Brussels, 25 July 2006
The Commission has decided to refer Germany to the Court of Justice on account of its treatment of services supplied by executors of wills. In addition the Commission has issued a reasoned opinion (second step of the infringement procedure provided for in article 226 of the EC Treaty) concerning the requirements imposed by Greece on invoicing and on the storage of electronic invoices. Reasoned opinions have been also addressed to Ireland concerning its treatment of public bodies as non taxable persons and to Italy concerning its restrictions on VAT charges and VAT refunds which are against the 6th VAT Directive and against the Eights and Thirteenth VAT Directives, respectively. If the relevant national legislations are not amended in order to comply with the respective reasoned opinions, the Commission may decide to refer these matters to the European Court of Justice.
Germany: services supplied by executors of wills
The European Commission has decided to refer Germany to the European Court of Justice for its treatment of services supplied by executors of wills. According to German law and the resulting administrative practice of the tax authorities, these services are always taxed in the place where the executor is established. Conversely, the Commission considers that these services are similar to the services of lawyers and therefore, according to the provisions of the Sixth VAT Directive, should be taxed where the recipient of the service is established if the recipient is a taxable person. Therefore, the Commission concludes that the German authorities' interpretation may result in double taxation.
Since Germany has not replied satisfactorily to the reasoned opinion that the Commission sent to it on 19 December 2005 (see IP/06/39), the Commission has decided to refer the case to the European Court of Justice.
Greece: requirements imposed on invoices and on the storage of electronic invoices
The adoption of harmonised rules concerning the issuance and storage of invoices (see IP/01/1730) was a major step towards simplifying the obligations and reducing the costs to tax payers. A common list of requirements should ensure that invoices issued in one Member State allow clients in other Member States to deduct the relevant input VAT. Electronic invoicing and electronic storage of invoices, both essential in cutting the costs of invoicing, are now possible across the Community. However, the expected benefits of that legislation will not be achieved if Member States do not transpose Community legislation correctly.
In maintaining the obligation to translate all invoices into Greek and recalculate all amounts shown in invoices into Euros and in requiring the storage in paper form of certain invoices issued electronically, Greece has, in the Commission's view, failed to correctly transpose the agreed common rules. The Commission has therefore issued a Reasoned Opinion requesting that Greece amend its legislation within two months of its receipt.
Ireland: treatment of public bodies as non taxable persons
While, according to the Sixth VAT Directive, public bodies should be treated as taxable persons in a number of cases and, at any rate, where doing otherwise would result in significant distortions of competition, Irish public bodies (Government Departments, local bodies and others) are not deemed to be taxable persons under Irish VAT legislation. Accordingly, when they engage in the supply of goods and services they neither charge VAT nor are they entitled to deduct the VAT incurred on their costs.
The Court of Justice (see Case C-430/04) has recently confirmed that taxable persons in competition with public bodies which are not being treated as taxable persons are entitled to rely on the relevant provision in the Directive before the national tax authorities.
The Commission has issued a Reasoned Opinion requesting that Ireland amend its legislation within two months of its receipt.
Italy: restriction in the right to deduct VAT charged on the acquisition of cars and other related expenses
The right of deduction, which implements the principle of neutrality, is one of the fundamental principles governing the whole VAT system. Member States do not have the possibility to introduce exceptions to the right of deduction unless such possibility is expressly provided for under the Sixth VAT Directive.
Italy introduced after 1 January 1979 - date of entry into force of the Sixth Directive in Italy - a restriction of the right to deduct VAT on acquisitions of goods and services related to motor vehicles and on the acquisition of fuel and lubricants. At that time, Italy argued that the exception to the full deduction regime was justified for cyclical economic reasons, on the basis of Article 17(7) of the Sixth Directive. However, Italy has maintained such restrictions until the present time. The Commission therefore believes that Italy has infringed the Sixth Directive inasmuch as such limitations to deduct input VAT cannot be viewed as measures introduced for "cyclical economic reasons" but that, on the contrary, they maintain a structural and permanent character. The Commission has decided to send a Reasoned Opinion asking Italy to change its legislation within 2 months from the receipt of the letter.
The Court of Justice in case C-228/05 has been addressed with a preliminary ruling concerning the same issue tackled by the Commission in the framework of this infringement. Advocate General Sharpston issued her Opinion in this case on June 22nd last. The Opinion of an Advocate General is not binding on the Court. The Opinion advises the Court to find that Article 17(7) of the Sixth Directive authorises only temporary measures responding to short-term economic circumstances.
Italy: taxable persons with fixed establishments in the country are required to obtain VAT refunds by way of the Eighth or Thirteenth VAT Directives
The Eighth and Thirteenth VAT Directive establish the procedure by which a non established taxable person who does not carry out any output transaction in a Member State, and does not maintain a fixed establishment in that Member State can receive a refund of the input VAT paid in that same State.
According to the Italian legislation, a taxable person whose main place of establishment is in another Member States but who has a fixed establishment in Italy, must make use of the refund procedure in the Eighth VAT Directive to obtain a tax refund. Similarly, a taxable person whose main place of establishment is outside the Community but who has a fixed establishment in Italy, must make use of the refund procedure in the Thirteenth VAT Directive.
In fact, the Italian rules require that, where a non-established taxable person, who maintains a fixed establishment in Italy, acquires goods and services for which VAT is deductible but the acquisition is done not through the fixed establishment itself, but directly through the main establishment (located in another State), that taxable person obtains a refund of the VAT on the acquisitions according to the Eighth and Thirteenth Directives.
The Commission has found the Italian legislation infringing the scope and purpose of the Eighth and Thirteenth Directive and, after having given the opportunity to express its observation with a Letter of Formal Notice, has decided to send a Reasoned Opinion asking Italy to change its legislation within the deadline of two months from the receipt of the letter.
Commission cases' reference numbers are 2005/4161 (Germany), 2001/2176 (Greece), 2004/4084 (Ireland), 2005/2302 (Italy - VAT deduction) and 2003/4648 (Italy - 8th and 13th Directive)
For the press releases issued on infringement procedures in the taxation or customs area see:
For the latest general information on infringement measures against Member States http://ec.europa.eu/taxation_customs/common/infringements/infringement_cases/index_en.htm