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RECENT DEVELOPMENTS FOR TAX SPECIALISTS

EDITION 183

EU Tax Alert

- CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted


Highlights in this edition - CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings) - CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) - CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone; Tesco) - VAT: new payment data exchange requirements adopted


EU Tax Alert 3

Contents Highlights in this edition

-- CJ rules that Belgian tax on stock exchange transactions does not breach freedom to provide

-- CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach of the fundamental freedoms (AURES Holdings)

services (Anton van Zantbeek) -- Upcoming Commission proposals for June 2020

VAT

-- CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka) -- CJ rules that Hungarian progressive tax having greater

-- Small Business Exemption extended to cross-border activities

impact on undertakings owned by non-residents is not

-- New payment data exchange requirements adopted

in breach of EU Law (Vodafone; Tesco)

-- CJ rules that Hungarian progressive tax having greater

-- VAT: new payment data exchange requirements adopted

State Aid/WTO

impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone) -- CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Tesco)

-- CJ rejects preliminary reference made by Central Tax Tribunal of Spain as it does not qualify as a ‘Court’ (Banco Santander)

Direct Taxation

-- CJ rules on Hungarian obligation to submit a tax declaration on suppliers of advertising services established in another Member State (Google Ireland) -- CJ rules on VAT deduced rate for letting of places on camping or caravan sites (Segler) -- CJ rules on the VAT treatment of land registry costs

-- Council has revised EU list of non-cooperative jurisdictions for tax purposes (blacklist) -- CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach to the fundamental freedoms (AURES Holdings) -- CJ rules on the Belgian legislation applying the PSD as

which concern a statutory obligation of the seller (Amărăşti Land Investment) -- AG opines on the right to VAT deduction (AGROBET CZ)

Customs Duties, Excises and other Indirect Taxes

regards the order in which the deductible income must be deducted from taxable profits (Brussels Securities) CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka)

-- CJ rules that Italian tax on betting is not in breach of EU Law (Stanleyparma)


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Highlights in this edition CJ rules that impossibility to deduct tax losses incurred in another Member State prior to the transfer of corporate tax residence is not a breach to the fundamental freedoms (AURES Holdings)

liable on the basis of the 2012 tax year. The Czech tax authorities considered that that loss could not be invoked as a deductible element of the tax base on the basis of Paragraph 38n of the Law on income tax. According to those authorities, Aures is, as a Czech tax resident, taxable on its worldwide income under Czech tax law. However, it

On 27 February 2020, the CJ delivered its judgment in

can deduct from the tax base only a loss arising from an

case AURES Holdings a.s. v Odvolací finanční ředitelství

economic activity in the Czech Republic. Aures appealed

(C-405/18). The case deals with the transfer of a

against this decision. It claimed in the appeal before

company’s place of effective management to a Member

that by the cross-border transfer of its place of effective

State other than its registered seat and the fact that the

management it exercised the freedom of establishment

national legislation at stake does not allow a tax loss

and that the impossibility for it to deduct the 2007 tax loss

incurred in the Member State of incorporation before the

in the Czech Republic, which it can no longer claim in the

transfer of its seat to be claimed.

Netherlands, amounts to an unjustified restriction on that freedom.

AURES Holdings, is a company incorporated under Netherlands law whose registered seat and place of

The CJ started by observing that, to exclude a loss

effective management were in the Netherlands, by virtue of

incurred by a company resident in one Member State

which it was a tax resident of the Netherlands. In the 2007,

but incorporated in another Member State under the

Aures incurred a loss in the Netherlands. On 1 January

latter’s law during the tax year in which that company

2008, Aures set up a branch in the Czech Republic which,

was resident in the Member State of incorporation from

under Czech law, constitutes a permanent establishment

the benefit of that advantage, whereas that advantage

of that company without legal personality and whose

is granted to a company resident in the Member State

activity is taxable in that Member State. On 1 January

of residence which incurred a loss in the same tax year,

2009, Aures transferred its place of effective management

constitutes a difference in tax treatment. Therefore, and by

from the Netherlands to the Czech Republic. Following that

reason of that difference in treatment, a company

transfer, Aures also transferred its tax residence from

incorporated under the law of a Member State might

the Netherlands to the Czech Republic. However, Aures

be dissuaded from transferring its place of effective

retained its registered seat and its entry in the commercial

management to another Member State in order to pursue

register in Amsterdam. Thus, it continued to be governed,

its economic activities there.

as regards its internal relations, by Netherlands law. In the light of that transfer of place of effective management and,

Such a difference in treatment resulting from a Member

consequently, of its tax residency, Aures applied to the

State’s tax legislation to the detriment of companies

Czech tax authorities for deduction of the loss which it

exercising their freedom of movement can be permissible

had incurred in the Netherlands on the basis of the 2007

only if it relates to cases which are not objectively

tax year from the corporation tax base for which it was

comparable or if it is justified by an overriding reason in


EU Tax Alert 5

the public interest. According to the Court, by providing that a company may not claim, in the Member State in which it is now resident, a loss incurred in a tax year in

CJ rules that Netherlands tax rules on dividends paid to non-resident UCITS partly violate EU law (Deka)

which it was a tax resident of another Member State, the Czech legislation is conducive, in essence, to preservation

On 30 January 2020, the Court of Justice of the European

of the allocation of the power to impose taxes between

Union (‘CJ’) issued its judgment in the case of Köln

the Member States and to prevent the risk of double

Aktienfonds Deka (‘KA Deka’). The CJ answered two

deduction of losses.

preliminary questions from the Netherlands Supreme Court on the compatibility with EU law of differences in the

In this regard, the CJ noted that a company resident in a

Netherlands dividend withholding tax regime, depending

Member State which has incurred a loss in that Member

on whether the recipient is a non-resident UCITS or a

State and a company which has transferred its place of

Netherlands resident UCITS qualifying as a so-called ‘fiscal

effective management and, consequently, its tax residency

investment fund’ (fiscale beleggingsinstelling, ‘FBI’).

to that Member State having incurred a loss during a tax year during which it was a tax resident of another Member

The judgment makes clear that the Netherlands FB regime

State, without any activity in the former Member State are

is at least partly not in line with the TFEU. The Netherlands

not, in principle, in a comparable situation. The situation

Supreme Court will now need to apply the CJ findings to

of a company which effects such a transfer is subject

the specific case. This judgment is relevant for funds and

successively to the tax jurisdiction of two Member States,

other interested parties in a similar position. Furthermore, it

namely, first, the Member State of origin, in respect of the

may impact several cases pending before the Netherlands

tax year during which the loss is incurred, and, second,

courts in which non-resident UCITS claim a refund of

the host Member State, in respect of the tax year for which

Netherlands dividend withholding tax based on the free

that company applies for that loss to be deducted.

movement of capital under the TFEU.

