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March 2013 - edition 115EU Tax Alert

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Highlights in this editionCommission issues proposed Directive on Financial Transactions Tax to be implemented under enhanced cooperationOn 14 February 2013, the Commission published a proposal for a Directive on a common system of a Financial Transaction Tax (‘FTT’). This Directive, which mirrors the scope and objectives of the original FTT proposal put forward by the Commission in September 2011, would be introduced by 11 Member States (Germany, France, Austria, Belgium, Greece, Italy, Portugal, Slovakia, Slovenia, Spain and Estonia) under the ‘enhanced cooperation’ mechanism.

CJ rules that the ne bis in idem principle of the EU Charter of Fundamental Rights does not preclude the imposition of combined tax penalties and criminal penalties for non-compliance with VAT obligations (Åkerberg) On 26 February 2013, the CJ issued its judgment in the case Åkerberg (C-617/10) concerning the interpretation of the principle of ne bis in idem set out in the EU Charter of Fundamental Rights (‘Charter’) with regard to Swedish legislation pursuant to which the same act of non-compliance with tax obligations may entail both tax penalties and criminal penalties.The CJ considered that such Swedish legislation constituted ‘implementation of Union law’ within the meaning of Article 51(1) of the Charter and therefore, it had jurisdiction to interpret the fundamental right at issue.

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ContentsTop News• Commission issues proposed Directive on Financial

Transactions Tax to be implemented under

enhanced cooperation

• CJ rules that the ne bis in idem principle of the EU

Charter of Fundamental Rights does not preclude

the imposition of combined tax penalties and

criminal penalties for non-compliance with VAT

obligations (Åkerberg)

State Aid• ‘Compulsory voluntary levy’ does not amount to

State aid according to Advocate General (Doux

Élevage SNC)

Direct taxation• Finnish rules on deductibility of losses upon merger

of companies of different Member States in breach

of the freedom of establishment (A Oy)

• CJ holds that insurance premium tax is to be paid

in the Member State where the policyholder resides

at the time of the payment of the premium (RVS

Levensverzekeringen)

• CJ holds that the refusal of the German ‘splitting

method’ to frontier workers violates the EC-

Switzerland Agreement on the free movement of

persons (Ettwein)

• CJ rules that the method used by Germany for

calculating foreign tax credit is contrary to the free

movement of capital (Beker and Beker)

• Commission asks Belgium to change its taxation of

paid interest

• Commission requests Belgium to amend tax

reductions in the Flemish region

• Commission refers Belgium to the CJ over

discriminatory tax reduction for Walloon tax

residents

• Commission requests Romania to review its taxation

of foreign businesses

• Commission asks Spain to amend inheritance and

gift tax rules in the Historical Territories of Alava and

Bizkaia

• Public consultations on EU Taxpayer’s Code and EU

Tax Identification Number

• Developments in Belgium: Constitutional Court rules

that EU competition fines are not tax deductible

VAT• CJ rules on deduction of VAT (improperly) entered

on invoices (Stroy Trans and LVK – 56)

• CJ rules that granting access to aquatic park may

constitute services closely linked to sports (Město

Žamberk)

• CJ rules that VAT on legal costs for criminal

proceedings brought against managing directors

in their personal capacity is not deductible by the

company (Wolfram Becker)

• Advocate General opines on place of supply of

storage services (RR Donnelley)

• Proposal for derogating measure allowing Latvia to

restrict the right to deduct VAT on cars

• Commission refers France and Luxembourg to CJ

over VAT rates on e-books

• Commission refers UK to CJ for its reduced VAT rate

on supply and installation of energy-saving materials

• Commission requests Poland to amend its

legislation on reduced VAT rates

Customs Duties, Excises and other Indirect Taxes• Commission refers Hungary to the CJ over tax

exemption of pálinka

• Anti-dumping duty on imports of bio-ethanol of US

origin

4 5

agreements. According to the proposal, some

transactions will be excluded, such as primary market

transactions for raising capital through the issuance of

shares or bonds, spot currency transactions and the

issuing of government bonds. Consumer transactions

would also be excluded, such as the granting of

mortgage loans, consumer credits, entering into

insurance contracts etc.

The proposed minimum tax rate is 0.1% for all financial

transactions other than those concerning derivatives.

The taxable amount consists of the (arm’s length)

consideration paid or owed in return for the financial

instrument. For derivatives, the minimum proposed tax

rate is 0.01%. For transactions concerning derivatives,

the taxable amount is the notional amount of the

agreement at the time it is concluded. The notional

amount is the underlying nominal amount that is used to

calculate the payments to be made.

According to the proposal, each financial institution

that is party to the transaction or which is involved

in the transaction is liable to FTT. A single financial

transaction is thus, in principle, taxed twice under

the proposed FTT (i.e. with both contracting parties).

Financial institutions which are not resident in one

of the participating Member States may nonetheless

come under the scope of FTT, given that under certain

conditions, such a financial institution which is party to

a financial transaction with a counterparty established

in the territory of a participating Member State, shall be

deemed to be resident in that Member State. The same

may apply to financial institutions not established in the

territory of participating Member States if they trade a

financial instrument issued by an entity that is resident in

the participating territory.

The Netherlands government expressed its intention to

accede to the enhance cooperation procedure subject to

the following conditions:

• Netherlands pension funds will be exempt from FTT;

• The FTT should not coincide disproportionately with

the current Netherlands banking tax; and

• The FTT collected contributes to the budget of the

Member States.

Top News

Commission issues proposed Directive on Financial Transactions Tax to be implemented under enhanced cooperationOn 14 February 2013, the Commission published a

proposal for a Directive on a common system of a

Financial Transaction Tax (‘FTT’). This Directive would

be introduced by 11 Member States (Germany, France,

Austria, Belgium, Greece, Italy, Portugal, Slovakia,

Slovenia, Spain and Estonia) under the ‘enhanced

cooperation’ mechanism. The proposed Directive

mirrors the scope and objectives of the original FTT

proposal put forward by the Commission in September

2011 (see EU Tax Alert edition no. 97, October 2011).

According to the proposed Directive, the FTT will apply

to all financial transactions on the condition that at least

one party to the transaction is a ‘financial institution’

established in one of the participating Member States.

This financial institution should either act for its own

account, for the account of another person or act in

the name of a party to the transaction. The definition of

financial institution in the proposal is broad, including

banks, investment firms, organised markets, credit

institutions, insurance and reinsurance undertakings,

collective investment undertakings and their managers,

pension funds and their managers as well as other

undertakings where financial transactions constitute

a significant part of their activities. Furthermore,

certain intra-group transactions may be liable to FTT.

In addition, FTT will also be due if the traded financial

instrument is issued in one of the participating Member

States.

