EU Tax Alert May 2016 - edition 155 The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more. To subscribe (free of charge) see: www.eutaxalert.com Please click here to unsubscribe from this mailing. 2 3 Highlights in this edition CJ rules that German legislation that requires credit institutions to disclose information relating to accounts of their dependent branches established in other Member States is not in breach of the freedom of establishment (Sparkasse) On 14 April 2016, the CJ delivered its judgment in case Sparkasse Allgäu v Finanzamt Kempten (C-522/14). The case deals with the German legislation concerning the obligation of credit institutions who are engaged in the management or custody of third party assets to notify, in writing, the tax office responsible for the administration of inheritance tax of those assets in their custody and any claims directed against them. This obligation refers to the assets that, at the time of the death of the owner of those assets, formed part of the latter’s estate. The new Union Customs Code As of 1 May 2016, the new Union Customs Code (UCC) is applicable in the European Union (EU). This new UCC will have its impact on any business engaged in the import or export of goods into and within the EU. Below you will find a Q&A on the UCC which is based on the most frequent questions we have received so far. It also sets out what the opportunities are in terms of simplification of customs procedures, centralising clearance for all EU customs activities, conversion to paperless customs procedures, etc. Particular reference is also made to the questions 13 to 16: the rules regarding the inclusion of royalty and licence fee payments for the determination of the customs value have been broadened. These changes may result in higher customs duties, have an impact on the group’s business model and transfer prices and therefore, deserve special attention. 3 Contents Highlights in this edition • CJ rules that German legislation that requires credit institutions to disclose information relating to accounts of their dependent branches established in other Member States is not in breach of the freedom of establishment (Sparkasse) • The new Union Customs Code Direct taxation • AG Kokott considers that Belgian legislation regarding credit for withholding taxes on dividends paid from another Member State is not in breach of the free movement of capital (Timmermans) VAT • CJ rules that insolvent trader may apply for admission to a procedure for a creditors arrangement resulting in partial payment of a VAT claim (Degano Trasporti) • CJ rules on determining VAT taxable amount for right in rem in case of self-supply (Het Oudeland Beheer BV) • AG Saugmandsgaard opines that VAT exemption for intra-Community transfer of own goods may not be refused on the basis of non-compliance with formal requirement (Plöckl) Customs Duties, Excises and other Indirect Taxes • CJ rules on the non-transferability of rights deriving from import licences (Malvino Cervati) • CJ rules on the application of preferential import duty tariff for consignments of goods originating in different countries (ADM Hamburg AG) • AG opines on minimum retail prices for manufactured tobacco (Colruyt) 4 5 not only with respect to the accounts held by its various agencies and branches established in Germany, but also with respect to accounts opened at its dependent branch established in Austria. However, the referring court also raised the issue whether the German institution would be impeded from complying with this obligation taking into account the Austrian requirement of bank secrecy. In this regard, the CJ stated that while it is not inconceivable that the German rules might deter credit institutions established in Germany from opening branches in Austria, inasmuch as compliance with that obligation would place them at a disadvantage simply because they would then be subject to an obligation which is not imposed on credit institutions established in Austria, it nevertheless cannot be concluded that the existence of that obligation is liable to be classified as a restriction on freedom of establishment for the purposes of Article 49 TFEU. Therefore, the CJ concluded that under EU law as it applied at the time of the facts in the main proceedings, and in the absence of any harmonising measure in relation to the exchange of information for the requirements of fiscal supervision, Member States were free to impose on national credit institutions an obligation concerning their branches operating abroad, such as that at issue in the main proceedings, with the objective of ensuring the effectiveness of fiscal supervision, on condition that the transactions carried out in those branches are not treated in a manner that is discriminatory in comparison with transactions carried out by their national branches. The mere fact that a notification obligation, such as that at issue in the main proceedings, is not prescribed by Austrian law cannot lead to the conclusion that Germany is precluded from imposing such an obligation. It follows from the Court’s case law that freedom of establishment cannot be understood to mean that a Member State is required to draft its tax rules and, in particular, a notification obligation such as that at issue in the main proceedings on the basis of those in another Member State in order to ensure, in all circumstances, that any disparities arising from national rules are removed. Highlights in this edition CJ rules that German legislation that requires credit institutions to disclose information relating to accounts of their dependent branches established in other Member States is not in breach of the freedom of establishment (Sparkasse) On 14 April 2016, the CJ delivered its judgment in case Sparkasse Allgäu v Finanzamt Kempten (C-522/14). The case deals with the German legislation concerning the obligation of credit institutions who are engaged in the management or custody of third party assets to notify, in writing, the tax office responsible for the administration of inheritance tax of those assets in their custody and any claims directed against them. This obligation refers to the assets that, at the time of the death of the owner of those assets, formed part of the latter’s estate. Sparkasse Allgäu is a credit institution which operated pursuant to an authorisation issued by the German authorities, inter alia, a dependent branch in Austria. On 25 September 2008, the Kempten tax office requested Sparkasse Allgäu to supply information in relation to clients of its branch established in Austria who were resident in Germany at the time of their death. At the same time, the Austrian legislation provided for a general obligation of bank secrecy. The German referring Court expressed doubts whether the German legislation restricts the freedom of establishment even though the notification obligation laid down in that