Therefore and for the CJ, where the host Member State

Netherlands FBI regime

has no tax jurisdiction over the tax year during which the

Under Netherlands tax law, UCITS qualifying as an FBI

loss at issue arose, the situation of a company, which

may claim a refund of Netherlands dividend withholding

has transferred its tax residency to that Member State

tax. This requires meeting in particular the following two

and subsequently claims a loss there previously incurred

conditions:

in another Member State, is not comparable to that of

i. The shareholders or participants must meet certain

a company the turnover of which was subject to the tax powers of the previous Member State on the basis of the tax year during which that company incurred that loss.

requirements, generally related to the percentage of investment (the ‘shareholder requirements’). ii. The UCITS must distribute all proceeds eligible for

In addition, the fact that a company which has transferred

distribution within 8 months after the relevant financial

its tax residency from one Member State to another falls

year (the ‘redistribution requirement’).

successively within the tax jurisdiction of two Member States is liable to give rise to a greater risk of that loss

Judgment of the CJ

being taken into account twice, since such a company

The CJ first decided that the shareholder requirements

might claim the same loss in respect of the authorities of

comply with the free movement of capital, under two

both Member States.

conditions: i. the requirements should not ‘de facto’ constitute a less

Overall, the CJ concluded that the Member State to which a company transfers its place of effective management

favourable treatment for non-resident UCITS, and ii. the tax authorities should require proof from both

cannot be required to take into account a loss incurred

resident and non-resident UCITS that they comply with

before that transfer which relates to tax years in respect of

the shareholder requirements.

which that company did not fall within the tax jurisdiction of

It will be for the Netherlands national court to investigate

that Member State.

whether these conditions are met. Further, the CJ ruled that the redistribution requirement is in conflict with the free movement of capital, if two conditions are met. First, in the home State of the UCITS,


6

the proceeds should be deemed distributed or are

Vodafone appealed against this decision claiming that the

included in the shareholders’ or participants’ tax base in

legislation relating to that tax constitutes prohibited State

that State, as if they were distributed. Second, in view of

aid and is contrary to Article 401 of the VAT Directive.

the objective pursued by the requirement, the non-resident

It considered that the effect of that tax, which is based

UCITS is in a situation comparable to that of an FBI, which

on turnover and is calculated in accordance with a scale

again will have to be investigated by the Netherlands

that comprises progressive rates applicable to various tax

national court. The CJ confirmed that, if the objective

bands, may be indirectly discriminatory vis-à-vis taxable

of the redistribution requirement is taxing the proceeds

persons owned by foreign natural persons or legal persons

at the level of the participant, a non-resident UCITS is

and, therefore, be contrary to Articles 49, 54, 107 and 108

comparable to an FBI.

TFEU particularly since, in practice, only the Hungarian subsidiaries of foreign parent companies pay the special

Additional remarks

tax at the rate laid down for the highest band of turnover.

Following this CJ judgment, the domestic procedure will resume. Shortly, the Netherlands Supreme Court can

The CJ started by recalling that the freedom of

be expected to answer the preliminary questions of the

establishment aims to guarantee the benefit of national

Lower Court. It is then up to the Lower Court to determine

treatment in the host Member State to nationals of other

how to precisely apply the framework laid down by the

Member States by prohibiting any discrimination based

CJ (and the Supreme Court) in the case of KA Deka.

on the place in which companies have their seat. In order

The judgment only deals with years before the introduction

to be effective, the scope of freedom of establishment

of the ‘remittance reduction’ (afdrachtsvermindering) in

must mean that a company may rely on a restriction on

Netherlands tax law (years prior to 2008). It is currently

the freedom of establishment of another company which

not yet clear whether the outcome of the case would be

is linked to it in so far as that restriction affects its own

different under the new remittance reduction regime.

taxation. In this case, Vodafone has its registered office in

The CJ’s ruling is of relevance for other cases with a

Hungary but is 100% owned by Vodafone Europe, which

similar fact pattern. The KA Deka case, however, does not

has its registered office in the Netherlands.

cover situations where the shareholders or participants

Furthermore, not only overt discrimination based on the

are resident in a State that is neither the home State of

location of the seat of companies, but also all covert forms

the UCITS, nor the investment State. It is therefore still

of discrimination which, by the application of other criteria

open whether the ruling of the CJ on the redistribution

of differentiation, lead in fact to the same result are, in that

requirement in this case would also apply to such

regard, prohibited. Therefore, a compulsory levy which

‘triangular situations’.

provides for a criterion of differentiation that is apparently objective but that disadvantages in most cases, given

CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Vodafone)

its features, companies that have their seat in another Member State and which are in a situation comparable to that of companies whose seat is situated in the Member State of taxation, constitutes indirect discrimination based on the location of the seat of the companies, which is

On 3 March 2020, the CJ delivered its judgment in case

prohibited under Articles 49 and 54 TFEU. 

Vodafone Magyarország Mobil Távközlési Zrt. V Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága/ (C-75/18).

In this case, the law on the special tax on certain sectors

The case deals with the Hungarian tax on the turnover of

makes no distinction between undertakings according to

telecommunications operators that is a progressive tax

where they have their registered office. All the undertakings

that causes a greater impact on undertakings owned by

operating in Hungary in the telecommunications sector are

natural or legal persons of other Member States than on

subject to that tax, and the tax rates that are, respectively,

national undertakings.

applicable to the various bands of turnover defined by that law apply to all those undertakings. That law

Vodafone is a public limited company governed by

does not, therefore, establish any direct discrimination.

Hungarian law, active in the telecommunications

However, Vodafone and the Commission maintain that

market, whose sole shareholder is Vodafone Europe BV,

the fact that the special tax is progressive is, in itself, to

established in the Netherlands. Vodafone was the subject

the advantage of taxable persons owned by Hungarian

of a tax inspection that led to an additional assessment.

natural persons or legal persons and to the disadvantage


EU Tax Alert 7

of taxable persons owned by natural persons or legal

Identically to the decision followed in the Vodafone case

persons of other Member States, with the result that

(C-75/18) dealt with in this edition, the CJ confirmed that

the special tax constitutes, taking into consideration its

the progressive rates of the special tax do not, inherently,

characteristics, indirect discrimination.

create any discrimination, based on where companies have their registered office, between taxable persons

According to the CJ and contrary to what is maintained by

owned by Hungarian natural persons or legal persons

the Commission, progressive taxation may be based on

and taxable persons owned by natural persons or legal

turnover, since, on the one hand, the amount of turnover

persons of other Member States.

constitutes a criterion of differentiation that is neutral and, on the other, turnover constitutes a relevant indicator of a taxable person’s ability to pay. Following the preamble

New payment data exchange requirements adopted

of the relevant legislation, its aim is to impose a tax on taxable persons who have an ability to pay that exceeds

On 18 February 2020, the Council of the EU agreed to

the general obligation to pay tax. For the CJ, the fact that

new measures to facilitate the detection of tax fraud in

the greater part of such a special tax is borne by taxable

cross-border e-commerce transactions.

persons owned by natural persons or legal persons of other Member States cannot be such as to merit, by itself,

The new measures supplement the EU’s ‘e-commerce

categorisation as discrimination. That situation is due to

package’ which enters into force on 1 January 2021.

the fact that the Hungarian telecommunications market

The supplementary rules require payment service providers

is dominated by such taxable persons, who achieve the

(most notably banks) to establish and maintain a register

highest turnover in that market. Accordingly, that situation

of cross-border payments. The information gathered has

is an indicator that is fortuitous, if not a matter of chance,

to be suitable for electronic submission to the Member

and which may arise, even in a system of proportional

States’ Tax Authorities. The information collected by the

taxation, whenever the market concerned is dominated by

Member States will be stored centrally in what has been

undertakings of other Member States or of non-Member

dubbed the ‘central electronic storage system of payment

States or by national undertakings owned by natural

information’ (‘CESOP’). From this system, all Member

persons or legal persons of other Member States or of

States will be able to extract the necessary information for

non-Member States.

processing by the national anti-fraud officials.

