Brussels, 25/06/2010 (Agence Europe) - On Thursday 24 June, the European Commission decided to move to the next stage in a series of infringement procedures, which it had begun for failure to comply with or infringement of EU law on indirect and direct taxation.
Indirect taxation. The Commission decided to refer France to the Court of Justice of the EU for failure to comply with Community rules on VAT and duties. In the common VAT system, rates below 5% are banned. Member states which, on 1 January 1991, charged rates below 5% are allowed to keep them at this level as a transitory measure. Super-reduced rates may not be extended to other areas. Until 1 January 2007 France applied a rate of 2.1% to tickets for the first 140 performances of theatre productions provided that no refreshments were served during the performance. This condition was scrapped following an amendment to legislation making this rate applicable to tickets for performances during which drinks could be served. However, broadening the scope of this super-reduced rate infringes the rules of the VAT directive. France's failure to take the measures needed to comply with European rules within the time limit has prompted the European Commission to refer the case to the Court of Justice. In similar fashion, on Thursday, the Commission sent a reasoned opinion to Ireland which applies a reduced rate of 4.8% for the supply of horses and greyhounds, the hiring of horses and the sale of nomination services in studs. Although Ireland did apply the reduced rate to horses and greyhounds before 1991, the Commission considers that this measure does not fit the requirement of having a clearly defined social reason, nor does it seem to benefit the final consumer. To return to France, it will be referred to the Court of Justice as French legislation provides for strict limits on the quantities of manufactured tobacco that may be transported (1 kg) and held (2 kg) in France by private individuals who purchased it in other member states. The Commission considers that this is not in line with the principle of free movement and with Directive 92/12/EEC under which private individuals are allowed to buy products subject to excise duty, such as manufactured tobacco, in another member state and to transport them to another member state without further taxes being levied. The European Commission has decided, also, to refer seven member states to the Court for failure to respect their obligations under EU law as regards VAT grouping rules. VAT grouping is allowed for the purpose of administrative simplification under the VAT directive, which gives member states the option of treating those who are legally independent but closely bound to one another by financial, economic and organisational links as one single taxable person. The Netherlands, Ireland, Finland, Sweden, United Kingdom, the Czech Republic and Denmark allow non-taxable persons to join a VAT group. The Commission considers that this is not in line with the provisions of the VAT Directive. Proceedings against Sweden and Finland are due to the fact that these member states limit the VAT grouping system to financial and insurance services. EU VAT grouping rules do not allow for such a sectoral limitation. The Netherlands also failed to inform the VAT Committee of changes to the application of their VAT grouping scheme. Still with VAT, the Commission has sent reasoned opinions to the Netherlands, Poland and Austria. Under the terms of the VAT directive, services related to water sports or physical education which are provided by non-profit-making organisations to people engaged in the sport or physical education, may be exempted from VAT. In the Netherlands, a VAT exemption is granted to services provided by water sports organisations related to the provision of berths and moorings for vessels. The Commission considers that the VAT exemption should not be applied to the provision of berths or moorings, because such services cannot be considered as closely linked to sport or physical education. Furthermore, the way in which The Netherlands distinguishes between organisations which can and cannot benefit from the VAT exemption is not in line with the VAT Directive and threatens to distort competition. The Commission has formally requested Poland to amend its legislation on VAT exemptions for transactions related to aircraft since Polish legislation exempts only aircraft which weigh more than 12 tonnes. Austria was also asked to change its legislation with regard to VAT exemptions for aircraft used by state institutions as the provisions at issue are not in line with EU criteria for VAT exemptions for aircraft.
Direct taxation. The Commission has sent a reasoned opinion to the United Kingdom requesting it change its income tax provisions, which allow a tax deduction for the earnings of seafarers who are resident in the UK but do not allow the same deduction for seafarers who are not resident in the UK. The Commission considers these rules to be discriminatory and to constitute a restriction on the free movement of people. The European Commission has also asked Luxembourg to amend its legislation on inheritance tax. This legislation stipulates additional conditions for non-resident heirs and, in particular, freezes their entire estates until they provide “an additional guarantee”. This freeze rule does not apply to resident heirs and therefore constitutes a discriminatory practice. (O.L./transl.rt)