provision applies equally to all German credit institutions. According to the referring court, that requirement has the result that German credit institutions may be deterred from exercising, by means of a branch office, commercial operations in Austria. The CJ started by stating that the German legislation is drafted in general terms and does not make any distinction on the basis of the location in which the custody or management of the third-party assets to which it relates takes place. Consequently, German institutions, are subject to the obligations arising from that provision 5 3 Is the UCC relevant for non-EU operators? Any business / operator engaged in the import and or export of goods into and within the EU will be impacted by this new UCC. 4 What should we do as of 1 May 2016? The implementation of the new UCC will have a major impact on the customs aspects of the business. This includes, inter alia, the current import and export model, customs valuation methods applied and the current licence authorizations. The existing customs authorizations and procedures of operators will be reassessed by the authorities under the new UCC rules before 2020. At the same time, new rules/opportunities will become available, in particular the option of centralised clearance. Operator’s should therefore develop an integrated plan taking into account their overall business strategy, as well as the new obligations and opportunities under the UCC. As the year 2020 is rapidly approaching, it is time to take a pro-active approach to prepare for this new customs era. 5 What will be the biggest driver for the success of the UCC? The success of the UCC will be dependent to a large extent on the ability of EU Member States to implement the IT systems needed to fully benefit from the facilitations embedded in the UCC. 6 What is an AEO? The key words on Authorised Economic Operator (AEO) status are: ‘compliant and trustworthy economic operators, leading to less interference by customs authorities in the supply chain’. It is an internationally recognised quality mark which indicates that a business operates within a secure supply chain and their internal controls and procedures are efficient and compliant. AEO standards are linked throughout the UCC and will become the cornerstone for operating customs procedures and obtaining benefits. The new Union Customs Code As of 1 May 2016, the new Union Customs Code (UCC) is applicable in the European Union (EU). This new UCC will have its impact on any business engaged in the import or export of goods into and within the EU. Below you will find a Q&A on the UCC which is based on the most frequent questions we have received so far. It also sets out what the opportunities are in terms of simplification of customs procedures, centralising clearance for all EU customs activities, conversion to paperless customs procedures, etc. Particular reference is also made to the questions 13 to 16: the rules regarding the inclusion of royalty and licence fee payments for the determination of the customs value have been broadened. These changes may result in higher customs duties, have an impact on the group’s business model and transfer prices and therefore, deserve special attention. Q&A – Why it matters to global trade and potential opportunities 1 What is the Union Customs Code? The UCC is a substantive update and modernization of the existing customs legislation across the EU. It will introduce an important number of revisions to existing requirements and will apply as of 1 May 2016. A number of transitional phases will follow until full implementation in 2020. 2 What is the vision behind the new UCC? The ultimate aim of the UCC is to facilitate legitimate trade to the maximum extent possible, simplify procedures and reallocate resources from transactional reviews to external border security. Increasing revenue is not a specific goal. On the contrary, the EU is negotiating trade agreements with various countries / regions aimed at reducing trade barriers (financial and other). However, individual countries may try to use some of the UCC features to increase their stake of taxes on international trade. Moreover, the amended rules on inclusion of royalty and fee payments may increase customs values. 6 7 11 What will be the impact of the UCC for non-EU operators? In order to fully benefit of the facilitations and simplifications of the UCC, non-EU operators may wish to set up a central place of establishment in one EU Member State and register there as an AEO. In the near future (expected by 2020) centralized clearance will be implemented for AEO’s. This regime will mean a huge facilitation for operators active in multiple EU jurisdictions. Under the centralised clearance regime, an AEO may file its customs declarations with the customs authorities of its place of establishment, regardless of where the goods have actually entered the EU territory. It may thus be beneficial for non-EU operators importing goods into the EU to establish one central branch in a Member State of choice recognized as AEO that will perform all of the group’s import & export activities in the EU. 12 What will be the impact of the UCC on a ‘principal structure’? As such the provisions of the UCC do not have a direct impact on the principal structure. The definition under the UCC of a fixed establishment directly refers to an establishment from which customs activities are performed, which differs from the direct tax permanent establishment definition. On this basis a non-EU business could set up a dedicated customs centre of expertise in one of the EU Member States with no connection to the existing commercial structure of the business. However, the new conditions for royalty and licence fee payments under the UCC may impact principal structures (see below). Needless to say that also BEPS and subsequent national corporate tax reforms will have an impact on principal structures. 13 What will be the impact on royalty and licence fee payments? This is potentially a very important aspect: the rules for including royalty and licence fee payment into the customs value are significantly broadened under the UCC. Not only royalties and licence fees that are paid as a condition of sale, but also royalties and licence fees 7 Is AEO a totally new concept? The AEO certification, as such, is not new (this system was introduced back in 2008), but under the UCC the conditions for obtaining a licence (as compared to the certification under the Community Customs Code (CCC)) in the 28 EU Member States will be unified. Current AEO authorisation holders will be re-assessed (and licensed) by 30 April 2019. 