Tax Alert – VAT and Indirect Tax News – 3rd Quarter 2016

By Laurence Clot, Sophie Dorin


Are Multipurpose Cards and cinema books of ticket (or others services) subject to VAT?
  • In a judgment of 15 April 2016, SA MK2 Vision, the French State council judged that the money paid to purchase a book of tickets or a multiple entry card must be subject to VAT under the article 256 of the French tax code (“FTC”).
  • These amounts are not compensation but the counterpart of a service consisting of the possibility for the buyer to receive the broadcast service at any time for a limited period. (See ECJ in this sense, December 23, 2015, Air France KLM and Hop C-250/14)
  • VAT is payable at the date of receipt of the book, even though the service has not been rendered as long as all relevant elements of the VAT liable event of the future delivery are already known and identified with precision.
27 June 2016, Adoption of the Directive amending Directive 2006/112/EU as regard the VAT treatment of vouchers “exchanges” (Directive No. 8741/16-FISC-70/378 ECOFIN) applicable from 1st  January 2019.
  • The Directive provides a working definition of voucher defined as “an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services”. The directive distinguishes between single-purpose vouchers (SPV) and multi-purpose vouchers (MPV). This distinction determines the VAT liable point. The qualification of SPV or MPV is based on whether the relevant information for taxation purposes can be determined with certainty upon issue of the voucher or, if, due to the final use of vouchers by the consumer, taxation can only be made at the time of exchange of the voucher.
  • The SPV is a voucher where both the location and the VAT rate of the underlying transaction can be determined with certainty upon issue of the voucher. MPV is the voucher that does not meet the definition of SPV at the time of issuance. Regarding MPV, the VAT repayment is deferred at the time vouchers are redeemed.
Validation of a national regulation that limits, under certain circumstances, the right to deduct VAT: ECJ, 28 July 2016, Case C-332/1 Tribunale di Treviso against Giuseppe Astone Del ferro company representative
  • The VAT Directive does not preclude a national regulation allowing to the tax authorities to deny to a taxable person the right to deduct VAT on bills paid, when it is proved that the company has failed to fulfill most of the formal obligations that would have allowed him to benefit from this right. The aim of the fight against fraud and tax evasion is a limit to the deduction right of the VAT liable person if it is proved that the VAT deduction right is claimed fraudulently or unreasonably.
  • In this case, the applicant was unable to produce any accounting records nor VAT register. The company had not fulfilled its accounting obligation of registration of invoices issued by third parties.
  • The Court judges that a limitation period the expiry of which has the effect of penalizing a taxable person who has not been sufficiently diligent and has failed to claim deduction of input VAT cannot be regarded as incompatible with the VAT Directive.
  • The ECJ court judges that the compatibility of national rules is conditioned on the one hand to the fact that this limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and second, that it does not in practice render impossible or excessively difficult the exercise of the right to deduct VAT (principle of effectiveness).
Deductibility of VAT on purchases of a branch for the needs of its headquarters abroad: ECJ order of 21 June 2016 aff 393/15 Dyrector Izby Skarbowej w Krakowie against ESET spol. S r.o.sp.z.o.o. Odddzial w Polsce
  • Articles 168 and 169 a) of VAT Directive must be interpreted as meaning that a branch established and registered for VAT in a Member State may deduct the input VAT incurred on purchases used for the purposes of taxable transactions of its headquarter located in another member State.
  • The exercise of the VAT deduction right referred to in Article 169 of the VAT Directive is not limited to situations where the input VAT is linked to taxable transactions located in the Member State in which the branch requests the deduction of its VAT. This solution is based on the principle of neutrality which leads to disregard the fact that internal transactions between a seat and its branch are not subject to VAT as well as not to distinguish whether the expense subject to VAT incurred by the branch was for the branch or for its headquarters.