EU Tax Alert. To subscribe (free of charge) see: Please click here to unsubscribe from this mailing. July edition 119

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1 EU Tax Alert July edition 119 The EU Tax Alert is an newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more. To subscribe (free of charge) see: Please click here to unsubscribe from this mailing.

2 Highlights in this edition CJ rules that Belgian rules on taxation of interest income derived from savings deposits held in foreign banks are in breach of the free movement of services (Commission v Belgium) On 6 June 2013, the CJ issued its judgment in case Commission v Belgium (C-383/10) regarding the taxation of interest income derived from savings deposits. The CJ considered that the Belgian legislation which provides for an income tax exemption for interest in the amount of EUR 1,250 (to be indexed annually) only in case of savings accounts opened with a bank established in Belgium, is in breach with the free movement of services. UK challenges the legality of Council Decision to authorise enhanced cooperation on a common framework of FTT and the scope and objectives of the initial Commission proposal (UK v Council) On 18 April 2013, the UK challenged the legality of the Decision of 22 January 2013 of the Council (Council Decision 2013/52/EU) to authorise enhanced cooperation on a common framework of the Financial Transactions Tax ( FTT ) and the scope and objectives of the initial Commission proposal. This case is now pending as case UK v Council (C-209/13). 2

3 Contents Top News CJ rules that Belgian legislation on taxation of interest income derived from savings deposits held in foreign banks is in breach of the free movement of services (Commission v Belgium) UK challenges the legality of Council Decision to authorise enhanced cooperation on a common framework of FTT and the scope and objectives of the initial Commission proposal (UK v Council) State Aid / WTO Commission opens formal investigation into UK video games tax relief EFTA Surveillance Authority clears Norwegian VAT benefit for lessors to public schools European Commission clears French parafiscal levy on on-line horse-race betting Direct taxation AG Mengozzi considers German inheritance tax legislation in breach of the free movement of capital (Yvon Welte) Commission proposes to extend the scope of automatic exchange of information within the EU Commission asks five Member States to implement the Directive on administrative cooperation into their domestic laws Commission requests Portugal to end discriminatory taxation of non-resident companies Commission requests Spain to end discriminatory taxation of investments in non-resident companies European Parliament Committee on Economic and Monetary Affairs issues report on the proposal for a Council directive implementing enhanced cooperation in the area of financial transaction tax VAT CJ rules on the qualification as economic activity of exploiting a private photovoltaic installation which is connected to the network (Fuchs) CJ rules on VAT duty for private service from VATregistered private bailiff (Kostov) CJ rules on supply of immovable property sold by a judgment debtor in a compulsory sale procedure (Promociones y Construcciones) CJ holds that for VAT purposes, the sale of a 30% participation is not to be regarded as a transfer of a going concern whereby the assets and liabilities are continued (X BV) Advocate General finds the special scheme for taxation of travel agents of countries compatible with the Directive (Commission v Member States) Advocate General finds that it is for the national judge to determine what is the correct understanding to treat commercial advertising screening tax according to the national law (TVI) Advocate General finds that VAT due upon VAT adjustment may not be levied from a taxable person other than the one who deducted the VAT (Pactor Vastgoed) Customs Duties, Excises and other Indirect Taxes CJ rules on the retroactive recovery of antidumping duty on imports of fasteners (Paltrade) CJ rules on the refusal to reimburse excises for goods transported to another Member State (Scandic Distilleries SA) EU strategy to step up fight against illicit tobacco trade Provisional anti-dumping duties on certain biodiesel from Argentina and Indonesia imported in the European Union (EU) EU imposes provisional anti-dumping tariffs on Chinese solar panels Capital Duty Belgian Constitutional Court: Preliminary ruling requested from CJ on compatibility of tax on conversion of bearer shares with Capital Duty Directive 3

4 Top News CJ rules that Belgian rules on taxation of interest income derived from savings deposits held in foreign banks are in breach of the free movement of services (Commission v Belgium) On 6 June 2013, the CJ issued its judgment in case Commission v Belgium (C-383/10) regarding the taxation of interest income derived from savings deposits held in foreign banks. Belgian tax law exonerates from income tax interest in the amount of EUR 1,250 (to be indexed annually) derived from savings deposits. To benefit from the exemption, the savings accounts must be opened with a bank established in Belgium. Moreover, the deposits must satisfy certain criteria such as currency, methods of withdrawal and deductions, structure, level and calculation of remuneration. The Court found that the provisions have the effect of discouraging Belgian residents from using the services of banks established in other Member States, as interest payments by those banks are not eligible for the exemption and discourage holders of Belgian savings accounts from transferring their accounts to banks established in other Member States. The justifications of the restriction put forward by Belgium were not accepted by the Court. Belgium invoked the need to guarantee the effectiveness of fiscal supervision and the ineffectiveness of the Directive 77/799 on mutual assistance. The Court held that Member States should not be able to rely on the possible difficulties in obtaining the information required or on the shortcomings of cooperation between their tax authorities in order to justify a restriction of a fundamental freedom. Moreover, income from foreign savings accounts is subject to exchange of information in the framework of Directive 2003/48. Belgium thus has at its disposal an effective instrument to ensure proper taxation of that type of income. Belgium further invoked the need to prevent double exemption and thus the objective of preventing tax evasion and avoidance if a Belgian resident has several savings accounts. The Court held that this risk is inherent in the national system and does not require a cross-border element. Moreover, the provisions are too restrictive, as by precluding foreign interest income from the exemption, the provisions not only prevent tax avoidance and evasion but also the legitimate exercise of the freedom to provide services where taxpayers prove that their objective is not one of tax evasion. The Court further held that the national provisions are precluded under the freedom to provide services contained in the EEA Agreement. Despite the Commission s request, the Court refused to examine an infringement of the free movement of capital under both the TFEU and the EEA treaties given that the national provisions are precluded under the freedom to provide services. UK challenges the legality of Council Decision to authorise enhanced cooperation on a common framework of FTT and the scope and objectives of the initial Commission proposal (UK v Council) On 18 April 2013, the UK challenged the legality of the Decision of 22 January 2013 of the Council (Council Decision 2013/52/EU) to authorise enhanced cooperation on a common framework of the Financial Transactions Tax ( FTT ) and the scope and objectives of the initial commission proposal which is now pending as Case UK v Council (C-209/13). The main arguments of the UK are: that Council Decision 2013/52/EU is contrary to Article 327 TFEU because it authorizes the adoption of the FTT with extraterritorial effects which will fail to respect the competences, rights and obligations of the Non-Participating States. that Council Decision 2013/52/EU is unlawful because it authorizes the adoption of an FTT with extraterritorial effects for which there is no justification in customary international law. 4