Therefore, the CJ concluded that the progressive rates of

The additional rules for collection and storage of

the special tax do not, inherently, create any discrimination,

information naturally also require additional rules on the

based on where companies have their registered office,

protection of personal data. In this light, information may,

between taxable persons owned by Hungarian natural

for example, only be stored for a limited time and only

persons or legal persons and taxable persons owned by

the information necessary for combatting VAT fraud may

natural persons or legal persons of other Member States.

be collected. Moreover, stored information will only be accessible to designated VAT fraud investigation officials.

CJ rules that Hungarian progressive tax having greater impact on undertakings owned by non-residents is not in breach of EU Law (Tesco) On 3 March 2020, the CJ delivered its judgment in case Vodafone Magyarország Mobil Távközlési Zrt. V Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága/ (C-323/18).

The new measures are intended to enter into force as of 1 January 2024.

State Aid/WTO CJ rejects preliminary reference made by Central Tax Tribunal of Spain as it does not qualify as a ‘Court’ (Banco Santander)

The case deals with the Hungarian tax on the turnover in the store retail trade sector that is a progressive tax that

On 21 January 2020, the CJ delivered its judgment in case

causes a greater impact on undertakings owned by natural

Banco de Santander SA (C-274/14). The case deals with

or legal persons of other Member States than on national

the definition of court or tribunal of a Member State.

undertakings.


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In May 2002, Banco de Santander Central Hispano

law.  However, the question arises as to whether the TEAC

(BSCH), the ultimate parent company of the tax

fulfils the criterion of independence.

consolidated group, acquired 100% of the shares in AKB Holding GmbH (‘AKB’), a company governed

According to the CJ case law, the concept of

by German law.  That acquisition generated financial

‘independence’ has two aspects. The first aspect, which

goodwill. In December 2002, BSCH transferred the

is external, requires that the body concerned exercises

shares in AKB whose acquisition price had generated the

its functions wholly autonomously, without being subject

relevant goodwill to Holneth BV, a company governed

to any hierarchical constraint or subordinated to any

by Netherlands law, and Santander Consumer Finance

other body and without taking orders or instructions from

SA (‘SCF’), a company governed by Spanish law; both

any source whatsoever, being thus protected against

companies also belonged to the tax consolidated group.

external interventions or pressure liable to impair the

In view of the relevant goodwill, the tax consolidated

independent judgment of its members and to influence

group made deductions. The tax authorities rejected the

their decisions. The second — internal — aspect of

goodwill deduction claimed by SCF. Banco de Santander

the concept of ‘independence’ is linked to ‘impartiality’

submitted a complaint against that recovery notice to the

and seeks to ensure a level playing field for the parties

TEAC (Central Tax Tribunal), claiming that, notwithstanding

to the proceedings and their respective interests with

the indirect nature of the relevant goodwill as a result of

regard to the subject matter of those proceedings.

its having been generated by the acquisition of a holding

That aspect requires objectivity and the absence of any

company, that goodwill is deductible from corporation

interest in the outcome of the proceedings apart from

tax. It argued that, the question in this case is whether,

the strict application of the rule of law. The concept

pursuant to Decision 2011/5, the Commission’s first

of ‘independence’, which is inherent in the task of

decision on the tax scheme at issue, the tax deduction

adjudication, implies above all that the body in question

corresponding to the amortization of the relevant goodwill

acts as a third party in relation to the authority which

before 21 December 2007, following the acquisition of a

adopted the contested decision. Those guarantees of

non-resident holding company, must be recovered as aid

independence and impartiality require rules, particularly as

that is illegal and incompatible with the internal market.

regards the composition of the body and the appointment,

For Banco Santander, given that the combined provisions

length of service and the grounds for abstention, rejection

of Article 1(2) and Article 4(1) of Decision 2011/5 are such

and dismissal of its members, in order to dismiss any

that acquisitions made before 21 December 2007 are

reasonable doubt in the minds of individuals as to the

excluded from the obligation of recovery, on account of

imperviousness of that body to external factors and its

a pre-existing legitimate expectation, and the fact that

neutrality with respect to the interests before it.

the acquisition at issue in the main proceedings took place before that date, it was argued that it is essential,

The CJ noted that, in the present case and according

for the purposes of determining the dispute in the main

to the national legislation applicable, the President and

proceedings, that an answer be given to the question

members of the TEAC are appointed by Royal Decree

as to whether those provisions of Decision 2011/5 must

adopted by the Council of Ministers, on the proposal of

be interpreted as applying also to indirect acquisitions,

the Minister for the Economy and Finance, for an indefinite

in particular to the acquisition of a non-resident

period. According to that provision, both the President

holding company, such as the one at issue in the main

and the members of the TEAC may be removed from

proceedings. The Central Tax Tribunal decided to refer the

office according to the same procedure, that is to say,

case to the CJ.

by Royal Decree adopted by the Council of Ministers on the proposal of the Minister for the Economy and

The CJ discussed whether the question was admissible

Finance. Whilst, it is true, the applicable national legislation

and in particular, whether the TEAC meets the criteria

lays down rules governing, inter alia, abstention and

for being considered as a court or tribunal. The CJ

recusal of the President and other members of the

started by observing that there is no doubt that the body

TEAC or, in the case of the President of the TEAC, rules

making the reference in the present case, on the basis

on conflicts of interest, disqualification and duties of

of the information in the file submitted to the Court, that

transparency, it is common ground that the arrangements

it satisfies the criteria that it be established by law, that

for removal of the President and other members of the

it be permanent, that its jurisdiction be compulsory, that

TEAC are not determined by specific rules, by means of

its procedure be inter partes and that it apply rules of

express legislative provisions, such as those applicable


EU Tax Alert 9

to members of the judiciary. The members of the TEAC

appeal are thus conflated. Thus, those characteristics of

are covered solely, in that respect, by the general rules

the extraordinary appeal for the unification of precedent

of administrative law and, in particular, by the basic

which may be brought against decisions of the TEAC

regulations relating to civil servants, as the Spanish

demonstrate the organisational and functional links that

Government confirmed during the hearing before the

exist between that body and the Ministry of the Economy

Court. That finding also applies in relation to the members

and Finance, in particular, the Director-General of Taxation

of the regional and local TEAs (tax tribunals). Consequently,

of that ministry and the Director-General of the department

the removal of the President and the other members of

which adopts the decisions contested before the TEAC.

the TEAC and of the members of the other TEAs is not

The existence of such links makes it impossible to regard

limited, to certain exceptional cases reflecting legitimate

the TEAC as a third party in relation to that administration.

and compelling grounds that warrant the adoption of such a measure, subject to the principle of proportionality and to

Consequently, the CJ concluded that the TEAC does

the appropriate procedures being followed, such as cases

not satisfy the internal aspect of the requirement of

of incapacity or of a serious breach of obligations rendering

independence that is characteristic of a court or tribunal.

the individuals concerned unfit for the purposes of carrying out their duties. It follows that the applicable national

Direct Taxation

legislation does not ensure that the President and the other members of the TEAC are protected against direct or indirect external pressures that are liable to cast doubt on their independence.

