Indirect Tax News N°107 – February 2016

SAS Sovaro and Juliane, Conseil d’État, 21 January 2016, decisions n° 388676 and n° 388989 – Payroll tax

SAS Savaro requested the cancellation of payroll tax assessments concerning the remuneration of its managing director and its chairman on the ground that they are not considered as employees within the meaning of the employment law. The Conseil d’Etat held that the income from activities mentioned in article L311-3 of the Social security code must be included in the payroll tax base and thus aligned the tax base of payroll tax with that of the Social security contribution (under the regime applicable before 1 January 2013).

The company Juliane requested the annulment of paragraph 40 of the guidance BOI-TPS-TS-20-10-20140122, on the ground that it enlarged the scope of the payroll tax (under the regime applicable from 1 January 2013 onwards). The Conseil d’Etat held that this paragraph of the French tax authorities’ guidance is illegal: only the income from activities mentioned both in article 80 ter of the French tax code and in article L311-3 of the Social security code are included in the payroll tax base. The payroll tax regime is aligned with the General social contribution (French: CSG) since 1 January 2013.

The regime applicable to the remuneration of these executives has now been conclusively established.

Marriott Rewards LLC (Administrative Court of Appeal of Versailles, 1 December 2015, n° 14VE00566) – Loyalty programmes – Deductibility of the VAT invoiced by participating companies

The US company Marriott Rewards LLC, which managed the customer loyalty programme for the Marriott hotel group, requested reimbursement of the VAT that had been invoiced to it by the group hotels for the nights provided to customers under the terms of the loyalty programme.

The Administrative Court of Appeal considered that the services supplied by hotels to the clients using their loyalty points were provided in application of the rewards program agreement. The company therefore incurred the cost of those services for the purposes of its business of managing the rewards program. Therefore, the company had the right to deduct the corresponding VAT.

The decision has been appealed to the Conseil d’Etat.

Order of 7 January 2016 – Audit trail – Requirements for scanned documents

The new article A 102 B-1 of the Tax procedures code provides that the transfer of documents mentioned in article L. 102 B, I bis, originally created in paper form, to an electronic format must be carried out under conditions that guarantee an identical reproduction of the documents.

The documents thereby converted must be held in PDF format with a matching electronic signature conforming, at a minimum, to the “one-star” level within the general security framework (French: Référentiel général de sécurité or RGS).

Position of the DRESG – Société Eye Shelter, Administrative Court of Montreuil, 10 July 2015 n° 1409770-1501714 – Deductibility of VAT – Invoices on which the VAT amount is not expressed in euros

The DRESG (the tax office specifically dedicated to foreign taxpayers) has been systematically refusing VAT repayment claims concerning invoices on which the VAT amount is not expressed in euros, relying on the judgment of the Administrative Court of Appeal of Montreuil in Société Eye Shelter. This decision endorses a strict application of article 230 of Directive 2006/112/EC which provides that the amounts which appear on the invoice may be expressed in any currency, provided that the amount of VAT payable is expressed in the national currency of the Member State in which the supply of goods or services take place.

In order to avoid any difficulties, businesses should verify whether the VAT amount is expressed in euros on invoices issued and received.

Circular of 8 February 2016 – The statute of limitations under the Customs code – Articles 354 to 354 quarter and 355 of the Customs code

The statute of limitations for customs debts is extended to five years from 1 May 2016 for all acts liable to give rise to a criminal proceedings, whereas the statute of limitations for national taxes recovered under the Customs code (VAT, TGAP, TSVR, TICPE etc) remains three years.

Moreover, the five-year period can be interrupted by an official written notification up to the end of the tenth year following the year during which the duty fell due.

In addition, as is the case for tax matters, in the case where customs omissions or inadequacies (customs duties or national taxes) are revealed during a criminal or administrative procedure, the time limit for the customs authorities is extended to the end of the year following the year of the decision which settles the procedure (but no later than the end of the tenth year following the year in the course of which the duty and tax fell due). These new provisions will apply to “taxable events” occurring after 1 May 2016 and to taxable events which have not yet been time-barred on that date.

Ces nouvelles dispositions sont applicables aux faits générateurs intervenant après le 1er mai 2016 et à ceux non encore prescrits à cette date.

We alert our readers to the fact that some aspects of these implementing provisions are not entirely in accordance with the Union Customs Code. Furthermore, these extremely long time limits raise problems regarding the time limit for record-keeping, which remains three years under the Union Customs Code.

Cross-border rulings

The European Commission had previously extended, to 30 September 2018, the pilot project set up in 2013 to allow taxpayers to request rul-ings on the VAT treatment applicable to complex cross-border transactions involving multiple European countries.

The list of rulings obtained was updated in January 2016 and is available on the Commission website.

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