Indirect Tax News N°109 – April 2016

The European Commission’s VAT action plan: “Towards a single EU VAT area”

On 7 April 2016, the Commission adopted its VAT action plan, which takes stock of recent and ongoing initiatives. In order to remove the VAT-related obstacles impeding e-commerce within the single market, a legislative proposal will be submitted by the end of 2016.

Measures aimed at combatting fraud (by improving administrative cooperation within the EU and with countries outside the EU, increasing the tax authorities’ effectiveness, etc.) as well as simplification measures in favour of SMEs should be implemented.

A legislative proposal concerning a definitive VAT system for cross-border trade based on the taxation in the country of destination of the goods, with the payment of tax in the country of origin, and on the extension of the one-stop shop to B2B sales of goods should be presented in 2017. The Commission is also considering the policy of VAT reduced rates to be applied within this new regime.

Our upcoming conference on 2 June will be dedicated to this topic.

Air France-KLM / Brit Air (Conseil d’État, 13 April 2016, n°365173 and n°365172) – Contract of transport – Scope of VAT

The litigation concerned the application of VAT to non-exchangeable airline tickets which had expired by virtue of the non-attendance of the customer at the point of embarkation, as well as to exchangeable tickets which remained unused at the end of their period of validity. Air France did not account for VAT in respect of sales of such tickets.

The Conseil d’Etat followed the position of the CJEU and repeated that VAT is due even when the transaction has not yet been performed, if all the elements relevant to the chargeable event (i.e. the future service) are already known and, in particular, that at the time of the advance payment, the goods and services are precisely determined. The Conseil d’Etat considered that the chargeable event relating to the service received by the passenger consists of the actual performance of the transport or of the expiration of the air carrier’s contractual obligations. As for the tax point, this occurs upon receipt of the payment of the price by the operator in charge of carrying out the transport service.

In respect of the nature of the obligation created by the contract, the Conseil d’Etat confirmed that the obligation created by a contract of transport entitles the customer to the right to be transported, exercisable at a time of his choosing for a one year period, and does not constitute a distinct obligation in respect of the reservation of the ticket or the transportation itself.

Finally, in terms of the nature of the payment made by the “no show” passenger, this is not aimed at compensating a loss. The Conseil d’Etat noted that the customer cannot be considered as having cancelled the contract where he had exercised his right to walk away from a refundable transport contract.

P&O Ferrymasters Ltd (ACA Douai, 15 March 2016, n°14A00505) – Fixed establishment

A French company was held to be the fixed establishment of a company established outside of France in respect of its international maritime transport activity carried out for French customers. The Administrative Court of Appeal (ACA) considered that this activity was carried out in France, and that the attribution of this activity to the head office of the company in the UK would have led to an irrational outcome from a tax perspective. Thus, the French company was considered as being a permanent structure able, in light of its personnel and its material and logistical resources, to perform the whole supply of services in an autonomous manner. The ACA therefore held that the French tax authorities were right to have considered that, with respect to the principles governing the place of supply and the scope of VAT, the appellant company had a fixed establishment in France and that the supplies of services in question should be considered to have been made by it. In this respect, the ACA pointed out that although the appellant company maintained that the assessments which it had received constituted double taxation incompatible with the principle of VAT neutrality, arguing that its French customers would already have self-accounted for VAT under the reverse charge, it had provided no evidence proving that the transactions concerned by the assessments had already been subject to VAT in this manner. The question remains open as to the nature of the evidence which would have been admitted.

VAT Committee – 106th Meeting – Working papers

The Working papers concern, in particular, the following subjects: options arising from Articles 80, 167a, 199 and 199a of Directive 2006/112/EC, evidence required for the exemption of intra-Community supplies, electronic services (scope of the concept of electronically-supplied services, concept of “minimal human intervention” and the presumption contained in Article 9(a) of the Implementing Regulations), treatment of an exportation of goods after their conversion in another Member State.

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Self-supplies and input tax adjustments – Updated guidance

In March 2016, the French tax authorities updated their official guidance (BOFiP) following the reform of the rules governing self-supplies brought in by the business simplification law of 20 December 2014.

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French Income Tax Withholding: Are you Ready?

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