- The most important amendments are probably, on the one hand, the modification of the rules applicable to intra- Community supply of goods as of 1993, following the abolition of customs borders among Member States, and, on the other hand, the so-called ‘VAT package’ of 2010 which relates mainly to the place of supply of services.
- Case C-320/88 Staatssecretaris van Financiëne v Shipping and Forwarding Enterprise Safe BV [1990] ECR I-285.
- See Michel Lambion, ‘Les exonérations de TVA en matière financière au Luxembourg: concepts et interprétation’ (VAT exemption regarding financial matters in Luxembourg: concepts and interpretation) in Droit fiscal luxembourgeois, Livre jubilaire de l'IFA Luxembourg (Bruylant, 2008).
- See also Charles Duro, David Burbi, Marianne Goebel, Joëlle Choucroun et al, La société en poche: Luxembourg (Kluwer, 2002), specifically David Burbi, Part 2, ‘Droit comptable des entreprises' (Accounting law in firms).
- Loi du 19 décembre 2002 concernant le registre de commerce et des sociétés ainsi que la comptabilité et les comptes annuels des entreprises et modifiant certaines autres dispositions légales (Law of 19 December 2002 concerning the Trade and Companies Register and accounting and firms' annual accounts) (Mém, A-149, 31 December 2002).
- Fourth Council Directive 78/660/CEE [1978] based on Article 54(3)(g) of the Treaty on the annual accounts of certain kinds of companies.
- Loi du 10 décembre 2010 relative à l'introduction des normes comptable internationales pour les entreprises (Law concerning the introduction of international accounting standards for firms) (Mém A-225, 17 December 2010).
- For more information see www.aed.public.lu/FAIA/index.html.
- These comments are based on practice. It should not, however, be concluded that the legal status of periodical (monthly or quarterly) VAT returns is inferior to that of annual VAT returns and that periodical VAT returns are never audited.
- Case C-118/11 Eon Asset Management OOD [2012] ECR I-0000.
- With respect to the distinction between private and business assets, one has to bear in mind that this distinction concerns only individuals. Indeed, it cannot be envisaged that a company owns ‘private’ assets. By its nature, a company undertakes only business activities and all its assets are, consequently, business ones. Moreover, the ECJ did not clarify the criteria to be used to determine whether a good is allocated to private or business assets. In the case at hand, since it was clear that the goods were allocated to the business's assets, the ECJ distinguished between an acquisition of goods, which entitles VAT to be deducted, and use, which brings about the extension of the deduction right.
- In Luxembourg, deduction of VAT for costs linked to a company car is usually permitted, whether the vehicle is the company's property (which is quite rare) or under a leasing agreement. However, when the car is also used for private purposes by the employee, this private used is considered a fringe benefit granted to the employee. This fringe benefit is considered to be a supply of services made for free. In accordance with Art 26(b) of Directive 2006/112, a supply of services carried out free of charge for the private use of staff is subject to VAT. For natural taxable persons, deduction of part of the VAT paid on the costs will in practice be refused.
- In fact, various questions were referred to the ECJ, two of which are interesting for our purposes. First, ‘How must the requirement “are used” established in Article 168 of [the VAT Directive] be interpreted and, as regards the origin of the right to deduct tax passed on, when must that requirement be satisfied: in the tax period in which the goods were purchased or the services received, or does it suffice that the requirement is satisfied in a subsequent tax period?’ Second, ‘In the light of Articles 168 and 173 of [Directive 2006/112], how must the allocation (present or future use) of the goods or services acquired by a taxable person be assessed: as a prerequisite for giving rise to the right to deduct VAT or as grounds for the adjustment of the amount of tax to be deducted?’ These questions did not state whether it was goods or services that were being purchased. The ECJ was therefore able to give an answer without undertaking an analysis of the status (supply of goods or supply of services) of the lease agreements. In the case at hand, the only interest in analysing the operation as an acquisition of investment goods, and not as services, lies in the fact that an acquisition of investment goods should be allocated to the professional estate. Nevertheless, in the case of a company, there is no doubt that the goods are used for professional purposes and that the company must apportion all its assets to its business estate. Thus, the ECJ's analysis here has no impact, but it may, on the contrary, have various consequences for natural taxable persons.
- Case C-320/88 Safe, para 7; Case C-185/01 Auto Lease Holland [2003] ECR I-1317, para 32.
- Case C-72/05 Wollny [2006] ECR I-8297, Opinion of AG Léger, para 104.
- Case C-141/08 P Foshan Shunde Yongjian Housewares & Hardware v Council [2009] ECR I-9147; Case T-274/07 Zhejiang Harmonic Hardware Products v Council (8 November 2011).