5 that Council Decision 2013/52/EU is contrary to Article 332 TFEU because it authorizes enhanced cooperation for an FTT, the implementation of which will inevitably cause costs to be incurred by the Non- Participating States State Aid/WTO Commission opens formal investigation into UK video games tax relief On 16 April 2013, the European Commission decided to open an in-depth investigation into a UK proposal for a 25% tax relief on up to 80% of video game production expenditure meeting certain British/European cultural requirements. As the UK government indicated, it wished to introduce such tax relief. The Commission has doubts as to restrictions for UK-based productions, as video games are often developed by people cooperating worldwide. The Commission explicitly refers to the risk of starting a subsidy race within the EU, and expresses its doubts about limiting such subsidies to those games that do indeed provide certain cultural content (i.e. subject matter and setting of the game in the UK/EEA, lead characters are British/EEA citizens, dialogue/voiceover in English). EFTA Surveillance Authority clears Norwegian VAT benefit for lessors to public schools On 24 April 2013, the EFTA Surveillance Authority closed its investigation into the Norwegian VAT system. Despite education and letting real estate being normally exempt from VAT, lessors of premises to public entities were allowed to opt-in for VAT, allowing them to both charge VAT and have input VAT returned. Public schools would subsequently be compensated for any such VAT paid on their rent. Lessors to private schools must still charge a rent that covers their input-vat, as no VAT can be charged to the private schools (which would also have been compensated had VAT been due). As all potential lessors would be free to compete for business (often in tenders) with public and private schools alike, there did not seem to be a particular advantage to lessors of premises to public schools. As for the VAT compensation, the Authority found that the providing of schooling did not amount to an economic activity as most costs were already covered by the State, with no more than 15% of funding coming from (maximized) student fees in the case of private schools, hence placing the compensation outside of the scope of State aid. European Commission clears French parafiscal levy on on-line horse-race betting On 19 June, the Commission cleared a revised French proposal to impose a levy of about 5.6% on any online horse-race betting in order to finance part of the costs of organizing such races. France had to ensure that local betting (i.e. face-to-face, not online) would contribute at least the same as on-line bets, relatively speaking. The levy was put in place after recent liberalisation of French on-line betting. Direct Taxation AG Mengozzi considers German inheritance tax legislation in breach of the free movement of capital (Yvon Welte) On 12 June 2013, AG Mengozzi delivered his Opinion in case Yvon Welte v Finanzamt Velbert (Case C-181/12). This case deals with the legislation in Germany regarding the tax free amount on inheritance tax. According to German law, in the case a land situated in Germany is acquired through inheritance by a nonresident person, that person is entitled to a tax-free amount of EUR 2,000, whereas a tax-free amount of EUR 500,000 is applicable if, at the time of the inheritance, the deceased person or the acquirer has a permanent residence in Germany. Mr Welte, a Swiss national and resident inherited from his deceased wife land situated in Dusseldorf. As his wife, although born in Germany, had also acquired Swiss nationality and residence, Mr Welte only benefited from the tax-free amount of EUR 2,000. In that regard, he filed a claim before the German tax authorities in order to benefit 5

6 from the otherwise applicable amount of EUR 500,000. The German tax authorities rejected the complaint lodged by Mr Welte with a view to obtaining a taxfree allowance of EUR 500,000. Mr Welte contested that decision arguing that the unequal treatment of resident and non-resident payers of inheritance tax is incompatible with the free movement of capital guaranteed by the EC Treaty. AG Mengozzi started by clarifying that the referred case does not fall within the scope of the Agreement between the European Community and its Member States, on the one side, and the Swiss Confederation, on the other, on the free movement of persons, which was signed at Luxembourg on 21 June 1999 and came into force on 1 June In the proceedings, Mr. Welte was not seeking to work or to establish himself in the territory of a Member State of the European Union in any capacity, or to enjoy the provision of services, for the purposes of Article 1(a) to (c) of the Agreement on freedom of movement for persons. He then went on to analyse whether the legislation at stake constituted a breach of the free movement of capital. In that regard, he concluded that the measure at issue has the effect of imposing a higher overall tax burden on the inheritance of non-residents in the main proceedings constitutes a restriction on the free movement of capital, which can be permitted only if it is covered by the standstill provision provided for in Article 57(1) EC, or if it can be justified by an overriding reason in the public interest. As regards whether the German rules at issue fall within material scope of the standstill clause, AG Mengozzi concluded that they do not fall within Article 57 (1) EC. In that regard, AG Mengozzi opined that this provision covers only situations involving direct investment including in real estate. AG Mengozzi s main argument was that the reference in Article 57(1) EC to direct investment including in real estate should be construed as covering investments in real estate which constitute direct investments, that is to say to paraphrase the explanatory notes investments in real estate of such a kind as to establish or to maintain direct links with an entrepreneur or an undertaking in order to engage in an economic activity. By contrast, investments in real estate of a financial nature, which are unconnected with the pursuit of an economic activity, do not fall within the scope of Article 57(1) EC. This understanding is supported by the fact that, as an exception to the free movement, Article 57(1) EC should be interpreted narrowly. AG Mengozzi then analysed the two justifications brought forward by the German government regarding the measure at stake: the need to ensure the coherence of the tax system and effectiveness of fiscal supervision. As regards the first justification, AG Mengozzi referred to the fact that there appeared to be no logical symmetrical link between the tax advantage and a particular tax levy in order to reject such justification. The allowance of EUR 500,000 is granted to German residents irrespective of the value of the estate. Accordingly, there is no direct link between that allowance and the levy. Furthermore, the allowance of EUR 500,000 would also be granted to a German resident inheriting a single item of immoveable property even though, on account of the deceased s place of residence on the date of death, the estate was located abroad, without Germany being able, for various reasons, to tax that estate. In analysing the second justification, AG Mengozzi referred, in particular, to the fact that although Council Directive 77/799/EEC of 19 December 1977 concerning mutual assistance by the competent authorities of the Member States in the field of direct taxation does not apply to relations between Member States and the competent authorities of third countries. Even in the context of relations between the tax authorities of Member States, the cooperation arrangements established by the directive cover, not information on the payment of inheritance and transfer duties, but only information on income and wealth tax, and since 2004 the taxation of insurance premiums. In any event, it could be possible to rely on Article 13 of the Agreement of 30 November 1978 between the Federal Republic of Germany and the Swiss Confederation for the avoidance of double taxation with respect to inheritance tax. AG Mengozzi concluded therefore that, upon the rejection of the two justifications there would be no need to analyze the proportionality of the measure at stake. In 6

