VAT News in June
With regard to the changes in the conditions of cross-border trading with goods in the EU from January 2020, the European Commission has published material with a description of selected aspects of the new rules. The General Financial Directorate (GFD) is finishing its work on the methodological note concerning the VAT treatment of the issuance and distribution of vouchers. What is new at the Court of Justice of the European Union (CJEU)? This and much more is debated in detail in the VAT news for June.
Opinion of the European Commission on Changes Effective from 1 January 2020
With regard to the changes in the conditions of cross-border trading with goods in the EU from January 2020, the European Commission published material with a description of selected aspects of the new rules. The material focuses on the terms for using the call-off stock simplification (losses of goods, creating a fixed establishment for VAT purposes), allocating transport in intra-Community supplies (use of triangulation for multiple entities in a row, the role of a customer’s registration for VAT), or the question of determining persons that can produce evidence on such transportation. The European Commission seeks to provide a rather liberal interpretation of the highly-stringent criteria of European legislation; nevertheless, to which extent the unambiguous legislative text may be adapted to specific circumstances still remains unclear. In this context, we would like to note that the Ministry of Finance of the Czech Republic is preparing the respective amendment to the VAT Act with proposed effectiveness from January 2020; the external comment procedure is already terminated at present.
Information of the General Financial Directorate
The General Financial Directorate (the “GFD”) is already finishing its work on the methodological note concerning the VAT treatment of the issuance and distribution of vouchers. Some opinions included in this note are likely to be considered controversial (refunding cash when handling a complaint about goods paid with a voucher, obligation to return VAT deduction with regard to unused vouchers) while some other ones will be welcome in practice (reverse charge regime, non-taxation of the amounts paid with vouchers above the respective price etc.). Other comments of the stakeholders are still being incorporated.
As part of the debates at the level of the Coordination Committee, the General Financial Directorate took a negative stance regarding the operation of associations in which individual income and expenses (costs and revenues) are not distributed evenly among participants. Pursuant to the GFD, a mere distribution of income is insufficient for the elements of a contract on association to be met. This opinion could have far-reaching implications on the functioning of associations in the Czech Republic.
CJEU Case Law
In C-185/18 Oro Efectivo, the CJEU admitted that other sales taxes may also apply if they do not meet fundamental VAT elements (system of deductions, generality). The digital sales tax, the introduction of which is being considered by the Ministry of Finance, does not seem to contravene VAT legislation in any respect.
The opinion of the Advocate General as to case C-42/18 Cardpoint confirms that the VAT exemption for transactions concerning payments and transfers cannot be extended to include ATM operation services, even though they are of vital significance to cash withdrawals. It is, however, possible that in practice, some entities may exempt such service from VAT as they believe that they constitute the key element in money transfers. The ultimate decision in the matter will be taken by the CJEU. Nevertheless, considering the analysis performed by the Advocate General, a different conclusion is hardly to be expected.
The article is part of dReport – June 2019, Tax news; Grants and investment Incentives.