Council has revised EU list of noncooperative jurisdictions for tax purposes (blacklist)

Furthermore, as regards the requirement of independence in its second, internal, aspect, it must be noted that there

On 27 February 2020, the Council agreed on a revised

is indeed a separation of functions within the Ministry of

EU list of non-cooperative jurisdictions for tax purposes

the Economy and Finance between, on the one hand,

(blacklist). The list is now composed by the following

the departments of the tax authority responsible for

12 jurisdictions:

management, clearance and recovery of tax and, on the other, the TEAs which rule on complaints lodged against

1.   American Samoa

the decisions of those departments. Nevertheless, certain

American Samoa does not apply any automatic exchange

characteristics of the extraordinary appeal procedure

of financial information, has not signed and ratified,

before the Sala Especial para la Unificación de Doctrina

including through the jurisdiction they are dependent on,

(Special Chamber for the Unification of Precedent,

the OECD Multilateral Convention on Mutual Administrative

Spain), are such as to cast doubt on the fact that the

Assistance as amended, did not commit to apply the

TEAC acts as a ‘third party’ with respect to the interests

BEPS minimum standards and did not commit to

before it. Only the Director-General of Taxation of the

addressing these issues.

Ministry of the Economy and Finance may lodge such an extraordinary appeal against decisions of the TEAC with

2.   Cayman Islands

which he or she disagrees. However, that Director-General

Cayman Islands does not have appropriate measures

will automatically be part of the eight-person panel that is

in place relating to economic substance in the area of

to hear that appeal, along with the Director-General or the

collective investment vehicles.

Director of the department of the State Tax Administration Agency to which the body that issued the act referred to in

3.  Fiji

the decision that is the object of that extraordinary appeal

Fiji is not a member of the Global Forum on transparency

belongs. Thus, both the Director-General of Taxation of

and exchange of information for tax purposes (‘Global

the Ministry of the Economy and Finance, who lodged the

Forum’), has not signed and ratified the OECD Multilateral

extraordinary appeal against a decision of the TEAC, and

Convention on Mutual Administrative Assistance as

the Director-General or the Director of the department

amended, has harmful preferential tax regimes, has not

of the State Tax Administration Agency which adopted

become a member of the Inclusive Framework on BEPS

the act referred to in that decision, will sit as part of

or implemented OECD anti-BEPS minimum standard, and

the Special Chamber of the TEAC hearing that appeal.

has not yet resolved these issues yet.

The roles of party to the extraordinary appeal procedure and that of members of the body that is to hear such an


10

4.   Guam

11.   US Virgin Islands

Guam does not apply any automatic exchange of

US Virgin Islands does not apply any automatic exchange

financial information, has not signed and ratified, including

of financial information, has not signed and ratified,

through the jurisdiction they are dependent on, the

including through the jurisdiction they are dependent on,

OECD Multilateral Convention on Mutual Administrative

the OECD Multilateral Convention on Mutual Administrative

Assistance as amended, did not commit to apply the

Assistance as amended, has harmful preferential tax

BEPS minimum standards and did not commit to

regimes, did not commit to apply the BEPS minimum

addressing these issues.

standards and did not commit to addressing these issues.

5.   Oman

12.   Vanuatu

Oman does not apply any automatic exchange of

Vanuatu does not have a rating of at least ‘Largely

financial information, has not signed and ratified the

Compliant’ by the Global Forum on Transparency and

OECD Multilateral Convention on Mutual Administrative

Exchange of Information for Tax Purposes for Exchange

Assistance as amended, and has not resolved these

of Information on Request, facilitates offshore structures

issues yet.

and arrangements aimed at attracting profits without real economic substance and has not resolved these issues

6.   Palau

yet.

Palau does not apply any automatic exchange of

issues yet.

CJ rules on the Belgian legislation applying the PSD as regards the order in which the deductible income must be deducted from taxable profits (Brussels Securities)

7.   Panama

On 19 December 2019, the CJ delivered its judgment

Panama does not have a rating of at least ‘Largely

in case Brussels Securities SA v État Belge (C-289/19).

Compliant’ by the Global Forum on Transparency and

The case deals with the application of the Parent-

Exchange of Information for Tax Purposes for Exchange

Subsidiary Directive (PSD) and the order in which the

of Information on Request and has not resolved this issue

deductible income must be deducted from taxable profits.

financial information, has not signed and ratified the OECD Multilateral Convention on Mutual Administrative Assistance as amended, and has not resolved these

yet. According to Belgian legislation for determining the 8.   Samoa

definitive taxed income (DTI), 95% of the amount collected

Samoa has a harmful preferential tax regime and has not

or received from a subsidiary should be deducted pursuant

committed to addressing this issue.

to the PSD regime,. In so far as it has not been possible

Furthermore, Samoa committed to comply with criterion

to deduct that amount, it is to be carried forward to

3.1 by the end of 2018 but has not resolved this issue yet.

subsequent tax years. In turn and in regard to deduction for risk capital (‘DRC’) in respect of a tax period, the risk

9.   Seychelles

capital to be taken into account corresponds, to the

Seychelles has harmful preferential tax regimes and has

amount of the company’s equity capital at the end of

not resolved these issues yet.

the previous tax period, determined in accordance with accounting legislation and the annual accounts as shown

10.   Trinidad and Tobago

on the balance sheet.

Trinidad and Tobago does not apply any automatic exchange of financial information, has a ‘Non-Compliant’

Brussels Securities, a company established in Belgium,

rating by the Global Forum on Transparency and

is subject to corporation tax in that Member State. In its

Exchange of Information for Tax Purposes for Exchange

tax return for the 2011 financial year, Brussels Securities

of Information on Request, has not signed and ratified the

stated that it had determined its tax base by deducting

OECD Multilateral Convention on Mutual Administrative

first, the DRC and second, the DTI. It also claimed the

Assistance as amended, has harmful preferential tax

right to carry forward deductions to the 2012 tax year in

regimes, and has not resolved these issues yet.

respect of DTI, DRC and tax losses.  In a correction notice dated 21 May 2013, the tax authorities stated that they intended to review the amount of DRC which could be


EU Tax Alert 11

carried forward at the beginning and at end of the 2011

that continues to be possible after the DTI has first been

tax year on the basis of the order in which tax deductions

deducted. In particular, the parent company’s tax base is

are to be applied. According to that order, first DTI must

established by deducting from its profits, first DTI carried

be deducted from the taxable profits, then the DRC, and

forward, then, to the extent that there remain taxable

finally the losses to be carried forward. Since Brussels

profits, DRC carried forward, if the time limit for its use has

Securities had not made the deductions in that order in

not expired, and finally, losses carried forward. Therefore,

respect of the tax years 2005 to 2011, the tax authorities

the CJ observed that, the deduction as a priority of DTI

considered that no amounts could be carried forward to

may reduce or even extinguish, the tax base, which may

the 2012 tax year in respect of DTI and that the amount

have the effect of depriving the taxpayer, totally or partially,

of the DRC should be increased. The losses to be carried

of another tax advantage. While, in accordance with the

forward were maintained.