7 any event, even if that would be the case, the measure should be considered manifestly disproportionate in the light of each of the public interests relied upon by the German Government. Commission proposes to extend the scope of automatic exchange of information within the EU On 12 June 2013, the Commission has proposed extending the automatic exchange of information between EU tax administrations, as part of the intensified fight against tax evasion. For that purpose, it submitted a proposal amending Directive 2011/16/ EU of 12 February 2013 ( Directive on administrative cooperation ) as regards mandatory automatic exchange of information in the field of taxation. This Directive foresees the automatic exchange of information on other forms of income such as employment, directors fees, life insurance, pensions and property. Under the proposal, dividends, capital gains, all other forms of financial income and account balances, would be added to the list of categories that are subject to automatic information exchange within the EU. Such inclusion would allow ensuring equality of treatment between different types of assets and to avoiding undesirable reallocation of portfolios. The amended Directive would allow Member States to share as much information amongst themselves as they have committed to doing with the US under the Foreign Account Tax Compliance Act (FATCA) and therefore, comply with Article 19 of the Directive which states that a Member State that provides wider cooperation to a third country may not refuse to provide such wider cooperation to any other Member State wishing to enter into such mutual wider cooperation with that Member State. The Commission is of the view that the adoption of such proposal will contribute to the coherent, consistent and comprehensive EU-wide approach to automatic exchange of information in the internal market. It would mean a single reporting approach across Member States, which would lead to costs savings both for tax administrations and for economic operators. In addition, it may use IT platforms already available, for instance, under the EU Savings Directive. It will also represent a step towards the internal standard of automatic exchange of information. Commission asks five Member States to implement the Directive on administrative cooperation into their domestic laws On 20 June 2013, the Commission sent Reasoned Opinions to Belgium, Greece, Finland (Province of Åland), Italy and Poland asking them to notify the transposition of the Directive on administrative cooperation into national law. Member States had a legal obligation to start applying this Directive from 1 January Belgium, Finland (concerning the Province of Åland), Greece, Italy and Poland have not notified the Commission of the transposition of the Directive into their national legislation. In the absence of a satisfactory response within two months, the Commission may refer these five Member States to the Court of Justice. Commission requests Portugal to end discriminatory taxation of non-resident companies The Commission has requested Portugal to amend its tax rules for non-resident companies owned by Portuguese residents. According to Portuguese legislation, companies which do not have their registered office or effective place of management in Portugal are subject to corporate income tax on the income obtained in Portugal. These companies, as other taxpayers, may enjoy a number of tax benefits. However, these benefits are denied if more than 25% of the capital of the non resident company is owned by Portuguese residents. The Commission considers that a different tax treatment of non-resident companies on the basis of their shareholders residence is in breach of the free movement of capital. This request takes the form of a reasoned opinion. In the absence of a satisfactory response within two months, the Commission may refer Portugal to the CJ. 7

