Advanced search
Publication Cover
World Journal of VAT/GST Law Volume 2, 2013 - Issue 1
Journal homepage
59
Views
1
CrossRef citations to date
0
Altmetric
Original Articles

Issue of shares and partnership interests, and the look-through approach within the scope of VAT and GST

Caroline Heber Research Assistant, Faculty of Law, University of Sydney, Australia.
Pages 24-45 | Published online: 07 May 2015

  • Chris Bates and Julia Lloyd, ‘Skatteverket v AB SKF: A New Approach to VAT Recovery on a Share Sale' (2010) 1 British Tax Review 31; Ad van Doesum, Herman van Kesteren and Gert-Jan van Norden, ‘Share Disposals and the Right of Deduction of Input VAT' (2010) 19(2) EC Tax Review 73.
  • See Joachim Englisch, ‘VAT/GST and Direct Taxes: Different Purposes' in Michael Lang, Peter Melz and Eleonor Kristoffersson (eds), Value Added Tax and Direct Taxation (IBFD Amsterdam, 2009) 1, 14; Hans Georg Ruppe and Markus Achatz, UStG (Fakultas Verlag, 4th edn 2012) § 1 para 82.
  • Council Directive (EC) 2006/112 of 28 November 2006 on the common system of value added tax, [2006] OJ L347/1 (EU VAT Directive).
  • ibid, Art 1(2).
  • Case C-317/94 Elida Gibbs [1996] ECR I-5339, para 19; Case C-427/98 Kommission/Deutschland [2002] ECR I-8315, para 29; Case C-475/03 Banca Popolare di Cremona [2006] ECR I-9373, para 31; Case C-409/04 The Queen v Commissioners of Customs & Excise [2007] ECR I-7797, para 60.
  • Case C-215/94 Mohr [1996] ECR I-959; Case C-384/95 Landboden-Agrardienste [1997] ECR I-7387.
  • Council Directive (EEC) 67/227 on the harmonisation of legislation of Member States concerning turnover taxes [1967] OJ 71/1301.
  • 8 VAT Directive, Art 167.
  • Council Directive (EC) 77/388 of 17 May 1977 on the harmonisation of the laws of Member States relating to turnover taxes—Common system of value added tax: uniform basis of assessment [1977] OJ L145/1 (Sixth VAT Directive); now Art 168 EU VAT Directive.
  • Case C-174/08 NCC Construction Danmark [2009] ECR I-567, para 39.
  • 11 Different results arise in the in the field of exempt supplies (Art 135 VAT Directive).
  • A New Tax System (Goods and Services Tax) Act 1999 (GST Act).
  • 13 Explanatory Memorandum (EM) to the Bill that became the GST Act.
  • Sterling Guardian Pty Limited v Commissioner of Taxation [2005] FCA 1166, para 15.
  • HP Mercantile Pty Limited v Commissioner of Taxation [2005] FCAFC 126.
  • 16 s 184–1 GST Act.
  • Board of Tax Administration, Issue Paper, ‘Review of the Legal Framework for the Administration of the Goods and Services Tax' (July 2008), para 2.1.1, www.taxboard.gov.au. All websites accessed March 2013.
  • For VAT purposes: Case C-141/00 Ambulanter Pflegedienst Kügler GmbH [2002] ECR I-6833, para 30; Cases C-453/02 and C-462/02 Linneweber und Akritidis [2005] ECR I-1131, paras 24 ff; Case C-246/04 Turnund Sportunion Waldburg [2006] ECR I-589, paras 33 ff; see also Ad van Doesum and Gert-Jan van Norden, ‘T(w)o Become One: The Communication from the Commission on VAT Grouping’ (2009) 6 British Tax Review 657, 660 with reference to Ad van Doesum, Contractuele samenwerkingsverbanden in de btw (Kluwer, 2009) 136, 162–3, 519.
  • See eg RFH 9.9.1938, V 573/37, RStBl 1938, 1165; 20.2.1942, V 91/41, RStBl 1942, 781; 20.6.1941, V 400/39, RStBl 1941, 573; VwGH 9.1.1959, 230/57, ÖStZB 1959, 57; 9.6.1986, 85/15/0285, ÖStZB 1987, 170; 22.9.1987, 86/14/0178, ÖStZB 1988, 229; 23.4.1992, 91/15/0142, ÖStZB 1992, 907; Hans Georg Ruppe and Markus Achatz, ‘Umsatzsteuergesetz Kommentar’ (Fakultas Verlag, 4th edn 2012) § 1 para 82; Rita de la Feria, ‘When do Dealings in Shares Fall within the Scope of VAT?’ (2008) 1 EC Tax Review 24.