national legislation applicable to the dispute in the main proceedings, losses may be carried forward indefinitely,

Brussels Securities appealed this decision. It considered

DRC may be carried forward only to the following seven

that ‘According to Brussels Securities’, the order in

tax years. In those circumstances, the order in which

which tax deductions are to be applied, would mean that

deductions must be applied, as described in paragraph 41

a company covered by the DTI system would lose the

above, may result in the expiry of the right to use the

benefit of the tax advantage represented by the DRC, up

deferred DRC, up to the amount of DTI that has been

to the amount of DTI that it may deduct. Therefore, and

deducted as a priority from the parent company’s taxable

in its view, the national legislation does not comply with

profits. Therefore, the CJ considered that the combination

Article 4 of the PSD. The case was referred to the CJ.

of the DTI scheme applicable to dividends received, the order of deductions set out in national legislation, and the

The CJ started by observing that the first indent of

time limit on the ability to use DRC can have the effect

Article 4(1) of the PSD prohibits Member States from

that receiving dividends is likely to result in the parent

taxing the parent company in respect of the profits

company losing another tax advantage provided for by

distributed by its subsidiary, without drawing a distinction

national legislation, and, therefore, that company being

based on whether the chargeable event of the taxation

taxed more heavily than would have been the case if it had

of the parent company is the receipt of those profits or

not received dividends from its non-resident subsidiary or

their redistribution (and that that prohibition also applies

if, as the referring court states, the dividends had simply

to national legislation which, although it does not tax the

been excluded from the parent company’s tax base.

dividends received by the parent company in themselves,

The CJ noted that the Belgian legislation is contrary to the

may have the effect that the parent company is subject

objective pursued by the first indent of Article 4(1) of the

indirectly to taxation on those dividends). Such legislation

PSD, the receipt of such dividends is not fiscally neutral for

is compatible neither with the terms, nor with objectives

the parent company.

and scheme of PSD, since it does not allow the objective of preventing economic double taxation, as set out in the

Therefore, the CJ concluded that the PSD must be

rule established at the first indent of Article 4(1) of that

interpreted as precluding the Belgian legislation which

directive, to be fully attained.

provides that dividends received by a parent company from its subsidiary must first be included in the tax base

In accordance with the Belgian legislation, the part of

of the parent company, before 95% of the amount of

the DTI that cannot be deducted in the relevant tax year

the dividends is then deducted, and any surplus may be

due to insufficient profits may now be carried forward

carried forward to subsequent tax years indefinitely, that

to subsequent tax years. In addition, the ability to carry

deduction having priority over another tax deduction which

forward is not limited in time. It is therefore apparent that

may only be carried forward for a limited time.

the reduction in losses which may be carried forward, due to the inclusion of dividends in the parent company’s tax base, is now offset by an unlimited ability to carry forward DTI in the same amount.  However, DTI carried forward must be deducted as a priority from the positive results achieved by the parent company in subsequent years, other deductible items, in particular, the DRC and losses, being deductible only if, and to the extent that,


12

CJ rules that Belgian tax on stock exchange transactions does not breach freedom to provide services (Anton van Zantbeek)

Belgian legislation establishes a difference in treatment between recipients of financial intermediation services resident in Belgium which is liable to dissuade them from using the services of non-resident service providers, while

On 30 January 2020, the CJ delivered its judgment in

making it more difficult for the latter to offer their services

case Anton van Zantbeek VOF v Ministerrad (C-725/18).

in that Member State. It concluded that national legislation

The case deals with the Belgian rules that extend the

therefore constitutes a restriction on the freedom to

scope of a tax on stock exchange transactions.

provide services. The Belgian Governed argued that such legislation,

Anton van Zantbeek, a company established in Belgium,

however, is intended to ensure the effective collection of

brought an action before the Constitutional Court seeking

tax and fiscal supervision and to combat tax evasion.

the annulment of the Belgian provisions. Those allegedly have widened the scope of the tax on stock exchange

The CJ observed that according to the information

transactions to which transactions entered into or

contained in the reference for a preliminary ruling and

executed in Belgium which relate to Belgian or foreign

confirmed by the Belgian Government, the Belgian

public funds are subject, in so far as the transaction is

provisions are intended, inter alia, to prevent unfair

executed through a professional intermediary. Under those

competition between resident and non-resident

provisions, those transactions are no longer the only

professional intermediaries, in so far as the former are

transactions subject to that tax, since the transactions

obliged to levy the tax at source on behalf of their clients

‘deemed to be concluded or executed in Belgium’ are

when executing stock exchange transactions, while the

also covered, with the result that that tax is also due if

latter are not obliged to do so on transactions executed for

the purchase or sale order is issued to a non-resident

Belgian issuers of an order, and to ensure the effectiveness

professional intermediary by a resident issuer of an order,

of tax collection and fiscal supervision. Therefore, the

namely by ‘a natural person who has his habitual residence

CJ considered that such reasons within the concept

in Belgium’ or by a ‘legal person on behalf of a registered

of ‘overriding reasons in the public interest’, within the

office or an establishment of that legal person in Belgium’.

meaning of the case law of the Court so that they are

In this latter case, the issuer of an order becomes liable for

capable of justifying a restriction on the freedom to provide

the tax instead of the professional intermediary, since non-

services.

resident professional intermediaries cannot be required to comply with the Belgian tax provisions. That issuer of

The CJ then assessed whether that legislation is able to

an order is required to declare and pay that tax within

achieve the objectives pursued. In this regard it noted that

two months of the transaction in question unless he can

that making the issuer of an order using the services of

establish that it has already been paid, either through the

a non-resident intermediary subject to the tax is likely to

intermediary or his liable representative.

ensure that the stock exchange transactions concerned will not escape taxation by making fiscal supervision more

Mr Zantbeek argued that the legislation at

effective and making it more difficult to circumvent that tax,

stake establishes a difference in treatment between

the burden of which is borne by the issuer of an order.

Belgian issuers of an order, depending on whether they

As regards the question whether the national legislation at

use a professional intermediary established in Belgium

issue in the main proceedings does not go beyond what

or elsewhere, being therefore contrary, inter alia, to the

is necessary to achieve those objectives, the CJ observed

freedom to provide services. The case was referred to

that the information necessary for the establishment and

the CJ.

supervision of such tax such which is levied on each stock exchange transaction, cannot be obtained by

The Court started by assessing whether the free

administrative cooperation alone and by the automatic and

movement of services precludes legislation of a Member

compulsory exchange of information in the field of taxation.

State which establishes a tax on stock exchange

Finally, the CJ also noted that the solution provided in

transactions concluded or executed on the order of

the legislation appears to be the least restrictive on the

a resident of that Member State by a non-resident

freedom to provide services rand therefore does not

professional intermediary, with the result that an issuer

appear to go beyond what is necessary to achieve these

of an order is liable for that tax and for the declaration

objectives.

obligations connected with that tax. For the CJ, the


EU Tax Alert 13

Therefore, the CJ concluded that the Belgian legislation

The legislative proposals mentioned above are part of the

does not contravene the freedom to provide services.

