Brussels, 19/03/2010 (Agence Europe) - On Thursday 18 March 2010, the European Commission adopted several decisions on infringement proceedings against various member states for failure to properly implement direct and indirect taxation rules.
VAT. The Commission has decided to take two member states to the European Court of Justice - Portugal over its flat rate value-added tax (VAT) system for farmers, and Hungary over the refund of VAT credits.
Instead of introducing a flat rate scheme for farmers to refund them for VAT paid on the purchase of goods and services, Portugal introduced an optional exemption for agricultural activities, exempting VAT on supplies provided by the farmer, unless he opts to apply the normal VAT arrangements. The Commission takes the view that the flat rate scheme applied to farmers in Portugal clearly conflicts with the purpose of the scheme and is not in line with the VAT Directive. It sent Portugal a reasoned opinion about this in June 2009 and is not happy with response. It has therefore decided to take the case to the European Court of Justice.
On Hungarian VAT credit reimbursement rules, the Commission considers that this regime infringes Article 183 of the VAT Directive which states that where for a given tax period, the amount of deductions exceeds the amount of VAT due, member states may either make a refund or allow the carry-over of the excess VAT forward to the following period, under the conditions which they shall determine. The Commission has decided to take Hungary to the European Court of Justice because it has not amended its legislation, as requested in a reasoned opinion.
The Commission has formally requested in a reasoned opinion that France amend its VAT exemption for supplies related to ships, which goes beyond what is permitted by the VAT Directive. The French exemption applies to all ships used for the transport of passengers and commercial activities, while it should be limited to vessels used for navigation on the high seas.
Direct taxation. The European Commission has formally requested in reasoned opinions that Belgium, Denmark and the Netherlands change tax rules which impose an immediate exit tax when companies transfer their head office or assets to another member state. The Commission considers these provisions to be incompatible with the freedom of establishment provided for in Article 49 of the Treaty on the Functioning of the European Union. A similar case against Sweden has been closed, since Sweden had complied with the Commission's request.
The Commission has sent reasoned opinions (requests) to Belgium, France, Greece, the Netherlands and Portugal to change various rules related to direct taxation which are disproportionate and/or discriminatory and infringe upon the fundamental freedoms set out in the Treaty of the Functioning of the EU. The proceedings cover Belgian rules on tax relief for pensions savings, Belgian requirements for fiscal representatives, French discriminatory taxation of foreign pension and investment funds, Portuguese discriminatory taxation of non-resident taxpayers, Greek medical services legislation and the Dutch law on donations, gifts and inheritances to foreign charities.
Refunding overpaid tax. On three occasions (case C-62/93; joint Cases C-78/02 to C-80/02 and C-13/06) Greece was condemned by the European Court of Justice for the wrong application of the VAT directive, in a way that should have entitled taxpayers to a refund of the unduly paid VAT or to a deduction. In practice Greece did not make these refunds or deductions possible. Greece has not taken appropriate action, despite being sent reasoned opinions in February 2008 and October 2009 and the Commission has decided to refer it again to the European Court of Justice.
Electricity taxation. Under Council Directive 2003/96/EC of 27 October 2003 on the taxation of energy products and electricity, France had a transition period of until 1 January 2009 to adapt its electricity taxation system but has not yet taken the necessary measures or communicated them to the Commission, which has therefore sent France a reasoned opinion requiring it to change its legislation on local energy taxes.
Withholding tax. The Commission has formally requested in a reasoned opinion that Germany change its anti-abuse provision on withholding tax relief. German tax authorities refuse withholding tax relief for a foreign company owned by persons who would not be entitled to the relief if they received the income directly, and if the foreign company does not pursue genuine economic activities. The Commission believes the requirement to demonstrate genuine economic activity is disproportionate to the aim of preventing abuse. (A.B./transl.fl)