For the definition of the financial transactions, a

reference is made to other EU directives. It is intended

to cover the purchase and sale of financial instruments

such as company shares, bonds, money-market

instruments, units of undertakings for collective

investment (UCITs) and alternative investment funds

(AIFs), structured products and derivatives as well

as the conclusion or modification of derivatives

5

bis in idem principle, as one of the fundamental

rights laid down in the Charter, having regard to the

scope of application of those fundamental rights. In

particular, Article 51(1) of the Charter provides that the

fundamental rights contained therein bind the Member

States ‘only when they are implementing Union law’.

According to the CJ, this provision confirms the case

law which states that the fundamental rights guaranteed

in the EU’s legal order are applicable to the acts of the

Member States when the latter fall within the scope

of EU law. The explanations relating to Article 51 of

the Charter reinforce such interpretation. Thus, the

CJ examined whether the imposition of tax penalties

and the initiation of criminal proceedings against Mr

Åkerberg could be regarded as implementing EU

law in the above sense. In this regard, it referred to

the fact that such actions by the Swedish authorities

were the consequence of the breach by Mr Åkerberg,

inter alia, of his obligations to declare VAT. From

the provisions of the VAT Directive, it follows that

every Member State is under an obligation to take all

legislative and administrative measures appropriate

for ensuring collection of all the VAT due on its territory

and for preventing evasion. In addition, Article 325

TFEU obliges the Member States to counter illegal

activities affecting the financial interests of the EU

through effective deterrent measures. The EU’s own

resources include revenue from VAT collected by the

Member State. The CJ considered that there is a direct

link between the collection of VAT revenue and the

availability to the EU budget of the corresponding VAT

resources. Hence, the Court held that the tax penalties

and criminal proceedings to which Mr Åkerberg was

subject constituted implementation of Articles 2, 250(1)

and 273 of the VAT Directive and of Article 325 TFEU,

and thus, EU law. Therefore, contrary to what the

Advocate General proposed (see EU Tax Alert edition

no. 107, July 2012), the CJ considered that the condition

under Article 51(1) of the Charter was fulfilled and it thus

had jurisdiction to answer the questions referred by the

District Court.

As regards the substantive question, the CJ pointed out

that the ne bis in idem principle would only preclude a

prosecution for tax evasion subsequent to administrative

proceedings concerning the same act if the tax penalties

CJ rules that the ne bis in idem principle of the EU Charter of Fundamental Rights does not preclude the imposition of combined tax penalties and criminal penalties for non-compliance with VAT obligations (Åkerberg) On 26 February 2013, the CJ issued its judgment in the

case Åkerberg (C-617/10) concerning the interpretation

of the principle of ne bis in idem set out in the EU

Charter of Fundamental Rights (‘Charter’) with regard to

Swedish legislation pursuant to which the same act of

non-compliance with tax obligations may entail both tax

penalties and criminal penalties.

Article 50 of the Charter lays down the ne bis in idem

principle: ‘No one shall be liable to be tried or punished

again in criminal proceedings for an offence for which he

or she has already been finally

acquitted or convicted within the Union in accordance

with the law’.

Mr Åkerberg, a self-employed fisherman residing and

working in Sweden, provided false information in his

tax returns for the fiscal years 2004 and 2005 which

resulted in a loss of tax revenue, including VAT, for the

Swedish treasury. In 2007, the Tax Board (Skatteverket)

imposed tax penalties on the taxpayer a part of which

related to the evasion of VAT. No proceedings were

brought to challenge these penalties which, thus,

became final. In 2009, the Public Prosecutor initiated

criminal proceedings against the taxpayer before the

Haparanda District Court based on the same act of

providing false information as had been the basis of the

decision imposing tax penalties. The question arose

before the District Court whether the ne bis in idem

principle set out in Article 50 of the Charter as well as in

Article 4 of Protocol No 7 of the European Convention

on Human Rights (‘ECHR’) is to be interpreted in a way

that it requires the criminal charges to be dismissed on

the ground that the taxpayer has already been punished

for the same act in administrative proceedings. The

District Court stayed the proceedings and referred

several questions to the CJ for a preliminary ruling.

First, the CJ addressed the question whether it had

jurisdiction to interpret in the case at issue the ne

6 7

A Oy is a Finnish resident company which holds all the

shares in the Swedish company B AB. This subsidiary

company had ceased its trading activities and incurred

losses for the period from 2001 to 2007. The Finnish

company planned a merger with its Swedish subsidiary,

which would result in the dissolution of such subsidiary

and the acquisition of all its assets by the Finnish parent

company.

Under Finnish legislation, upon a merger of companies,

the receiving company shall have the right to deduct

from its taxable income any loss made by the merged

entity, provided certain conditions are met. Such

possibility is excluded, however, with regard to losses

from business activity which is not subject to Finnish

taxation (foreign accumulated losses).

The first question dealt with by the CJ was whether the

abovementioned limitation in cross-border situations

constituted a breach of the freedom of establishment.

The CJ considered that the possibility granted by

Finnish law to a resident parent company of taking into

account a resident subsidiary’s losses when it merges

with that subsidiary constitutes a tax advantage for the

parent company. The fact that is not possible to take

over the losses of a foreign subsidiary makes it less

attractive to set up subsidiaries in another Member

State. The CJ considered that, looking to the aim

pursued by the national provisions at stake – allow

the parent company to benefit from a tax advantage

consisting of being able to deduct from tax the losses

incurred by the subsidiary – makes domestic and cross-

border situations objectively comparable. The difference

in treatment by the Finnish tax legislation constitutes a

restriction to the freedom of establishment.

Turning to the analysis of the possible justifications,

the CJ confirmed that such restriction was, in principle,

justified based on three justifications taken together:

balanced allocation of the powers to tax, prevent the

double use of losses, and tax avoidance. However, the

Court continued by examining whether the legislation

at stake goes beyond what is necessary to attain

those objectives. In that regard, the CJ recalled that

it is previous case law which held that legislation is

which had been imposed on the defendant in the

administrative proceedings by means of a final decision

are of a criminal nature. Whether the tax penalties at

issue are criminal in nature needs to be determined by

the referring court in the light of three criteria namely

(i) the legal classification of the offence under national

law, (ii) the very nature of the offence, and (iii) the nature

and degree of severity of the penalty that the person

concerned is liable to incur.

State Aid‘Compulsory voluntary levy’ does not amount to State aid according to Advocate General (Doux Élevage SNC) On 31 January 2013, Advocate General Wathelet

rendered his Opinion in the case Doux Élevage SNC

(C-677/11). A number of companies had filed an appeal

at the French Counseil d’État arguing that a levy

imposed on them on behalf of a sectoral organisation

was meant to finance unlawfully granted aid, given that

the levy outweighed the benefits they receive from the

activities of that organisation. The Advocate General

proposed to the Court to hold that the intervention of

a national authority to impose a voluntary levy by a

sectoral organisation on all companies within a sector to

avoid free riders does not to amount to State aid, as it

does not lead to the use of State resources but of funds

from economic subjects. He does point out, however,

that such levy can run afoul of other primary EU law, an

issue not addressed by the referring court.

