof

aSpanishtax(the‘IVMDH’)whichisleviedonthe

consumptionofcertainmineraloils(namelypetrol,

diesel,fueloilandparaffin).Thismeansthatthetax

ispassedontothefinalconsumer.Inaccordance

withSpanishlegislationgoverningtheIVMDH,the

revenuegeneratedfromthistaxhastobespenton

healthorenvironmentalmatters.Morespecifically,its

aimistoensurethattheAutonomousCommunities

possesssufficientresourcestomeetthehealth-related

costswhichtheytookonasaresultofthetransferof

competencesinthehealthsectorfromthenationalto

theregionallevel.RevenuegeneratedfromtheIVMDH

hasbeenused,interalia,tobuildnewhospitals.

100

Moreover,afindingofincompatibilitycould,inhis

view,haveseriousrepercussionsonthesystem

whichcontributestothefinancingoftheAutonomous

Communitiesandupsetordisruptregionalfundingof

healthcare.However,theAGconsideredthattherewas

nosignificantuncertaintyastothemeaningandscope

oftherelevantEUlegalprovisions.Inparticular,when

theIVMDHwasadopted,theCourthadalreadygivena

rulingontheincompatibilityofasimilarduty.

Lastly,theAGpointedoutthatitcannotbecategorically

ruledoutthattheCourtcouldconsiderlimitingthe

temporaleffectsofajudgmentevenwherethecondition

concerningtheuncertaintyastothemeaningofrelevant

EUlawprovisionsisnotfulfilled.Thiswouldbepossible

incertainhighlyexceptionalcircumstanceswherethe

financialimpactofretroactivitywouldbeparticularly

serious.However,inthiscase,hecautionedagainst

discardingthatcriterion.Infact,Spainappearstohave

knowinglytakentheriskofgoingforwardwiththe

legislationinquestionand,asaresult,thatlegislation

hasbeenappliedformanyyearstothedetrimentofthe

end-userandtheinternalmarket.

CommissionadoptsCommunicationclarifyingEUrulesoncartaxesOn14December2012,theCommissionpresenteda

Communication(COM(2012)756)clarifyingEUruleson

cartaxationandrecommendingmeasurestostrengthen

theSingleMarketinthisarea.TheCommunicationis

accompaniedbyaCommissionStaffWorkingDocument

(SWD(2012)429)givinganoverviewofthemainlegal

issuesthatariseinthefieldofvehicletaxationand

thelevelofprotectionavailabletoEUcitizensand

businessesthatcanbederivedfromEUlawandthe

CourtofJustice’s(CJ)caselaw.Thisinitiativeisaimed

atminimizingtheproblemsencounteredbycitizensand

businessesmovingcarsbetweenMemberStatesand

removingobstaclestocross-borderrentals.

Carregistrationtaxesandcirculationtaxesarenot

harmonisedintheEU.Thiscanresultindoubletaxation

incertainsituationsandcausethefragmentationofthe

SingleMarketforpassengercars.Themagnitudeof

theproblemisshownbythenumerousquestionsand

hydrocarbonsortoencouragetheuseofsomeother

lessharmfulproduct.

Withregardtotheuseofthetax,therevenuescollected

mustbeallocatedtospecificmeasures.Inthepresent

case,themereallocationoftaxrevenuefromthe

IVMDHtohealthandenvironmentalmeasuresin

generaldoesnotsufficetoprovethatthetaxpursuesa

non-budgetarypurpose.Infact,nodirectlinkhasbeen

establishedbetween,ontheonehand,themeasures

financedwiththerevenueobtainedfromtheIVMDH,

andontheother,theaimofobviatingandrectifying

theadverseimpactassociatedwiththeconsumptionof

hydrocarbons.

Second,theAGconsideredthattheIVMDHdoesnot

complywiththegeneralschemeofexcisedutyorVAT

asfarasdeterminationofchargeabilityisconcerned.

ThisissobecausetheIVMDHisleviedatapointin

timewhichdoesnotcoincidewiththerequirements

setbyeitherEUlegislationonchargeabilityofexcise

dutyorthatonVAT.Unlikeexciseduty,whichbecomes

chargeableoncetheproductleavesthelasttax

warehouse,andVAT,whichischargedateachstageof

theproductionanddistributionprocess,theIVMDHis

chargedwhenhydrocarbonsaresoldtotheconsumer.

Inthiscase,SpainalsorequestedtheCourttolimit

thetemporaleffectsofthejudgmentintheeventthatit

foundtheIVMDHtobecontrarytoEUlaw.Inpractice,

thiswouldmeanthatthejudgmentwouldonlyproduce

effectsinthefutureandwouldnotaffectanytaxes

leviedinthepast.Onthisissue,AdvocateGeneralWahl

observedthattheCourtacceptssuchrequestsonlyin

exceptionalcircumstanceswheretwoconditionsare

met.Ontheonehand,afindingofincompatibilitymust

entailariskofseriouseconomicrepercussions.On

theother,theremustalsobeobjectiveandsignificant

uncertaintyconcerningtheinterpretationandscopeof

theEUlawprovisionsinquestion.

Inthisrespect,theAGconsideredthatariskofserious

economicrepercussionscannotberuledoutgiventhe

considerablesumsinvolved(EUR13billionaccording

totheestimateoftheSpanishGovernment).Thisisso

inparticularbecauseofthecurrentprecariousfinancial

situationofSpainanditsAutonomousCommunities.