8 Commission requests Spain to end discriminatory taxation of investments in non-resident companies The Commission has requested Spain to amend its discriminatory tax rules for dividends distributed by a non-resident company to a Spanish company. According to its domestic legislation, a Spanish company which invests in a non-resident company must fulfil more conditions (for example, related to volume of income and level of shareholder participation) than a domestic investment if it wants to benefit from the tax break. In other cases, the tax advantage foreseen for domestic dividends is not available for foreign dividends. The Commission considers that this regime is in breach with the freedom of establishment, the freedom to provide services, the cross-border supply of goods and the free movement of capital as set out in the TFEU. The request takes the form of a reasoned opinion. In the absence of a satisfactory response within two months, the Commission may refer the matter to the CJ. European Parliament Committee on Economic and Monetary Affairs issues report on the proposal for a Council directive implementing enhanced cooperation in the area of financial transaction tax On 24 June 2013, the European Parliament Committee on Economic and Monetary Affairs issued a report on the proposal for a Council directive implementing enhanced cooperation in the area of financial transaction tax. This report approves the Commission proposal for the financial transaction tax but recommends introducing some amendments to the existing proposal. In particular, it aims at closing some loopholes and reinforcing mechanisms to prevent tax evasion and tax avoidance. The main suggested amendments in the proposal are: 1. Closing the loophole of the issuance principle arising from the exemption applicable to OTC derivatives. 2. Introduction of the ownership principle according to which a financial transaction in relation to which no FTT has been levied is not legally enforceable and does not result in a transfer of legal title of the underlying instrument. 3. Clarification of the residence principle by stating that branches of EU institutions registered within the FTT jurisdiction would fall within the scope of the FTT. 4. Creation of an FTT Committee composed by representatives from participating Member States, the Commission, ESMA and the ECB. The mandate of this Committee will be to monitor effective implementation of the Directive across participating Member States, to detect avoidance schemes and propose countermeasures VAT CJ rules on the qualification as economic activity of exploiting a private photovoltaic installation which is connected to the network (Fuchs) On 20 June 2013, the CJ delivered its judgement in case Finanzamt Freistadt Rohrbach Urfahr v Unabhängiger Finanzsenat Außenstelle Linz (C-219/12). The case concerns Mr. Fuchs who installed a photovoltaic (solar panel) system which produces electricity but has no storage capacity. Its annual production is less than the household s annual consumption. Mr. Fuchs has a contract with an electricity provider under which he sells electricity to that provider, who also supplies electricity to Mr. Fuchs. Since he considers that his sale of electricity constitutes an economic activity Mr. Fuchs seeks to recover the input VAT paid on his system and its installation. The Austrian Finanzamt refuse to reimburse Mr. Fuchs s input tax on the ground that he has not carried out any economic activity by operating his photovoltaic system. Therefore, the Higher Administrative Court wanted to know whether the operation of a network-connected photovoltaic installation with no independent power storage capability on or adjacent to a privately owned house used for private residential purposes, which is technically designed such that the power generated by the installation is, on a continuing basis, below the total quantity of power privately consumed by the installation 8

9 operator in the privately owned house, constitutes an economic activity of the installation operator. On 7 March 2013, Advocate General Sharpston delivered her opinion. She concluded that the operation of a network-connected photovoltaic installation on or adjacent to a privately owned house used for private residential purposes constitutes an economic activity to the extent that electricity produced by the installation is supplied to the network for consideration. In such circumstances, input tax paid on the acquisition of the installation may be deducted from output tax charged on the supply of electricity to the network, subject to all the provisions of that directive which govern such deduction. On 20 June 2013, the CJ ruled that the operation of a photovoltaic system constitutes an economic activity if it is designed such that the electricity produced is a) always less than the electricity privately consumed by its operator and b) supplied to the network in exchange for income on a continuing basis. It follows that, for a finding that the exploitation of property is carried out for the purpose of obtaining income therefrom, it is irrelevant whether or not that exploitation is intended to make a profit. CJ rules on VAT duty for private service from VAT-registered private bailiff (Kostov) On 13 June 2013, the CJ gave its judgment in case Galin Kostov v Direktor na Direktsia «Obzhalvane I upravlenie na izpalnenieto» - Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite (C-62/12), on whether a VAT registered person is to be treated as a taxable person in relation to other activities. In this case, Mr. Kostov is a self-employed private bailiff who is registered for the purposes of VAT. However, he also provided other services, on an occasional basis, not in connection with his activity as a private bailiff. These other activities involved the purchase and sale of land. In 2008, Mr. Kostov concluded a contract of agency with Bon Marin. Under that contract, Mr Kostov undertook, as agent for Bon Marin, to make bids in the context of three auctions of three plots of partially built-upon land which were owned by the State under private law, were managed by the Ministry of Defence and covered an area of approximately 40,000 m2. He also undertook to transfer ownership in those properties to Bon Marin in the event of a successful bid. Mr. Kostov received a remuneration of EUR 25,500. The Bulgarian tax inspector stated that Mr. Kostov had received this remuneration in consideration for a taxable supply of services and had made the supply as a taxable person for VAT purposes. Therefore, he should have paid VAT on the remuneration. Mr. Kostov claimed that he had provided the service on an occasional basis and not in connection with his economic activity as a self-employed private bailiff. In those circumstances, the national judge decided to ask the CJ, in essence, whether Article 9(1) of the VAT Directive is to be interpreted as meaning that a person who is taxable for VAT purposes in respect of his activities as a self-employed bailiff must be regarded as a taxable person in respect of any other economic activity carried out occasionally. By its judgement, the CJ answered the question in the affirmative: the answer to the question referred is that Article 9(1) of the VAT Directive is to be interpreted as meaning that a natural person who is already a taxable person for VAT purposes in respect of his activities as a self-employed bailiff must be regarded as a taxable person in respect of any other economic activity carried out occasionally, provided that that activity constitutes an activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive. CJ rules on supply of immovable property sold by a judgment debtor in a compulsory sale procedure (Promociones y Construcciones) On 13 June 2013, the CJ rendered its judgment in case Promociones y Construcciones BJ 200 SL (C-125/12). Promociones y Construcciones was declared insolvent by order of 22 February During the insolvency proceedings, an opportunity to sell two of the company s 9