Direct TaxationFinnish rules on deductibility of losses upon merger of companies of different Member States in breach of the freedom of establishment (A Oy) On 21 February 2013, the CJ delivered its judgment

in the case A Oy (C-123/11). The case deals with the

compatibility of Finnish rules on the deductibility of

losses upon a cross-border merger with the freedom of

establishment set out under Articles 49 and 54 TFEU.

7

Belgian tax law imposes an annual tax on insurance

transactions, if the insured risk is located in Belgium.

That is deemed the case if the policyholder has his

or her habitual residence in Belgium. In the case

at issue, a Netherlands insurance company, RVS

Levensverzekeringen, entered into life assurance

contracts with Netherlands residents who have

since moved to Belgium. Having paid to the Belgian

State the tax on insurance transactions which was

due during the Belgian residency of its clients, RVS

Levensverzekeringen sought a refund of the tax.

Belgian law mirrors the wording of the Life Assurance

Directive concerning the allocation of taxation rights over

life assurance contracts. The Directive provides, under

Article 50(1), that every assurance contract shall be

subject exclusively to the indirect taxes and parafiscal

charges on assurance premiums in the Member State

of the commitment. The ’Member State of commitment’

is defined in Article 1(1)(g) of the Directive as the

State in which the policyholder has his or her habitual

residence. According to RVS Levensverzekeringen, the

Directive must be interpreted as giving taxation rights

to the Member State of which the policyholder is a

resident at the time of the conclusion of the assurance

contract. Belgium, on the other hand, applies a dynamic

interpretation of the provision to the effect that the

attribution of taxation rights may vary over time if the

policyholder changes his or her residence during the

term of the contract.

First, the CJ noted that the Life Assurance Directive

was adopted having regard to the need to complete

the internal market in direct life assurance, from the

point of view both of the right of establishment and of

the freedom to provide services, to make it easier for

assurance undertakings with head offices in the EU

to cover commitments situated within the EU. Indirect

taxation of life assurance transactions has not been

harmonised at EU level. Some Member States do

not subject assurance transactions to any form of

indirect taxation while others apply special taxes and

other forms of contribution, the structure and rate of

which vary considerably. The EU legislature sought to

prevent existing differences from leading to distortions

not considered proportional in case the non-resident

subsidiary has exhausted the possibilities available in

its State of residence of having the losses taken into

account. In that event, it is for the parent company to

demonstrate that the subsidiary has exhausted all the

possibilities of taking account of the losses which it had

incurred in Sweden. Therefore, the Court concluded

that the Finnish legislation is incompatible with EU law

to the extent that it does not allow the parent company

the possibility of showing that its non-resident subsidiary

has exhausted the possibilities of taking those losses

into account and that there is no possibility of their being

taken into account in its State of residence in respect of

future years, either by itself or by a third party.

The other question dealt with by CJ concerned the

calculation of the loss and whether it should be

calculated in accordance with the rules of the State

of residence of the parent company or that of the

subsidiary. According to the Court, in the present state

of EU Law, the freedom of establishment in principle

does not imply the application of a particular law to the

calculation of the losses. Nevertheless, the CJ stated

that the applied method must not lead to unequal

treatment compared with the calculation which would

have been made in a similar case for the taking over of

the losses of a resident subsidiary.

CJ holds that insurance premium tax is to be paid in the Member State where the policyholder resides at the time of the payment of the premium (RVS Levensverzekeringen)On 21 February 2013, the CJ rendered its judgment

in the case of RVS Levensverzekeringen (C-243/11)

regarding the interpretation of Directive 2002/83/EC

(‘Life Assurance Directive’) – in the meantime repealed

by Directive 2009/138/EC with effect from 1 November

2012 – as regards the question where the assurance

premium tax is to be paid in the case of change of

residence of the policyholder after the conclusion of

a life assurance contract. The CJ did not follow the

interpretation proposed by Advocate General Kokott

in her Opinion of 6 September 2012 (see EU Tax Alert

edition no. 109, October 2012).

8 9

interpretation of the Directive incompatible with the

freedom to provide services.

CJ holds that the refusal of the German ‘splitting method’ to frontier workers violates the EC-Switzerland Agreement on the free movement of persons (Ettwein) On 28 February 2013, the CJ rendered its judgment

in the case Ettwein (C-425/11) regarding the free

movement of (self-employed) persons under the

Agreement concluded between the European

Community and its Member States, on the one hand,

and Switzerland, on the other (‘EC-Switzerland

Agreement’).

The underlying case concerns Mrs Ettwein and her

husband, both of whom are German nationals and

pursue a self-employed professional activity in Germany.

Mrs and Mr Ettwein moved their place of residence

to Switzerland on 1 August 2007. They continued to

pursue their professional activity in Germany earning

almost all their income in Germany. In their 2008

personal income tax return, they applied, as they had

done in the previous years, for joint taxation under the

splitting method.

The German tax authorities rejected this on the ground

that the splitting method was not applicable to Mrs and

Mr Ettwein, as their residence was neither in Germany,

nor in one of the Member States of the European

Union, nor in a State which is a party to the European

Economic Area (‘EEA’). Mrs and Mr Ettwein challenged

the rejection before the Finance Court of Baden

Württemberg which referred a question for a preliminary

ruling to the CJ on the interpretation of the relevant

provisions of the EC-Switzerland Agreement.

Advocate General Jääskinen delivered his Opinion in

this case on 18 October 2012, concluding that Mrs and

Mr Ettwein, as they pursue a self-employed activity in

the Member State of which they are nationals, do not

derive rights from the provisions of the EC-Switzerland

Agreement (for details see EU Tax Alert edition no. 110,

November 2012).

of competition in assurance services between Member

States by designating the ‘Member State of commitment’

as the Member State which has the right to tax

assurance contracts.

The CJ found that an interpretation based on the

wording of the relevant provisions of the Directive

permits both the static and the dynamic approaches.

Therefore, it had regard to the objectives pursued by

both Article 50(1) and the Directive as a whole. First,

Article 50(1) of the Directive aims at eliminating double

taxation as regards indirect taxation of life assurance

premiums. The CJ found that the criterion chosen by the

EU legislature entailed that a connection should exist

between the territory of the Member State competent

to levy the tax and the policyholder. As the chargeable

event is the payment of the premiums and not the

conclusion of the contract, it follows that the Member

State competent to levy the indirect tax should be

the Member State with which the policyholder has a

connection at the time of the payment of the premium.

