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April 2016 - edition 154EU Tax Alert
The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.
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Highlights in this edition
CJ rules that claims settlement services performed by third party on behalf of insurance company are not VAT exempt (Aspiro SA)On 17 March 2016, the CJ delivered its judgment in the case Minister Finansów v Aspiro SA (C-40/15). The case
deals with the issue whether services in connection with the settlement of insurance claims are exempt from VAT if
an insurer does not perform this task itself, but outsources it to a third party.
Commission proposes public disclosure of tax information by multinationalsOn 12 April 2016, the Commission proposed to introduce public country-by-country reporting (CbCR) for large
multinational enterprises (MNEs). In its Anti-Tax Avoidance Package, released in January 2016, the Commission
already indicated it was looking at the issue of public CbCR. The current legislative proposal to introduce public
CbCR is published only a few weeks after the Council of the European Union reached political agreement on non-
public CbCR to national tax authorities of the EU Member States. It is yet another EU initiative aimed at enhancing
transparency and public scrutiny on corporate income tax affairs of MNEs.
Commission presents Action Plan on VATOn 7 April 2016, the Commission presented an Action Plan on VAT. The purpose of this plan is to set a pathway such
to create a single EU VAT area. This Action Plan is based on four pillars: (i) recent and ongoing policy initiatives;
(ii) urgent measures to tackle the VAT gap; (iii) create a robust single European VAT area, and (iv) modernized VAT
rates policy.
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Contents
Highlights in this edition• CJ rules that claims settlement services performed
by third party on behalf of insurance company are not
VAT exempt (Aspiro SA)
• Commission proposes public disclosure of tax
information by multinationals
• Commission presents Action Plan on VAT
State Aid / WTO• General Court annuls Frucona decision a second time
Direct taxation• AG Wathelet considers that German rules on
inheritance tax are not in breach of the free movement
of capital (Feilen)
• AG Kokott considers that Portuguese withholding
taxes on interest paid to non-resident creditors is in
breach of the freedom to provide services (Brisal)
VAT• AG opines on Belgian VAT exemption for services
supplied by lawyers (Ordre des barreaux francophones
et germanophone and Others)
• AG opines that financed public broadcasting should
not confer a right to deduct input VAT on goods and
services acquired for that activity (Český rozhlas)
• Commission publishes Report on VAT Gap Estimations
• European Court of Auditors publishes a report on
tackling VAT fraud
• Confirmation that Luxembourg VAT should apply on
Director Fees
Customs Duties, Excises and other Indirect Taxes• CJ rules on the customs classification of soya protein
concentrate (Customs Support Holland BV)
• CJ rules on the definition of ‘goods put up in sets for
retail sale’ for the customs classification of audio-video
equipment (VAD BVBA – Van Aert)
• CJ rules on the customs classification of stand-alone
device designed to retrieve, receive and stream digital
audio files in the form of amplified sound (Sonos
Europe BV)
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- provided moreover to the insurer - does not constitute
an insurance transaction within the meaning of Article
135(1)(a) of the EU VAT Directive, which would be VAT
exempt. Furthermore, in the view of the CJ, the settling of
claims by and on behalf of an insurer such as performed by
Aspiro, is not linked in any way to the finding of prospective
clients and their introduction to the insurer with a view to
the conclusion of insurance contracts. For this reason,
the settlement of claims cannot be considered as related
services performed by insurance brokers and insurance
agents.
Commission proposes public disclosure of tax information by multinationalsOn 12 April 2016, the Commission proposed to introduce
public country-by-country reporting (CbCR) for large
multinational enterprises (MNEs). In its Anti-Tax Avoidance
Package, released in January 2016, the Commission
already indicated it was looking at the issue of public
CbCR. The current legislative proposal to introduce public
CbCR is published only a few weeks after the Council of
the European Union reached political agreement on non-
public CbCR to national tax authorities of the EU Member
States. It is yet another EU initiative aimed at enhancing
transparency and public scrutiny on corporate income tax
affairs of MNEs.
According to the draft proposal:
• The annual public CbCR obligation would rest on MNEs
with a total consolidated group revenue exceeding
EUR 750 million. If the ultimate parent company is
based outside the EU, the public CbCR obligation would
apply to medium-sized or large subsidiaries or branches
in the EU, unless those subsidiaries and branches are
included and specified in a report published on the
website of the ultimate parent.
• An exemption may apply to EU ultimate parent companies
of banking groups already disclosing information under
the EU’s Capital Requirement Directive.
• The information to be published is less extensive
than under non-public CbCR requirements and would
comprise: the nature of the activities, the number of
employees, the net turnover (including with related
parties), the profit or loss before tax, the tax accrued
and paid and the amount of accumulated earnings.
The public CbCR report shall present this information
Highlights in this edition
CJ rules that claims settlement services performed by third party on behalf of insurance company are not VAT exempt (Aspiro SA)On 17 March 2016, the CJ delivered its judgment in the
case Minister Finansów v Aspiro SA (C-40/15). Aspiro SA
(‘Aspiro’) is a Polish company that supplies, in the name
and on behalf of an insurance company, comprehensive
services for the settlement of insurance claims. Under the
contract, Aspiro performs or delegates to an external sub-
contractor multiple tasks, among which are the receipt of
damage reports, the performing of damage investigations
and the further administrative processing. Aspiro is
remunerated in accordance with a flat rate, depending on
the type of claim concerned and does not have a liability
toward the insured persons.
