Brussels, 03/03/2014 (Agence Europe) - On 28 February, the European Court of Justice ruled in cases C-454/12 and C-455/12 that taxis and minicabs may, under certain conditions, be subject to different rates of VAT, but must not be subject to different rates of tax where the journeys are carried out under identical conditions, as may be the case with regard to the transport of patients for a sickness insurance fund.
The Court of Justice was ruling on questions brought before it by Germany's federal finance court over two cases by minicab companies that felt they were being discriminated against because taxis in Germany are subject to reduced-rate VAT of 7% for the transport of people and baggage provided that that transport is carried out within a municipality or that the journey does not exceed 50 kilometres although, when minicabs do the same trips (transporting patients under a contract with a sickness insurance fund), then the normal rate of VAT is applied to the minicab journeys (16% from 2003 to 2006 and 19% in 2007). The German court wanted to know whether the different tax rates complied with the tax neutrality rules laid down in the EU VAT directives (77/388/EEC and 2006/112/EC).
The Court of Justice replied that the different rates of VAT are lawful if: a) by reason of the different statutory requirements to which those two types of transport are subject, transport by taxi must constitute a concrete and specific aspect of the category of services at issue (transport of passengers and their accompanying luggage) and unlike minicab undertakings, taxis must be on call to provide a transport service, which prohibits them from refusing to provide transport in the expectation of a more profitable journey; and (b) those differences must have a decisive influence on the decision of the average user to use one such type of transport or the other. The Court of Justice notes that this requirement is satified because under their special rules, taxis can pick up passengers in the street, have to agree to client requests and are recognisable cars, thus meeting special needs and more likely to be chosen by clients than minicab services. In this case, however, where taxis and minicabs are subject to the same conditions outside the normal requirements under a special contract to ferry passengers about, then different VAT rates must not be applied. (FG)