Second, the Directive aims to prevent distortion of

competition between assurance undertakings by linking

the competence over taxation of assurance premiums to

the habitual residence of the policyholder. The CJ found

that only the dynamic interpretation can ensure that the

same tax treatment will be applied to existing and new

contracts. Indeed, if the Directive allowed a policyholder

to retain, after a change in his habitual residence, the

more favourable tax treatment of the Member State in

which the contract was concluded, this would deter the

policyholder from changing assurance undertaking.

Therefore, the objective pursued by Article 50(1) of

the Directive calls for the dynamic interpretation. Then

the CJ examined whether such an interpretation is

compatible with the general objective of the Directive,

namely, the completion of the internal market in direct

life assurance, in particular, from the point of view of the

freedom to provide services. The CJ considered that,

although assurance undertakings may face an additional

administrative burden due to the change of the tax

rules applicable to the assurance contract upon the

policyholder’s change of residence or the need to follow-

up the habitual residence of the policyholder throughout

the term of the contract, this does not make the dynamic

9

parties from distinguishing, when applying the relevant

provisions of their fiscal legislation, between taxpayers

whose situations are not comparable, especially as

regards their place of residence. The CJ emphasised

that this provision allows a different treatment of

residents and non-residents only in the case when they

are not comparable. The CJ ruled that based on the

Schumacker case (C-279/93) and the Asscher case

(C-107/94), the situation of Mrs and Mr Ettwein was

comparable to the situation of a German resident person

pursuing a self-employed activity in Germany, as they

both earned almost all their income in Germany and had

elected for unlimited tax liability in Germany while their

personal and family circumstances could not be taken

into account in their State of residence, as they did not

receive income there.

Consequently, the CJ ruled that the EC-Switzerland

Agreement precludes legislation of a Member State

which refuses the benefit of joint taxation with the use

of the ‘splitting’ method to spouses who are nationals

of that State and subject to income tax in that State

on their entire taxable income, on the sole ground that

their residence is situated in the territory of the Swiss

Confederation.

CJ rules that the method used by Germany for calculating foreign tax credit is contrary to the free movement of capital (Beker and Beker) On 28 February 2013, the CJ rendered its judgment in

the case Beker and Beker (C-168/11) concerning the

compatibility of German rules on the computation of

the maximum tax credit granted to resident taxpayers

deriving income from abroad with EU law. In particular,

the question raised in this case is in which way the

Member State of residence has to take into account

the allowances that it grants with respect to the

taxpayer’s personal and family circumstances (‘personal

allowances’) when calculating the amount of tax paid in

another State which can be credited against the tax due

in that State.

In Germany, the maximum tax credit for natural persons

is calculated as follows. First, the amount of tax which

The CJ did not follow the Opinion of the Advocate

General insofar as it concluded that the situation of

Mrs and Mr Ettwein does fall within the scope of the

EC-Switzerland Agreement. It rejected the argument of

the German Government and the Commission that the

EC-Switzerland Agreement applies solely where there

is discrimination on grounds of nationality, that is, where

nationals of one contracting party are treated unequally

in the territory of the other contracting party compared to

its own nationals. The CJ referred to the Bergström case

(C-257/10), in which it was clarified that under certain

circumstances and in accordance with the provisions

applicable, nationals of a contracting party may also

claim rights under the EC-Switzerland Agreement

against their own country.

Thereafter, the CJ stated that Mrs and Mr Ettwein qualify

as ‘self-employed frontier workers’ under the terms of

the EC-Switzerland Agreement. It pointed out that the

concept of ‘self-employed frontier worker’ differs from

the concept of ‘self-employed person’ and therefore,

the condition under the latter concept according to

which a national of a contracting party should establish

himself in the territory of the other contracting party in

order to pursue self-employed activity there does not

apply to self-employed frontier workers. The difference

is reinforced by the fact that self-employed frontier

workers, unlike self-employed persons, are not required

to obtain a residence permit in order to pursue a self-

employed activity. Further, it is of relevance that the

Agreement grants the right of residence regardless

of the pursuit of an economic activity. According to

the CJ, it is frontier workers who in particular must be

able to benefit fully from that right of residence, while

maintaining their economic activity in their country of

origin.

As self-employed frontier workers, Mrs and Mr Ettwein

are entitled, according to the provisions of the EC-

Switzerland Agreement, to equal treatment in the host

country, i.e. Germany, also as regards tax concessions.

The CJ then ruled on whether such conclusion was

affected by Article 21(2) of the Agreement. The latter

provides that no provision of the Agreement may be

interpreted in such a way as to prevent the contracting

10 11

influence over the company paying the dividends such

rules must be assessed under the provisions of the

free movement of capital. Thus, the CJ held that the

contested rules had to be considered exclusively in the

light of the free movement of capital.

In examining whether the calculation by Germany of

the maximum tax credit restricts the free movement of

capital, the CJ pointed out that such calculation has

the result that the State of residence grants personal

allowances to taxpayers who earn foreign income only

in proportion to their domestic income. A proportion

of those allowances is thus not taken into account by

Germany in calculating those taxpayers’ income tax.

According to the De Groot case (C-385/00), it is a matter

for the State of residence, in principle, to grant the

taxpayer all the tax allowances relating to his personal

and family circumstances. The Member State in which

the income originated is required to take into account

personal and family circumstances only where the

taxpayer receives almost all or all of his taxable income

in that State and where he has no significant income

in his State of residence, so that the latter is not in a

position to grant him the related advantages. The CJ

ruled that these principles are fully transposable to the

present case, despite the fact that the De Groot case

concerned the free movement of workers instead of

capital and its facts differed from those of the present

case. It is also not relevant in this respect that De Groot

concerned the tax exemption method given that the

calculation under the version of the exemption method

applied by the Netherlands in that case is substantially

similar to the calculation under the credit method at

issue in the present case.

Thus, due to the calculation of the maximum credit by

Germany, taxpayers who earn some of their income

abroad are disadvantaged compared with taxpayers

who earn all of their income in the State of residence.

This difference in treatment constitutes a restriction on

the free movement of capital.

This restriction cannot be justified, according to the

CJ, by the preservation of the allocation of the power

would have been due if all the income were generated

in Germany is calculated by taking into account the

aggregate income of the taxpayer reduced by the

personal allowances due. Then, the amount of tax

credit is calculated. The income from the foreign State

is divided by the total income of the taxpayer without

taking into account the personal allowances of the

taxpayer. Subsequently, this fraction is multiplied by the

amount of the German tax which would have been due

if all the income were generated in Germany. This is the

maximum amount of foreign tax which can be credited

against the German tax due.