8 Why should I choose to become an AEO? What are the (in)direct benefits? Applying for an AEO authorization remains voluntary. However, under the UCC any application for a customs authorization will be judged on the basis of the AEO criteria. The question will thus rather be: do you want to go through the scrutiny of a review each time you apply for a new licence, or go through the review only once and get AEO certified. Moreover, a number of selected simplifications and authorizations, including centralised clearance, will become exclusively accessible for AEO certified companies under the UCC. 9 What are the practical requirements for an AEO? An AEO should ensure that it has the technology in place that is capable of facilitating audit-based controls and can properly identify customs issues. Under the UCC, they should also be able to show that they have practical standards of competence or professional qualifications relating to the customs activities they carry out. 10 Will AEO status also be recognised outside of the EU? Globally more than 50 countries/regions have AEO-like trade programs in place. The EU has agreed mutual recognition for its AEO program with many other trading countries/regions. Being part of global supply chains and having AEO certification will definitely facilitate cross border movement. More and more multinational companies require their suppliers or service providers to be AEO certified. 7 be carefully reviewed due to not only the impact on the customs position of operators but on their overall supply chain and structure also from a direct tax, Value Added Tax (VAT) and legal liability perspective. 17 What will be the impact of the UCC on audit and control of an operator’s customs activities? Under the UCC, the audit and control activities of the customs authorities will move more and more towards administrative audits of AEO’s, rather than controlling individual transactions. As a result, the implementation of the UCC system automatically focusses attention on the central place of establishment of these AEO’s in the EU. This is potentially a huge benefit for operators since customs compliance could be centralized at one spot (in one EU Member State) instead of dealing with several different authorities. The customs authorities in the country of establishment will then be the main contact point for AEO’s for all their activities in the EU. 18 What are the benefits of operating via Belgium or the Netherlands? As in the past, it is expected that for the reasons mentioned above and since these countries account for a large part of the total physical entries of goods in the EU, non-EU operators would continue to choose their establishment in either Belgium or the Netherlands. These countries have a long tradition of customs compliance procedures equipped for international trade. Moreover, unlike some other EU member states, Dutch and Belgian VAT legislation provides for a VAT deferment system which allows importers to declare their import VAT in their periodic VAT returns instead of paying it upfront upon importation. This relieves importers from the burdensome pre-financing of import VAT. 19 What will be the impact of the UCC on an operator’s reporting system? The UCC will ultimately lead towards a fully paperless customs environment. Generally Enterprise Resource Planning (ERP) systems (are able to) already contain the that are paid as a condition to purchase the goods must now be included in the customs value. Such inclusion of a royalty or licence fee payment in the customs value may thus lead to higher customs duties. Operators should therefore carefully review their royalty and licence fee agreements. 14 When will royalty and licence fee payments be included in the customs value under the UCC? Under the UCC, royalties and licence fees are considered to be paid as a ‘condition of sale’ for the imported goods and included in the customs value when any of the following conditions is met: • The seller or a person related to the seller requires the buyer to make this payment; or • The payment by the buyer is made to satisfy an obligation of the seller, in accordance with contractual obligations; or • The goods cannot be sold to, or purchased by, the buyer without payment of the royalties or licence fees to a licensor. 15 Are there specific condition of sale requirements for intercompany payments? In case of intercompany payments the ‘condition of sale’ requirement will be deemed to be met. The only test that then remains for such intercompany payments under the UCC will be whether the royalty or licence fee payment is ‘related’ to the imported goods, which is a very broad definition. For example, in case of trademarks this condition will be met if the goods are marketed under the trademark. 16 Are there potential alternatives to limit the impact of royalty and licence fee payments under the UCC? There may be alternatives available to limit the impact of the inclusion of royalty and licence fee payments under the UCC on the customs value and potentially resulting higher customs duties. However, such alternatives should 8 9 22 Will there still be differences between EU Member States? Yes. Firstly, the UCC Implementing and Delegated Acts will have to be translated in the national legislation of the different Member States, which may lead to different interpretations. Secondly, the impact is not the same for all countries, as it depends to what extent specific procedures are already aligned with the UCC. These differences, together with the language capabilities of customs authorities in the different Member States, may be decisive for foreign operators to choose their place of establishment in one particular Member State. 23 Will Free Zones still be available in the EU under UCC? Under the UCC Free Zones will still be available. However, please note that these do not exist in all EU Member States. 24 How will the change-over for existing customs licences take place? Transitional rules apply for existing customs licences with an expiry date beyond 1 May 2016 already held under the old CCC. Over a period of several years, the authorities will re-assess existing licences under the new rules, which will create a huge burden on the resources of the authorities. It is therefore likely that the authorities will re-assess all customs licences and authorizations of a business at the moment that one of the licences expires and needs to be renewed. 25 What will be the effect of the UCC on (existing) Customs procedures The UCC reduces the number of customs procedures available. Under the UCC, imported goods may be released for free circulation, special procedures or export. Special procedures constitute transit (e.g. external, internal or intra-EU), storage (in a customs warehouse or free zone), specific use (temporary admission or enduse) or processing (e.g. inward processing relief (IPR) or outward processing relief (OPR)). majority if not all of the information needed to support customs processes, either directly or through the use of intermediate software. The changes in the UCC confirm that a well-organized ERP landscape is key. The integration of financial and customs processes into an ERP system avoids manual duplication of data, which is still one of the key causes of mistakes in filing customs declarations. The current and future changes create an ideal opportunity for operators to integrate their customs data/processes into financial and other operational systems. 