Indirect Tax News N°110 – May 2016

Het Oudeland Beheer BV (CJUE, 28 April 2016, case C-128/14)

The value of a property right granting its holder a right of use over immovable property and the cost of completing the office building built on the land in question may be included in the taxable amount of a self-supply when the taxable person has already paid VAT on that value and on those costs, but also deducted that VAT immediately and in full.

In a situation where a parcel of land and a building under construction on that land have been acquired by way of the grant of a property right giving its holder a right of use over such immovable property, the taxable amount of the self-supply corresponds to the value of the amount to be paid in consideration each year for the remainder of the long lease granting the property right.

The conformity of the French tax authorities’ official guidance, which provides that “When the construction is made by a taxable person to whom the land is leased, the cost price includes the amount of the lease payments related to the lease term” (BOFiP BOI-TVA-IMM-10-20-10) may be called into question.

Gemeente Borsele (CJUE, 12 May 2016, case C‑520/14)

A municipality which organises school transport using third-party transport companies, and which received contributions, from the parents of (only) certain students, representing merely 3% of the actual transport costs, was found not to be carrying out an economic activity.

According to the Court, the supply of services for consideration, which was first of all considered to have been present in the instant case, is not sufficient for there to be an economic activity.

The Court specified, however, that the existence of an economic activity required the presence of a transaction within the scope of VAT.

In our view, the case can largely be limited to its facts, the Court having been at pains to set out in great detail the conditions of eligibility to benefit from school transport aid.

MK2 (Conseil d’Etat, 15 April 2016, n°373591) – Multiple-usage or “carnet” tickets

The Conseil d’Etat held that the counterpart received in exchange for the price paid for a “carnet” (booklet) of cinema tickets, or a card valid for multiple showings, comprised the right for the customer to benefit from the execution of the obligations resulting from the contract concluded with the cinema operator, irrespective of whether the customer took advantage of that right or not.

As a result, the amounts retained by the cinema operator in the event of the non-utilisation or expiry of such tickets must be viewed as the consideration for a supply of services subject to VAT, rather than as compensation falling outside the scope of VAT.

The taxable event arises when the customer, in attending the showings to which he is entitled, benefits from the agreed service, or, if this does not happen, at the time when the tickets or cards expire.

VAT is due when payment is received, provided that all of the elements relevant to the taxable event (in other words, the service), are known at the time of payment.

The Conseil d’Etat applied the principles recently established by the CJEU concerning the VAT treatment of unused, non-refundable airline tickets (CJUE, 23 décembre 2015, aff. 250/14 et 289/14 Air France KLM / Hop!-Brit Air).

APR Services (ACA Bordeaux, 7 April 2016 n°14BX03392) Reduced rate for personal care services

Noting that supplies of personal care services are not provided directly by an approved supplier to individuals but by “platform” service companies or organisations such as insurance companies or mutual societies on the basis of subcontracting agreements, the administrative court of appeal of Bordeaux held that the reduced rate available for such services did not apply.

Opinion of the VEG of 20 May 2016 on the action plan for the adoption of a definitive VAT regime

On 20 May 2016, the VAT Expert Group (VEG) adopted an opinion on the action plan for creating a definitive regime for VAT. VEG welcomed the initiative of the EU Commission to further explore possible options for implementing the destination principle. The VEG highlighted, to the Commission and the Member States, that the implementation of a generalised domestic reverse charge system, even on an experimental basis, would put at risk the development of a coherent, harmonised and fraudproof VAT system.

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