  • See eg VwGH 9.6.1986, 85/15/0285, ÖStZB 1987, 170; 15.9.1999, 94/13/0019, ÖStZB 2000, 308.
  • See eg Ruppe and Achatz (n 2) § 1 para 82 with reference to Martin Schauer in Susanne Kalss, Christian Nowotny and Martin Schauer (eds), Gesellschaftsrecht (Manz Verlag, 6th edn 2008) para 1/69.
  • Case C-442/01 KapHag [2003] ECR I-6851.
  • ibid, para 40.
  • ibid, para 43.
  • Case C-465/03 Kretztechnik [2005] ECR I-4357.
  • See eg Case C-60/90 Polysar Investments Netherlands [1991] ECR I-3111, para 13; Case C-77/01 EDM [2004] ECR I-4295, para 57.
  • 27 Case C-437/06 Securenta [2008] ECR I-1597.
  • Case C-515/07 VNLTO [2009] ECR I-839. Within the Austrian VAT system the non-economic and private spheres are treated equally: Werner Doralt and Hans Georg Ruppe, ‘Grundriss des österreichischen Steuerrechts I’ (Manz Verlag, 9th edn 2007) para 1241; UStR 2000, para 479, https://findok.bmf.gv.at. However, the fact that equal treatment of the private and non-economic spheres is not in line with the ECJ's case law was already noticeable in Case C-184/04 Uudenkaupungin kaupunki [2004] ECR I-3039, para 24.
  • 29 Case C-437/06 Securenta (n 27) para 26; Case C-515/07 VNLTO (n 28) para 36.
  • ‘Private purposes’ within the meaning of Arts 16 and 26 of the EU VAT Directive may give rise to a full deduction of input VAT at the time of acquisition if the goods are also needed for economic purposes, but they cause a tax event at the time of private use because they qualify as a supply of goods for consideration. The taxable person has the right to decide whether it wants to allocate the acquired goods to the business or to its private assets if the goods are mixed-use goods (for business and private purposes). A taxable person can also choose to retain mixed-use items of property among its private assets. To the extent that goods or services are allocated to the taxpayer's private assets, no right to deduct input VAT arises. Case C-415/98 Bakcsi [2001] ECR I-1831; Case C-97/90 Lennartz [1991] ECR I-3795; Case C-291/92 Armbrecht [1995] ECR I-2775.
  • Art 16 EU VAT Directive also includes all disposals free of charge and therefore gives rise to a taxable ‘supply’ if business assets are disposed free of charge for business purposes. See Case C-48/97 Kuwait Petroleum [1999] ECR I-2323. In what follows, that part of the provision will be ignored because it is beyond the scope of this paper to examine the differences between Arts 16 and 26 EU VAT Directive and their impact on non-economic activities. See Caroline Heber, Gesellschaft und Gesellschafter in der Umsatzsteuer, dissertation, University of Graz (2012), 97 ff.
  • Case C-20/91 de Jong [1992] ECR I-2847, para 15; Case C-230/94 Enkler [1996] I-4517, para 35; Case C-258/95 Fillibeck [1997] ECR I-5577, para 25; Case C-48/97 Kuwait Petroleum (n 31) para 21; Case C-415/98 Bakcsi (n 30) para 42; Cases C-322/99 and C-323/99 Fischer [2001] ECR I-4049, para 56; Case C-412/03 Scandic [2005] ECR I-743, para 23.
  • Heber (n 31) 35; cf Patrick Pfister, Die umsatzsteuerliche Behandlung grundlegender Leistungsbeziehungen zwischen Gesellschafter und Gesellschaft, dissertation, University of Linz (2012), 21.