The taxpayers in this case, Mr Beker and Mrs Beker, are

liable to unlimited taxation in Germany. They earn the

greater part of their income in Germany, but have some

small investments in the form of shares in companies

resident in other Member States and third States. Upon

these shares, dividend was distributed and dividend

withholding tax was withheld in the source States. In

the main proceedings, the taxpayers argued that the

calculation by Germany of the maximum tax credit

granted with regard to the foreign dividend withholding

tax is in conflict with the free movement of capital as laid

down in Article 63 TFEU.

As regards the question of which freedom is applicable

to the case, the CJ ruled, making reference to the Test

Claimants in the FII Group Litigation case (C-35/11),

that the purpose of the legislation concerned must be

taken into consideration. The German rules at issue

apply regardless of the amount of shareholding in a

company. Insofar as those rules relate to dividends

which originate in a Member State, it cannot, having

regard to the purpose of the rule, be determined if the

rules fall under the freedom of capital or the freedom of

establishment. Therefore, the CJ took into account the

facts of the underlying case. The shareholdings held by

the Beker couple amount to less than 10% of the capital

in the companies. Consequently, they do not have a

definite influence within the meaning of the case law,

therefore, the free movement of capital is applicable.

As regards the dividends from third country companies,

when the national rules at issue do not apply exclusively

to situations in which the shareholder exercises decisive

11

discriminatory, having regard to the fact that the same

interest paid to Belgian investment companies or

relating to securities deposited or credited to financial

bodies established in Belgium is exempt from property

tax.

According to the Commission, the above provisions

create unjustified restrictions on the freedom to provide

services and the free movement of capital. If Belgium

does not comply with the reasoned opinion within two

months, the Commission may refer the case to the CJ.

Commission requests Belgium to amend tax reductions in the Flemish regionOn 21 February 2013, the Commission sent Belgium

a reasoned opinion requesting it to amend its tax rules

on the so-called ‘Win-win-loan’ (‘Winwinlening’: ‘Prêt

gagnant-gagnant’) venture capital scheme.

Under Belgian legislation, more specifically Flemish

regional legislation, a tax reduction is granted for loans

from residents of the Flemish region to businesses

established in that region, while the same reduction is

not available for non-residents receiving their income in

Belgium.

According to the Commission, the above rules are not

compatible with the free movement of workers and the

freedom of establishment set out under Articles 45 and

of the 49 TFEU. If Belgium does not comply with the

request within two months, the Commission may refer

the case to the CJ.

Commission refers Belgium to the CJ over discriminatory tax reduction for Walloon tax residents On 21 February 2013, the Commission announced that

it had referred Belgium to the CJ, as the last step in an

infringement procedure, on account of a discriminatory

tax reduction provided by the Walloon Region.

The Walloon Region provides to its residents that invest

in the public company, ‘Caisse d’Investissement de

Wallonie’ (Investment Fund of Wallonia) a tax reduction

to impose tax between Member States. The German

government argued that for the purposes of crediting

foreign withholding tax, that principle implies that it is

possible to deduct expenses or costs only when they

are directly linked to the tax revenue coming under a

Member State’s power to impose taxes and thus, the

State of residence is not obliged to compensate for

disadvantages linked to the failure to take into account

the taxpayers’ personal circumstances by the State

of source of the income. The CJ, however, held that

such justification cannot be invoked by a taxpayer’s

State of residence in order to evade its responsibility in

principle to grant to the taxpayer the personal and family

allowances to which he is entitled, unless, of their own

accord or as a consequence of specific international

agreements, the States in which one part of the

income is received grant such allowances. Moreover,

if Germany fully grants the benefit of the personal

allowances to the taxpayers it will not forgo part of its

tax jurisdiction to other Member States. According to the

CJ, the income received in Germany by the taxpayers

is not taxed less than if it constituted the only income

received by the persons concerned and the latter had

not received foreign income.

Finally, the CJ stated that the fact that German

law grants an option to the taxpayer to choose the

deduction of the foreign tax from the tax base as an

expense instead of a foreign tax credit does not rectify

the infringement of EU law entailed by the German

mechanism of applying the credit method.

Commission asks Belgium to change its taxation of paid interestOn 21 February 2013, the Commission requested

Belgium to amend its legislation on taxation of paid

interest. The request takes the form of a reasoned

opinion (second stage of the infringement procedure

under Article 258 TFEU).

The Commission considers that the property tax

imposed on the interest paid to foreign investment

companies and the taxation of interest relating to

securities deposited or credited to the accounts of

financial institutions established outside Belgium is

12 13

Commission asks Spain to amend inheritance and gift tax rules in the Historical Territories of Alava and Bizkaia On 21 February 2013, the Commission requested Spain

to amend the provisions of the inheritance and gift

tax legislation of the Historical Territories of Alava and

Bizkaia, which the Commission considers to be contrary

to the free movement of capital. The Commission’s

request takes the form of a reasoned opinion.

Under these tax provisions, public debt issued by the

local administrations benefits from a preferential tax

treatment. This means that titles of public debt from

these administrations are taxed less than other similar

titles after inheritance. This tax treatment discriminates

against investments in public debt issued by other EU

Member States or EEA States.

If the legislation is not brought into compliance with EU

law within two months, the Commission may refer the

matter to the CJ.

Public consultations on EU Taxpayer’s Code and EU Tax Identification Number On 25 February 2013, the Commission launched two

public consultations on specific measures which could

improve tax collection and ensure better tax compliance

across the EU.

The first consultation is on the development of a

European Taxpayer’s Code, which would clarify the

rights and obligations of both taxpayers and tax

authorities. Most Member States have established

taxpayer’s codes, which, however, vary considerably

from one Member State to another. This makes it

difficult for citizens and companies to understand their

rights in different Member States and comply with their

tax obligations in cross-border situations.

The second consultation is on a European Tax

Identification Number (EU TIN), which would facilitate

the proper identification of taxpayers in the EU. Given

the increased mobility of people and more cross-border

nature of economic activity, Member States also find it

for personal income tax purposes. The Commission

considers that excluding non-residents who earn their

income in the Walloon Region from this reduction

is discriminatory and restricts the free movement of

workers.

Regions in Belgium have a limited fiscal autonomy

to impose or reduce personal income tax. They may

provide for tax reductions but the federal law limits

their competence to residents of their Region. Thus,

inherently, the law providing for the fiscal autonomy

leads to conflict with EU law. It must be noted that

since the regional fiscal autonomy has been instated in

Belgium four tax measures have been questioned by

the Commission in infringement procedures (inheritance

tax in the Walloon Region, the aforementioned

“winwinlening” of the Flemish region and the property

transfer tax in the Brussels Region).

Commission requests Romania to review its taxation of foreign businesses On 21 February 2013, the Commission requested

Romania to amend its discriminatory tax treatment of

foreign companies. The Commission’s request takes the

form of a reasoned opinion.