101

liberalarrangementsallowingforthetemporaryuse

ofvehiclesinMemberStateswithoutapplication

ofregistrationandcirculationtax.Thisrelates,

inparticular,torentalcarsregisteredinanother

MemberState,butalsotoothersituationsof

temporaryoroccasionalusebyaresidentofacar

registeredinanotherMemberState.

• totakeactiontoreducethefragmentationoftheEU

carmarketcausedbythedivergentapplicationby

MemberStatesofcarregistrationandcirculation

taxes.TheupcomingGuidelinesonfinancial

incentivesforcleanandenergy-efficientvehicles

alsoneedtobetakenintoaccount.

TheCommunicationwillbediscussedbytheEuropean

Parliament,theEconomicandSocialCommittee

andtheCouncil.TheCommissionaimstousethese

discussions,andthetechnicaldiscussionswiththe

MemberStates,togivenewmomentumtoits2005

proposaloncartaxation.

CommissionadoptsCommunicationonCustomsUnion:boostingEUcompetitiveness,protectingEUcitizensinthe21stcenturyOn21December2012,theCommissionadopteda

CommunicationontheStateofCustomsUnion.The

Communicationtakesstockofthecurrentstateofthe

EUCustomsUnion,identifiesthechallengesthatit

currentlyfaces,andsetsoutpriorityactionsforensuring

itsfutureevolution.TheaimistoensurethattheEU

CustomsUnionisasmodern,effectiveandefficientas

possibleinthecomingyears,tocontinueitsworkin

ensuringasafeandcompetitiveEurope.

Everyyear,EUcustomsprocess2billiontonnesof

goodsworthEUR3,300billion,andcollectsEUR16.6

billionincustomsduties.Yet,EUcustomstodayare

farmorethansimplyrevenuecollectors.Overthepast

fourdecades,theCustomsUnionhasevolvedintoa

multi-functionalserviceprovider,deliveringbothfor

businessesandforsocietyasawhole.Customsnot

onlyensuresmoothtradeflowsandprotectagainst

securityrisks,theyalsohelptoenforceotherpolicies

complaintsrelatedtocross-bordercartaxationthatthe

Commissionreceivesyearbyyear.

TheCommissionhadalreadytriedtoaddressthe

problemwhen,in2005,itputforwardaproposal

aimedatabolishingregistrationtaxesandreplacing

themwithannual‘green’circulationtaxes.The

MemberStates,however,couldnotreachunanimous

agreementonthisproposal.Asaresult,EUlaw

relatedtocartaxationismainlyderivedfromtheCJ’s

judgments.TheCommissionhasalsolaunchedover

300infringementproceduresagainstMemberStates

relatedtodiscriminationinnationalcarregistrationrules

andcirculationtaxes.DespitethecaselawoftheCJ

andlegalproceedingsagainsttheMemberStates,the

fragmentationofnationaltaxschemes,discrimination

anddoubletaxationofcarstransferredbetween

MemberStatespersists.

Asashort-termsolution,inthisCommunication,the

CommissionidentifiesandproposestotheMember

Statestoapplythefollowingbestpractices:

• toensurethattaxpayersknowtheirrightsand

obligationswhenmovingtoanotherMemberState,

MemberStatesshouldprovideadequateinformation

ontheirapplicationofregistrationandcirculation

taxesonvehiclesincross-bordersituations,

includinginformationonhowtheyhaveimplemented

theEUlegalframeworkdescribedinthe

CommunicationandtheStaffWorkingDocument.To

thisend,acentralcontactpointfortaxpayersshould

bedesignated,towhichalinkcanbeprovidedon

thewebsiteoftheCommission.

• toavoiddoubletaxationand‘over-taxation’where

citizensmoveacarpermanentlyfromoneMember

Statetoanother,MemberStatesthatinitiallyapplied

aregistrationtaxshouldasaminimumgranta

partialrefundofthetaxtakingintoaccountthe

depreciationofthecarindependentlyofwhether

ornottheMemberStateofdestinationprovidesan

exemptionfromregistrationtax,ifany.

• MemberStatesshouldmakefulluseoftheflexibility

offeredbyDirective83/182/EECtoapplymore

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disputeonArgentina’simportrestrictionswhichare

damagingtoEuropeanbusiness.TheEUistaking

thisaction,alongwithJapanandtheUnitedStates,to

forceArgentinatoliftthesemeasureswhichhavebeen

harmfultoEuropeantradeandinvestmentformorethan

18months.ThesemeasurespotentiallyaffectallEU

exportstoArgentina,worthEUR8.3billionin2011.This

decisionfollowseffortsbytheEUtofindasolutionwith

ArgentinathroughWTOdisputesettlementconsultations

duringthesummerwhichendedwithoutsuccess.

Argentina’simportmeasureshavebeensystematically

imposedwithaviewtopursuingArgentina’sstated

policyofimportsubstitutionandeliminationoftrade

balancedeficits,whichisinconsistentwithWTOrules.

