Do grants and subsidies from a third party form part of the VAT base? The ECJ answered this question in the affirmative in the proceedings C-573/18 and C-574/18. The case concerned the financing of capital goods via an operational fund. The decision shows the means by which the tax authorities attempt to make subsidies or grants de facto subject to taxation.
In May 2019, the ECJ ruling in Vega on fuel card transactions was issued, following on from the earlier ECJ decision in Auto Lease Holland. The fuel card sector previously considered the two judgments to be of little relevance, given that they concerned individual cases. However, Austria is now proving that these decisions have the potential for significant impact. The current draft of the Austrian VAT Guidelines update strikes at the core business of fuel card companies: chain transactions will no longer be possible. Fuel will be regarded as being supplied directly from the petrol station operator to the cardholder. Fuel card issuers will be considered to provide a supply of services, possibly even VAT-exempt credit services. This will also apply to toll transactions. All companies involved in the fuel card business will be affected, possibly from as early as November 2019.
On 10.10.2019 the European Commission decided to initiate formal infringement proceedings against Germany in relation to its new legislation on the liability of online marketplaces. This is based on the new regulations in secs 22f and 25e of the German VAT Act on the liability for online marketplaces which came into force on 1 January 2019. The Commission has requested that Germany act within the next two months, i.e. withdraw the new regulations in secs 22f and 25e of the German VAT Act affecting EU online merchants.
Banks outsource some of their tasks to external service providers. Due to the (at least partial) VAT exemption of their output supplies, it is particularly important for banks that their service providers provide their supplies to the bank VAT-exempt. In the legal case Cardpoint (C-42/18), the ECJ ruled on such an outsourcing case. However, the ECJ assumed that the outsourced supply of service (operation of ATMs) was subject to VAT. Due to the ECJ's strongly case-by-case argumentation, it is not possible to draw too many conclusions for other supplies of services to banks.
In our last newsletter, we reported on the developments regarding the Quick Fixes 2020 and dealt with call-off stocks and proof of transport. In the current newsletter we take a look at the impact on chain transactions and the indication of the VAT-ID for the VAT exemption of intra-Community supplies.
The practical implementation of the Quick Fixes 2020 is currently the number 1 VAT topic for most companies and their tax advisors. The fact that a draft of the German law already exists for this is certainly beneficial. However, there are a number of detailed questions that make implementation difficult. It is therefore helpful that the EU has published draft Explanatory Notes following discussions in the VAT Expert Group and the Group on the future of VAT. These are not binding. However, it is to be hoped, that the Member States and their tax administrations will follow these guidelines.
In this context, we would also like to draw your attention to our series of seminars on quick fixes, in which we address the various issues in detail. There are still places available for Frankfurt and Hamburg.
PORTUGAL postpones requirement of certified invoicing software +++ LITHUANIA implements Reverse Charge for mobile phones +++ NORWAY implements SAF-T +++ UK postpones Reverse Charge for construction services +++ POLAND publishes White List of taxable persons and postpones replacement of VAT return by SAF-T +++ CROATIA reduces VAT rate for hospitality and standard VAT rate +++ JAPAN reduces standard VAT rate +++ SAUDI-ARABIA waives obligation of fiscal representative for non-residents +++ CZECH REPUBLIC plans implementation of a general Reverse Charge
The Federal Ministry of Finance has suggested changing the German VAT regulations as regards VAT groups (Federal Ministry of Finance, key issue paper of 14 March 2019). One significant proposed innovation is that the legal consequences of group taxation will only occur after the group members have submitted a joint application. By means of these and other innovations, there is finally the prospect of more legal certainty for the taxpayers concerned. It is therefore to be hoped that the German legislator will soon implement the Federal Ministry of Finance’s proposal.
The ECJ’s decision in baumgarten sports & more GmbH (see KMLZ VAT Newsletter 52/2018) served to provide the German Federal Fiscal Court with guidelines on the incurrence of VAT in payment by instalment transactions. The case concerned a professional football player agency. Nevertheless, the decision impacts on almost all businesses where payments by instalment agreements play a role. With the now published decision, the German Federal Fiscal Court follows the requirements set up by the ECJ. For taxable persons, recommendations for action concerning national practice can be drawn from this decision.
In a decision subsequent to the ECJ decision A & G Fahrschul-Akademie (C-449/17), the Federal Fiscal Court ruled that driving lessons are not exempt from VAT (Az: V R 7/19). In so doing, the Court confirmed, for the very first time, its acceptance of the narrower definition of “tuition”. Although the decision itself is not surprising, the restricted interpretation will have far-reaching consequences for those educational services which have, “traditionally”, been exempt from VAT. The judgement corresponds to the legal reorganization of educational services planned for 01.01.2021 and is thus important for all suppliers.