10 properties arose. On the basis of a favourable report from the insolvency administrator, the Spanish judge authorised the request to carry out that sale to purchaser Banesto S.A. The authorisation of that sale, which is an integral part of Promociones y Construcciones s commercial activity, gave rise to a chargeable event for VAT purposes. The referring court expressed doubts as to the identity of the debtor liable for payment of that tax debt, namely whether it was Promociones y Construcciones or the purchaser of the properties. The referring court wanted to know, in essence, whether Article 199(1)(g) of the VAT Directive is to be interpreted as meaning that every sale of immovable property carried out by the debtor in the course of insolvency proceedings comes within the concept of compulsory sale procedure, including where the sale is carried out in the course of the first phase which does not form part of the liquidation proceedings and is carried out pursuant to a voluntary agreement between the parties. The CJ ruled that Article 199(1)(g) of the Directive must be interpreted as meaning that every sale of immovable property by a judgement debtor carried out not only in the course of the liquidation of the debtor s assets but also in the course of insolvency proceedings occurring before such liquidation comes within the concept of a compulsory sale procedure, provided that such a sale is necessary in order either to settle creditors claims or to enable the debtor to re-establish its economic or professional activities. CJ holds that for VAT purposes, the sale of a 30% participation is not to be regarded as a transfer of a going concern whereby the assets and liabilities are continued (X BV) On 30 May 2013, the CJ ruled on case Staatssecretaris van Financiën v X BV (C-651/11). The main question in this case was whether the disposal of 30% of the shares in a company to which the transferor supplies services that are subject to VAT constitutes the transfer of a totality of assets or services or part thereof within the meaning of those provisions. The second question was what would happen if all the minority shareholders (who had all been supplying services to the company) sold their shares in the company to the same person at roughly the same time. The third question was what would happen if the shares are sold and the management activities carried out for that participation cease simultaneously. X held 30% of the shares in A, a company carrying on business in the field of automation. As a member of the Management Board, X carried out management work for A in return for a contractually agreed remuneration. X and the other holders of shares in A sold their shares to D Plc. In connection with that sale, the management work for A came to an end and X resigned from A s Management Board. A number of services were supplied to X in conjunction with that sale of shares, and the invoices provided for VAT to be charged. X deducted that VAT in its VAT returns, on the basis that the disposal of its shareholding constituted the transfer of a totality of assets and of services and that the costs incurred by X in connection with that transaction had to be considered part of the general costs associated with its entire economic activity and were, therefore, fully deductible. According to the regional court of appeal, the transfer of X s shareholding was not within the scope of VAT because it was not an economic activity. It considered, however, that the input VAT could be deducted, since the shares had been sold and transferred in conjunction with acts carried out by X as a trader. The Staatssecretaris van Financiën appealed in cassation against this judgement. The CJ ruled that the sale of a 30% participation is not to be regarded as a transfer of a going concern whereby the assets and liabilities are continued. Each transaction must be assessed individually and independently. Therefore, the fact that all the shareholders are selling their shares to the same purchaser at practically the same time, as a result of which the purchaser becomes the owner of 100% of the shares in the undertaking concerned, is of no importance. Furthermore, the fact that the shares were transferred at the same time as the 10

11 management activities ceased has no bearing on the answer given to the questions referred for a preliminary ruling. Advocate General finds the special scheme for taxation of travel agents of countries compatible with the Directive (Commission v Member States) On 6 June 2013, Advocate General Sharpston delivered her opinion in the joined cases European Commission v. several Member States regarding travel agencies (C-189/11, C-193/11, C-236/11, C-269/11, C-293/11, C-296/11, C-309/11, and C-450/11). The cases were referred to the CJ by the Commission on 20 April 2011, as those countries had failed to amend their legislation following the reasoned opinion sent to them on 28 February 2008, concerning the application of the special scheme for taxation of travel agents. In the case Commission v. Spain (C-189/11), the Commission considers that the application by Spain of the special scheme for travel agents, insofar as it is not limited to services provided to travellers, as the Directive prescribes, but is extended to operations carried out between travel agents, infringes the provisions of the legislation concerning VAT. The Advocate General delivered her joined Opinion in the seven cases and addressed the different Spanish issues in a separate conclusion. She concluded that the Court should declare that by applying the special scheme for travel agents in cases where travel services have been sold to a person other than the traveller; by excluding from that special scheme sales to the public, by retail agents acting in their own name, of trips organised by wholesale agents Spain has failed to fulfil its obligations under the Directive; nor has Spain implemented the Directive correctly by authorising travel agents, in certain circumstances, to charge in the invoice an overall amount that is not related to the actual VAT charged to the customer, and by authorising the latter, where he is a taxable person, to deduct this overall amount from the VAT payable; furthermore, Spain has not acted appropriately by authorising travel agencies, insofar as they benefit from the special scheme, to make an overall determination of the basis of assessment of the tax for each tax period. Advocate General finds that it is for the national judge to determine what is the correct understanding to treat commercial advertising screening tax according to the national law (TVI) On 11 June 2013, Advocate General Cruz Villalón delivered his opinion in the joined cases TVI (C-618/11, C-637/11 and C-659/11). In the course of its activities in the television market, TVI provides commercial advertising services to various advertisers. The invoices it issued for these services included the screening tax of 4% of the price of the services. TVI applied the VAT to the total amount invoiced. It thus included the screening tax in the taxable amount. The VAT was paid and included in the respective periodic declaration accordingly. TVI paid the screening tax. Doubting whether the screening tax should really be included in the taxable amount, TVI challenged tax returns concerning advertising services provided to various advertisers. The tax authorities rejected the appeals. With this request for a preliminary ruling, the Portuguese court asked whether a screening tax imposed on the screening and broadcasting of advertising charged to the advertisers but paid to the State by the service providers ( fiscal substitute ) has to be included in the taxable amount for the purposes of calculating the VAT. The Advocate General concluded that the answer to whether the screening tax should really be included in the taxable amount depends on the fiscal relationship of public law. The screening tax should be included in the taxable amount if the decisive fiscal relationship between the tax authorities and the television operators is of public law character. However, if the decisive fiscal relationship of public law character runs between the advertisers and the tax authorities, the VAT Directive must be interpreted as prohibiting the inclusion of said tax in the taxable amount, according to the Advocate General. 11