Thesemeasurestaketheformofthefollowing:

1. AsofFebruary2012,Argentinahassubjectedthe

importofallgoodstoapre-registrationandpre-

approvalregimecalledthe‘DeclaraciónJurada

AnticipadadeImportación’;

2. Hundredsofgoodsalsoneedanon-automatic

importlicence.Onthepretenceofthisrequirement,

importsaresystematicallydelayedorrefusedon

non-transparentgrounds.AsofMarch2011,more

than600producttypeshavebeenaffectedbythis

licensingregime.

3. Argentinaalsorequiresimporterstobalance

importswithexports;toincreasethelocalcontent

oftheproductstheymanufactureinArgentina;

ornottotransferrevenuesabroad.Thispractice

issystematic,unwrittenandnon–transparent.

Acceptancebyimporterstoundertakethispractice

appearstobeaconditionforallowingthemtoimport

theirgoodsintoArgentina.Thesemeasuresdelayor

blockgoodsattheborderandinflictmajorlossesto

industryintheEUandworldwide.

Therestrictions,whichwereinplacein2011,affected

aboutEUR500millionofexportsinthesameyear.As

of2012,theextensionofthemeasurestoallproducts

raisedthemagnitudeofthepotentiallyaffectedtradeto

allEUexportstoArgentina,whichamountedtoEUR8.3

billionin2011.Thelong-termimpactofanegativetrade

andinvestmentclimateissignificantlyhigher.

suchaspublichealth,consumerprotection,intellectual

propertyrights,environmentandagriculture.

Agrowingsetofresponsibilitiesandintensifyingglobal

challengessuchasgreatertradeflows,increasingly

complexsupplychains,aneverfasterpaceofbusiness

andtheglobalisationofterroristriskshaveputa

mountingstrainoncustoms.Meanwhile,theeconomic

crisishassqueezedpublicresourcesavailableto

performthesetasks.TheCustomsUnionmustdo

increasinglymorewithincreasinglyless.

Therefore,Commission’sCommunicationsetsout

acourseofactiontomodernise,strengthenand

rationalisetheCustomsUnionintheyearsahead.

First,themodernisationoftheCustomsUnion,which

wasstartedin2003,mustbecompletedasapriority.

TheCommissioncallsontheCouncilandParliamentto

adoptandimplementtheUnionCustomsCode,which

willmakeproceduressimpler,moreefficientandbetter

fittedformoderntradeneeds.

Second,worktoaddressidentifiedgapsmustbe

accelerated.InJanuary2013,theCommissionisto

publishaCommunicationoutlininghowtoimprove

customsriskmanagementandsecurityofthesupply

chain.Othermeasuresforeseenfor2013includea

proposalonapproximationofcustomspenalties,a

reviewoftariffsuspensions/quotarules,implementinga

crisismanagementactionplananddevelopingatoolbox

ofprocedurestoimprovetheefficiencyofcustomsin

enforcinghealth,safetyandenvironmentrules.

Finally,areviewofgovernanceofhowtheCustoms

Unionfunctionsinternallywillbeinitiated.Thereview,

tobeundertakeninclosecollaborationwithMember

States,shouldaddresshowtoworkbettertogether,ina

moreharmonisedway,toprovidehighqualitycustoms

servicesandimproveresourceefficiencyacrosstheEU.

EUrequestsWTOdisputesettlementpaneloverArgentina’simportrestrictions On7December2012,theEUhasrequestedtheWorld

TradeOrganisation(WTO)inGenevatoruleovera

103

BoththeEUandSingaporewillnowseekapprovalfor

thedealfromtheirrespectivepoliticalauthorities,and

envisageinitiallingthedraftagreementinspring2013.

Talksbetweenthetwosidesoninvestmentwillcontinue.

Thesediscussions,whichstartedlaterthanthetrade

negotiations,arebasedonthenewEUcompetence

undertheLisbonTreaty.

CommissionproposesimprovedrulestoenforceEUrightsunderinternationaltradeagreements-UpdatedwithaRegulationOn18December2012,theCommissionproposeda

newframeworktoenhancetheEU’sabilityto enforce

itsrightsintheinternationaltradingsystem.Ensuring

thattheEU’stradepartnersrespecttheagreedtrade

rulesisessentialtomaketradeagreementsworkfor

theEUeconomy.TheproposalcoverstheEU’strade

responsesincasesofillegaltrademeasuresinother

countries,anditwillalloweffectiveactiontosafeguard

theinterestsofEUcompaniesandworkers.The

proposalisforaframeworktoenabletheCommission

totakeexecutiveactionwhenthetradeinterestsof

theEUareatstake,ratherthanreactingonacase

bycasebasiswhentheEUrightsarenotrespected.

Today’sproposalwouldallowtheEUtoimplementtrade

responsesinamorestreamlined,efficientmannerin

ordertoencouragetheoffendingcountrytoremovethe

illegalmeasures.

TheCommissionisproposingaRegulationtoestablish

aclearandpredictableframeworkforadopting

implementingactsfollowinginternationaltradedisputes

thathaveanegativeeconomicimpactontheEU.In

casesoflastresort,tradesanctionscanbeputinplace

toencouragetheoffendingcountrytoremoveillegal

measures.

Actioncouldalsobetakentocompensateforimport

restrictionsthatareimposedonEUproductsin

exceptionalsituations(so-calledsafeguardmeasures),

ortoreacttocaseswhereaWTOmembercountry

changesitstraderegimeinawaythatnegativelyaffects

EUtrade(suchasraisingitsimporttariffs)without

adequatecompensation.