20 How will centralised clearance work under the UCC? As mentioned above, centralised clearance is a new procedure under the UCC where more than one customs authority is involved in the imports. It is expected to become operational by 2020 and it will allow businesses to declare their goods to a customs authority in one EU Member State but present the goods to customs in another Member State. To rely on Centralised Clearance the AEO status is mandatory. This new procedure will thus allow the centralization of customs processes into centres of expertise or shared service centres. Being the last procedure to be implemented under the UCC, it can be seen as the ultimate accomplishment of the vision of trade facilitation and paperless customs. 21 Are VAT rules already aligned with centralised clearance? No, the rules for declaring import VAT under the current VAT Directive are yet not aligned with the centralised clearance procedure under the UCC. Change is thus needed in order for operator’s to fully benefit from centralised clearance. The VAT action plan, announced in April 2016 by the European Commission, does include ideas that may facilitate centralised clearance such as broadening the one-stop-shop possibilities and full reverse charge application to licensed (legitimate) traders. Implementation of these ideas is expected in the years to come. 9 to perform exports from the EU. A confirmation of this is expected in the Commission’s UCC guidelines which are expected soon. 29 What will be the impact of the abolition of the ‘first sale for export rule’? Under the UCC the so-called ‘first sale for export rule’ will be abolished. Under the current regime of the CCC, an earlier sale can be taken as the basis for customs valuation, provided it took place with the intent to export the goods to the territory of the Community. Given that the customs value is the taxable basis for calculating customs duties, a duty savings can be made if one depends on the ‘first sale rule’. The UCC foresees a grandfathering clause allowing importers to apply the ‘first sale rule’ until 2017 under the condition that a binding contract had been in place before 18 January 2016. Operators might thus want to consider alternative methods to reduce their taxable base for customs valuation purposes. The latter would in most cases imply changes in the supply chain. 30 What will be the changes to guarantees? Under the UCC, any known or potential customs debts must be secured by a guarantee. This includes not only known debts deferred for later payment, but any duties suspended (including special regimes such as Inward Processing, End use, Temporary Storage facilities and Customs Warehousing). Although mandatory guarantees will be introduced on 1 May 2016, under the transitional arrangements they will not apply until a company’s special procedure authorisation has been reassessed or reissued as a UCC authorisation. Companies with an AEO status, or that meet the certain criteria required to be an AEO, will be eligible to apply for a guarantee reduction or waiver under certain conditions. 31 How is the guarantee calculated? The guarantee amount will vary by country and circumstance. No guarantee will be required under €1,000 - the de minimis threshold. Under the UCC it will be possible to cover more than one transaction – a so called ‘comprehensive’ guarantee if certain conditions are met. Authorizations will be required for all kinds of special procedures. As mentioned, existing authorizations granted before 1 May will remain valid until they expire or until they are reassessed, whatever happens first before 1 May 2019. All special procedures will in principle require a guarantee. 26 What will change to the IPR-regime? Inward processing with duty suspended, inward processing with duty drawback, and processing under customs control will be merged into the IPR regime with duty suspension only. The UCC will not require reexportation of processed products under the IPR-regime, and operators will be able to calculate the amount of duty payable for goods entered under IPR based on either the value of the imported goods or the final value of the processed products. 27 What are the rules to be recognised as exporter of record? Under a strict interpretation of the UCC, only EU based businesses can act as an exporter of record (including nonEU businesses in case they have a fixed establishment from which customs activities are performed). This needs to be seen from the point of view that trade facilitation and paperless customs (e.g., the UCC vision) do require the need for customs authorities to be able to execute control. 28 Can non-EU companies depend on customs brokers when exporting from the EU? There is currently some uncertainty on whether non-EU companies without a permanent establishment in the EU could still act as exporter of record. Informal contacts with customs authorities seem to indicate that the UCC still includes the possibility to make use of customs brokers when exporting from the EU. A non-established company can in principle not act as an exporter of record. However, there are ways to include wording in customs declarations to pinpoint the owner of the goods being exported (e.g. customs broker X, in the name of non-EU company Y). This terminology was already used in certain countries (in the periphery of the EU) where a non-EU principal wants 10 11 that there was a discriminatory treatment as in case of participations held in certain third countries, a credit would have been granted. The question dealt by the AG was whether it is compatible with the free movement of capital a rule that sets additional conditions for granting a credit for withholding taxes on dividends from another Member State (in this case Poland) while a different (more favourable) treatment is granted to dividends from a third State as in that case there is a general credit granted in all situations. The AG considered that the free movement of capital prohibits differences in treatment between income arising from different Member States and consequently, also that a disadvantageous treatment is granted for dividends arising in a Member State as per comparison of dividends from third States. Therefore, there is a prima facie discrimination. As regards possible justifications, the AG considered that the free movement of capital cannot oblige a Member State to grant specific benefits which derive from a particular double tax treaty. Such benefits are granted based on a balanced allocation of taxing rights and that a Member State cannot be obliged to grant such benefits to dividends received from another country. Furthermore, Article 65(1)(a) of the TFEU specifically allows a different treatment depending on the country of investment. AG Kokott stated that double tax treaties do not constitute a carte blanche that allow Member States to treat differently dividends depending of their origin within or outside the EU. Also within the context of tax treaties, Member State are bound by the fundamental freedoms. This means that, if in the scope of tax treaties Belgium would be allowed to (freely) decide whether to grant a credit or not there would be a possible restriction to the free movement of capital. However, in this case, Belgium is obliged, by virtue of the applicable treaty to grant a credit and therefore, the existing restriction is justified. 