12 It is for the national judge to determine which of these two understandings of the nature of fiscal substitution in the precise context of the screening tax is the correct one according to national law. Advocate General finds that VAT due upon VAT adjustment may not be levied from a taxable person other than the one who deducted the VAT (Pactor Vastgoed) On 30 May 2013, Advocate General Wathelet delivered his opinion in the case Pactor Vastgoed BV (C-622/11). This case concerns input tax deduction under Article 20 of the Sixth VAT Directive (now Articles 184 to 192 of the VAT Directive). Pactor Vastgoed is a company that carries on business in real estate. In January 2000, a property was supplied to Pactor Vastgoed by A. The supplier and Pactor Vastgoed together had opted for a taxable supply. Pactor Vastgoed has supplied the property to a third party in July 2000 without opting for a taxable supply and therefore VAT exempt. As a consequence of the VAT exempt supply in July 2000, the option for a taxable supply in January 2000 (between A and Pactor Vastgoed) turned out to be invalid. As a result, the input VAT deducted by A in the past relating to the property had to be adjusted. Based on Netherlands law, the tax authorities decided to transfer the liability of that adjustment VAT from A to Pactor Vastgoed as it was due to Pactor Vastgoed s subsequent exempt supply that the adjustment VAT was due by A. to be paid back, that amount is levied from a person other than the taxable person who applied the deduction in the past, in particular, from the person to whom a property has been supplied by that taxable person and who did not participate in the transaction concerned. Customs Duties, Excises and other Indirect Taxes CJ rules on the retroactive recovery of antidumping duty on imports of fasteners (Paltrade) On 6 June 2013, the CJ delivered its judgment in the case Paltrade (C-667/11). The case deals with the retroactive levy of antidumping duty on certain types of fasteners originating in Malaysia, imported in EU. On 31 January 2011, Paltrade, whose registered office is in Varna (Bulgaria), filed a customs declaration by means of a single administrative document (the SAD ) for simultaneous release for free circulation and home use the following goods: 2,528,800 wood screws and 634,000 self-tapping screws, which were consigned from Malaysia and were among the products on which the anti-dumping duty was to be imposed under an EU implementing Regulation. The customs duties and value added tax owed were taken into account on 31 January 2011, that is to say, before the anti-dumping duty had been definitively extended to the importation of those goods. The referring court wanted to know whether domestic law is compatible with EU law where this input VAT is adjusted in such a way that the amount of the deduction must be reimbursed to the authorities in full or in part by someone who has not had the original input tax credit. The Advocate General concluded that it is incompatible with the VAT Directive that, in case a deduction of VAT is adjusted on the basis of the Directive in such manner that the amount of the deduction entirely or partially has However, after the entry into force, on 27 July 2011, of the EU implementing Regulation, adopted on the basis of Article 78 of the Customs Code, subsequent to the release of the goods in question, the customs authority carried out an ex post facto review of the declaration in order to verify the accuracy of the data therein. Following the review of the SAD and of the documents attached to it, the customs authority found that the single administrative document had been registered during the period of investigation conducted under 12

13 Regulation No 966/2010. Consequently, the customs authority carried out a revision of the data set out in that document. The Bulgarian customs authorities did not adopt any particular measures with a view to the registration of imports from Malaysia, nor did they register the TARIC additional code A999 set out in Article 1(2) of Regulation No 91/2009. Rather, they applied the usual registration procedure of customs declarations made in accordance with the SAD model, in the Bulgarian integrated customs information system (Balgarska integrirana mitnicheska informatsionna sistema, the BIMIS system ). By decision No of 10 August 2011, the customs authority levied the additional amount of BGN 14, of anti-dumping duties and BGN 2, of value added tax on Paltrade. The latter brought an action against that decision before the Administrativen sad Varna. In those circumstances, the Administrativen sad Varna decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling: 1. Is the retroactive levy of an anti-dumping duty pursuant to Article 1 of the EU implementing Regulation permissible, without a customs registration except for the customs registration of the single administrative document in the BIMIS system taking place with the registration of the TARIC additional code which is mentioned in Article 1 of Regulation No 91/2009? 2. What is, in accordance with recital 18 of Regulation No 966/2010, the appropriate amount for the retroactive levy of an anti-dumping duty pursuant to the EU implementing Regulation? The CJ ruled that: - the means of registration such as those at issue in the proceedings are in accordance with that provision, and suffice, therefore, for the retroactive levy of an anti-dumping, and - the rate of the extended anti-dumping duty levied retroactively on goods imported prior to the entry into force of Implementing Regulation No 723/2011 is 85% for all other companies. CJ rules on the refusal to reimburse excises for goods transported to another Member State (Scandic Distilleries SA) On 30 May 2013, the CJ delivered its judgment in the case Scandic Distilleries SA (C-663/11) (hereinafter: Scandic ). The case deals with the refusal to reimburse excises that had been paid in Romania for products that were transported to the Czech Republic and brought into consumption in the Czech Republic. Scandic, a Romanian company, markets alcoholic products in Romania and other Member States. In February, March, May, June and July 2009, Scandic released for consumption in Romania alcoholic products intended for consumption in the Czech Republic and it paid excise duty on those products in Romania. Between September 2009 and February 2010, Scandic requested reimbursement of that duty from the Direcţia Generală, on the basis of Article 22 of Directive 92/12 and of Article of the Tax Code. The requests for reimbursement were drawn up pursuant to Article of the Tax Code and Paragraph 18-4 of the implementing rules. Scandic respected all the requirements laid down in Annex 11 to Title VII of the Tax Code, since it provided information about the name and tax identification code of the consignee, a description of the products dispatched, the date of receipt of the products, the quantity received, and data relating to the payment of excise duty in the Member State of destination. The requests for reimbursement were submitted after the goods had reached the Czech Republic. Scandic explained that the delay was due to the fact that it did not have in its possession all the documents listed in Annex 11 to Title VII of the Tax Code before the arrival of the products at their destination and the payment 13

