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Recent Irish and Court of Justice of the European Union Cases 

Ireland – Appeal Commissioners’ Cases

24TACD2019 – Name Redacted v Revenue Commissioners - July 2019

In this case the taxpayer operated as a self-employed bread distribution agent for a large commercial bakery. Revenue issued a notice of assessment to the taxpayer for VAT underpaid of €55,378.

Revenue submitted that the taxpayer was an accountable person in respect of the commissions earned from his bread distribution business and that he had failed to charge VAT on commission sales. In addition, Revenue also submitted that the taxpayer was not in compliance with his obligations to issue VAT invoices.

The taxpayer contended that sales invoices in the bread delivery business were produced by the bakery as the bakery had access to the sales system which calculated the commissions due. However, the taxpayer did not contest that he was an accountable person in respect of the commissions earned. The taxpayer filed VAT returns and claimed input credits on VAT costs incurred however, he failed to account for output VAT on his supplies. The taxpayer contended that the failure to return VAT on commissions was an unintended error on his part. He sought to avail of the ‘no loss to Revenue’ concession contained in the Revenue Code of Practice for Revenue Audit and Compliance Interventions.

Following submissions by Revenue and the taxpayer, the commissioner ruled that a taxable person who is an accountable person and who engages in VATable supplies is liable to charge and return VAT in respect of those supplies. The accountable person must also ensure compliance with VAT invoicing obligations and the retention of books and records. Therefore as the taxable person who made the VATable supplies, the taxpayer in this case was the accountable person and liable to charge and return VAT in respect of each supply.

Regarding the applicability of the “no loss to Revenue” concession, Revenue submitted that the conditions for the concession, had not been met. The commissioner stated that the concession is not a matter over which the Tax Appeals Commission may exercise jurisdiction and therefore was not relevant to the determination of this appeal. The taxpayers appeal was dismissed.

Europe – CJEU cases

C-133/18 - Sea Chefs Cruise Services GmbH v Ministre de l'Action et des Comptes publics - 2 May 2019

Sea Chefs, a German company, submitted an electronic VAT refund (EVR) claim for €40,054 of French VAT it had incurred. This claim was rejected by the French tax authorities on the basis that Sea Chefs’ had failed to respond to a request for subsequent information within one month of that request being made.

The Court ruled that the one month period was not a strict time limit and did not preclude the taxpayer from seeking to regularise the claim before the national court by providing the necessary supporting documentation.

C‑265/18- Valstybinė mokesčių inspekcija prie Lietuvos Respublikos finansų ministerijos V Akvilė Jarmuškienė – 2 May 2019

In this case Akvile Jarmuskiene bought farmland in 2011 and constructed a house and two tourism buildings thereon. In December 2012, the house and a portion of the land was sold for a price exceeding the VAT registration threshold in Lithuania. Akvile argued that VAT should only be accounted for on the portion of the sale which resulted in the registration threshold being exceeded. The court however rejected this argument stating that as both the sale of the house and a portion of the land were to the same buyer under a single contract, it would be artificial to split the two interests for VAT purposes despite the fact that the contract for sale referred to the house separately from the land. Therefore, the court concluded that VAT should be accounted for on the entire value of the property being supplied.

C-568/17 - Staatssecretaris van Financiën v L.W. Geelen - 8 May 2019

The general place of supply rule for services B2C is the place where the supplier is established.
In this case the CJEU ruled that the provision of adult webcam sessions to Dutch customers fell under the place of supply rules for entertainment activities, which as an exception to the general rules is the place where the service actually takes place.

Applying this rule, the court held that live interactive erotic webcam sessions organised by Mr Geelen for customers in the Netherlands were performed not by the models based in the Philippines, but by Mr Geelen, who employed the models, provided the computer equipment, and engaged with internet service providers, all of which were components of the service supplied. On this basis, the Court ruled that the supply took place in the Netherlands.

The court failed to address a supplementary question referred to it in relation to the rules on electronically supplied services; specifically whether the human involvement meant that the service should not be treated as an electronically supplied service.

C-566/17 - Związek Gmin Zagłębia Miedziowego w Polkowicach v Szef Krajowej Administracji Skarbowej - 8 May 2019

ZGZM was an entity set up by several Polish local authorities to carry out municipal waste management services, a non-business activity for VAT purposes but it also supplied some commercial waste management services, which were taxable economic activities.

