News

04.01.2023

Tax & Financial Standards New Judgments of the ECJ For December 2022

Tax & Financial Standards New Judgments of the ECJ For December 2022

Tax&Financial Standards (T&FSt) – International Financial Reporting Standards, Date or entry into force: 1.01.2022 (consolidated version), in 4 languages - Bulgarian, English, German and French

New judgments

Value added tax – Taxable persons – Option for Member States to treat as a single taxable person entities that are legally independent but closely bound to one another by financial, economic and organisational links (‘VAT group’) – National legislation designating the controlling company of a VAT group as a single taxable person – Need for the controlling company to have a majority of voting rights as well as a majority shareholding – Assessment of the independence of an economic entity in the light of standardised criteria - Concepts of ‘close financial links’ and „independent economic activity“

Key aspects of the decision in the economic range:

VAT group. Designation of a member of a VAT group as the taxable person. The second subparagraph of Article 4(4) of the Sixth Directive must be interpreted as not precluding a Member State from designating, as a single taxable person liable for VAT purposes, not the VAT group itself but a member of that group, namely the controlling company of that group, where that controlling company is in a position to impose its will on the other entities. It must be interpreted as precluding national legislation which makes the possibility for a given entity to form, with the undertaking of the controlling company, a VAT group conditional upon that controlling company having, in that entity, a majority of the voting rights in addition to a majority holding in the share capital of that entity. It must be interpreted as precluding a Member State from classifying, by categorisation, given entities as non-independent, where those entities are integrated, in financial, economic and organisational terms, into the controlling company of a VAT group.

Concepts of ‘close financial links’ and „independent economic activity“.

Proceedings concerning the liability for value added tax.

Common agricultural policy (CAP) — Investment support — National legislation making the grant of the support conditional upon the person applying for support submitting a certificate of registration of a livestock facility in that person’s name and showing that, on the date of submission of the application, the output of that person’s agricultural holding is equivalent to at least EUR 8 000

Key aspects of the decision in the economic range:

European Agricultural Fund for Rural Development (EAFRD) funding. National legislation which makes the grant of the support referred to in that provision conditional upon the person applying for support submitting a certificate of registration of a livestock facility in that person’s name.. National legislation which makes the grant of the support referred to in that provision conditional upon the person applying for support showing that, on the date of submission of the application for support, the output of that person’s agricultural holding is equivalent to at least EUR 8 000..

Proceedings between D, a single-member limited liability company, and the State Agricultural Fund, Bulgaria, concerning the latter’s refusal to grant the former funding for investment with a view to the purchase of equipment for a poultry farm.

Combating late payment in commercial transactions — Compensation for recovery costs incurred by the creditor due to late payment by the debtor — Fixed minimum sum of EUR 40 — Several late payments for supplies of goods or services under a single contract — Concepts of ‘commercial transactions’ and „late payment“

Key aspects of the decision in the economic range:

Entitlement to interest for late payment. Where a single contract provides for successive deliveries of goods or provision of services, each requiring payment within a specified period, the fixed minimum sum of EUR 40 is payable for each late payment, by way of compensation for the creditor’s recovery costs.

Concepts of ‘commercial transactions’ and „late payment“

Proceedings concerning a claim for fixed compensation for recovery costs incurred as a result of successive late payments within the framework of a single contract.

General system of value added tax - Right to deduct VAT - Principles of fiscal neutrality, efficiency and proportionality - Fraud - Duties of due care by the taxable person - Taking into account non-fulfillment of obligations arising from national provisions and Union law on the safety of the food chain - An order assigned by the taxable person to a third party for carrying out taxable transactions - Charter of Fundamental Rights of the European Union - Right to a fair trial

Key aspects of the decision in the economic range:

Where the tax authority intends to refuse to recognize a taxable person's right to deduct VAT paid on supplies received on the basis that the taxable person has participated in a chain of VAT fraud, the Directive does not allow that tax authority merely to establish that the transaction is part from circular billing. The said tax authority must, on the one hand, accurately determine the elements of the factual composition of the fraud and prove the fraudulent acts, and on the other hand, prove that the taxable person actively participated in this fraud or that he knew or should have known, that the transaction is part of a fraud, which does not necessarily mean identifying all participants in the fraud and their respective actions. In relation to the principle of proportionality, when there are data giving grounds to suspect the existence of fraud, it allows the taxable person to be required to exercise greater due diligence to ensure that the transaction carried out by him does not lead to his participation in fraud, however, he cannot be required to carry out complex and thorough checks such as those which may be carried out by the tax administration.

Proceedings concerning the amount of value added tax payable by a company.

Value added tax – Exemption – Triangular transaction – Designation of the final recipient of a supply as being liable for VAT – Invoicing – Reference to ‘Reverse charge’ – Mandatory – Omission of that reference on an invoice – Retroactive correction of the invoice

Key aspects of the decision in the economic range:

In a triangular transaction, the final customer has not been validly designated as liable for payment of VAT where the invoice issued by the intermediary acquiring the goods does not contain the words ‘Reverse charge’. Correction of an incorrect invoice. Retroactive effect of the correction. The omission, on an invoice, of the words ‘Reverse charge’ may not subsequently be corrected by adding a statement that that invoice relates to an intra-Community triangular transaction and that the tax liability is transferred to the person to whom the supply is made.

Proceedings between L and the tax authority concerning the value added tax claimed from that company.

Common system of value added tax – Adjustment of the VAT return – Recipients of services who not entitled to make deductions – No risk of loss of tax revenue

Key aspects of the decision in the economic range:

A taxable person who has supplied a service and who has stated on the invoice an amount of VAT calculated on the basis of an incorrect rate is not liable, under that provision, for the part of the VAT invoiced incorrectly if there is no risk of loss of tax revenue on the ground that the recipients of that service are exclusively final consumers. Correction of invoices not necessary where the recipients of the supplies are non-taxable persons.

Proceedings between P and the Tax Office concerning the tax authorities’ refusal of an application to adjust P’s value added tax return on the ground that the invoices P issued featured a VAT amount calculated using the incorrect rate.

 

November

 

Value added tax — Exemptions for certain activities in the public interest — Service used by an insurance company to review the accuracy of a diagnosis of serious illness and find and provide the best possible care and treatment abroad — Concept of „provision of medical care”

Key aspects of the decision in the economic range:

VAT exemptions. Services not falling within the scope of the intended exemption, consisting in verifying the accuracy of an insured person’s diagnosis of serious illness, in order to determine the best possible health care with a view to the insured person’s recovery and to ensure, where that risk is covered by the insurance contract and where the insured person so requests, that the medical treatment is provided abroad.

Proceedings concerning whether services relating to health insurance contracts are subject to value added tax.

Value added tax — Right to deduct input VAT — Principle of prohibition of fraud — Chain of supply — Refusal of the right to deduct in the case of fraud — Second purchaser of goods — Fraud affecting part of the VAT due in respect of the first purchase — Scope of the refusal of the right to deduction

Key aspects of the decision in the economic range:

Possibility of refusal of the the benefit of deducting input VAT to the second purchaser of goods on the ground that he or she knew or ought to have been aware of the existence of VAT fraud committed by the original seller at the time of the first sale, even if the first purchaser was also aware of that fraud.

Possibility of refusal in its entirety of the right to deduct the input VAT to the the second purchaser of goods which, at a stage prior to that purchase, were the subject of a fraudulent transaction relating to only part of the VAT which the State is entitled to collect

Proceedings concerning a refusal of the right to deduct input value added tax on the acquisition of a vehicle.