The minister of finance announced VAT remission on free delivery of selected protective and medical equipment. The Court of Justice of the EU issued a judgment in a case involving the payment of VAT on a free supply of goods. It also ruled on the application of a reduced VAT rate on products without nutritional value. Read more in the October VAT News.
Based on the decision of the minister of finance, VAT will be remitted on free delivery of selected protective and medical equipment related to the fight against the coronavirus pandemic or on the free delivery of goods or services to selected entities (health facilities, rescue services etc.). This will apply to VAT payers with an obligation to declare VAT arising between October and December 2020.
In its judgment, the Court of Justice of the EU commented on the possibility to claim VAT in case the VAT payer manufactures goods for its own economic purposes but provides these goods for free to a third party after the goods have been manufactured. Together with the VAT payer, the third party uses the goods or lets other parties use them. According to CJEU, the manufacturer of the goods is entitled to deduct VAT and is not obliged to pay output VAT when the goods have been provided for free. We find this CJEU judgment crucial, as it has the potential to change the practical approach to the supply of goods free of charge.
The CJEU judgment in the C-331/19 case is likely to change the practice of delivery of goods which are intended for human consumption or which can reasonably be expected to be consumed by humans (food and food supplements). Therefore, a reduced VAT rate cannot be applied to products that do not contain building, energy or regulatory nutrients and thus do not have a nutritional function.
In his analysis, the Advocate General dealt with the operation of a commission structure from a VAT legislation perspective. What is interesting about his opinion is that he does not find it possible for the commission agent to charge the committer for a separately calculated remuneration for their services. If CJEU approves this opinion, it could mean a substantial change in VAT application on commission structures.
The CJEU Advocate General signed a VAT regime for employees’ use of company cars for private purposes, regardless of whether this is a charged or free-of-charge provision. The Advocate General reasons that in principle, this situation constitutes a lease of goods with the place of performance at the employee’s residence. We do not expect this case to have large implications in practice.
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