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Umsatzsteuer Newsletter 31/2020
ECJ: Payments on premature termination of contracts are subject to VAT
In practice, the distinction between payment for damages and remuneration for a supply plays a recurring role. The ECJ recently ruled on this question in the case of Vodafone Portugal. In this ruling, the ECJ found that amounts paid by customers to their contractual partners in the event of premature termination of a contract, are subject to VAT. This ruling is significant for all companies which conclude contracts with a predetermined minimum period. However, as the German VAT Circular has, so far, taken a different view, the decision is likely to only have implications for the future.
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Umsatzsteuer Newsletter 30/2020
ECJ creates further uncertainty about the definition of “immovable property”
Does a server cabinet constitute part of a computer hosting centre building? The current decision of the ECJ of 02.07.2020 on this issue in the case A Oy (C-215/19) was eagerly awaited. This is because the facts of the case can be readily transferred to everyday business life in the plant and mechanical engineering sector. There, one is constantly exposed to the question of the possible connection of transactions to immovable property. Moreover, the ultimate answer to this question should be the same in all Member States. In practice, however, uniform application of the standards on the concept of immovable property within the European Union is still a long way off.
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Umsatzsteuer Newsletter 29/2020
ECJ: Transportation arrangement is not only based on contractual agreements
In the ECJ ruling of 18 June 2020 in the case KrakVet (C-276/18), the primary issue was whether a company can engage in "VAT rate shopping" by structuring its transport arrangement in a particular way. KrakVet’s goal for its distance sales to Hungary was only to pay 8% Polish VAT, rather than 27% Hungarian VAT. The specific question was whether, according to the chosen arrangement, the goods were dispatched or transported "by the supplier (KrakVet) or on its behalf" and thus whether Art. 33 of the VAT Directive was applicable. Similar wording is also found in Article 36a VAT Directive that stipulates to which supply the transport shall be ascribed to in chain transactions. One must therefore ask oneself what significance the ECJ's statements on transport arrangements have beyond the distance sales.
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