Recent VAT Decisions

The Court of Justice of the European Union (CJEU) has recently published two decisions related to VAT:

In Case C-592/15 (British Film Institute), published February 15, 2017, the CJEU held that Member States have discretion to determine the scope of an exemption for “certain cultural services and goods closely linked thereto supplied by bodies governed by public law [or other recognized cultural bodies],” pursuant to Article 132(n) of Council Directive 2006/112/EC (“the EU VAT Directive.”)

The British Film Institute (BFI) had relied on this provision to apply for a VAT exemption on admission to its film showings. The UK tax authorities, however, denied the exemption for a period from 1990-1996, when Article 132(n) had not yet been transposed into national law.

The CJEU sided with the tax authorities, stating that in the absence of such transposition, the phrase “certain cultural services” did not have direct effect and could not be relied upon by BFI for its exemption claim.

In Case C-21/16 (Euro Tyre BV), the CJEU held that the Portuguese government could not refuse an exemption for an intra-Community supply of goods on the sole grounds that the customer, while possessing a valid Spanish VAT identification number, did not have a status of intra-Community operator and was not registered in the VAT Information Exchange System (“VIES”). The court wrote that absence any evidence of fraud, the receipt of a VAT ID number fulfilled the material conditions for an intra-Community supply.

ECOFIN Debates Generalized Reverse Charge Derogation

In its meeting of January 27, 2017, the Economic and Financial Affairs Council (ECOFIN) held an exchange of views on a proposal to institute an optional, generalized reverse charge in European Union Member States for all domestic supplies above a specified threshold. The Council noted that this would be a “short-term solution whilst a new VAT system is being prepared” under the April 2016 European Commission VAT Action Plan.
The Council also noted that that the proposed reverse charge directive would require unanimous approval in order to be adopted. As previously reported, the reverse charge directive has been promoted by countries heavily affected by VAT fraud, such as the Czech Republic and Austria.

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