14 of the excise duty in the Member State of destination. Scandic stated that it took that approach to avoid the risk of seeing its requests for reimbursement refused on the ground of inadequate proof, even if that meant being reimbursed the amount that it had paid in advance relatively late. According to Scandic, as the information referred to in Annex 11 relates, inter alia, to the date of receipt of the products and the quantity received, that information and the relevant documents could clearly be furnished only after the delivery of the products in the Member State of destination. It argues that, therefore, the lodging of the request for reimbursement was possible only after the product at issue had been delivered and received in the Czech Republic. Scandic also noted that it was clear from the request for reimbursement specimen, as provided in Annex 11, that the requests for reimbursement were to be submitted monthly, and not before the products subject to excise duty had been dispatched to another Member State. Given that the Direcţia Generală did not grant its requests for reimbursement, Scandic brought an action before the Tribunalul Bihor (District Court, Bihor) (Romania) requesting that the Direcţia Generală be ordered to reimburse the excise duties at issue and pay the interest on that amount. In its defence, the Direcţia Generală pointed out that all the documents required under Article of the Tax Code had been submitted. However, it explained that it was refusing to grant the request for reimbursement on the ground that Scandic had not requested reimbursement of the excise duty before the products had been dispatched to another Member State, in accordance with Article 22 of Directive 92/12. As the Tribunalul Bihor dismissed Scandic s action, the latter brought an appeal against that court s judgment before the referring court. Considering that an interpretation of the provisions of Directive 92/12 is necessary for its decision, the Curtea de Apel Oradea (Court of Appeal, Oradea) (Romania) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling: (1) Does the refusal of the Romanian tax authorities to grant a request for reimbursement of excise duty constitute an infringement of European Union law (Articles 7 and 22 of Directive 92/12, and the preamble thereto) in the case where: (a) the trader requesting reimbursement of excise duty furnished proof that all the technical conditions laid down in Romanian law governing the admissibility of requests for reimbursement were satisfied, and in particular those relating to: (i) proof of payment of excise duties in Romania, and (ii) proof that the products subject to excise duty were dispatched to another Member State; (b) according to the requirements of Romanian tax law (Article of the Tax Code, Paragraph 18-4 of the implementing provisions, and Annex 11 to Title VII of the Tax Code), certain documents which had to accompany the request for reimbursement could be furnished only after the products subject to excise duty had been delivered in another Member State; (c) Romanian tax law (Article 18-4(4) of the implementing provisions, which refers to Article 135 of the Code of Tax Procedure) provides for a general period of five years for each request for refund/reimbursement? (2) Must Article 22[(2)](a) of Directive 92/12 be interpreted as meaning that failure by a trader to request reimbursement of excise duty in the Member State in which that excise duty was paid, before the products subject to excise duty were delivered in the other Member State where the products are intended for consumption, entails forfeiture of the trader s right to obtain reimbursement of the excise duty paid? (3) If the answer to Question 2 is in the affirmative, does the decision on the forfeiture of the trader s right to obtain reimbursement of excise duty, which involves double taxation of the same products subject to excise duty (in the Member State in which the products subject to excise duty are initially released 14

15 for consumption and in the Member State in which the products are intended for consumption), comply with the principle of fiscal neutrality? (4) If the answer to Question 2 is in the affirmative, can the extremely brief period between the date of payment of the excise duty on the products released for consumption in one Member State and the date of dispatch of the products subject to excise duty to another Member State in which they are intended for consumption be regarded as complying with the principles of equivalence and effectiveness? Is it relevant, in that regard, that the general period during which the refund/reimbursement of a tax, duty or charge can be requested in the Member State in question is significantly longer? The CJ ruled that Article 22(1) to (3) of Council Directive 92/12/EEC of 25 February 1992 on the general arrangements for products subject to excise duty and on the holding, movement and monitoring of such products, as amended by Council Directive 92/108/EEC of 14 December 1992, must be interpreted as meaning that, when products, which are subject to excise duty that has been paid and which have been released for consumption in one Member State, are transported to another Member State where those products are subject to excise duty, which has also been paid, a request for reimbursement of the excise duty paid in the Member State of departure may not be refused on the sole ground that that request was not made before those goods were dispatched, but must be assessed on the basis of Article 22(3) of Directive 92/12/EEC. By contrast, if the excise duty has not been paid in the Member State of destination such a request may be refused on the basis of Article 22(1) and (2) of the Directive. EU strategy to step up fight against illicit tobacco trade On 6 June 2013, the European Commission adopted a comprehensive package to step up its fight against illicit tobacco trade, especially cigarette smuggling. The illicit tobacco trade is a global threat, depriving Member States and the EU of over EUR 10 billion in revenue every year in terms of unpaid taxes and duties. Not only does this hit national revenues hard, illicit trade also fuels the shadow economy since it is almost exclusively the domain of organized criminal groups operating across borders. Furthermore, it also undermines health policy initiatives aimed at discouraging the consumption of tobacco products and legitimate business as most illicit products are not made in line with EU rules on tobacco products. To effectively tackle the problem of illicit tobacco trade, the Commission s strategy sets out a number of coordinated measures at national, EU and international level. The strategy proposes specific actions in four key areas to efficiently tackle the illicit trade in tobacco products: Measures to decrease incentives for smuggling activities Measures to improve the security of the supply chain Stronger enforcement of tax, customs, police and border authorities; and Heavier sanctions for smuggling activities The strategy also analyses existing legislation and policies, identifies weaknesses and gaps, and proposes additional reinforced actions. It also seeks to better coordinate existing policies and tools as the fight against illicit trade is a cross-cutting issue, as well as to improve cooperation between the various actors at EU, national and international level. The implementation of concrete measures and actions in the strategy are set out in an Action Plan. The Commission invites the European Parliament and the Council to discuss the measures proposed in the Communication and its Action Plan and to support the Commission and the Member States in their implementation by the end of Provisional anti-dumping duties on certain biodiesel from Argentina and Indonesia imported in the European Union (EU) With Commission Regulation (EU) 79/2013, the EC had already made biodiesel from Argentina and Indonesia subject to registration for anti-dumping purposes. The product concerned by this registration 15