TheEU,togetherwithothermajorworldtrading

partners,hasraisedtheissuewithArgentinarepeatedly

overthepastyearswithoutsuccess.

On7December2012,alsothankstoacloseand

constructiveco-operation,theEUdecidedtopursue

thedisputeatthesametimeastheUnitedStatesand

Japan.Mexicohadalreadyrequestedtheestablishment

ofapaneloverthesamemeasureson21November

2012.Allcomplainantsaimatjointpanelproceedings.

EUandSingaporeagreeonlandmarktrade deal On16December2012,theEUTradeCommissioner

andSingapore’sMinisterofTradeandIndustry

completedfinalnegotiationsonafreetradeagreement

(FTA)betweentheEuropeanUnionandSingapore.The

agreementisoneofthemostcomprehensivetheEU

hasevernegotiatedandwillcreatenewopportunitiesfor

companiesfromEuropeandSingaporetodobusiness

together.ThegrowingSingaporeanmarketoffersexport

potentialforEU,industrial,agriculturalandservices

businesses.AnEU-SingaporeFTAwillbetheEU’s

secondambitiousagreementwithakeyAsiantrading

partner,aftertheEU-KoreaFTA,whichhasbeenin

operationsinceJuly2011.

ItisexpectedthattheFTAwillcreatenewopportunities

inmanyservicessectors.Forexample,inbanking,

insuranceandotherfinancialservicesindustriesas

wellasinpublictendering.Itwillalsocutdownonthe

redtapeanddouble-testingthatmakeslifedifficultfor

business.Thedealwillfacilitatetheaccessofindustrial

andagriculturalproductsonanimportantexport

market,throughgreaterrecognitionofEUstandards.

Forexample,SingaporewillagreetoimportEuropean

manufacturedcarsbasedonEUtechnicalandsafety

standardsandapprovals.

Inaddition,thisagreementisafirstwhenitcomes

topromoting‘greengrowth’andhasbeenespecially

designedtomeettheEU’s‘2020strategy’fora

competitiveeconomy.Thedealwillsimplifyrules

toboosttradeandinvestmentinenvironmental

technologiesandpromotegreenpublictendering.

104

consideringthecreationofariskmanagement

capacityatEUleveltocomplementMemberState

efforts;

• Morestructuredandsystematiccooperation

betweencustomsandotherauthorities;

• IncreasedinternationalcooperationwiththeEU’s

maintradingpartners.

Drugprecursors:CommissionadoptsproposalforaCouncildecisiononthesigningofanEU-RussiaagreementOn21January2013,theCommissionadopteda

proposalforaCouncildecisiononthesigningofan

AgreementbetweentheEuropeanUnionandthe

RussianFederationondrugprecursors.

Theagreementwouldallowstrengtheningthebilateral

co-operationinpreventingdiversionandtraffickingof

precursorsusedintheillicitmanufactureofnarcotic

drugs.Thisagreementwouldbethe11thofitskind.

TheEUhasalreadysignedbilateralagreementson

drugprecursorswithBolivia,Colombia,Ecuador,Peru,

Venezuela,Mexico,UnitedStates,Chile,Turkeyand

China.Theseagreementsprovideforco-operationin

trademonitoringandmutualadministrativeassistance

(exchangeofinformation).Theyalsoprovidefor

technicalandscientificco-operationandestablisha

regularplatformofdialoguebetweenthePartiesthrough

theJointFollow-upGroup.

Drugprecursorsarechemicalsthatareprimarilyused

forthelegitimateproductionofawiderangeofproducts

suchaspharmaceuticals,perfumes,plastics,and

cosmetics.However,theycanalsobemisusedforthe

productionofillicitdrugssuchasmethamphetamines,

heroinorcocaine.

CommissionrefersHungarytotheCJovertaxexemptionofpálinkaOn21February2013,theCommissiondecidedto

referHungarytotheCJforgrantinganexemptionfrom

excisedutytotheproductionoffruitdistillates(pálinka).

Hungaryexemptspálinkafromexcisedutywhenitis

producedbyhouseholdsordistilleriesforpersonaluse,

uptoamaximumof50litresayear.However,Directive

92/83/EECallowsHungarytogrant,undersuch

Suchimplementingactscanonlybetakenundercertain

well-definedconditionsandmighttaketheformofnew

orincreasedcustomsdutiesorquotasonimportsor

exportsofgoods,amongstotherpossiblemeasures.

TheproposalisforanEURegulationoftheCounciland

theEuropeanParliamentandwillnowbediscussed

bytheCouncilandtheEuropeanParliamentunderthe

ordinarylegislativeprocedure.

Customs:strengtheningthesecurityofthesupplychainOn8January2013,theCommissionadopteda

CommunicationonCustomsRiskManagementandthe

SecurityoftheSupplyChain.Itsetsoutastrategyto

enablecustomstobettertacklerisksassociatedwith

goodsbeingtradedininternationalsupplychains.It

involvesmorerationaluseofresources,betterquality

andavailabilityoftradedata,anddeeperpartnership

withtradeandinternationalpartners.Thisproposed

newEUapproachwillsupplementnationalworkby

integratingawiderscopeofinformationandintelligence

frommanysources.

