Indirect Tax News N°101 – May-June 2015
French Administrative Supreme Court, April 15th, 2015, n°369652, AB Science – Payroll tax – scope and taxa-ble basis
AB Science is specialized in the research, development and commercialization of active principles. Before 2007, year during which it asked for its first authorization to market, its turnover was made up of financial revenues (interests and profits on sales of “SICAV“ – mutual fund) only. AB Science has always obtained VAT refunds from the French authorities since it was a busi-ness carrying out research activity which will generate VATable turnover after the development phase. Further to a tax audit, the French authorities notified a payroll tax reassessment for the period 2005-2007 on the basis of the wages paid to the CEO of the company.
In essence, the company argued that it was not subject to payroll tax but, if it was the case, the wages of the CEO should be excluded from the taxable basis since they cover his pure scientific role within the business.
The French Administrative Supreme Court did not concur with such analysis. First, the Court ruled that the company was in the scope of the salary tax. Second, it considered that the company did not evidence the existence of separate fields of activity, avoiding therefore to rule over the arguments of the company as regards the allocation of the CEO to a VATable sector, in his capacity of scientific director. Hence, the French Administrative Supreme Court renders an adverse decision for all the start up. An impact study should be made for those operators.
Administrative Court of Appeal of Marseille, April 28th, 2015, n° 13MA00786 – Payroll tax / taxable basis
The Company Marcou Habitat has been subject to a payroll tax reassessment. The question was about the inclusion or not of self-supplies for VAT purposes of immovable properties in the payroll tax ratio.
The Administrative Court of Marseille considered that self-supplies for VAT purposes of immovable properties are (i) subject to VAT for that period and (ii) constitute income booked in the P&L even if they do not generate any cash flow. Hence, self-sup-plies of immovable properties are included in the payroll tax ratio (reducing as such the tax liability).
To us, this decision is interesting for the period before December 22th, 2014. Indeed, after this date, the liability to com-pute some self-supplies for VAT purposes has stopped, notably as to immovable properties.
It has to be noted that the French authorities made an appeal before the French Supreme Court.
Administrative Court of Appeal of Versailles, June 9th, 2015, n° 13VE02573, L’AIR LIQUIDE – VAT on expenses for share acquisition – follow up of the case
In its decision dated June 9th 2015, referring to the ruling issued on December 9th, 2014, the Administrative Court of Appeal of Ver-sailles accepted the documentation provided by the company and cancelled the VAT reassessment linked to the subsidiaries invoiced directly. As to the portion of acquisition costs corresponding to other subsidiaries purchased but not directly invoiced (i.e. in practice those billed via an intermediate subsidiary), the Court confirmed the VAT reassessment.
This decision seems to add a condition not provided by the French Administrative Supreme Court since it requires a direct invoicing link between the holding and the sub-subsidiaries, limiting as such the input VAT recovery right.
Missed taxable outgoing transactions and regularization process – BOI-TVA-DECLA-20-20-20-10
As of June 3rd, 2015, where the missed taxable outgoing transactions relate to (i) previous financial years and (ii) that the VAT return at hand shows VAT due, the company must file a corrective VAT return if the missed output VAT exceeds a threshold of 4,000 euros.
This amendment limits the possibility provided by the official VAT guidelines to adjust the VAT position – with of course a disclo-sure wording in the box “correspondence” – onto the VAT return of the month during which the missed taxable outgoing transac-tions have been known.
Prorogation of « Octroi de mer » duties
The French Parliament has voted the prorogation until 2020 of « Octroi de mer » duties in force in Guadeloupe, Martinique, Guyana and Reunion.
As of July 1st, 2015 onwards, inter alia, the tax turnover threshold is decreased from 550,000 euros to 300,000 euros. The scope of tax exemptions is extended to fuels used for business purposes, goods used for the refueling of ships and aircrafts and spe-cific imports for listed operators.