Recent Irish and Court of Justice of the European Union Cases

Indirect Tax Matters | March 2022

CJEU (Cases C-45 & 46/20): Finanzamt N & G – 14 October 2021

E designed his new house to include a home office and was therefore partly using the house for a business purpose (a mixed-use asset) and was entitled to some input tax recovery. However, he only notified the German tax authorities that he was adopting this treatment in his annual VAT declaration for 2015, which he submitted after the 31 May deadline for declaring the business use of mixed-use assets required by German law. In the CJEU’s judgment, the requirement for a declaration was a formal rather than a substantive requirement for VAT recovery, and E should be allowed to demonstrate his decision to use part of the house for business purposes. However, this right did not exist indefinitely, and Germany was allowed to impose time limits on E. The court was satisfied that the time limit in this case satisfied the principles of equivalence and effectiveness, although it was left to the national court to determine whether input tax denial was proportionate, or whether an administrative penalty would have been a more appropriate response to E’s tardiness.

CJEU (Case C-373/19): Dubrovin & Troger GbR – 21 October 2021

Following on from recent EU caselaw regarding the VAT treatment of driving tuition, the CJEU has now found in this case that swimming lessons for children cannot be exempt from VAT as “school and university education”, as outlined in Articles 132(1)(i) & (j) of the EU VAT Directive. In coming to its decision, the CJEU found that while swimming lessons for children is of “undoubted importance and in the general interest, it nevertheless constitutes specialised tuition provided occasionally which does not amount, in itself, to the transfer of knowledge and skills covering a wide and diversified set of subjects […] which is characteristic of school or university education”.

CJEU (Case C-80/20): Wilo Salmson France – 21 October 2021

This Romanian case involved the purchase of equipment in Romania by a French established entity in 2012. As local Romanian VAT was charged, the French entity sought to recover this VAT by way of an 8th Directive reclaim. The claim was rejected by the Romanian tax authorities in 2014, on the basis that the invoice provided did not fulfil the requirements of a valid VAT invoice. The supplier subsequently cancelled same and revised invoices were raised in 2015 for the same supply. The French entity then submitted a revised claim for the VAT paid, which was rejected once again by the tax authorities on the basis that the VAT had already been claimed.

The CJEU held that Member States cannot rule out the possibility of a VAT refund solely because the VAT became due in an earlier refund period, while a valid VAT invoice was issued at a later date. In other words, the cancellation and reissuance of invoices does not change the period for which VAT refund can be requested.

CJEU (Case C-324/20): X – 28 October 2021

In 2012, X supplied mediation services to T-GmbH to assist with the latter’s sale of a plot of land, where it was agreed that X would be paid €1m in total but spread across five even annual instalments. X proceeded on the basis that it should account for VAT on each instalment when it was paid. This position was challenged by the German tax authorities who contended that X should account for VAT on the full contract price of €1m at the time the services were provided to T-GmbH.

The CJEU held that accounting for VAT can be deferred if the services are performed continuously over a period of time, which is not the case here as the tax point is clear. Therefore, it was found that X should have accounted for VAT in full at the time of supply. Furthermore, the CJEU ruled that X was not entitled to bad debt relief to reduce its VAT liability as T had not defaulted on its payments.

CJEU (Case C-281/20): Ferimet – 11 November 2021
CJEU (Case C-154/20): Kemwater ProChemie – 9 December 2021

Over recent years the CJEU has distinguished between formal and material conditions for input tax recovery. It has also been prepared to forgive certain errors on supplier invoices. More recently, however (in both Ferimet and now in Kemwater Prochemie), the CJEU has emphasised the importance of correct evidence. The name of the supplier on an invoice may in theory be a formality, but the supplier’s status as a taxable person is critical to establishing that a supply is subject to VAT and that input tax actually exists.

Kemwater purchased advertising at a golf tournament from Viasat but was denied input tax recovery of €1,500 by the Czech tax authorities on the basis that it could not prove that the services were actually from Viasat (it did not help that its managing director had no knowledge of supplying Kemwater). The CJEU ruled that it was unnecessary for customers to check the taxable status of all their suppliers but the absence or incorrect name of a supplier on an invoice might make it impossible to determine that the supply had actually been made by a taxable person. In such cases, the CJEU has confirmed that input tax recovery could be denied.

