The General Financial Directorate has made comments on the issue of correcting the tax base in respect of supplies made for debtors in bankruptcy, the Court of Justice of the EU addressed the rules of exempting services consisting of the provision of transfers of funds and the European Commission has prepared another of the series of proposals to change the functioning of intra-Community trade in goods. Read the VAT news.
Guidance Note of the General Financial Directorate
On its website, the General Financial Directorate (the “GDF”) has made comments on the issue of correcting the tax base in respect of supplies made for debtors in bankruptcy that is addressed in the form of reorganisation under the Insolvency Act. It has confirmed the opinion that if the creditor’s receivable has been reduced under the reorganisation plan, this represents a change in the tax base resulting in a correction under Section 42 of the VAT Act. In our view, the GFD’s Guidance Note is inaccurate and restrictive in certain aspects as it does not fully reflect the judicature of the Court of Justice of the EU.
Judicature of the CJEU
In Case C-5/17 DPAS, the Court of Justice of the EU (the “CJEU”) addressed the rules of exempting services consisting of the provision of transfers of funds. Pursuant to a direct debit mandate, DPAS issued an order to a financial institution to deduct a certain amount of funds from the applicant’s bank account. The CJEU held that the transaction constituted a taxable supply. It appears that, in practice, exemption is often incorrectly applied in similar situations, for example by card payment companies.
In Case C-414/17 Arex, the Advocate General of the CJEU comments on the rules of assigning transport in respect of an international chain trade in goods subject to excise duty. She univocally rejected the opinion of Arex, according to which transport should be assigned to the supply that is associated with excise duty suspension arrangements under the Excise Duty Directive. In addition, she also rejected the opinion of the Tax Administration according to which transport should be assigned to the commercial chain participant that physically transports the goods. According to the Advocate General, it is necessary to always review who holds the rights to handle goods similar to those of owners during transport.
In our view, this is the generally correct approach as stipulated by the EU’s VAT Directive; nevertheless, in its deliberation, the Advocate General eventually arrived at a conclusion that contradicts the Directive. It will be interesting to see whether the CJEU will adopt her deliberation or whether it will uphold the existing interpretation of the EU’s VAT Directive.
In Case C‑320/17 Marle Participations SARL, the CJEU specified how the position of holding companies should be treated from the VAT perspective and when they may claim tax deductions.
EU VAT Legislation
The European Commission has prepared another of the series of proposals to change the functioning of intra-Community trade in goods. Starting from 2020, member states will be obliged, among others, to transpose fairly detailed (and contradictory to the present wording of the Czech VAT Act) rules for applying the call-off stock simplification.
The article is part of dReport – September 2018, Tax news; Grants and investment Incentives.
Seminars, webcasts, business breakfasts and other events organized by Deloitte.