Under Romanian tax law, a foreign business with

several establishments in Romania is subject to

corporate taxation on each of the establishments

individually, despite the fact that these do not have

separate legal personality. The impossibility for a

foreign taxpayer to consolidate the results of all its

establishments in Romania amounts to a cash-flow

disadvantage or higher taxation for the foreign legal

entity. According to the Commission, such restriction

is contrary to the freedom of establishment set out in

Article 49 TFEU.

If the legislation is not brought into compliance with EU

law within two months, the Commission may refer the

matter to the CJ.

13

mainly concerned a different issue, it can be inferred

from it that according to the CJ, the tax deductibility of a

part of a fine imposed by the Commission can affect the

effectiveness of the fine. Reference was also made to a

similar case brought before the General Court in which

the General Court considered that the EU Commission,

in determining the fine, takes into account the fact that

the fine is to be paid from the profits after taxation as

otherwise, the Member State would have to bear part of

the fine (Case T-10/89 Hoechst AG).

Taking into account the aforementioned positions of

the CJ and the General Court, the Constitutional Court,

referring to the principle of loyal cooperation (Article

4(3) TEU), concluded that Belgian tax law must be thus

interpreted in such way that EU competition fines qualify

as non-deductible expenses.

VAT CJ rules on deduction of VAT (improperly) entered on invoices (Stroy Trans and LVK – 56) On 31 January 2013, the CJ delivered its judgments

in the Stroy Trans and LVK – 56 cases (C-642/11 and

C-643/11). These cases, which were not joined in the

proceedings, both revolved around the question whether

VAT (improperly) entered on an invoice was deductible

by the recipient of the invoice.

Case C-642/11 concerned the Bulgarian company,

Stroy Trans EOOD (‘Stroy Trans’), whose activities

consisted of road freight transport and the provision

of mechanized services with special equipment. Stroy

Trans purchased diesel fuel and deducted the VAT

entered on the invoices issued for those purchases.

Following an audit of the suppliers of the diesel fuel, the

Bulgarian tax authorities denied the deduction of the

VAT on the grounds that it could not be established how

the suppliers had purchased the diesel fuel and that

there were no actual supplies of the diesel fuel to Stroy

Trans.

increasingly difficult to identify taxpayers properly. This

can undermine national efforts to collect taxes properly,

lead to situations of double non-taxation, and even

facilitate tax fraud and evasion.

The Commission indicated that the aim of the public

consultations is to gather examples of best practices

in the Member States on collecting data on taxpayers’

identities as well as taxpayer compliance and

transparency. The consultations run until 17 May 2013.

The results of the consultations will be used to identify

and develop the appropriate policy responses by the

end of 2013.

Both the Taxpayer’s Code and the EU TIN were

among the measures proposed by the Commission in

December 2012 in its Action Plan to tackle tax fraud and

evasion (see EU Tax Alert edition no. 111, December

2012).

Developments in Belgium: Constitutional Court rules that EU competition fines are not tax deductible On 20 December 2012, the Belgian Constitutional

Court delivered a judgment in which it held that EU

competition fines are not tax deductible under Belgian

tax law, as such tax deduction would be an infringement

of Belgium’s obligation to refrain from any measures that

could jeopardize the realization of the goals of the EU.

The tax deductibility of EU competition fines has

been disputed for several years in Belgian tax law.

Since the issuance of an administrative Circular in

2008, the tax administration has considered that the

general prohibition to deduct fines is to be interpreted

as to include not only criminal sanctions but also

administrative fines and thus, also EU competition fines.

A case finally ended up before the Constitutional

Court in which both the tax administration and the

EU Commission asked the Constitutional Court to

submit a preliminary ruling request to the CJ. However,

the Constitutional Court considered such request

unnecessary, as the CJ has already taken position on

this issue in case X BV (C-29/07). Although this case

14 15

to the CJ, the mere fact that the tax authorities did not

correct the output VAT declared by the issuer of an

invoice does not imply that they acknowledged that the

invoice corresponded to actual taxable transactions.

However, the CJ also ruled that EU VAT law does not

preclude the competent authority from checking whether

actual taxable transactions have taken place and

rectifying, where necessary, the output VAT declared.

According to the CJ, the outcome of such a check is

a factor to be taken into account by the national court

in order to determine whether a taxable transaction

conferring the right to deduct input VAT by the recipient

of an invoice exists.

Finally, the CJ ruled that the principles of fiscal

neutrality, proportionality and the protection of legitimate

expectations do not preclude the recipient of an invoice

from being refused the right to deduct input VAT on

the grounds that there is no taxable transaction, even

if the VAT declared by the issuer of the invoice was

not adjusted in a tax adjustment notice. However, if

the transaction is considered to have been carried out

in the light of VAT fraud or irregularities committed by

the issuer of the invoice or upstream of the transaction

relied on for deduction, the CJ ruled that it should be

established by the referring court whether, based on

objective factors and without requiring the recipient of

the invoice of checks which are not his responsibility,

that the recipient knew or should have known that that

transaction was connected with VAT fraud.

CJ rules that granting access to aquatic park may constitute services closely linked to sports (Město Žamberk)On 21 February 2013, the CJ delivered its judgment in

the case Město Žamberk (C-18/12). Město Žamberk

runs a municipal aquatic park in the Czech Republic. In

return for an entrance fee, the visitors can make use of a

swimming pool divided into several lanes and equipped

with diving boards, a paddling pool for children, water

slides, a massage pool, a natural river for swimming, a

beach-volleyball court, areas for table tennis and sports

equipment for hire. The referring court noted that, to its

knowledge, no sports club or organization carries out its

In case C-643/11, the Bulgarian company LVK – 56

EOOD (‘LVK’), an agricultural producer, purchased

goods from suppliers. LVK deducted the VAT on the

invoices. The Bulgarian tax authorities did a crosscheck

on the two suppliers during which they required the

submission of a number of documents. The suppliers did

not reply within the prescribed time limit. Moreover, LVK

was requested to provide evidence that the supplies

had actually been carried out, but the provided evidence

contained errors. Consequently, the tax authorities took

the view that no supplies had actually been carried out

and that VAT had, therefore, improperly been entered on

the invoices. In this regard, they refused LVK to deduct

the VAT.

Stroy Trans and LVK both maintained that there were

actual supplies and that there was as such no basis

for refusing the right to deduction. In this regard, both

taxpayers referred to tax adjustment notices issued

to their suppliers. In these tax adjustment notices, the

output VAT declared by the suppliers on the sales, as

entered on the invoices issued to Stroy Trans and LVK

respectively, was not adjusted. According to Stroy Trans

and LVK, the fact that the output VAT was not adjusted,

proved that the supplies by the suppliers to Stroy Trans

and LVK respectively had actually taken place.