Ferimet applied a domestic reverse charge to scrap metal purchases. However, the Spanish tax authorities found that Ferimet had falsified the name of the supplier on the invoices and accordingly denied Ferimet input tax recovery. Ferimet protested that as it had accounted for VAT (under the reverse charge) the name of the supplier on the invoice should not prevent input tax recovery. It is suggested in the background to the case that this falsification may have arisen because of an attempted direct tax evasion (e.g., not for VAT purposes). The CJEU observed that deliberately concealing the supplier’s name might make it impossible for the Spanish tax authorities to verify that the supplier was a taxable person, which is a material condition for VAT recovery. If the falsification of the invoice related to VAT fraud, then the CJEU held that Ferimet could be denied input tax recovery, even if it obtained no VAT benefit itself and there was no immediate risk of VAT loss.

CJEU (Case C-334/20): Amper Metal KFT – 25 November 2021

Amper Metal Kft paid €133k plus VAT to have a small logo displayed on cars at a Hungarian motor racing championship. Amper could recover the VAT if it “used” the advertising for business purposes. However, the Hungarian tax authorities considered that Amper Metal did not have a proper business reason for advertising through motor racing, as its clients were paper factories which were unlikely to be influenced by such channels. Furthermore, the authorities did not see the advertising as useful, as it did not help increase Amper’s turnover, and it had been significantly over-priced. The CJEU has ruled that input tax recovery was possible if the advertising could be objectively linked to Amper’s business activities. The mere fact that the advertising did not work, or was too expensive, could not justify an input tax restriction. However, the CJEU indicated that the referring court should consider whether the input tax should be blocked as business entertainment. If so, then Amper would be unable to recover the VAT even if a direct link could be established.

CJEU (Case C-513/20): Termas Sulfurosas – 13 January 2022

Termas Sulfurosas de Alcafache SA provides a range of traditional thermal cures to help people suffering from rheumatism and respiratory conditions. The Portuguese tax authorities accepted that these treatments had a therapeutic purpose and could therefore be exempt from VAT. However, visitors first had to pay an annual “thermal registration” fee of around €30, in return for which TSA prepared a file setting out the visitor’s clinical history. This preliminary service would only qualify for VAT exemption if it was “closely related” to the provision of medical care. According to the CJEU, the registration service would be exempt if the file set out not just the visitor’s state of health, but also their prescribed care (i.e., it was a record of a specific therapeutic plan). However, if registration was simply an administrative exercise which enabled the subsequent purchase of spa treatments, but which was not itself part of the therapeutic plan, then it was not essential to the provision of care, and as such could not be considered as “closely related”, and should be subject to VAT.

CJEU (Case C-156/20): Zipvit – 13 January 2022

For Zipvit Ltd to recover VAT on Mailmedia services provided by Royal Mail in 2006-10, VAT must have been “due or paid” and should have been evidenced by a VAT invoice. At the time, however, the services were (incorrectly) considered to be exempt from VAT. Although HMRC did not pursue Royal Mail for output tax, Zipvit still sought to recover input tax. Last July, AG Kokott rejected Zipvit’s case, on the basis that it was impossible to establish a right to recover input tax in the absence of a VAT invoice showing the amount of VAT on a supply. The CJEU has now also ruled against Zipvit, albeit for a different reason. In principle, the fact that Royal Mail had not charged VAT to Zipvit meant that Zipvit had not passed on any VAT to its customers (even though the contract provided that Zipvit should bear the cost of any VAT). VAT was not “due” in relation to Royal Mail’s supplies, as HMRC accepted that they had no enforceable claim against Royal Mail (which had a legitimate expectation that Mailmedia services should have been treated as exempt until 2010). In those circumstances, it was unnecessary to consider whether the absence of a VAT invoice was significant, as Zipvit’s claim could not in any event succeed.

CJEU (Case C-90/20): Apcoa Parking Denmark – 20 January 2022

Apcoa operates car parks in Denmark and the company sets the conditions for their use. Apcoa imposed a “control fee” if drivers broke one of the terms of use (e.g., exceeded the permitted parking time, parking incorrectly etc). The CJEU found that these fees were, in fact, additional consideration for the “excessive use” of the car park. This is because there is a direct link between the control fees and the provision of the parking and represents a significant departure from the situation where a hotel retains “no show” deposits which results in no supply taking place (as per the previous d’Eugenie-les-Bains CJEU case). Therefore, it was held that Apcoa as liable for VAT on such fees.

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