32 What will be the changes to Binding Tariff/Origin Information? The validity of the Binding Tariff/Origin Information (BTI) will be reduced from 6 to 3 years under the UCC and the use will be made mandatory. The latter will apply both for BTI’s issued prior as well to BTI’s that are issued after the entry into force of the UCC. 33 What is meant by the ‘phased’ entry into force of the UCC? The UCC and its supplemental Commission Regulations will in principle apply as from 1 May 2016. Over a period of several years, existing customs licences / authorizations need to be renewed under the conditions of the UCC. It is expected that a wide range of legislative changes will follow, covering procedural law such as legislation concerning Customs Economic Procedures, Customs Simplified Procedures and Transit as well as substantive law such as Valuation, Origin and Tariffs over the period until 31 December 2020. Direct Taxation AG Kokott considers that Belgian legislation regarding credit for withholding taxes on dividends paid from another Member State is not in breach of the free movement of capital (Timmermans) On 12 April 2016, AG Kokott delivered her Opinion in the case Guy Riskin, Geneviève Timmermans v. État belge (Case C-176/15). The case deals with the Belgian legislation as regards credits granted for taxes withheld at source from dividends paid from another Member State. The taxpayers held a participation in the Polish company, Auto Truck Centrum. They received a dividend which was subject to withholding tax in Poland. However, the taxpayers were not entitled receive a credit for this tax in Belgium because the participation was not held in the context of a business activity. The taxpayers claimed 11 the effective collection of the EU’s own resources. As a result, according to the CJ, an insolvent trader may apply to a court to open a procedure for an arrangement with creditors for the purpose of settling its debts by liquidating its assets, in which that trader offers only partial payment of a VAT debt and establishes by an independent expert’s report that that debt would not be repaid more fully in the event of that trader’s bankruptcy. CJ rules on determining VAT taxable amount for right in rem in case of selfsupply (Het Oudeland Beheer BV) On 28 April 2016, the CJ delivered its judgment in the case Het Oudeland Beheer BV (C-128/14). As lessee, Oudeland concluded a long lease agreement (20 years), for an annual ground rent, on a plot of land and an office building under construction on that land. In conformity with Netherlands VAT rules, the lease was treated as a VAT taxable supply of immovable property and the VAT taxable amount of the supply amounted to the capitalized value of the ground rent as a whole. Oudeland paid the VAT charged to it to the lessor and deducted the VAT amount in its VAT return. Following the grant of the long lease, Oudeland had the construction of the office building completed. Of the amount of the completion costs, Oudeland paid and deducted the VAT. Oudeland granted ordinary leases over the office building and opted, for part of the office building, to waive the VAT exemption available for the leasing of immovable property. Oudeland assumed that the grant of the lease had to be treated as a supply of goods produced in the course of such business. It paid VAT on the part of the building covered by the VAT exemption. In its VAT return, Oudeland had calculated the taxable amount of the supply as the whole costs, excluding VAT, of completion of the building plus the annual ground rent already due at the time of the supply. The tax authorities however, took the view that the taxable amount of the grant of the lease on the office building had to be based on the completion cost of the building plus the capitalized value of the ground rent as a whole. The tax authorities issued a notice of additional assessment for an amount VAT CJ rules that insolvent trader may apply for admission to a procedure for a creditors arrangement resulting in partial payment of a VAT claim (Degano Trasporti) On 7 April 2016, the CJ delivered its judgment in the case Degano Trasporti Sas di Ferruccio Degano & C. (C-546/14). Degano Trasporti applied to the referring court in order to be admitted to a procedure for an arrangement with creditors. Indicating that it was in financial crisis, it sought to liquidate its assets in order to pay certain preferential creditors in full and to pay a percentage of its debts to unsecured creditors and some lower-ranking preferential creditors. In the view of Degano Trasporti, the latter creditors could not, in any event, recover the entirety of their claims if a bankruptcy procedure were initiated. Among these claims is a VAT debt which Degano Trasporti proposes to pay in part, without linking that proposal to the conclusion of a tax settlement. The referring court stated, in particular, that national law prohibits, in the context of a tax settlement, on partial payment of the VAT due and only allows for staggered payment of State claims to VAT. That prohibition applies in all cases and cannot be derogated from, even in the context of a proposal for an arrangement with creditors. It questions however, whether the obligation on Member States to take all legislative and administrative measures appropriate for the full recovery of VAT in fact prevents the use of collective proceedings other than bankruptcy, such as the procedure for an arrangement with creditors at issue. The referring court decided to stay the proceedings and to refer to the CJ for a preliminary ruling in this respect. The CJ ruled that the admission of a partial payment of a VAT claim by an insolvent trader in the context of an arrangement with creditors, which does not constitute a general and indiscriminate waiver of collecting VAT, is not contrary to the obligation on Member States to ensure collection of all of the VAT due in their territory as well as 12 13 year 2007. That VAT assessment was revoked at a later date. Then, the German tax authorities amended the VAT statement for the year 2006, taking the view that the transfer of the