Brussels, 17/01/2006 (Agence Europe) - The Commission has decided to refer Spain and Greece to the European Union Court of Justice, on matters relating to income tax and value added tax (VAT) respectively. It will also send a reasoned opinion to Germany over taxation of supplies of services by executors of wills.
Spain. Spain will have to give explanations to the Court on two of its tax legislation measures. Firstly, Spanish legislation subjects resident individuals to progressive taxation on their employment-related income while applying a flat tax rate of 25% to the Spanish income from employment of non-resident individuals, with exceptions for pensions and income of non-resident short term employees. And secondly, capital gains of non-resident individuals are taxed at a flat rate of 35% whereas residents are subject to progressive taxation when the fixed assets remain within the possession of the taxpayer for less than one year, and to a flat rate of 15% when the assets are realised after one year of possession. The Commission considers that the Spanish tax legislation fails to conform to Community Law.
Car insurance contracts. 1) In Greece, motorists insured with ELPA, a roadside assistance body, pay an annual flat rate subscription on which the State charges VAT. The Sixth VAT Directive (77/388/EEC) exempts insurance services from taxation. 2) The Commission also considers that Greek legislation risks higher taxation on imported second-hand vehicles than on similar vehicles registered from new in Greece. The Greek authorities will be referred to the Court on both these matters.
Services by executors of wills. The Commission has decided to send Germany a formal request to change its laws on the taxation of the services provided by executors of wills, such as lawyers, tax advisers or auditors. Under German legislation the place of taxation of such services is that from which the executors provide their services. The Commission considers that these services are similar to the services provided by lawyers and, therefore, that the place of taxation should, under Community VAT rules, be the place of residence or establishment of the customer.