  • Tina Ehrke-Rabel, ‘Vorsteuerabzug bei gemischt, aber nicht unternehmensfremd genutzten Gegenständen’ (2010) 5 Österreichische Steuerzeitung 97, 100; Christian Korn, ‘Eröffnet der EuGH eine dritte umsatzsteuerliche Sphäre?’ (2009) 11 Österreichische Steuerzeitung 262, 263.
  • In order to be a taxable person, someone must carry out an economic activity (Art 9(1) VAT Directive).
  • Art 2 VAT Directive.
  • 37 See above, section II(a).
  • Oskar Henkow, Financial Activities in European VAT (Kluwer, 2007) 75.
  • Activities such as those by which an association promotes the general interests of its members are not economic activities because they are not a supply of services to an identifiable person: Case C-515/07 VNLTO (n 28). See also Case C-384/95 Landboden-Agrardienste (n 6); Case C-215/94 Mohr (n 6).
  • Case C-384/95 Landboden-Agrardienste (n 6) paras 23 and 24.
  • Case C-80/95 Harnas & Helm [1997] ECR I-745, para 16; Case C-155/94 Wellcome Trust Ltd [1996] ECR I-3013, para 35; Case C-60/90 Polysar (n 26) para 14; Case C-29/08 AB SKF [2009] ECR I-10413, para 31.
  • Case C-442/01 KapHag (n 22).
  • Joachim Englisch, ‘The Share Deal as a Non-Taxable Transaction’ in Thomas Ecker, Michael Lang and Ine Lejeune (eds), The Future of Indirect Taxation (Kluwer, 2012) 554.
  • Case C-60/90 Polysar (n 26) para 13.
  • Case C-98/98 Midland Bank [2000] ECR I-4177, para 24; Case C-408/98 Abbey National [2001] ECR I-1361, para 26.
  • Englisch (n 43) 564, see also Heber (n 31) 198ff.
  • Case C-98/98 Midland Bank (n 45) para 30; Case C-408/98 Abbey National (n 45) para 28.
  • ibid, para 58.
  • Case C-408/98 Abbey National (n 45) para 36; Case C-435/05 Investrand [2007] ECR I-1315, para 24; Case C-98/98 Midland Bank (n 45) para 31.
  • Case C-29/08 AB SKF (n 41) para 62; van Doesum, van Kesteren and van Norden (n 1) 62, 67; Englisch (n 43) 578; cf Midland Bank (n 45) para 30 (input VAT did form part of the cost components of the taxable transactions).
  • van Doesum, van Kesteren and van Norden (n 1) 62, 67.
  • Case C-4/94 BLP Group [1995] ECR I-983, paras 18 and 19; Advocate General Jacobs in Case C-408/98 Abbey National (n 45) para 35.
  • Georg Kofler, ‘Der Ausschluss vom Vorsteuerabzug für nicht besteuerte Leistungen’ in Markus Achatz and Michael Tumpel (eds), Vorsteuerabzug (Linde, 2005) 110; Babette Prechtl, ‘Kretztechnik: Ausgabe von Aktien nicht umsatzsteuerbar—Vorsteuerabzug für Emissionskosten' (2005) 6 taxlex 319, 321.
  • 54 Case C-4/94 BLP Group (n 52).
  • Hans Georg Ruppe,‘Vorsteuerabzug und Gemeinschaftsrecht’ [2003] Juristische Blätter 818, 820.
  • 56 Case C-29/08 AB SKF (n 41).
  • 57 The ECJ regarded the supply as an economic activity because, firstly, the company was directly or indirectly involved in the management of the subsidiary, and, secondly, the supply had to be regarded as exempt because of Art 135 of the VAT Directive, as it fell within the scope of VAT.
  • Bates and Lloyd (n 1).
  • See Case C-437/06 Securenta (n 27) and Case C-515/07 VNLTO (n 28): the non-economic activity formed a separate part of the taxpayers' business.
  • 60 VAT Directive, Recital 5.
  • Uudenkaupungin kaupunki (n 28) para 24; Case C-72/05 Wollny [2006] I-8297, para 20.
  • See also van Doesum, van Kesteren and van Norden (n 1) 62, 67.
  • 63 Section 40–5.09(1) GST Regulation.
  • Goods and Services Tax Ruling GSTR 2002/2, Goods and Services Tax: GST Treatment of Financial Supplies and Related Supplies and Acquisitions, para 79.