car to Spain in 2006 was subject to VAT and not VAT exempt, as Plöckl had not mentioned a VAT number of his business in Spain. Plöckl appealed against this decision and finally, the matter ended up with the Tax Court. This Court decided to refer to the CJ for a preliminary ruling in respect of the question whether or not the tax authorities may refuse the VAT exemption if the taxpayer has not reported the VAT number of the recipient, in transferring a business asset to another EU Member State. The AG answered the preliminary question on the basis of three factual establishments made by the referring Court. In the view of the AG, it follows from these establishments that the German tax authorities were not allowed to refuse the exemption for the intra-Community transfer of own goods on the basis of the fact that Plöckl failed his obligation to declare a Spanish VAT number as that obligation is only a formal requirement. Furthermore, according to the AG, there are no serious indication of fraud and the German tax authorities had the disposal of the necessary information in order to determine that the material requirements had been fulfilled. Customs Duties, Excises and other Indirect Taxes CJ rules on the non-transferability of rights deriving from import licences (Malvino Cervati) On 14 April 2016, the CJ delivered its judgment in the case Malvino Cervati (C-131/14). The case concerns the non-transferability of rights deriving from import licences. Malvi was an undertaking active in the fruit and vegetable import and export market as a traditional importer within the meaning of Article 2(c) of Regulation No 565/2002. Through another undertaking, which itself used other operators, Malvi bought garlic of Argentinian origin equal to the difference between the amounts calculated by themselves and Oudeland. Finally, the matter ended up with the Netherlands Supreme Court, which decided to refer to the CJ for a preliminary ruling in respect of determining the VAT taxable amount. The CJ ruled that the value of a right in rem granting its holder a right of use on immovable property and the completion cost of the office building may be included in the taxable amount of a supply where the taxable person has already paid VAT on that value and those costs, but also deducted the VAT immediately and in full. Furthermore, in the view of the CJ, the value of that right in rem to be taken into account in calculating the taxable amount of a supply, corresponds to the value of the amount to be paid in consideration each year for the remainder of the long lease granting the right in rem, as corrected or capitalized according to the same method used to determine the value of the grant of the long leasehold. AG Saugmandsgaard opines that VAT exemption for intra-Community transfer of own goods may not be refused on the basis of non-compliance with formal requirement (Plöckl) On 6 April 2016, AG Saugmandsgaard delivered his Opinion in the case J. Plöckl (C-24/15). In 2006, Plöckl bought a new car which was intended for his one-man business. Plöckl dispatched the car to a Spanish car dealer, for the purpose of selling it. A year later (2007), the car was sold by the car dealer to a Spanish company. Plöckl ha not reported any amounts for the intraCommunity transfer for the year 2006 and reported a VAT exempt intra-Community supply for the year 2007. However, Plöckl had not declared a VAT number of his business in Spain and had not reported any turnover in Spain. The VAT number of the Spanish companies was mentioned on the invoice issued by Plöckl.. After an audit, the German tax authorities took the view that the conditions for an intra-Community supply had not been met and imposed a VAT assessment for the 13 The Customs Authority appealed against that decision before the Commissione tributaria regionale della Toscana (Regional Tax Court of Tuscany), which amended the order in a judgment of 7 September 2010. That court held that it is fraudulent for a traditional importer which does not itself hold an import licence under the GATT quota, rather than buying goods directly from an exporter and importing the goods outside the quota directly, and thereby paying the specific customs duty, instead to buy the goods when they have already been cleared through customs by another operator, which, on instructions from the traditional importer, has acquired them with a view to selling them on to the latter through an undertaking which holds the licences under the quota, for an appropriate price in light of the service provided. As a general partner of Malvi, Mr M. Cervati brought an appeal on a point of law against that judgment before the Corte suprema di cassazione (Court of Cassation). In support of his appeal, Mr M. Cervati claims, inter alia, that Regulations No 1047/2001 and No 565/2002 have been infringed, on the basis that it is not unlawful for a traditional importer which does not hold a licence under the GATT quota to use another traditional importer, which acquires goods from a third-country supplier and then transfers them as foreign goods to a third operator, which, without transferring its own licence, introduces the goods into the European Union and sells them on to the second traditional importer for an appropriate price in light of the service provided, which then sells them on to the first. Mr M. Cervati also claims that the essential purpose of the GATT quota is to ensure the supply needs of the EU market while maintaining the balance of the market. It is, in fact, the loss of quotas previously attributed to specified importers and, consequently, the non-fulfilment of the quota which would have the effect of increasing prices through speculation. In cases such as those of this case there can, therefore, be no circumvention of the law. imported in February and March 2003 under the tariff quota provided for in that regulation and thereby eligible for a preferential customs duty (‘the imports at issue’), although it no longer held the necessary import licence for doing so, since its own licences had been exhausted. Considering that Malvi had unlawfully evaded customs duties and value added tax by means of a fraudulent mechanism whereby L’Olivo Maria Imp. Exp. (‘L’Olivo’), which was a new importer within the meaning of Regulation No 565/2002 and had carried out the imports at issue, acting as a shell company, and considering the former company joint and severally liable with that importer, the Customs Authority — Livorno Customs Office sent Malvi a correction and recovery notice. The mechanism called into question by the Customs Authority as fraudulent may be described as follows. First, L’Olivo, holder of the import licences necessary for eligibility for the preferential customs duty, would buy the consignments of garlic of Argentinian origin in transit at the bonded warehouses belonging to Bananaservice Srl (‘Bananaservice’), managed by Mr R. Tonini, which did not hold such licences. At the second stage, L’Olivo would import the garlic consignments into the European Union under the preferential customs duty, then, once the consignments had been released for free circulation, it would sell them on to Tonini Roberto & C. Sas (‘Tonini’). At the final stage, Tonini would sell the consignments on to Malvi. The Corte suprema di cassazione (Court of Cassation) stated, first, that only L’Olivo held import licences in its own right and, second, the garlic consignments were sold for an appropriate price, which was nevertheless less than the specific duty for imports not falling within the GATT quota. Malvi brought an action contesting the correction and recovery notice before the Commissione tributaria provinciale di Livorno (Provincial Tax Court of Livorno) which upheld the action by decision of 15 November 2006. 