Having doubts as to its right to deduct VAT on expenditure which was not exclusively attributable to either its economic or non-economic activity, it sought a ruling from the tax authority in relation to the tax deductible. The tax authority ruled that ZGZM must apportion the input VAT incurred between the respective activities. ZGZM sought an annulment of the ruling on the basis that at the time of transactions in question Polish legislation did not have any express rules governing how VAT on mixed expenditure must be apportioned. Additionally, the Supreme Administrative Court of Poland held in a judgment of 2011 that, in the absence of such criteria in national law, a taxable person was entitled to deduct VAT in full.

The CJEU ruled that while the determination of the methods and criteria for apportioning input VAT is at the Member States discretion, the fact that Poland had not set out such methods/criteria did not automatically lead to full VAT recovery. Therefore, despite the absence of express national rules, ZGZM was not entitled to full VAT recovery on costs attributable partly to its municipal waste management.

C-420/18 - IO v Inspecteur van de rijksbelastingdienst - 13 June 2019

In this case, the court has ruled that the income of an individual, acting as a member of a supervisory board for a Dutch housing association, even though the arrangement was not considered to be a contract of employment, was not subject to VAT.

The CJEU concluded that while IO’s services constituted an economic activity for VAT purposes, it was not an “independent” activity in this case as he was not exposed to economic risk on the basis that he was paid a fixed annual fee for representing the foundation regardless of the hours worked.

C-291/18 - Grup Servicii Petroliere SA v Agenţia Naţională de Administrare Fiscală – Direcţia Generală de Soluţionare a Contestaţiilor and Agenţia Naţională de Administrare Fiscală - Direcţia Generală de Administrare a Marilor Contribuabili - 20 June 2019

In this case the court held that Romanian VAT should have been charged by GSP on the sale and leaseback of three “jackup” drilling rigs in the Black Sea. These drilling rigs were not exempt as “commercial vessels used for navigation on the high seas” as they were not vessels used for navigation. The court considered that the exemption in the Directive was intended to facilitate international transport, while these rigs were only fulfilling their function once they were fixed in place and drilling for oil.

C-1/18 - SIA 'Oribalt Rīga v Valsts ieņēmumu dienests - 20 June 2019

In this case, Oribalt Riga imported medicines for Randaxy Laboratories in India, who retained ownership until the goods were sold to customers in Latvia, sometimes several months later.

In the absence of a transaction value at the time of import, an alternative valuation method had to be used for customs duty. The court held that it should be possible to identify “like goods” which could be used for valuation purposes, by examining their composition, substitutability of their effects, commercial interchangeability and any other factors affecting their economic value (e.g. market position). As the method is an approximation, discounts granted to customers after the sale cannot be used to adjust the import value.

C-597/17 - Belgisch Syndicaat van Chiropraxie and Others v Ministerraad - 27 June 2019

In Belgium, osteopathy does not qualify for VAT exemption as it is not a regulated medical profession. In this case the CJEU ruled that to determine whether a particular medical profession qualifies for exemption the training and education received by practitioners should be considered and not merely the fact that a profession is regulated. Therefore, if it could be shown that osteopathy provides personal care of a consistently high standard, the court considered it should also qualify for exemption.

In the case the CJEU also considered whether drugs supplied to plastic surgeons should qualify for the reduced rate and whether Belgium had breached the principle of fiscal neutrality in not applying the reduced rate to such drugs. The CJEU held that, from the average consumer’s perspective, cosmetic treatments were clearly distinct from therapeutic medical procedures. On this basis the CJEU considered that drugs supplied to plastic surgeons do not qualify for the reduced rate and consequently Belgium had not breached the principle of fiscal neutrality in limiting the application of the reduced rate in these circumstances.

C-316/18 - Commissioners for Her Majesty's Revenue and Customs v The Chancellor, Masters and Scholars of the University of Cambridge - 3 July 2019

In this case, the CJEU concluded that Cambridge University could not recover any input tax on charges for the management of its £1bn endowment fund as these costs were not attributable to the general activities of the University.
The court noted that collecting donations and endowments for the fund and the management of the fund were not economic activities for VAT purposes.

The CJEU ruled that because these costs generated funds which were used to subsidise the University’s services (by reducing the price thereof) rather than generating additional turnover they could not be considered to be a “cost component” of those services and there was no direct and immediate link between those investment management costs and the activities of the University as a whole.

C-242/18 - 'UniCredit Leasing' EAD v Direktor na Direktsia 'Obzhalvane i danachno-osiguritelna praktika' – Sofia pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (NAP) - 3 July 2019

Unicredit Leasing agreed to buy land and develop a building in Bulgaria for Vizatel. On completion, Vizatel would pay rent of €110,000 over an 11-year period, followed by an option payment to buy the property. VAT was accounted for in full upfront at the start of the lease.