16 is the same as defined in the notice of initiation, i.e. fatty-acid mono-alkyl esters and / or paraffinic gas oils obtained from synthesis and / or hydro-treatment, of non-fossil origin, in pure form or as included in a blend, currently falling within CN codes ex , ex , ex , ex , ex , ex , ex , , , , ex , and ex The EC has now concluded that low-priced dumped imports from Argentina and Indonesia, which undercut the prices of the EU industry, have had a determining role in the material injury suffered by the EU industry. Consequently, the EC published Commission Regulation (EU) No 490/2013 upon which provisional anti-dumping measures entered into force on 29 May These anti-dumping measures will be applicable for a period of six months. After that period, the anti-dumping levy will amount to EUR per tonne. In Malaysia, palm oil biodiesel producers may be able to benefit from the EU trade sanctions lodged against Indonesian and Argentine biodiesel exporters. The country s five biodiesel facilities are now running at full capacity in the hope of taking advantage of the EU s inquiry on the impact of the export tax differentials for vegetable oils and products in Argentina and Indonesia. EU imposes provisional anti-dumping tariffs on Chinese solar panels The EC has decided to impose provisional anti-dumping duties on imports of solar panels, cells and wafers from China. The product subject to the provisional anti-dumping duties is crystalline silicon photovoltaic modules or panels and cells and wafers of the type used in crystalline silicon photovoltaic modules or panels, currently falling within CN codes ex , ex , ex , ex , ex , ex , ex , ex , ex , ex and ex , and originating in or consigned from the country concerned. The cells and wafers have a thickness not exceeding 400 μm. This decision follows a thorough and serious investigation and extended contacts with market players. As the market for and imports of solar panels in the EU is very large, it is important for this duty not to disrupt it. Therefore, a phased approach will be followed with the duty set at 11.8% until 6 August From August on, the duty will be set at the level of 47.6% which is the level required to remove the harm caused by the dumping to the EU industry. The provisional duties are far lower than the 88% rate at which the panels are being dumped because the EU applies the so-called lesser duty rule, imposing only enough duty needed to restore a level playing field. The provisional duty, in addition to restoring fair competition, should ensure the continued development of an innovative green energy sector in the EU. The Commission will now continue its investigation and hear the views of all interested parties. It remains ready to intensify talks with China to find alternative satisfactory solutions through negotiation. On 5 December at the latest, the EU will have to decide whether definitive anti-dumping duties will be imposed for a duration of five years. Furthermore, a parallel anti-subsidy investigation on the same product is on-going, following a complaint initiated on 8 November Provisional anti-subsidy measures, if any, should be imposed by 7 August The decision on definitive anti-subsidy measures will be due in December

17 Capital Duty Belgian Constitutional Court: Preliminary ruling requested from CJ on compatibility of tax on conversion of bearer shares with Capital Duty Directive On 16 May 2013, the Belgian Constitutional Court requested a preliminary ruling from the Court of Justice regarding the compatibility of the new tax on the conversion of bearer shares with the Capital Duty Directive. The Capital Duty Directive provides that Member States may not levy indirect taxes on contributions to capital, loans, or the provision of services, occurring as part of contributions of capital, registration or any other formality required before the commencement of business to which a capital company may be subject, alteration of the constituent instrument or regulations of a capital company, restructuring operations and the creation, issue, admission to quotation of shares or bonds. The Member States, however, are not precluded from levying duties on, inter alia, the transfer of securities or duties in the form of fees or dues. Under a law of 14 December 2005, bearer shares have to be converted to nominative shares or book entry shares by 31 December On 28 December 2011, a new tax on the conversion of bearer shares was introduced. The new provision subjected the conversion of bearer shares to a 1% tax in 2012 and 2% tax in These new provisions were challenged before the Constitutional Court as being incompatible with the Belgian Constitution and the Capital Duty Directive. The Constitutional Court has stayed the proceedings on the compatibility of the legal provisions with the Belgian Constitution and Belgian national law pending the answer of the Court of Justice on this point. 17

18 About Loyens & Loeff Correspondents Loyens & Loeff N.V. is the first firm where attorneys at Peter Adriaansen (Loyens & Loeff Luxembourg) law, tax advisers and civil-law notaries collaborate on a Séverine Baranger (Loyens & Loeff Paris) large scale to offer integrated professional legal services Gerard Blokland (Loyens & Loeff Amsterdam) in the Netherlands, Belgium and Luxembourg. Kees Bouwmeester (Loyens & Loeff Amsterdam) Almut Breuer (Loyens & Loeff Amsterdam) Loyens & Loeff is an independent provider of Mark van den Honert (Loyens & Loeff Amsterdam) corporate legal services. Our close cooperation with Leen Ketels (Loyens & Loeff Brussel) prominent international law and tax law firms makes Sarah Van Leynseele (Loyens & Loeff Brussel) Loyens & Loeff the logical choice for large and medium- Raymond Luja (Loyens & Loeff Amsterdam; size companies operating domestically or internationally. Maastricht University) Arjan Oosterheert (Loyens & Loeff Amsterdam) Editorial board Lodewijk Reijs (Loyens & Loeff Eindhoven) For contact, mail: eutaxalert@loyensloeff.com: Bruno da Silva (Loyens & Loeff Amsterdam; René van der Paardt (Loyens & Loeff Rotterdam) Thies Sanders (Loyens & Loeff Amsterdam) Patrick Vettenburg (Loyens & Loeff Eindhoven) Dennis Weber (Loyens & Loeff Amsterdam; Ruben van der Wilt (Loyens & Loeff Amsterdam) University of Amsterdam) University of Amsterdam) Editors Patricia van Zwet Bruno da Silva Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended for general informational purposes and can not be considered as advice. 18