Eventually the cases ended up before the

Administrativen Court of Varna, which decided to refer

preliminary questions to the CJ in both proceedings in

order to find out, based on Article 203 of the EU VAT

Directive, what the significance is of the tax adjustment

notices addressed to Stroy Trans’ and LVK’s suppliers

and whether it is possible to infer from them that the

tax authorities acknowledged that the invoices at issue

corresponded to taxable transactions which were

actually carried out.

Based on settled case law, the CJ pointed out that

the issuer of an invoice can, under certain conditions,

correct improperly invoiced VAT. If such correction has

not taken place, the CJ ruled that the tax authorities are

not obliged in the context of a tax audit to determine

whether the VAT invoiced and declared corresponded

to taxable transactions actually carried out. According

15

the facilities constitutes, according to the CJ, a strong

indication of the existence of a single supply.

If the referring court established that there is a single

supply for VAT purposes, the CJ ruled that the referring

court should subsequently establish which element

of that supply is predominant from the point of view

of the typical customer. In this regard, according to

the CJ, it is necessary to take account of the design

and characteristics of the aquatic park and as regards

the aquatic areas, in particular, whether those areas

lend themselves to swimming of a sporting nature or

whether they are arranged so that they lend themselves

essentially to recreational use. Should the sporting

activities form the predominant element of the supply

from the point of view of the customer, the access to

the aquatic park, which offers visitors not only facilities

for engaging in sporting activities but also other types

of amusement or rest, constitutes a supply of services

closely linked to sport within the meaning of the VAT

exemption of Article 132(1)(m) of the EU VAT Directive.

CJ rules that VAT on legal costs for criminal proceedings brought against managing directors in their personal capacity is not deductible by the company (Wolfram Becker)On 21 February 2013, the CJ delivered its judgment

in the Wolfram Becker case (C-104/12). Mr Becker

was the majority shareholder in the German company

A-GmbH, which carried out construction works. A-GmbH

had three managing directors amongst which Mr Becker

and P, the authorized representative of A-GmbH. Mr

Becker and A-GmbH formed a VAT fiscal unity in which

Mr Becker, as the controlling entity, took responsibility

for the fiscal obligations of the VAT fiscal unity.

After A-GmbH had won and performed a construction

contract, criminal proceedings were brought against

Mr Becker and P, because A-GmbH was suspected of

having won the construction contract due to bribery.

However, the criminal proceedings against Mr Becker

and P were discontinued after payments of amounts

pursuant to the German Code of Criminal Procedure.

activities on the site and no school or other body used

the site for physical education.

In its VAT return, Město Žamberk requested a VAT

refund. The tax authorities considered, however, that

the services supplied by the municipal aquatic park of

Město Žamberk constituted exempt services without

a right to deduct VAT and, therefore, only granted a

partial VAT refund. Eventually, the case came before

the Supreme Administrative Court, which referred

preliminary questions to the CJ asking whether non-

organized and unsystematic sporting activities may be

categorized as ‘taking part in sport’ within the meaning

of the VAT exemption of Article 132(1)(m) of the EU

VAT Directive. In this regard, it also raised the question

whether the fact that an aquatic park such that at issue

in the main proceedings offers its visitors not only the

opportunity to take part in certain sporting activities

but also amusement or rest, and whether the fact that

the intention of all visitors is not necessarily to take

part in sporting activities, may have an effect on the

applicability of Article 132(1)(m) of the EU VAT Directive.

According to the CJ, the provision of Article 132(1)(m) of

the EU VAT Directive has the objective of encouraging

certain activities in the public interest. As regards

sporting activities, it would be counter to that object,

according to the CJ, to limit the scope of the application

of the exemption to sporting activities which are

engaged in an organized or systematic manner or aimed

at participation in sports competitions. Consequently, the

CJ ruled that non-organized and unsystematic sporting

activities which are not aimed at participation in sports

competitions may be categorized as taking part in sport

within the meaning of Article 132(1)(m) of the EU VAT

Directive.

In the case of an aquatic park that offers visitors not

only facilities for engaging in sporting activities but also

other types of amusement or rest, the CJ ruled that the

referring court should first establish whether a single

supply for VAT purposes has to be taken into account

or multiple supplies each with their own VAT treatment.

The fact that there is only one type of entrance ticket

offered for the aquatic park that gives access to all of

16 17

Advocate General opines on place of supply of storage services (RR Donnelley)On 31 January 2013, Advocate General Kokott delivered

her Opinion in the RR Donnelley case (C-155/12).

RR Donnelley Global Turnkey Solutions Poland Sp.

Z o.o. (‘RR Donnelley’), a Polish company, provided

storage services to companies in other EU Member

States and to companies in non-Member States. Those

services included admitting the goods to the warehouse,

placing the goods on storage shelves, storing the goods,

packaging the goods, issuing the goods, unloading and

loading. The services could also include repackaging

materials supplied in collective packaging into individual

sets.

RR Donnelley applied to the Polish tax authorities for

an interpretation of Polish VAT law in respect of these

activities. In particular, RR Donnelley inquired whether

the services were taxable in Poland. According to the

Polish Minister for Finance, the services qualified as

services connected with immovable property within

the meaning of Article 47 of the EU VAT Directive and,

as such, were taxable in Poland if the warehouse

was situated in Poland. RR Donnelley took the view,

however, that the services were taxable in the country of

the recipient of the service under the main rule of Article

44 of the EU VAT Directive. Eventually the matter ended

up before the Supreme Administrative Court, which

decided to refer preliminary questions to the CJ.

According to the Advocate General, the referring court

should first establish whether the various elements of

the services rendered should be taken into account as

a single service from a VAT point of view or as multiple

separate services. The Advocate General assumed, in

particular based on the preliminary questions referred,

that a single service has to be taken into account

consisting of the storage of goods.

Moreover, the Advocate General considered that Article

47 of the EU VAT Directive requires a sufficiently direct

connection between the service and the immovable

property. According to the Advocate General, this

sufficiently direct connection exists if the service has the

In the context of the criminal investigation proceedings,

Mr Becker and P were each represented by their

respective lawyers. The agreements with the lawyers

were signed by A-GmbH, represented by Mr Becker and

P. The invoices for the services were sent to A-GmbH.

Mr Becker, as controlling entity in the VAT fiscal unity,

deducted the VAT charged on the invoices. The Federal

Finance Court had doubts as to whether the VAT on

the services was deductible by A-GmbH and decided to

refer preliminary questions to the CJ.

The CJ ruled that the services by the lawyers sought

directly and immediately to protect the private interests

of the two accused managing directors, who were

charged with offences relating to their personal

behaviour. In this regard, the CJ took into account that

the criminal proceedings had been brought against them

in their personal capacity and not against A-GmbH,

although proceedings against A-GmbH would have

also been legally possible. As such, the costs relating

to those services could not, according to the CJ, be

considered as having been incurred for the purposes of

the economic activities of A-GmbH as a whole.

