Brussels, 24 June 2010
VAT: Commission requests Ireland, The Netherlands, Poland and Austria to change laws on preferential VAT rates for certain sectors
The European Commission has requested Ireland, The Netherlands, Poland and Austria to change certain aspects of their legislation which are not in compliance with EU rules on Value Added Tax (VAT Directive 2006/112/EC). The Commission's requests take the form of reasoned opinions (second step of EU infringement proceedings). In the absence of satisfactory responses within two months, the Commission may refer these Member States to the Court of Justice.
Ireland - reduced VAT rates for horses and greyhounds
The Commission has given Ireland two months to amend its legislation which grants a reduced VAT rate of 4.8% to the supply of horses and greyhounds, the hiring of horses and the sale of nomination services in studs. Under the VAT Directive, Member States can continue to apply exemptions or reduced rates that already existed on 1 January 1991, so long as they are in line with EU legislation and were adopted for clearly defined social reasons and to the benefit of the final consumer. Although Ireland did apply the reduced rate to horses and greyhounds before 1991, the Commission considers that this measure does not fit the requirement of having a clearly defined social reason, nor does it seem to benefit the final consumer. Therefore it is not compatible with EU legislation.
The Netherlands - VAT exemption for water sport activities
The Commission has formally requested that The Netherlands change its legislation with regard to VAT exemptions for sports activities (water sports), as the scope of the exemption is considered to be too wide. Under the VAT Directive, services linked to sport or physical education, which are supplied by non-profit making organisations to the persons taking part in these sports, can be exempt from VAT. In The Netherlands, a VAT exemption is granted to services provided by water sports organisations related to the provision of berths and moorings for vessels. The Commission considers that the VAT exemption should not be applied to the provision of berths or moorings, because such services cannot be considered as closely linked to sport or physical education. Furthermore, the way in which The Netherlands distinguishes between organisations which can and cannot benefit from the VAT exemption is not in line with the VAT Directive and threatens to distort competition.
Poland - VAT exemption for aircraft
The Commission has formally requested Poland to amend its legislation on VAT exemptions for transactions related to aircraft, since it is based on criteria which are different from, and inconsistent with, the criteria set out in EU legislation. Under the VAT Directive, certain supplies of goods and services related to aircraft can be exempt from VAT. The essential condition for those exemptions is that the aircraft must be "used by an airline operating for profit chiefly on international routes". Even aircraft which operate on domestic routes can benefit from the exemption, so long as they are owned by airlines that profit mainly from international traffic. Among the problems with the Polish legislation is the fact that Poland gives the exemption to aircraft which weigh more than 12 tonnes. Any aircraft under this weight does not benefit from the exemption in Poland, even if it meets the criteria set out in the EU legislation. Conversely, aircraft over 12 tonnes which do not meet the EU criteria are still given an exemption in Poland. In view of the above, the Commission has formally requested Poland to change its national rules, to bring them into line with the EU legislation.
Austria - exemption for aircraft
The Commission has formally requested Austria to change its legislation with regard to VAT exemptions for aircraft used by state institutions. Under Austrian law, the supply, modification, repair, maintenance, chartering and hiring of aircraft used by state institutions are exempt from VAT, as are the intra-Community acquisition and the importation of goods relating to such transactions. This is not in line with EU criteria for VAT exemptions for aircraft (see above), which Member States must respect. The Commission has therefore formally requested that Austria amends its legislation within 2 months.
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