EU Commission’s plans to fight tax evasion. The most important concrete steps to be taken in such regard

Upcoming Commission proposals for June 2020

include introducing new digital solutions to improve tax authorities’ analysis capacities and to share information in real time;

On June 2020, the Commission will present an action plan and two concrete legislative proposals to fight tax fraud

When it comes to tackling cross-border tax barriers, the

and evasion.

most important concrete steps to be taken include: -- mechanisms to prevent and solve tax disputes;

1. Exchange of data from digital platform to tax authorities The Commission will propose updating the EU Directive on Administrative Cooperation (Directive 2011/16/EU,

-- procedures for withholding taxes on investment across borders; -- exploring digital solutions to levy taxes at source in real time.

also known as the DAC) to include the ability for tax administrations to collect and then exchange taxpayer data

The Commission will also present defensive measures

collected by digital platform providers during the course

against blacklisted countries.

of their operations, delivering a common EU reporting standard in this area. The expected proposal in line with

VAT

the trend of many governments around the globe which are delegating more and more tax obligations to private platforms, which include not only reporting duties, but also

Small Business Exemption extended to cross-border activities

the collection and levy of taxes. On 18 February 2020, the Council of the EU agreed Pursuant to the EU Inception Impact Assessment of

to extend and simplify the VAT exemption for small

7 February 2020the aim of the proposal is to provide tax

businesses (SMEs).

administrations with information to identify taxpayers who

Currently, Member States are allowed to exempt supplies

generate revenue through the digital platform economy

by SMEs with an annual turnover not exceeding a given

and to enable tax administrations to obtain information

(Member State specified) threshold. This relieves the SMEs

to control that taxpayers pay their fair share as well as to

from the administrative burden of VAT filing obligations

provide for better cooperation across tax administrations

and relatively high compliance costs. At the same time,

and keep business compliance costs to a minimum by

it provides the Member States’ tax authorities with the

providing a common EU reporting standard.

same relief (i.e. not having to administratively process

In achieving such goal, the proposal expressly states that

every small business whose actual VAT taxable turnover is

the initiative must ensure the protection of taxpayers’

insignificant).

fundamental rights and especially data protection rights (GDPR).

Currently, cross-border supplies cannot benefit from the SME exemption, no matter how small the (VAT taxed)

2. VAT E-commerce fraud and third countries

business. After the extension however, a Member State

A Recommendation for a Council Decision will be

may exempt an SME from its VAT filing obligations, despite

proposed to authorize the Commission to open

the SME not being established in the Member State

negotiations for an agreement between the EU and a

concerned (where the supply is taking place), provided that

major economic player on administrative cooperation,

the turnover in concern stays below the national threshold

combating fraud (in particular in e-commerce) and recovery

and as long as the SME’s annual turnover in the Union as a

of claims in the field of VAT. The ‘major economic player’

whole stays below EUR 100,000.

could be, for instance, China or the US. This proposal would complement the recent Directive that introduced the

SMEs will be able to declare their transactions using

exchange of payment data by payment service providers

a ‘single registration window’ in their Member State of

(PSP) in cross-border e-commerce transactions.

establishment. This way, no additional VAT registration and reporting is required of the SME. All in all, this should contribute to a level playing field for businesses, regardless


14

of where they are established in the EU. The new and

According to the Court, it follows, first, that the obligation

improved VAT (filing) exemption for SMEs is intended to

to submit a tax declaration, laid down in the law, does not

enter into force on 1 January 2025.

impinge on the exercise of the activity of advertising online in Hungary and, second, that a supplier of advertising

CJ rules on Hungarian obligation to submit a tax declaration on suppliers of advertising services established in another Member State (Google Ireland)

services who, before commencing its advertising activity which is taxable, has not registered for tax purposes in Hungary is subject to that obligation, whereas that obligation does not apply to a supplier of advertising services who is already registered for tax purposes in

On 3 March 2020, the CJ delivered its judgment in case

that Member State for the purposes of some form of

Google Ireland Limited v Nemzeti Adó- és Vámhivatal

tax, that being so irrespective of either supplier’s place

Kiemelt Adó- és Vámigazgatósága (C-482/18). The case

of establishment. Therefore, the Court was of the view

deals with a series of fines on that company for having

that the obligation to submit a tax declaration, which is

infringed the obligation to submit a tax declaration of

an administrative formality, does not per se constitute an

persons exercising an activity subject to the tax on

obstacle to the freedom to provide services.

advertisements laid down in Hungarian legislation. Subsequently the CJ dealt with the Hungarian fines for By decision of 16 January 2017, the Hungarian tax

failure to comply with similar obligations to submit a

authority found, first, that Google Ireland was exercising an

tax declaration and to register required of them under

activity which fell within the scope of the law and, second,

the general provisions of the national tax legislation.

that it had not registered with the tax authority within

According to the Court, the system of penalties, of the Law

15 days of commencing its activity. Consequently, the

on the taxation of advertisements, enables significantly

tax authority imposed a fine. By decisions adopted on

higher fines to be issued than those resulting from the

the following four days, the tax authority imposed four

application of the Law on general tax procedures in the

new fines on Google Ireland. Google Ireland brought an

event of infringement, by a supplier of advertising services

action for the annulment of those decisions before the

established in Hungary. Furthermore, the amount of

referring court.

the fines imposed under that system is not increased for continued non-compliance with the corresponding

In support of its action, Google Ireland submits, first of

obligation to register to such an extent, nor necessarily

all, that the imposition of fines on the ground of a failure

within such a short period of time, as that applied under

to comply with the obligation to register laid down in the

the system of penalties laid down in the Law on the

Law on the taxation of advertisements is contrary to the

taxation of advertisements. Therefore, and having regard to

freedom of provide services. Furthermore, it submits

the difference in treatment introduced between suppliers of

that companies established in Hungary may satisfy the

advertising services according to whether or not they are

obligations laid down by that law more easily than those

already registered for tax purposes in Hungary, the system

established outside Hungary. Lastly, it maintains that fines

of penalties at issue in the main proceedings constitutes a

imposed on companies established outside Hungary on

restriction on the freedom to provide services.

the ground that they fail to comply with their obligations to submit a tax declaration differ from those applicable to

Such a restriction may nevertheless be warranted if it

companies established in Hungary which fail to comply

is justified by overriding reasons of public interest and,

with a similar obligation, and are disproportionate to

provided that that is the case, its application is suitable for

the seriousness of the infringement committed, thereby

securing the attainment of the objective which it pursues

constituting a restriction on the freedom to provide

and does not go beyond what is necessary in order to

services in the EU.

attain it. In the present case, the Hungarian Government invoked the need to preserve the integrity of its tax

The CJ started by observing that under the law on the

regime, essentially relying on grounds based on ensuring

taxation of advertisements, a person liable to the tax on

the effectiveness of fiscal supervision and the effective

advertisements who is not registered with the tax authority

collection of tax.

as a taxpayer for the purposes of some form of tax must register with the tax authority by submitting the relevant

In that regard, the Court has previously accepted that the

form within 15 days of commencing the taxable activity.

need to ensure the effectiveness of fiscal supervision and


EU Tax Alert 15

the effective collection of tax may constitute overriding

VAT rate should apply. Segler proceeded to appeal to the

reasons in the public interest capable of justifying a

‘Bundesfinanzhof’ (Federal Finance Court of Germany),

restriction on the freedom to provide services. It has also

arguing that the taxation on the letting of boat moorings at

held that the imposition of penalties, including criminal

the standard VAT rate infringes upon the general principle

penalties, may be considered to be necessary in order to

of equality since the provision of places on camping or

ensure compliance with national rules, subject, however,

caravan sites is subject to the reduced VAT rate. In this

to the condition that the nature and amount of the penalty

context, the Bundesfinanzhof decided to refer to the CJ for

imposed is, in each individual case, proportionate to the

a preliminary ruling on the question whether the reduced

gravity of the infringement which it is designed to penalise.