Moreover, the CJ acknowledged that the services by

the lawyers would not have been performed if A-GmbH

had not exercised the VAT taxable construction activities

and that, therefore, there was a causal link between the

two. However, according to the CJ, it did not concern a

direct and immediate link. Consequently, the CJ ruled

that the services by the lawyers were not used for the

purposes of taxable transactions within the meaning

of Article 17(2)(a) of the Sixth EU VAT Directive and

the VAT on the costs incurred was, therefore, not

deductible by A-GmbH. In this regard, the fact that

domestic civil law obliged a company to incur the costs

relating to criminal proceedings of its representative’s

interests was, according to the CJ, irrelevant as only the

objective relationship between the services performed

and the taxable economic activity was decisive for VAT

purposes.

17

detriment of traders in other EU Member States. The

Commission decided to refer the matter to the CJ,

because France and Luxembourg did not bring their

legislation into line following the Commission’s reasoned

opinion of 24 October 2012.

Commission refers UK to CJ for its reduced VAT rate on supply and installation of energy-saving materials On 21 February 2013, the Commission referred the

United Kingdom to the CJ for its reduced VAT rate on

the supply and installation of energy-saving materials.

According to the Commission, Member States may

apply reduced VAT rates to the supply of goods and

services used in the housing sector, as long as this

is part of social policy. However, the Commission

indicates that there is no provision in the VAT Directive

to allow a reduced VAT rate on ‘energy saving materials’

specifically, and that the universal application of a

reduced rate for energy saving materials is therefore not

allowed.

Commission requests Poland to amend its legislation on reduced VAT ratesPoland applies a reduced VAT rate to fire protection

goods. According to the Commission, this is not

allowed based on the EU VAT Directive. Therefore, the

Commission has sent a reasoned opinion to Poland

in which it requests Poland to bring its legislation

in compliance with EU VAT law. The Commission

may refer the matter to the CJ if the legislation is not

amended within two months.

Customs Duties, Excises and other Indirect TaxesCommission refers Hungary to the CJ over tax exemption of pálinka On 21 February 2013, the Commission decided to

refer Hungary to the CJ for granting an exemption from

excise duty to the production of fruit distillates (pálinka).

use of, work on, or assessment of specific immovable

property as its subject-matter or is explicitly listed

in Article 47 of the EU VAT Directive. In this regard,

the Advocate General stated as regards the storage

services, that it is of relevance whether the customer

obtains a right of use of a specific storage area or

whether he is merely to receive the goods back in the

same condition. Consequently, the Advocate General

concluded that services consisting of the storage of

goods are, based on Article 47 of the EU VAT Directive,

taxable in the Member State where the immovable

property is located, if the storage of the goods is the

principal supply of a single service and if that service

is connected with a right to use specific immovable

property or a specific part of such property.

Proposal for derogating measure allowing Latvia to restrict the right to deduct VAT on cars Articles 168 and 168a of the EU VAT Directive

provide that a taxable person is entitled to deduct VAT

charged on purchases made for the purposes of taxed

transactions. In the case of private use, Article 26(1)(a)

provides that a correction should be made of the VAT

initially deducted. As the split in private and business

use is difficult to apply to passenger cars, Latvia has

requested for a derogating measure allowing it to limit

to 80% the right to deduct VAT on expenditure on

passenger cars not wholly used for business purposes.

On 12 February 2013, the Commission published a

proposal for a Council Decision with respect to this

derogating measure.

Commission refers France and Luxembourg to CJ over VAT rates on e-books On 21 February 2013, the Commission announced

that it had decided to refer France and Luxembourg to

the CJ for applying reduced rates of VAT to e-books.

According to the Commission, the provision of e-books

is an electronically provided service and as such, cannot

benefit from a reduced rate based on EU VAT law. The

Commission indicates that application of the reduced

VAT rate on e-books by France and Luxembourg has

resulted in serious distortions of competition to the

18

Hungary exempts pálinka from excise duty when it is

produced by households or distilleries for personal use,

up to a maximum of 50 litres a year. However, Directive

92/83/EEC allows Hungary to grant, under such

conditions, only a 50% reduction of the normal excise

rate on pálinka. Since Hungary failed to withdraw the

contested measures as requested by the Commission’s

reasoned opinion (see EU Tax Alert edition no. 107, July

2012), the Commission has now decided to refer the

case to the CJ.

Anti-dumping duty on imports of bio-ethanol of US origin On 23 February 2013, Council implementing Regulation

No 157/2013 came into force. On the basis of this

Regulation, a definitive anti-dumping duty will be

imposed on imports of bio-ethanol, denatured or

undenatured, of US origin that will be used as a fuel.

The rate of the definitive anti-dumping duty shall be

EUR 62.30 per ton net.

An exemption applies to bio-ethanol if it is for other uses

than as use for fuel. The exemption shall be subject

to the conditions laid down in the relevant provisions

of the European Union with a view to customs control

of the use of such goods (see Articles 291 to 300 of

Commission Regulation (EEC) No 2454/93).

19

Correspondents● Peter Adriaansen (Loyens & Loeff Luxembourg)

● Séverine Baranger (Loyens & Loeff Paris)

● Gerard Blokland (Loyens & Loeff Amsterdam)

● Alexander Bosman (Loyens & Loeff Rotterdam)

● Kees Bouwmeester (Loyens & Loeff Amsterdam)

● Almut Breuer (Loyens & Loeff Amsterdam)

● Mark van den Honert (Loyens & Loeff Amsterdam)

● Leen Ketels (Loyens & Loeff Brussel)

● Sarah Van Leynseele (Loyens & Loeff Brussel)

● Raymond Luja (Loyens & Loeff Amsterdam;

Maastricht University)

● Arjan Oosterheert (Loyens & Loeff Amsterdam)

● Lodewijk Reijs (Loyens & Loeff Eindhoven)

● Bruno da Silva (Loyens & Loeff Amsterdam)

● Rita Szudoczky (Loyens & Loeff Amsterdam)

● Patrick Vettenburg (Loyens & Loeff Eindhoven)

● Ruben van der Wilt (Loyens & Loeff Amsterdam)

www.loyensloeff.com

About Loyens & LoeffLoyens & Loeff N.V. is the first firm where attorneys at

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Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:

● René van der Paardt (Loyens & Loeff Rotterdam)

● Thies Sanders (Loyens & Loeff Amsterdam)

● Dennis Weber (Loyens & Loeff Amsterdam;

University of Amsterdam)

Editors● Patricia van Zwet

● Rita Szudoczky

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for

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