Brussels, 6 July 2007
The European Commission has decided to refer Italy to the European Court of Justice for treating certain taxable persons established in that Member State as if they were non established operators for the purposes of the recovery of the tax borne in Italy. The Commission has likewise decided to refer Spain and France to the Court: in the former case, for not applying VAT to certain services supplied by the "registradores de la propiedad" and in the latter for applying a reduced VAT rate to services supplied in the framework of legal aid.
Italy: recovery of VAT by taxable persons established in that Member State but whose main place of establishment is outside Italy.
The Italian legislation requires taxable persons established in Italy, but whose main place of establishment is outside that Member State, to recover VAT paid or due in Italy according to the refund procedures provided for non established taxable persons in the Eighth or the Thirteenth VAT Directives. By sending a letter of formal notice and a reasoned opinion, the Commission has drawn Italy's attention to the fact that the aforementioned national legislation is incompatible with the purpose of these directives and the relevant provisions defining their scope of application (IP/06/1058). The Commission is of the opinion that taxable persons established in Italy must be able to recover input VAT, as a general rule, through the standard deduction mechanism and not by way of the VAT refund procedure laid down in those Directives.
Italy having failed to introduce the necessary amendments within the prescribed deadline of two months set up in the reasoned opinion, the Commission has decided to refer the case to the European Court of Justice.
Spain: services supplied by "registradores de la propiedad" consisting of the calculation and collection of certain taxes
The "registradores de la propiedad" are professionals chosen and entrusted by the Spanish State with the management of the immovable property registry. In that capacity they provide services to the public which are subject to VAT.
In addition to that, the "registradores de la propiedad" have been entrusted by the regional governments in Spain with certain tasks relating to the inheritance and property transfer taxes, basically their calculation and collection. In return for providing those services to the regional governments, the "registradores" receive a remuneration consisting of a percentage of the taxes collected. According to the current practice in Spain, these services are not subject to VAT.
The Commission takes the view that even in the context of this activity the "registrador" acts as an independent professional (and not as a public body) who organizes autonomously both human and material resources with the aim of providing the services requested by his client (the regional government). The consequence is that the aforementioned services are subject to VAT.
In this regard, the Commission recalls that the European Court of Justice has already ruled (Case 235/85) with regard to Dutch notaries that services supplied by this category of professionals (who, like the "registradores", perform functions entrusted by the public authorities) are subject to VAT. Furthermore, the same Court decided that services supplied in Spain by "zonal tax collectors" to the local authorities were equally subject to VAT (Case C-202/90). This latter judgment is particularly relevant, since the collectors supplied services (the calculation and collection of local taxes, in return for a remuneration made of a percentage of the taxes collected) clearly similar to those at stake in the present proceedings.
Since Spain has not changed its legislation despite the Commission's formal request in the form of a Reasoned Opinion (see IP/06/1815), the Commission has decided to refer the case to the European Court of Justice.
France: services supplied by lawyers within the framework of legal aid ("aide juridictionnelle")
France applies a reduced VAT rate (5,5%) to services provided by lawyers within the framework of legal aid ("aide juridictionnelle"). Under this framework, the services provided are totally or partially paid by the State.
Under Community legislation, the supplies of goods and services subject to VAT are normally subject to a standard rate of at least 15%, but the Member States may opt to apply one or two reduced rates of no less than 5% to a restricted list of goods and services. However, this list does not include services provided by lawyers.
Since France has not changed its legislation despite the Commission's formal request in the form of a Reasoned Opinion (see IP/06/1878), the Commission has decided to refer the case to the European Court of Justice.
The Commission notes that the application of the normal VAT rate would have no impact on the financial situation of the beneficiaries of legal aid in those cases where the services are totally paid for by the State. In case of partial payment by the State, the Commission notes that France may choose to use the additional income linked to the application of the normal VAT rate to these services in order to increase the amount of legal aid and thereby offset any increase in costs. Therefore, the application of VAT principles by France, which implies that the standard rate of VAT be applied to these services, is perfectly compatible with the decision taken to grant legal aid and facilitate the access to legal advice for more modest persons.
The Commission's case reference numbers are 2003/4648 (Italy), 2004/2175
(Spain) and 2005/2277 (France).