14 15 The CJ ruled as follows: Article 3(3) of Commission Regulation (EC) No 565/2002 of 2 April 2002 establishing the method for managing tariff quotas and introducing a system of certificates of origin for garlic imported from third countries and Article 4(3) of Council Regulation (EC, Euratom) No 2988/95 of 18 December 1995 on the protection of the European Communities financial interests must be interpreted as meaning that they do not, in principle, preclude a mechanism, such as that at issue in the main proceedings, whereby, following an order placed by an operator, a traditional importer within the meaning of the former regulation, having exhausted its licences to import at a preferential rate of duty, with a second operator, also a traditional importer not holding such licences, • goods are, first of all, sold, outside the European Union, by an undertaking connected with the second operator, to a third operator, a new importer within the meaning of the former regulation, holding such licences, • the goods are, then, released for free circulation in the European Union by the third operator at the preferential rate of customs duty, subsequently sold on by the third to the second operator and • the goods are, finally, sold by the second to the first operator, which thereby acquires goods imported under the tariff quota set out in the former regulation despite the fact that the first operator does not hold the necessary licences for so doing. CJ rules on the application of preferential import duty tariff for consignments of goods originating in different countries (ADM Hamburg AG) On 7 April 2016, the CJ delivered its judgment in the case ADM Hamburg AG (C-294/14). The case concerns the application of preferential import duty tariff for consignments composed of a mixture of crude palm oil originating in several countries benefiting from the same preferential treatment. On 11 August 2011, ADM Hamburg imported a number of consignments of crude palm kernel oil from Ecuador, Against that view, the Customs Authority claimed that part of the quota allocated to another operator had been used and, consequently, that there was customs fraud intended to circumvent the system for the protection of the internal market. It considered the fraud to be blatant in the present case on the basis, inter alia, that Malvi had ordered the consignments of garlic of Argentinian origin in advance, those consignments being subsequently imported by L’Olivo, that Malvi provided advance payment to Tonini, which has the same manager as Bananaservice, and that L’Olivo made a profit of EUR 0.25 per kilo. The Customs Authority added that Mr M. Cervati has not explained what benefit he would gain from such a mechanism other than the tax benefit consisting of the payment of the preferential rate of duty. On the basis that the case law of the Court does not provide a solution to the case brought before it and the finding that the applicable EU legislation has been given different interpretations in national case law, the Corte suprema di cassazione (Court of Cassation) decided to stay the proceedings and to refer the following question to the CJ for a preliminary ruling: ‘On a proper construction of Regulations No 1047/2001 and No 2988/95, is conduct such as that engaged in by Community operator A (Malvi) prohibited, and does it constitute an abuse of rights and conduct designed to evade tax, where Community operator A (Malvi), which does not hold an import licence or which has exhausted its own quota share, buys certain consignments of goods from another Community operator B (Tonini), which in turn has bought them from a third-country supplier (Bananaservice), the goods being sold as foreign goods to another Community operator C (L’Olivo), which holds a licence under the quota because it meets the requisite criteria and which, without transferring its own licence, releases the goods for free circulation in the European Union in order to transfer them after customs clearance and for an appropriate price, lower than the specific duty for imports outside the quota, to operator B (Tonini), which finally sells them to operator A (Malvi)?’ 15 In those circumstances, the Finanzgericht Hamburg (Finance Court, Hamburg) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling: ‘Is the factual condition laid down in the first sentence of Article 74(1) of Regulation No 2454/93, whereby the products declared for release for free circulation in the European Union must be the same products as exported from the beneficiary country in which they are considered to originate, fulfilled in a case such as the present case, where several consignments of crude palm kernel oil are exported from different GSP exporting countries, in which they are considered to originate, and imported into the European Union not as physically separate consignments, but are all exported after being poured into the same tank of the cargo vessel and imported as a mixture in that tank into the European Union, such that it can be ruled out that other products (not enjoying preferential treatment) have been put into the tank of the cargo vessel during the time the products were being transported until they were released for free circulation?’ The CJ ruled that Article 74(1) of Commission Regulation (EEC) No 2454/93 of 2 July 1993, must be interpreted as meaning that in a situation, such as that at issue in the main proceedings, where valid certificates of origin have been presented, the preferential origin, within the meaning of the generalized system of preferences, of consignments of crude palm kernel oil may be recognized even where those products have been mixed in the tank of a vessel at the time of their transport to the European Union in circumstances where it is possible to rule out that other products, in particular products not benefiting from any preferential treatment, have been added to that tank. AG opines on minimum retail prices for manufactured tobacco (Colruyt) On 21 April 2016, AG Wahl delivered his opinion in the case Fr. Colruyt NV (C-221/15). The case concerns the obligation to respect minimum retail prices for manufactured tobacco products. Colombia, Costa Rica and Panama to Germany for release for free circulation in the European Union. Those four countries, which have the status of developing countries benefiting from the generalised system of preferences granted by the EU under its scheme of generalised preferential tariffs introduced by Regulation No 732/2008 (‘the relevant GSP countries’), issued certificates of origin Form A in respect of those various consignments. During its transport to the European Union, the palm kernel oil was loaded into different tanks on a cargo vessel. In three of those tanks consignments originating respectively from three of the relevant GSP countries were loaded and transported separately. In a fourth tank, ADM Hamburg mixed the oil from different consignments coming from each of the four relevant GSP countries. On arrival of the goods in Germany, ADM Hamburg presented the certificates of origin Form A, requesting in respect of the whole palm kernel oil shipment the application of a preferential customs treatment under the scheme of generalised tariff preferences. By notice of 8 December 2011, the Customs Office fixed the import duties without granting preferential treatment for the part of the consignment consisting of a mix of oils stored in the fourth tank and decided to impose, on that part of the consignment, import duties calculated at the full rate. Following the rejection of its administrative complaint, ADM Hamburg brought an action before the Finanzgericht Hamburg (Finance Court, Hamburg) in which it requested the annulment of the import duty notice of 8 December 2011. In support of its action, ADM Hamburg contended, inter alia, that the common storage of oils for transport purposes was origin-neutral, whereas the Customs Office took the view that preferential customs treatment can be granted only to products in respect of which an absence of alteration is established; that had not been established in the present case. 16 (2) Does Article 34 TFEU preclude a national measure which requires retailers to respect minimum prices by prohibiting the application of a price for tobacco products which is lower than the price that the manufacturer/importer has affixed to the revenue stamp? (3) Does Article 4(3) TEU, read in conjunction with Article 101 TFEU, preclude a national measure which requires retailers to respect minimum prices by prohibiting the application of a price for tobacco products which is lower than the price that the manufacturer/importer has affixed to the revenue stamp?’ Written observations were submitted by Colruyt, the Belgian, French and Portuguese Governments and the Commission. Colruyt, the Belgian and French Governments and the Commission presented oral arguments at the hearing on 17 February 2016. The AG proposes that the CJ answer the questions as follows: Article 15(1) of Directive 2011/64/EU of 21 June 2011 on the structure and rates of excise duties applied to manufactured tobacco, Article 34 TFEU, and Article 101 TFEU read in conjunction with Article 4(3) TEU, do not preclude a national provision prohibiting price promotions on manufactured tobacco which requires retailers to respect minimum prices by prohibiting the application of a price for tobacco products which is lower than the price on the revenue stamp affixed by the manufacturer or importer. Etablissements Fr. Colruyt NV (‘Colruyt’) operates several supermarkets in Belgium. According to the referring court, Colruyt sold various tobacco products at a unit price below the price indicated on the revenue stamp affixed by the manufacturer or importer, applied both a temporary general discount and a quantity discount to some tobacco products, and offered a general discount to members of youth movements. The Openbaar Ministerie (Public Prosecution Service) considered that, by doing so, Colruyt had breached the law at issue since, inter alia, the sale of tobacco products at a price below the one on the stamp constitutes an act directly or indirectly aimed at promoting sales of those products. Following a finding of infringement by the correctionele rechtbank te Brussel (Criminal Court, Brussels), the case was appealed to the hof van beroep te Brussel (Court of Appeal, Brussels). Before that court, Colruyt submitted that the prohibition on applying retail prices which are lower than the price on the revenue stamp is incompatible with EU law, namely Article 15(1) of Directive 2011/64, Article 34 TFEU and Article 101 TFEU read in conjunction with Article 4(3) TEU. Entertaining doubts as to the interpretation of those provisions, the referring court decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling. ‘(1) Does Article 15(1) of Directive 2011/64/EU, whether or not read in conjunction with Articles 20 and 21 of the Charter of Fundamental Rights of the European Union of 7 December 2000, preclude a national measure which requires retailers to respect minimum prices by prohibiting the application of a price for tobacco products which is lower than the price that the manufacturer/importer has affixed to the revenue stamp? 17 Correspondents ● Gerard Blokland (Loyens & Loeff Amsterdam) ● Kees Bouwmeester (Loyens & Loeff Amsterdam) ● Almut Breuer (Loyens & Loeff Amsterdam) ● Robert van Esch (Loyens & Loeff Rotterdam) ● Raymond Luja (Loyens & Loeff Amsterdam; Maastricht University) ● Arjan Oosterheert (Loyens & Loeff Zurich) ● Lodewijk Reijs (Loyens & Loeff Rotterdam) ● Bruno da Silva (Loyens & Loeff Amsterdam; University of Amsterdam) ● Patrick Vettenburg (Loyens & Loeff Rotterdam) ● Ruben van der Wilt (Loyens & Loeff Amsterdam) www.loyensloeff.com About Loyens & Loeff Loyens & Loeff N.V. is the first firm where attorneys at law, tax advisers and civil-law notaries collaborate on a large scale to offer integrated professional legal services in the Netherlands, Belgium, Luxembourg and Switzerland. Loyens & Loeff is an independent provider of corporate legal services. Our close cooperation with prominent international law and tax law firms makes Loyens & Loeff the logical choice for large and medium-size companies operating domestically or internationally. Editorial board For contact, mail: email@example.com: ● René van der Paardt (Loyens & Loeff Rotterdam) ● Thies Sanders (Loyens & Loeff Amsterdam) ● Dennis Weber (Loyens & Loeff Amsterdam; University of Amsterdam) Editors ● Patricia van Zwet ● Bruno da Silva Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended for general informational purposes and can not be considered as advice. www.loyensloeff.com Amsterdam Arnhem Brussels Dubai Hong Kong London Luxembourg New York Paris Rotterdam Singapore Tokyo Zurich 16-05-EN-EUTA
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EU Tax Alert - May 2016 - edition 155
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