- Case T-417/05 Endesa v Commission (14 July 2006).
- para 111.
- Case F-107/05 Toth v Commission (11 July 2007).
- Case C-306/99 BIAO [2003] ECR I-1, para 103: ‘Whether there is an obligation to enter such a commitment as liability, rather than at the foot of the balance sheet or in the notes, is in principle a matter for national law, read where appropriate in the light of international accounting standards (IAS).’
- Cases T-415/05, T-416/05 and T-423/05 Olympiakes Aerogrammes v Commission (13 September 2010).
- UCITS stands for Undertakings for Collective Investments in Transferable Securities. This category of investment funds is regulated by various EU directives, the primary one being the UCITS Directive 85/611. This category of investment funds may be sold to retail investors, ie ‘small’ investors, and is therefore subject to severe rules in order to protect investors.
- Case C-169/04 Abbey National [2006] ECR I-4027; Case C-363/05 JP Morgan Fleming Claverhouse Investments Trust and The Association of Investment Trust Companies [2007] ECR I-5517. This method of interpretation also leads to various questions: see Lambion (n 3).
- Case C-255/02 Halifax [2006] ECR I-01609.
- The Court used the same approach in Case C-73/06 Planzer Luxembourg [2007] ECR I-5655.
- Case C-277/09 RBS Deutschland Holdings GmbH [2012] ECR I-13805.
- Based on the rules on location that applied at that time: the rules have since been modified.
- See ‘International Accounting Standards—The UK Tax Implications', www.hmrc.gov.uk/accounting-standars/int_accounting.htm.
- This analysis is confirmed by the footnotes under Art 12 of the VAT law (Code fiscal luxembourgeois).(2012) vol 1 issue 2
- See C Mack, Le leasing en droit fiscal (Leasing in tax law), Etudes fiscales, ° 80, March 1989 (Editions Saint-Paul).
- In this respect, it is worth noting that the treatment of leases under the IFRS might change in the future. Indeed, it is envisaged that financial and operational leases will receive the same treatment: under the envisaged change, the leased asset will be recorded in the balance sheet of the lessee.
- In the case of a natural person, if the operation is considered a supply of services, it will be taxable in the location of the service supplier. But, if it is considered an acquisition of a new vehicle (a vehicle which is less than six months old and has covered fewer than 6,000 kilometres), VAT will apply in the country of residence. Nevertheless, as of 2013, long-term leasing of means of transport (specific rules apply to pleasure boats) to natural persons will be taxable in the country of residence of the lessee, and the situation will therefore be harmonised. For taxable persons, long-term leasing regarded as a supply of services will be taxable in the lessee's place of establishment. If the operation is regarded as a supply of goods, it will be split into an exempt intra-Community supply of goods in the Member State of departure followed by a taxable intra-Community acquisition of goods in the Member State of arrival of the goods. Since we can reasonably consider that the vehicle will be transported to the place of establishment of the taxable person, the difference will have no impact.
- Member States could make this delay longer.
- Arts 184–92 of Directive 2006/112.
- Case C-60/90 Polysar Investments Netherlands BV v Inspecteur der Inoerrechten en Accijnzen [1991] ECR I-3111.(2012) vol 1 issue 2
- In practice, some companies follow LuxGAAP for their annual accounts published in Luxembourg while using IFRS for reporting to their foreign parent company.
- Regulation (CE) No 1606/2002 of the European Parliament and of the Council of 19 July 2002 concerning international accounting standards [2002] OJ L243/1.
- Impact assessment of 25 October 2011, p 19 (Commission Staff Working Paper, Part I, Impact assessment, Accompanying the document, Proposal for a Directive of the European Parliament and the Council on the annual financial statements, consolidated financial statements and related reports of certain types of firms).
- The 7.3 million companies in the EU to which the Fourth Directive applies are—mainly—commercial limited liability companies; in Luxembourg: SA, SCA and Sàrl.
- Of the 28.3 millions companies in the EU there are 7.3 million commercial limited liability companies, and 21 million partnerships and individual firms, which are not affected by the Fourth Directive concerning annual accounts, even if an obligation regarding annual accounts applies under national law.
- European Commission, Planned Implementation of the IAS Regulation (1606/2002) in the EU and EEA, 17 January 2005, http://ec.europa.eu/internal_market/accounting/docs/ias-use-of-options_en.pdf.
- Directive 2012/6/EU of the European Parliament and of the Council of 14 March 2012 amending Council Directive 78/660/EEC on the annual accounts of certain types of companies as regards micro-entities [2012] OJ L81/3.
- Exposure draft ED/2010/9 Lease Agreements, August 2010.
World Journal of VAT/GST Law
Volume 1, 2012 - Issue 2