EUexternaltradegrewbyalmost50%between2004

and2010.Althoughthemajorityoftradeislegal,

illicittradeisestimatedatalmost10%oftheglobal

economy(seestudybyWorldEconomicForum).With

globaltradeontherise,thechallengetostopabomb,

contaminatedfoodorsmuggledgoodsisbecoming

increasinglycomplex.

Thecurrentset-uptodealwithrisksattheEUborders

doesnotuniformlyaddresssecurityandsafetyrisks

acrosstheexternalborder.Tobetterensurethesecurity,

healthandwell-beingofcitizensaswellaslegaltrade

andtheeconomicandfinancialinterestsoftheEU,the

Commissionproposesanumberofkeyactions:

• Tradersshouldmakequalitydataavailableat

therighttime,intherightplaceforeffectiverisk

management;

• Deeperengagementwithcompaniesmovinggoods

acrossborders;

• Ensuringhomogeneousimplementationofrisk

managementthroughouttheexternalEUborders;

105

defencemeasurebeforeaWTOpanelinDecember

2011.

What products are subject to China’s current anti-

dumping duties?

China’santi-dumpinginvestigationconcernedX-Ray

Security Inspection Equipment-theso-called‘security

scanners’fromtheEuropeanUnion.Thesearewidely

usedinvarioustypesofsecuritychecksandcustoms

inspections,mainlyintheinspectionofweapons,

explosives,dangerousArticles,smuggledgoods,

andothersuspicioussubstancesandcontraband

concealedinobjectssuchasbags,goods,containers,

andvehicles.Theinvestigationcoveredawiderange

ofsuchproductsincludingsecurityscannersforhand

luggageandcargoscanners.

What is the impact of the duties on EU industry?

ThetradeflowatstakewasapproximatelyEUR70

millionofEUexportstoChinaperyearatthetimewhen

thedutieswereimposed.EUexportswereseverely

hamperedasaresultoftheduties.

CommissionproposestomodernisetheEU’stradedefenceinstrumentsOn10April2013,theEuropeanCommissionmadea

proposalthataimsatadaptingtheEU’srulebookto

tackleunfaircompetitionfromdumpedandsubsidised

importstothecontemporarychallengesfacingtheEU’s

economy.

TheproposedchangeswouldmaketheEUtrade

defenceworkbetterforallstakeholders,includingboth

EUproducersandimporters.Anti-dumpingandanti-

subsidyinstrumentswillbemoreefficientandbetter

enforcedtoshieldEUproducersfromunfairpracticesof

foreignfirmsandfromanyriskofretaliation.Atthesame

time,importerswillenjoygreaterpredictabilityinterms

ofchangingdutyrates,whichwillmaketheirbusiness

planningeasier.Theentiresystemwillbecomemore

transparentanduser-friendly.

Accordingtothelegislativeproposal,theCommission

will:

conditions,onlya50%reductionofthenormalexcise

rateonpálinka.SinceHungaryfailedtowithdrawthe

contestedmeasuresasrequestedbytheCommission’s

reasonedopinion(seeEUTaxAlerteditionno.107,July

2012),theCommissionhasnowdecidedtoreferthe

casetotheCJ.

China’santi-dumpingdutiesonX-raysecurityscannersfromtheEUfoundillegalbyWTOpanelAWorldTradeOrganizationpanelreport(DS425)found

thatChina’santi-dumpingdutiesonimportsofX-ray

securityscannersfromtheEUwereinbreachofWTO

anti-dumpingrules.Thereportmarksaclearvictory

fortheEU.Ifthereportisnotappealedwithin60days

afterthedateofpublicationofthereport,Chinawill

beexpectedtoremoveitsanti-dumpingdutiesonEU

importsofX-raysecurityscanners.

What did the EU challenge at the WTO?

Chinaimposedanti-dumpingdutiesonimportsof

X-raysecurityscannersfromtheEUinJanuary2011.

Rangingfrom33.5%to71.8%,theyessentiallyclosed

theChinesemarkettoimportsofEuropeanX-ray

securityscanners.Anti-dumpingmeasurescanbe

imposedwhenaninvestigationfindsthatimported

productsaresoldatpriceslowerthanthedomestic

pricesoftheproductandthatthis‘dumping’causes

injurytotheindustryoftheimportingcountry.Adirect

causallinkmustbeprovenbetweenthedumpingand

theinjurycaused.Inaddition,WTOrulesprovidefor

certaindueprocessandtransparencyrequirementsthat

havetoberespected.Basedontheserules,theEU

sawnojustificationfortheChinesemeasures,eitheron

substantiveorproceduralgrounds.

TheChineseanti-dumpingmeasureswereimposed

aftertheEUhaddecidedtointroducedefinitiveanti-

dumpingdutiesonarelatedproduct,cargoscanners

fromChinainJune2010,makingBeijing’sactionlook

morelikeretaliationratherthananefforttoaddress

genuineconcernsabout‘injuriousdumping’.

InJuly2011,theEUrequestedtheWTOconsultations

onthematter,butthesefailedtobringaboutan

acceptablesolution.Asaconsequence,theEU

challenged,forthefirsttimeever,aChinesetrade

106

usetheimportedproductand,whererelevant,

consumers;

• Calculationof‘injurymargin’,whichrequiresan

examinationofthevolumeandpricesofdumped

importsandtheirconsequentimpactontheEU

industry;

• Choiceofan‘analoguecountry’,whichisusedto

determineexistenceofdumpingforproductscoming

fromacountrywithout‘marketeconomystatus’.

