VAT – Commission tackles Germany over taxation of supplies of services by executors of wills
European Commission - IP/06/39 16/01/2006
Brussels, 16 January 2006
The European Commission has decided to send Germany a formal request to change its laws and resulting administrative practices regarding the place of taxation of the services provided by executors of wills. German law treats the place of taxation of such services as that from which the executors provide their services. The Commission considers that these services are similar to the services provided by lawyers and therefore that the place of taxation should, under the European Community VAT rules, be the place of residence or establishment of the customer. Germany's interpretation may lead to cases of double taxation. The Commission's request is in the form of a Reasoned Opinion, the second stage of the infringement procedure under Article 226 of the EC Treaty. In the absence of a satisfactory amendment to the German tax rules within two months of receipt of the reasoned opinion, the Commission may refer the matter to the Court of Justice.
According to Article 9 of the Sixth VAT Directive (77/388/EEC), services are normally deemed to be supplied, and therefore taxed, in the country where the supplier runs his business or has a permanent establishment. However, there are several exceptions to this main rule including for intangible services such as services of lawyers and other similar services. The place where such intangible services are deemed to be supplied and taxed varies according to the place of residence or establishment of the customer and according to the status of the person to whom the service is rendered, but the main rule is that supplies of intangible services take place in the country of the recipient of the services.
Under the administrative instructions of the German tax authorities, an executor's services are deemed always to have been at the place from which he exercises his activity. It follows that Germany deems lawyers, tax consultants and auditors who act as executors to provide such services at their place of business rather than at the place of the recipient of the services. The German authorities argue that an executor's activity is not as a rule an advisory service of the kind provided by lawyers. Moreover, they claim that the services of a lawyer and those of an executor serve different purposes.
The Commission considers the practice of the German tax authorities to be
inconsistent with Article 9 of the Sixth VAT Directive and not in the line with
the interpretation by other Member States. It considers that an executor's
activities do, in fact, belong among those habitually and principally exercised
by a lawyer. The determining factor is the nature of the service. Furthermore,
the Commission takes the view that an executor's activity is at any rate similar
to that of a lawyer. Both serve the same purpose, namely presenting and
defending the interests of a person.