After a few years, Vizatel defaulted on the rent payments, and eventually Unicredit exercised its right to terminate the lease. Upon termination of the lease, Unicredit became entitled to the net present value of the remaining rental payments as compensation.

The court, applying its recent MEO (C-295/17) judgement, ruled that the receipt of compensation would be consideration for Unicredit’s supply. Therefore, Unicredit was not entitled to adjust the VAT originally accounted for on the supply, but rather had to apply for bad debt relief should Vizatel be unable pay the compensation.

While Bulgaria had not formally implemented a bad debt relief scheme, the court considered that some form of relief should be permitted where no payment had been made for almost 10 years and it was highly improbable that Unicredit would actually receive additional amounts.

C-273/18 - SIA „Kuršu zeme' v Valsts ieņēmumu dienests - 10 July 2019

Kursu Zeme bought goods from UAB Baltfisher in Lithuania via a series of Latvian companies and received VAT invoices from KF Prema (the final intermediary in the chain). In the opinion of the Latvian tax authority, Kursu Zeme’s supply chain was suspiciously long and unnecessarily complicated.

The authorities considered that as the intermediaries didn’t actually do anything given that Kursu Zeme itself collected the goods in Lithuania that the supply should be treated as an intra-community supply by Baltfisher directly to Kursu Zeme and no Latvian VAT should have been charged, or be recoverable by Kursu Zeme, on KF Prema's invoices.

The referring court stated that the supply chain was “not necessarily” the result of any fraud and in that regard the CJEU concluded that the Latvian authorities had failed to demonstrate that any abuse of law had taken place and as such the authority was not entitled to redefine the supply chain. Kursu Zeme should therefore be entitled to recover input tax paid.

Even though no fraud had been found to have occurred in this case, the existence of multiple parties with little involvement in a supply chain can increase the risk for missing trader VAT fraud and will likely be an indicator analysed by tax authorities in the future.

C-249/18 - Staatssecretaris van Financiën v CEVA Freight Holland BV - 10 July 2019

When it imported media players at a duty rate of 0%, CEVA Freight used the price at which the players would be sold on within the EU in its declarations. The Dutch customs authorities challenged the 0% duty rate declared and it was eventually agreed that duty was due at 13.9%.

The CJEU held in this case that, under the Community Customs Code in force at the time, CEVA should be able to revisit the declaration value and request that the lower price charged by the Asian manufacturer be used instead.

An adjustment under the Community Customs Code can be requested where the customs declaration was inaccurate or incomplete. While there was nothing wrong with the value used by CEVA in this case, the application of the 0% rate counted as an inaccuracy. Without this inaccuracy, CEVA would have taken care to use the lower (equally justifiable) value. Therefore, the CJEU ruled that the Dutch customs authorities should consider allowing the lower value to be used.

C-304/18 - European Commission v Italian Republic - 11 July 2019

Italian authorities seized a number of empty shipping containers in 1997 which smelled of tobacco. It was estimated that 114 tonnes of tobacco had been smuggled into the Italy and in 2003 the authorities secured the conviction of one of the people involved in the smuggling operation.

Subsequent to this conviction the Italian authorities commenced recovery proceedings against that individual for just over €2m of customs duty that was correctly owed on the import of the tobacco. However, as too much time had passed from the point the duty was owed to the point recovery proceedings commenced, none of the duty was recovered.

The Community Customs Code states that Member States have a duty to account for customs duty to the EU as soon as the amount is calculated and a debtor is identified. In addition, the Community Customs Code does not allow authorities to wait until the end of the criminal proceedings before seeking to recover the amounts owed. As a result while it could not recover the debt from the convicted individual, Italy still had to pay the €2.1m, together with interest, to the Commission.

C-91/18 - EC v Greece – 11 July 2019

The CJEU in this case ruled that by applying an excise duty to two traditional Greek spirits, tsipouro and tsikoudia, at a rate that was half that had been levied on similar imported products, Greece had indirectly protected the goods against competition from similar imported products.

C-388/18 - Finanzamt A v B - 29 July 2019

In this case Mr B sold second-hand cars, an activity that fell under the remit of the VAT margin scheme. In 2009 and 2010, Mr B’s total margin on the sale of second-hand cars was just below the German VAT registration threshold. However, the CJEU ruled that when determining if the VAT registration threshold has been breached that account should be taken of the total amount received and not just the margin on which VAT would be levied.

As the VAT registration thresholds were introduced prior to the margin scheme, it appears improper to use the margin scheme to define whether or not Mr B should register for VAT. Therefore, turnover should be defined as all amounts to be collected by the dealer in the context of determining whether the registration threshold has been breached. 

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