Thesedraftproceduralguidelineswillnowbesubject

toathree-monthpublicconsultation.Afterwards,the

Commissionwillanalyzereceivedcommentsand

adoptthefinalversioninordertomakeiteasierforEU

companiesandthegeneralpublictounderstandEU

tradedefenceprocedures.

ProposaltopostponedateofapplicationoftheMCCIthasbeenproposedtopostponethedateofapplication

oftheModernizedCustomsCode.Theproposal

mentions,interalia,thefollowingreason:

On20February2012,theCommissionsubmittedto

theEuropeanParliamentandtheCouncilaproposal

foraRegulationlayingdowntheUnionCustoms

Code,intheformofarecastofRegulation(EC)No

450/2008,toreplaceitbeforeitsultimatedateof

application.However,theordinarylegislativeprocedure

cannotbecompletedintimeforadoptionofthat

proposedRegulationandconsequently,itsentryinto

forcebeforetheultimatedeadlineof24June2013.

Asaconsequence,intheabsenceofanycorrective

legislativeaction,Regulation(EC)No450/2008

wouldapplyonthatdateandRegulation(EEC)No

2913/92wouldberepealed.Thatwouldgeneratelegal

uncertaintyaboutthecustomslegislationactually

applicableandbeanobstacletomaintaininga

comprehensiveandconsistentUnionlegalframework

forcustomsmatterspendingtheadoptionofthe

proposedRegulation.

Topreventsuchseriousdifficultieswiththecustoms

legislationoftheUnionandprovidethelegislaturewith

• Improvethepredictabilityforbusinessesby

informingthemaboutanyprovisionalanti-dumping

oranti-subsidymeasurestwoweeksbeforethe

dutiesareimposed;

• Offerimportersreimbursementofdutiescollected

duringanexpiryreviewincaseitconcludesthat

thereisnoneedtomaintainthetradedefence

measuresinplaceafterfiveyears;

• ProtecttheEUindustrybyinitiatinginvestigationson

itsown(‘ex officio’),withoutanofficialrequestfrom

industry,whenathreatofretaliationexists;

• Discourageothertradingpartnersfromengagingin

certainunfairtradingpracticesbyimposinghigher

dutiesonimportsfromcountrieswhichuseunfair

subsidiesandcreatestructuraldistortionsintheir

rawmaterialmarkets.Insuchcases,theEUwould

deviatefromitsgeneral‘lesserduty’rulethatkeeps

theadditionaltariffwithinthelimitofwhatisstrictly

necessarytopreventinjurytoanEUindustry.

Thelegislativeproposalmustbeapprovedbythe

CouncilandtheEuropeanParliamentandwillprobably

notbecomelawbefore2014.

Additionalnon-legislativeproposalswill

• Facilitatecooperationwithfirmsandtrade

associationsinvolvedininvestigationsbyextending

certaindeadlinesduringtheinvestigations;

• Improvemonitoringoftradeflows;

• Allowex-officioanti-circumventioninvestigations

toensurefasteractionagainstillegalevasionof

measures.

Inparallel,aDGTradeworkingpapersetsout‘draft

guidelines’infourparticularlycomplexareas:

• Theexpiryreviewofatradedefencemeasure,

whichisaninvestigationattheendoftheusualfive-

yearapplicationofdutiestodetermineifdumping

andinjuryarelikelytocontinueorrecurifmeasures

expire;

• ‘TheUnioninteresttest’,i.e.thewaythe

Commissiondetermineswhetheratradedefence

measurewouldservetheoveralleconomicinterests

intheEU–includinginterestsofthedomestic

industryconcerned,importers,industriesthat

107

Thestrategyproposesspecificactionsinfourkeyareas

toefficientlytackletheillicittradeintobaccoproducts:

• Measurestodecreaseincentivesforsmuggling

activities

• Measurestoimprovethesecurityofthesupplychain

• Strongerenforcementoftax,customs,policeand

borderauthorities;and

• Heaviersanctionsforsmugglingactivities

Thestrategyalsoanalysesexistinglegislationand

policies,identifiesweaknessesandgaps,andproposes

additionalreinforcedactions.Italsoseekstobetter

coordinateexistingpoliciesandtoolsasthefightagainst

illicittradeisacross-cuttingissue,aswellastoimprove

cooperationbetweenthevariousactorsatEU,national

andinternationallevel.Theimplementationofconcrete

measuresandactionsinthestrategyaresetoutinan

ActionPlan.

TheCommissioninvitestheEuropeanParliamentand

theCounciltodiscussthemeasuresproposedinthe

CommunicationanditsActionPlanandtosupport

theCommissionandtheMemberStatesintheir

implementationbytheendof2015.

EUReport:TradeprotectionismstillonriseacrosstheworldGlobaleffortstobattletradeprotectionismneedtobe

reinforcedtohelpshieldthefragileeconomicrecovery

acrosstheworld.Inareportreleasedtoday,the

EuropeanCommissionidentifiedabout150newtrade

restrictionsintroducedoverthelastyear,whereasonly

18existingmeasureshavebeendismantled.Atotalof

almost700newmeasureshavebeenidentifiedsince

October2008,whentheEuropeanCommissionstarted

monitoringglobalprotectionisttrends.

