Weekly Tax News – 16 July 2018

July 16, 2018

ECOFIN discussion on VAT

On 13 July, the ECOFIN has discussed two VAT related proposals. The first proposal regards the generalised reverse charge mechanism aimed at allowing Member States to apply temporarily a generalised reversal of VAT liability. The second one relates to the application of non-standard VAT rates to electronic publication in order to align VAT rules between physical and electronic forms of publication. The agreement on these two proposals was expected for the 13 July, but there is still some discordance among some Member States: France does not agree on the reverse-charge mechanism and Czech Republic on the reduced VAT rates for e-books. A new attempt to reach an agreement is already on the agenda of October’s ECOFIN Council.

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Corporate Europe Observatory published a report on the Big Four lobbying activities

On 10 July, the Corporate Europe Observatory (CEO) published a report that examines the role played by the Big Four (KPMG, EY, Deloitte and PwC) in influencing the drafting of EU tax policies. The report lists the various ways the Big Four use to exercise their influence. First of all, they are often in charge of undertaking analyses and studies in tax and customs for the Commission. Furthermore, the Big Four are also very active members in various lobbying structures, such as European Business Activity on Taxation, European Contact Group, Accountancy Europe and American Chamber Of Commerce to the EU. Finally, CEO criticizes the “revolving doors” allowing a continuous movement of workers between Big Four and the European Commission, resulting in an influence in term of culture and ideology shared by these two spheres.

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Spain urged to recover €167 million of State aid

On 10 July, the European Commission officially required Spain to recover €167 million from Correos, a postal operator. Following the investigation started in February 2016 the Commission decided to ask Madrid to recover €166 million due to overcompensation awarded during the period 2004-2010 and approximately €0,9 million linked to a specific tax exemption that gave Correos an undue advantage.

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Investigations opened on the Madeira Free Zone

On 6 July, the European Commission has opened an in-depth investigation to examine the tax exemptions applied by Portugal to companies established in the Madeira Free Zone. The Madeira Free Zone was created to support the economic development of the region by attracting investments. The Commission is now worried that the flexibility provided to Portugal in this context has been used to grant a fiscal aid scheme which is not in line with the EU rules on state aid.

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ECA to examine VAT and customs duties in e-commerce

On 5 July, the European Court of Auditors has launched an audit to assess the effectiveness of the EU’s response to the challenges posed by e-commerce in terms of VAT and customs duties. The auditors will examine the European Commission’s regulatory and control framework for e-commerce and cooperation between Member States to ensure that VAT and custom duties on e-commerce transactions are collected in full. The report on the audit is expected to be published in mid-2019.

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VAT – Goods containing precious metals are not second-hands

On 11 July, the Court of the European Union issued a judgment confirming that goods that contain precious metal or stones are not second-hand goods. This judgement also explains that these goods cannot be subject to the profit margin regime set out in the 'VAT' directive, if they are no longer likely to fulfil their initial purpose and have retained only the functionalities inherent in those metals and stones.

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