VAT rate for the letting of places on camping or caravan

The CJ observed that that legislation introduces a system

sites of Article 98(2) VAT Directive, read in conjunction with

of penalties under which a supplier who has not complied

point 2 of Annex III, should also cover the letting of boat

with that administrative formality may, within a few days,

moorings.

at intervals of only one day apart, be fined, from the second day, in amounts which are tripled in relation to

The CJ began by considering that the aforementioned

the amount of the previous fine without the competent

Annex III to the Directive sets out an exhaustive list of

authority giving the supplier the time necessary to comply

supplies and services to which reduced rates may be

with its obligations or the opportunity to submit its

applied. Also, the CJ pointed out that provisions which

observations, or having itself examined the seriousness of

are in nature exceptions to a principle (reduced rate

the infringement. In those circumstances, such legislation

instead of the standard rate) must be interpreted strictly.

is disproportionate. The CJ further added that a fine is no

Based on the case Baštová (C 432/15), a concept such

less disproportionate merely because the authorities of

as ‘accommodation’ should be interpreted strictly and the

a Member State may, at their sole discretion, reduce its

scope of that provision should not be extended to services

amount.

which are neither included in its wording nor intrinsically linked to that concept. Along these lines, the CJ ruled

CJ rules on VAT deduced rate for letting of places on camping or caravan sites (Segler)

that the letting of boat moorings is (i) not included in the wording, and (ii) not intrinsically linked to the concept of ‘accommodation’ as its primary purpose is to enable

On 19 December 2019, the CJ delivered its judgment in

boats to be immobile and secured. Thus, the letting of

the case Segler-Vereinigung Cuxhaven eV (C-715/18).

boat moorings is not covered under the reduced VAT

Segler-Vereinigung Cuxhaven eV (‘Segler’) is a German

rate for the letting of places on camping or caravan sites.

VAT registered non-profit association aiming to promote

Lastly, the CJ rules that this interpretation of the provision

the sport of sailing and motorised water sports. Amongst

at issue does not undermine the principle of fiscal neutrality

the activities of Segler is the provision of boat moorings

as the services for the letting of places on camping or

to guests of their harbour. During the years at issue

caravan sites, on the one hand, and services for the letting

(2010 through 2012), Segler applied the reduced VAT rate

of boat moorings, on the other, perform different functions

for the letting of places on camping or caravan sites on

and are thus not in competition with each other.

the payments received for the provision of the moorings. Following an audit, the local Tax Office denied the application of the reduced VAT rate, instead applying the standard VAT rate.

CJ rules on the VAT treatment of land registry costs which concern a statutory obligation of the seller (Amărăşti Land Investment)

This dispute was brought before the ‘Niedersächsisches Finanzgericht’ (Finance Court of Lower Saxony), which

On 19 December 2019, the CJ delivered its judgment

dismissed Segler’s action and ruled that the short-term

in the case Amărăşti Land Investment (C-707/18).

provision of boat moorings cannot be classified under the

The Romanian entity Amărăşti Land Investment (hereafter

‘short-term letting of camping areas’ within the meaning

‘ALI’) aimed to carry out agricultural activities and

of the German VAT provisions. Moreover, it considers

purchased land to that end.

the provision of boat moorings to fall under the concept of the ‘letting of premises and sites for the parking of

The land was not registered in the Land Register and

vehicles’, which is excluded from the VAT exemption for

was purchased by means of a two-stage process. First a

the letting of immovable property. Thus, the standard

provisional purchase agreement had been signed between


16

the seller and ALI. Under this agreement ALI as buyer

June 2016, the Polish Tax Authorities declared the Polish

was obliged to register the plots in the land register,

purchaser a ‘missing trader’ as it could not be contacted.

while this registration is a legal obligation for the seller. This registration is required to transfer the land in a legally

This dispute was brought before the Supreme

valid manner. After the required registration the seller and

Administrative Court, which took note of the fact that

ALI concluded the second stage and had signed a final

AGROBET also had other transactions which were not

purchase agreement in order to transfer the land.

problematic. Furthermore, according to AG Kokott, it ‘seems uncertain’ in the present case whether AGROBET

The registry costs were not charged by ALI to the seller.

should have suspected its purchaser’s fraudulent nature.

Furthermore, in the provisional purchase agreement parties

In light of these circumstances, the AG was requested to

agreed that the purchase price would not include the

give her opinion on the preliminary question whether it is

consideration for registration in the Land Register.

consistent with EU law, and in particular, the principle of neutrality, for a Member State to make the assessment

In the view of the Romanian tax authorities, ALI had

and payment of part of a VAT deduction (the undisputed

provided a VAT taxed service to the seller by taking on the

part) claimed conditional on the completion of a procedure

registration in the Land register. Hence, after the purchase

applying to all taxable transactions in a given tax period.

of the land the tax authorities had issued an additional VAT

Particularly when taking into consideration that it is

assessment to ALI.

clear that a large part of the declared tax liabilities and deductions is legitimate.

In the procedure that followed, the Romanian court eventually turned to the CJ for a preliminary ruling. The CJ

The Tax Authorities primarily based their view that

considered that a buyer who has carried out the necessary

deduction for a given period can only be granted as an

steps for the first registration of the land in order to comply

indivisible whole on Article 179 of the VAT Directive. In

with a statutory obligation of the seller, those steps must

this regard, AG Kokott considered that Article 179, VAT

be deemed to have been carried out on behalf of the seller.

Directive only regulates the method of calculation by a

According to the judgment of the CJ, this follows from the

taxable person, i.e. making the deduction from the total

consideration that ALI had provided a service to the seller.

amount. However, the substantive right of deduction

That the registry costs were not included in the purchase

and the time that right arises follow from Article 167 and

price of the land does not change this judgment.