Althoughthetrendisslowerthanitwasin2011and

2012,anddespitesignsofarecoveryintheglobal

economy,therehasbeenaworryingincreaseinthe

adoptionofcertainhighlytrade-disruptivemeasures.

Tradeprotectionismwasanimportantpointonthe

agendaoftheG20SummittakingplaceinSaint

Petersburgon5and6September2013.

adequatetimetocompletetheprocessofadoption

oftheUnionCustomsCode,theultimatedateof

applicationofRegulation(EC)No450/2008,aslaid

downinthesecondsubparagraphofitsArticle188(2),

shouldbepostponed.Thenewdateofapplication

consideredappropriateforthatpurposeis1November

2013.

TheEuropeanCommissionreadyforanexofficiotradedefenceactionagainstChinesemobiletelecommunicationsequipmentOn15May,theEuropeanCommissiontookadecision

inprincipletoopenanexofficioanti-dumpingand

anti-subsidyinvestigationconcerningimportsofmobile

telecommunicationsnetworksandtheiressential

elementsfromChina.TheEuropeanCommission

cannowlaunchtheprocedureonitsowninitiative

withoutanofficialcomplaintbytheEUindustry,based

onprimafacieevidenceofunfairinternationaltrade

practice.However,theactivationofthedecisionison

holdtoallowforanamicablesolutionwiththeChinese

authorities.Exportsoftelecommunicationnetwork

equipmentfromChinaamounttoapproximatelyEUR1

billionperyear.

EUstrategytostepupfightagainstillicittobacco trade On6June2013,theEuropeanCommissionadopted

acomprehensivepackagetostepupitsfightagainst

illicittobaccotrade,especiallycigarettesmuggling.The

illicittobaccotradeisaglobalthreat,deprivingMember

StatesandtheEUofoverEUR10billioninrevenue

everyyearintermsofunpaidtaxesandduties.Notonly

doesthishitnationalrevenueshard,illicittradealso

fuelstheshadoweconomysinceitisalmostexclusively

thedomainoforganizedcriminalgroupsoperating

acrossborders.Furthermore,italsoundermineshealth

policyinitiativesaimedatdiscouragingtheconsumption

oftobaccoproductsandlegitimatebusinessasmost

illicitproductsarenotmadeinlinewithEUruleson

tobaccoproducts.Toeffectivelytackletheproblemof

illicittobaccotrade,theCommission’sstrategysetsout

anumberofcoordinatedmeasuresatnational,EUand

internationallevel.

108

anadditionalfeeforovertimework.Moreover,even

withinnormalopeninghours,anextrafeeischargedfor

validating,invalidatinganddischargingdeclarations,and

forhandlingrequestsforrepayment.TheCommission

considersthatthesesBelgianrulesareinviolationof

EuropeanCustomsrules.AReasonedOpinionwas

senttoBelgiumonthismatterinMay2011,butinthe

absenceofasatisfactoryresponse,theCommission

hasnowdecidedtoreferthecasetotheCourtof

Justice.

CapitalDutyBelgianConstitutionalCourt:PreliminaryrulingrequestedfromCJoncompatibilityoftaxonconversionofbearershareswithCapitalDutyDirectiveOn16May2013,theBelgianConstitutionalCourt

requestedapreliminaryrulingfromtheCourtof

Justiceregardingthecompatibilityofthenewtaxon

theconversionofbearershareswiththeCapitalDuty

Directive.

TheCapitalDutyDirectiveprovidesthatMember

Statesmaynotlevyindirecttaxesoncontributionsto

capital,loans,ortheprovisionofservices,occurring

aspartofcontributionsofcapital,registrationorany

otherformalityrequiredbeforethecommencementof

businesstowhichacapitalcompanymaybesubject,

alterationoftheconstituentinstrumentorregulations

ofacapitalcompany,restructuringoperationsandthe

creation,issue,admissiontoquotationofsharesor

bonds.TheMemberStates,however,arenotprecluded

fromlevyingdutieson,inter alia,thetransferof

securitiesordutiesintheformoffeesordues.

Underalawof14December2005,bearershareshave

tobeconvertedtonominativesharesorbookentry

sharesby31December2013.On28December2011,

anewtaxontheconversionofbearershareswas

introduced.Thenewprovisionsubjectedtheconversion

ofbearersharestoa1%taxin2012and2%taxin

2013.Thesenewprovisionswerechallengedbefore

theConstitutionalCourtasbeingincompatiblewiththe

BelgianConstitutionandtheCapitalDutyDirective.

MainconclusionsoftheReport:

• Therehasbeenasharpincreaseintheuseof

measuresapplieddirectlyattheborder,especially

intheformofimport duty hikes.Brazil,Argentina,

RussiaandUkrainestandoutforhavingappliedthe

heaviesttariffincreases.

• Measuresforcingtheuse of domestic goods

andrelocationofbusinesseshavecontinuedto

spread,especiallyingovernment procurement

markets.Brazilaccountedformorethanone-third

ofrestrictionsrelatedtogovernmentprocurement,

followedbyArgentinaandIndia.

• TheEU’spartnershavealsocontinuedapplying

stimulus measures,inparticular,supporting

exports.Someofthemtooktheformof

comprehensive,long-termandhighlycompetition-

distorting policy packages.