  • Securities include (a) a debenture described in paragraph (a), (b), (c), (e) or (f) of the definition of debenture in s 9 Corporations Act 2001; (b) a document issued by an individual that would be a debenture if it were issued by a body corporate; (c) a scheme described in paragraph (e), (i) or (m) of the definition of managed investment scheme in s 9 Corporations Act 2001; and (d) the capital of a partnership or trust.
  • Goods and Services Tax Ruling GSTR 2008/1, Goods and Services Tax: When Do You Acquire Anything or Import Goods Solely or Partly for a Creditable Purpose?, para 188.
  • 67 For the definition of a financial supply provider see s 40–5.06 GST Regulation.
  • 68 See examples in s 40–5.06 GST Regulation.
  • 69 See also GSTR 2008/1, para 189.
  • Jack Stuk and Mark Batistich, ‘GST and the Sale of a Partnership Interest’ (2000) 29 Australian Tax Review 11, 21.
  • 71 ss 9–5 and 11–15 GST Act; the concept of input taxation is thus equivalent to the notion of exempt supply within the meaning of Art 135 of the EU VAT Directive. This result is in line with the Commissioner's view, which regards the issue of shares as being input taxed and denies a general input tax credit on input tax payable on acquisitions which are made in respect of the issue of shares (GSTR 2008/1, paras 187–91).
  • HP Mercantile Pty Limited v Commissioner of Taxation [2005] FCAFC 126, para 16.
  • s 11–15 GST Act; HP Mercantile Pty Limited v Commissioner of Taxation [2005] FCAFC 126, para 17.
  • Michael Walpole, ‘The Miraculous Reduced Input Tax Credit for Financial Supplies in Australia’ (2011) International VAT Monitor 316, 318.
  • After 1 July 2012; before: AUD 50,000.
  • 76 s 189–5 GST Act.
  • 77 s 189–15 GST Act.
  • Walpole (n 74) 316, 318.
  • Rita de la Feria and Michael Walpole, ‘Options for Taxing Financial Supplies in Value Added Tax: EU VAT and Australian GST Model Compared’ (2009) 58(4) International and Comparative Law Quarterly 897, 920.
  • 80 See www.ato.gov.au.
  • 81 Board of Tax Administration, Issue Paper (n 17) 57.
  • ibid, 58.
  • Board of Tax Administration, Review of the Legal Framework of the Administration of the Goods and Services Tax: A Report to the Assistant Treasurer and Minister of Competition Policy and Consumer Affairs, December 2008, p 99, www.taxboard.gov.au.
  • ibid, para 5.1.12.
  • ibid, para 5.1.13.
  • 86 See submission by Greenwoods and Freehills, September 2008, p 13, www.taxboard.gov.au.
  • s 195–1 in conjunction with s 995–1 ITTA 1996.
  • 88 For a general definition see www.ato.gov.au.
  • 89 For other reasons, such as political issues, see Henkow (n 38) 87 ff.
  • 90 See Board of Tax Administration (n 83) para 5.1.14.
  • Barbara McDonald, ‘Legislative Intervention in the Law of Negligence: The Common Law, Statutory Interpretation and Tort Form in Australia’ (2005) 27(3) Sydney Law Review 443, 449 with further references.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Order Reprints Request Corporate Permissions

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

Request Academic Permissions

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.

Related research

People also read lists articles that other readers of this article have read.

Recommended articles lists articles that we recommend and is powered by our AI driven recommendation engine.

Cited by lists all citing articles based on Crossref citations.
Articles with the Crossref icon will open in a new tab.