168 VAT Directive. The AG added to this that Article 168 explicitly stipulates that the taxable person may deduct

AG opines on the right to VAT deduction (AGROBET CZ)

VAT due in respect of supplies to him of goods or services carried out by another taxable person. Thus, the right of deduction is to be understood not in relation to the total

On 19 December 2019, Advocate-General Kokott issued

amount, but in relation to a transaction.

her Opinion in the case AGROBET CZ (C-446/18). AGROBET CZ s.r.o. (‘AGROBET’) is a Czech company

Furthermore, although Article 183 VAT Directive provides

active in the import and export of agricultural products and

Member States with the choice to either refund excess VAT

feed in particular. In February 2016, AGROBET reported

or carry it forward to the following period, it is settled case

excess VAT in its VAT return. Included in the amounts to

law that the right to deduct is a fundamental of the EU VAT

be deducted was VAT relating to the purchase of rapeseed

system. As a general rule, it may not be limited. Moreover,

oil which AGROBET had sold to a Polish company free of

in particular, the right is exercisable immediately in respect

tax as it concerned an intracommunity supply of goods.

of all VAT charged on input transactions. Finally, no appeal

The Tax Authorities initiated an investigation because

to Article 273 VAT Directive is possible, which provides

they had doubts about the transactions concerning the

Member States the possibility to impose additional

rapeseed oil. Subsequently, the Tax Authorities decided

obligations to ensure the correct collection of VAT and

to defer the refund of the calculated excess VAT (both

prevent tax evasion, given that the part of the excess VAT

disputed and undisputed). AGROBET requested to

at issue is not related to tax evasion. AG Kokott thus came

receive the non-disputed part of the VAT refund. That was

to the conclusion that a Member State does not have

denied by the authorities as the deduction was indivisible

the right to limit in time the total amount of excess VAT if

and related to the tax period as a whole. Shortly after, in

only a part of it is disputed. The AG did acknowledge that the Tax Authorities require a reasonable period of time to


EU Tax Alert 17

investigate in case they have doubt over an amount of tax

Second, Stanleyparma, which is required to pay that

declared. With that said, however, in the present case,

tax, would be treated in the same way as those licence

excess VAT which is undisputed and requires no further

holders, whose activity, however, is different. According to

inspection, must be paid promptly. This follows from the

the referring court, there is no justification for the possible

principle of neutrality, the function of the taxable trader

restriction on the freedom to provide services, since

as a mere tax collector for the State and the fundamental

the national legislation at issue in the main proceedings

rights of the taxable person. In addition, effective fraud

pursues a purely economic objective.

prevention does not, in the present case, justify a deferral of the refund of the undisputed part of the excess VAT for

The CJ started by observing that, in order to determine

an unlimited period of time.

whether there is discrimination, it is necessary to verify that

Customs Duties, Excises and other Indirect Taxes

comparable situations are not treated differently and that different situations are not treated in the same way unless such treatment is objectively justified. Having regard to the information provided by the referring court, it appears that

CJ rules that Italian tax on betting is not in breach of EU Law (Stanleyparma)

the single tax applies to all operators who manage bets collected on Italian territory, without making a distinction on the basis of the place of establishment of those operators,

On 20 February 2020, the CJ delivered its judgment

such that the imposition of that tax on Stanleybet

in case Stanleyparma Sas di Cantarelli Pietro & C.,

Malta cannot be regarded as discriminatory. It must be

Stanleybet Malta Ltd v Agenzia delle Dogane e dei

observed that the national legislation at issue in the main

Monopoli UM Emilia Romagna — SOT Parma (C-788/18).

proceedings does not lay down a tax regime that differs

The case deals with the obligation to pay, in Italy, a single

according to whether the provision of services is executed

tax on betting (‘the single tax’) imposed, principally, on

in Italy or in other Member States. Furthermore, as

Data transmission centres (‘DTCs’), such as Stanleyparma,

regards Stanleybet Malta’s allegation that, under the Italian

and also, secondly, on Stanleybet Malta, as jointly and

legislation at issue in the main proceedings, it is subject to

severally liable.

a double taxation, in Malta and in Italy, it must be recalled that, in the current stage of the development of EU law,

Stanleybet Malta operates in Italy in the collection of bets,

the Member States enjoy a certain autonomy in the area

through ‘DTCs’ such as Stanleyparma, on the contractual

of taxation provided they comply with EU law, and are

basis of a mandate. DTCs, which are situated in locations

not obliged therefore to adapt their own tax systems

open to the public, place a computer link at the disposal

to the different systems of tax of the other Member

of gamblers and transmit the data relating to each bet to

States in order, inter alia, to eliminate the double taxation

their client. Stanleybet Malta, which has been active in

resulting from the parallel exercise by those States of their

Italy for about twenty years, does not hold a licence or

competences in respect of taxation .

an authorization. Therefore, the Court concluded that that Stanleybet Malta By a tax adjustment decision of 21 September 2016, the

does not suffer, in comparison with a national operator

ADM sent to Stanleyparma and, secondly, to Stanleybet

carrying out its activities under the same conditions as

Malta, as jointly and severally liable, a tax recovery notice.

that company, any discriminatory restriction owing to the

Stanleyparma and Stanleybet Malta brought an application

application to it of national legislation, such as that at issue

before the referring court, seeking the annulment of

in the main proceedings. Similarly, the CJ ruled that the

that decision, in which they submitted that the national

Italian legislation does not appear liable to prohibit, impede

legislation at issue in the main proceedings established,

or render less advantageous the activities of a company

in their regard, a restriction on the freedom to provide

such as Stanleybet Malta in Italy.

services. That court considered that, the fact that DTCs are liable for the single tax is an unlawful restriction on the freedom to provide services, within the meaning of the freedom to provide services, from two perspectives. First, it is not laid down that DTCs that operate on behalf of national licence-holders are liable for that tax, even though their activity is comparable to that of Stanleyparma.


EU Tax Alert 18

About Loyens & Loeff

Editorial board

Loyens & Loeff N.V. is the first firm where attorneys at law,

For contact, mail: eutaxalert@loyensloeff.com:

tax advisers and civil-law notaries collaborate on a large scale to offer integrated professional legal services in the

- Thies Sanders (Loyens & Loeff Amsterdam)

Netherlands, Belgium, Luxembourg and Switzerland.

- Dennis Weber (Loyens & Loeff Amsterdam; University of Amsterdam)

Loyens & Loeff is an independent provider of corporate legal services. Our close cooperation with prominent international law and tax law firms makes Loyens & Loeff

Editors

the logical choice for large and medium-size companies operating domestically or internationally.

- Patricia van Zwet - Bruno da Silva

loyensloeff.com

Correspondents - Gerard Blokland (Loyens & Loeff Amsterdam) - Raymond Luja (Loyens & Loeff Amsterdam; Maastricht University) - Bruno da Silva (Loyens & Loeff Amsterdam; University of Amsterdam) - Patrick Vettenburg (Loyens & Loeff Rotterdam) - Genevieve Vonken (Loyens & Loeff Amsterdam) - Thomas Warnaar (Loyens & Loeff Rotterdam) - Ruben van der Wilt (Loyens & Loeff Amsterdam)

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. To subscribe (free of charge) see: www.eutaxalert.com

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended for general informational purposes and can not be considered as advice.


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As a leading firm, Loyens & Loeff is the logical choice as a legal and tax partner if you do business in or from the Netherlands, Belgium, Luxembourg or Switzerland, our home markets. You can count on personal advice from any of our 900 advisers based in one of our offices in the Benelux and Switzerland or in key financial centres around the world. Thanks to our full-service practice, specific sector experience and thorough understanding of the market, our advisers comprehend exactly what you need. Amsterdam, Brussels, Hong Kong, London, Luxembourg, New York, Paris, Rotterdam, Singapore, Tokyo, Zurich

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EU Tax Alert - March 2020  

EU Tax Alert - March 2020