• Somecountriescontinuetoshield some of their

domestic industries from foreign competition

tothedisadvantageoftheirconsumersandother

industrysectors.BrazilandIndonesiaprovidethe

moststrikingexamplesofthisapproach.

Commissionpublishesthe2014versionoftheCombinedNomenclatureOn31October2013,theEuropeanCommission

publishedRegulation(EU)No1001/2013.This

regulationincludesthelatestversionoftheCombined

Nomenclature(CN)applicablefrom1January2014.

TheCombinedNomenclatureformsthebasisforthe

declarationofgoods(a)atimportationorexportation,

or(b)whensubjecttointra-Uniontradestatistics.This

determineswhichrateofcustomsdutyappliesandhow

thegoodsaretreatedforstatisticalpurposes.TheCN

isthusavitalworkingtoolforbusinessandtheMember

States’customsadministrations.

CommissionrefersBelgiumtoCourtovercustomsoffices’openinghoursand fees On20November2013,theCommissiondecidedto

referBelgiumtotheCJforfailingtobringitslegislation

intolinewithEUrulesonCustomsopeninghoursand

administrativefees.NotonlydoBelgiancustomsoffices

havelimitedopeninghours,theyalsochargeoperators

109

TheConstitutionalCourthasstayedtheproceedingson

thecompatibilityofthelegalprovisionswiththeBelgian

ConstitutionandBelgiannationallawpendingthe

answeroftheCourtofJusticeonthispoint.

PortugueseTaxArbitrationCourtrequestsforapreliminaryrulingonthecompatibilityofstampdutylegislationwiththecapitaldutyDirectiveOn3July2013,thePortugueseTaxArbitrationCourt

(TribunalArbitralTributário–CentrodeArbitragem

Administrative/CAAD)referredaquestionfora

preliminaryrulingregardingthecompatibilityofthe

Portuguesestampdutylegislationwiththecapitalduty

Directive.Thequestionreferrediswhether:

Article4(1)(c)and(2)(a),Article7(1)andArticle10(a)

ofCouncilDirective69/335/EEC(1)of17July1969

(asamendedbyCouncilDirective85/303EEC(2)

of10June1985)precludenationallegislation,such

asDecree-LawNo322-8/2001of14December2001,

whichsubjectedtostampdutyanyincreasesinthe

capitalofcapitalcompaniesthroughtheconversion

intocapitaloftheclaimsofshareholdersinrespectof

ancillaryservicesprovidedpreviouslytothecompany,

evenifthoseancillaryserviceshadbeenprovidedin

cash,bearinginmindthat,asat1July1984,national

legislationsubjectedthoseincreasesincapital,made

inthatway,tostampdutyattherateof2%,andthat,

atthesamedate,itexemptedfromstampdutycapital

increasesmadeincash?

ThecaseisnowpendingascaseAscendi Beiras Litoral

e Alta, Auto Estradas das Beiras Litoral e Alta, S.A. v

Autoridade Tributária e Aduaneira(C-377/13).

111

Correspondents● PeterAdriaansen(Loyens&LoeffLuxembourg)

● SéverineBaranger(Loyens&LoeffParis)

● GerardBlokland(Loyens&LoeffAmsterdam)

● KeesBouwmeester(Loyens&LoeffAmsterdam)

● AlmutBreuer(Loyens&LoeffAmsterdam)

● LeenKetels(Loyens&LoeffBrussel)

● SarahVanLeynseele(Loyens&LoeffBrussel)

● RaymondLuja(Loyens&LoeffAmsterdam;

MaastrichtUniversity)

● ArjanOosterheert(Loyens&LoeffAmsterdam)

● LodewijkReijs(Loyens&LoeffRotterdam)

● BrunodaSilva(Loyens&LoeffAmsterdam;

UniversityofAmsterdam)

● PatrickVettenburg(Loyens&LoeffRotterdam)

● RubenvanderWilt(Loyens&LoeffAmsterdam)

www.loyensloeff.com

AboutLoyens&LoeffLoyens&LoeffN.V.isthefirstfirmwhereattorneysat

law,taxadvisersandcivil-lawnotariescollaborateona

largescaletoofferintegratedprofessionallegalservices

intheNetherlands,BelgiumandLuxembourg.

Loyens&Loeffisanindependentproviderof

corporatelegalservices.Ourclosecooperationwith

prominentinternationallawandtaxlawfirmsmakes

Loyens&Loeffthelogicalchoiceforlargeandmedium-

sizecompaniesoperatingdomesticallyorinternationally.

Editorial boardForcontact,mail:[email protected]:

● RenévanderPaardt(Loyens&LoeffRotterdam)

● ThiesSanders(Loyens&LoeffAmsterdam)

● DennisWeber(Loyens&LoeffAmsterdam;

UniversityofAmsterdam)

Editors● PatriciavanZwet

● BrunodaSilva

Althoughgreatcarehasbeentakenwhencompilingthisnewsletter,Loyens&LoeffN.V.doesnotacceptanyresponsibilitywhatsoeverfor

anyconsequencesarisingfromtheinformationinthispublicationbeingusedwithoutitsconsent.Theinformationprovidedinthepublicationis

intendedforgeneralinformationalpurposesandcannotbeconsideredasadvice.

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