Highlights & Insights on European Taxation (H&I) – Year 2022, no. 3

Please find below a selection of articles published this month (March 2022) in Highlights & Insights on European Taxation (H&I), plus one freely accessible article.

Highlights & Insights on European Taxation (H&I) is a publication by Wolters Kluwer Nederland BV.

The journal offers extensive information on all recent developments in European Taxation in the area of direct taxation and state aid, VAT, customs and excises, and environmental taxes.

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Year 2022, no. 3

TABLE OF CONTENTS

DIRECT TAXATION, LEGISLATION

–   Code of Conduct Group (Business Taxation): Work programme during the French Presidency

(comments by the Editorial Board) (H&I 2022/66)

–   Council conclusions on the revised EU list of non-cooperative jurisdictions for tax purposes 

(comments by the Editorial Board) (H&I 2022/69)

DIRECT TAXATION, CASE LAW

–     MARCAS (C-363/20). CJ has no jurisdiction in case on practices of tax administration concerning control and punishment of tax offences in corporate taxation area. Court of Justice

(comments by Edwin Thomas) (H&I 2022/65)

INDIRECT TAXATION, CASE LAW

–   ELVOSPOL (C-398/20). Total or partial non-payment of the price on account of the debtor’s insolvency. Adjustment of VAT amount. Court of Justice 

(comments by Marie Lamensch) (H&I 2022/73)

–   Promexor Trade (C-358/20). Revocation of VAT identification. Payment of VAT due on taxed transactions is possible after re-registration. Court of Justice

(comments by Marilena Ene) (H&I 2022/62)

–    Zipvit (C-156/20). VAT deduction. Supply of postal services mistakenly exempted. Court of Justice 

(comments by Pawel Mikula) (H&I 2022/76)

–    Apcoa Parking Danmark (C-90/20). Control fees levied by private car parks subject to VAT. Court of Justice

(comments by Jette Thygesen) (H&I 2022/74)

CUSTOMS AND EXCISE

–    Commission Decision on relief from import duties and VAT exemption on importation granted for goods needed to combat the effects of the COVID-19 outbreak during 2022

(comments by Piet Jan de Jonge) (H&I 2022/50)

–    Commission decides to extend customs and VAT waiver in COVID-19 pandemic 

(comments by Piet Jan de Jonge) (H&I 2022/51)

… and much more on Highlights & Insights on European Taxation (H&I)!

FREE ARTICLE

Zipvit (C-156/20). VAT deduction. Supply of postal services mistakenly exempted. Court of Justice 

(comments by Pawel Mikula) (H&I 2022/76)

The Court’s decision in the Zipvit case might seem obvious: the purchaser does not have an invoice indicating VAT and therefore, has no right to deduct it. On a closer inspection, however, the subject matter of the case is not so evident. In a way, it is even one of the more critical VAT rulings in recent times. This is so for at least two reasons which are developed below.

The first reason is that the ruling seems to introduce for the first time in such an explicit way into the VAT law the claim that VAT is not always ‘included in the price‘.

The second reason is that the judgment seems to bring together and reconcile two contradictory claims: (1st claim) that possession of an invoice is only a formal condition for tax deduction, with (2nd claim) that it is a condition always necessary for such deduction.

VAT is not always included in the price

The Court’s case law has to date reinforced the following claims: VAT becomes chargeable when the services are supplied (Article 63 of the VAT Directive). The taxable amount includes everything which constitutes consideration obtained or to be obtained by the supplier but does not include VAT itself (Article 73 and 78 of the VAT Directive). This means that the VAT is included in the price charged for the supply of services. Consequently, the purchaser has the right to deduct this VAT charged to him – as long as this VAT is paid or due. This implies, in turn, that if the price was set as a certain amount (e.g., ‘EUR 100‘) without any reference to VAT (e.g., ‘EUR 100 + VAT‘), the VAT is included in that amount. Such effect occurs ex lege – regardless of whether the amount of tax was ‘de facto‘ passed on to the purchaser (it is implied ‘ex lege‘ – the amount of VAT is ‘ex lege‘ in the price charged, so the VAT is due and can be deducted). These claims seem to be confirmed, e.g., in the judgment of 7 November 2013 (joined cases C-249/12 and C-250/12 Tulică and Plavoşin, ECLI:EU:C:2013:722; and CJ 1 July 2021, C-521/19 Tribunal Económico Administrativo Regional de Galicia, ECLI:EU:C:2021:527).

In Zipvit, the Court appears to modify this approach. From now on, whether VAT is included in the remuneration, is treated by the Court as a factual circumstance to be proven, which depends on such circumstances of the case as the content of the contract concerning the price, the possibility for the supplier to claim part of the remuneration from the purchaser, the possibility for the tax authorities to claim VAT from the supplier, if a request to pay the VAT was addressed to the recipient. The adoption of such a thesis changes the direction of the case law. It might be helpful in various situations where the practical consequences depend on whether VAT is ‘in the consideration’.

Possession of an invoice is a formal but (almost) always necessary obligation

In the judgment at hand, the Court could have simply ruled that the buyer is not entitled to the deduction because he does not have an invoice indicating the VAT amount. However, it did not use this possibility. This should be assessed in the positive. Such a solution would be easy, but would not be consistent with the existing case law. The position taken by the Court seems to provide an opportunity to resolve a contradiction that has been present in the case law of the Court for a long time.

In accordance with the Court’s well-established case law (in several dozen rulings), the right to deduct depends on the fulfilment of formal (documentary) and substantive conditions (such as the purchase of the service and its use for taxable activities). According to this case law, fulfilling formal conditions is not necessary for VAT deduction, but substantive conditions are. However, there is a problem with the condition of holding an invoice. It is indeed a formal condition, but which the Court considered rather necessary (as a substantive one). Hence, an apparent contradiction. This inconsistency is likely to be resolved by the Zipvitjudgment which can be read as follows: in order to deduct input tax, VAT must be passed on to the recipient. And for this to happen, in the overwhelming number of cases, the only evidence of such a transfer is an invoice showing the VAT amount. In other words, the purchaser must possess the invoice to prove its VAT credit. This condition, however, does not have to be met in every case: in extreme instances passing the VAT from supplier to the customer may be proved by other means.

Such an approach solves various problematic situations. For example, if an invoice was issued in the past but has been lost, the right of deduction should be allowed if there is other evidence of the tax having been passed on. If the invoice itself contains very little information or even errors and does not allow the transaction to be reconstructed, a deduction should be allowed if the pass-on can be reconstructed based on other evidence. The outlines of this concept – although not exactly in this way – have already been presented by Advocate General Juliane Kokott in her Opinions in the commented case as well as in the one of Wilo Salmson France (CJ 21 October 2021, C-80/20, ECLI:EU:C:2021:870: Opinion of AG Kokott, issued 22 April 2022, C-80/20, ECLI:EU:C:2021:326). The approach presented in Zipvit, understood as elaborated here, has the potential to be a relatively permanent solution to the conundrum at hand.