According to Aspiro, the services performed by it constitute
insurance services. In its view, the services form a
distinct whole and constitute a singly supply of services,
of a complex nature, which must be VAT exempt as a
whole. The Finance Minister only partially confirmed
Aspiro’s position. He considered that only the settling of
substantive claims, including the analysis of the relevant
documents and the decision as to whether the claim was
covered, was an insurance activity. All other services did
not constitute insurance services and did not benefit from
the VAT exemption, because they were of a technical and
administrative nature and could be performed in the context
of other activities than insurance services. The Supreme
Administrative Court was uncertain whether the exemption
of Article 135(1)(a) of the EU VAT Directive was applicable
to the activities at issue in the main proceedings and
referred to the CJ for a preliminary ruling in this respect.
First, according to the CJ, it must be considered whether
the settlement of claims by Aspiro consist of making
‘insurance transactions’ or is to be regarded as ‘related
services performed by insurance brokers and insurance
agents’. The CJ ruled that a provider of services such as
Aspiro does not itself undertake to ensure that the insured
person is covered in respect of a risk and is not connected
in any way to the insured person through a contractual
relationship. Consequently, the CJ ruled that the service
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The Action Plan is then based on the need to reform
and reboot the current VAT system and to come with a
legislative proposal that puts in place a definitive VAT
system. The Action Plan is based on four major pillars:
1. Recent and ongoing policy initiatives: the Commission
will present a legislative proposal by the end of 2016
such to modernize and simplify VAT for cross-border
e-commerce. The purpose is to extend the current one-
stop-shop concept to all cross-border e-commerce,
including distance sales; introduce common EU-
wide simplifications measures to help small start-
up e-commerce businesses; streamline audits in
this sector and remove the VAT exemption for the
importation of small consignments from suppliers in
third countries.
In addition, the Commission is also preparing
a simplification package for SMEs as they bear
proportionally higher VAT compliance costs than large
businesses. The proposal is expected by the end of
2017.
2. Urgent measures to tackle the VAT gap: the
Commission will present, during 2016, measures to
improve cooperation between tax administrations,
including from non-EU countries, and with customs
and law enforcement bodies and to strengthen tax
administrations’ capacity for a more efficient fight
against fraud. Furthermore, it plans to submit an
evaluation report of the Directive on mutual assistance
for the recovery of tax debts. In 2017, the Commission
will present a proposal to enhance VAT administrative
cooperation.
3. Towards a robust single European VAT area: the
Commission will present, in 2017, a legislative proposal
for a definitive VAT system for cross-border trade. This
definitive VAT system will be based on the principle
of taxation in the country of destination of the goods.
The Commission is of the view that in the definitive
VAT system, the taxation rules according to which
the supplier of goods collects VAT from his customer
should be extended to cross-border transactions. This
will ensure consistent treatment of domestic and cross-
border supplies along the entire chain of a production
and distribution, and re-establish the basic features of
the VAT in cross-border trade.
4. Towards a modernised VAT rates policy: upon the
adoption of the definitive VAT system based on the
for each EU Member State where the MNE is active
(country-by-country basis), whereas the information
regarding activities outside the EU will in principle be
presented for all jurisdictions combined. However, for
non-EU tax jurisdictions which do not comply with certain
good governance standards in taxation, a breakdown
will be required if transactions take place with affiliates
in the EU.
• Reports are to be published in a business register and
on companies’ websites where they need to remain
publicly available for at least five years. The reports
will need to be audited and responsibility for drawing
up and publishing the report on tax information will lie
collectively with the members of the administrative,
management and supervisory board of the reporting
entity or the head office of the branch.
It has not yet been indicated when and for which period EU
Member States would need to apply the proposed rules
for the first time. The proposal needs to be approved by
both the Council of the European Union and the European
Parliament and may be amended.
Commission presents Action Plan on VATOn 7 April 2016, the Commission presented an Action
Plan on VAT. The purpose of this plan is to set a pathway
such to create a single EU VAT area. According to the
Commission, the current VAT system has been unable to
keep pace with the challenges of today’s global, digital and
mobile economy. From the outset, it has been intended
to be a transitional system and currently, it is fragmented,
complex for the growing number of businesses operating
cross-border, and leaves the door open to fraud: domestic
and cross-border transactions are treated differently and
goods or services can be bought free of VAT within the
single market. Therefore, the Commission acknowledges
the urgent need for a reform in order to:
a) Make the system easier to use as compliance costs
are higher in a single market trade than in domestic
trade;
b) Address the growing risk of VAT fraud;
c) Make the system more efficient, in particular at
exploiting the opportunities of digital technology and
reducing the costs of revenue collection;
d) Increase the trust between business and tax
administrations and between EU tax administrations.
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share in the estate of her deceased daughter, who died in
2004 in Austria, where the mother had also lived until the
daughter’s death. The distribution of the daughter’s estate
did not take place in Austria until after the mother’s death
and so the inheritance tax on that succession was paid
by Mr Feilen. In his tax return relating to his inheritance
from his mother, which he prepared in Germany, Mr Feilen
claimed the inheritance tax paid in Austria as a liability
of the estate and applied for a reduction, in the amount
of German inheritance tax due. In its assessment, the
German tax authorities deducted the inheritance tax paid in
Austria from the basis of assessment, but refused to allow
any reduction in the inheritance tax. Mr Feilen appealed
from this decision and the case ended up with a reference
before the CJ.
AG Wathelet started by affirming that the different
tax treatment in the present case demonstrates the
existence of a restriction to the free movement of capital
as the tax relief is only granted if the assets have been
previously taxed in Germany. This means that there is a
more favourable tax treatment of domestic assets when
compared to foreign assets. Therefore, a difference in
treatment may be regarded as consistent with the Treaty
provisions on the free movement of capital only where (i) it
concerns situations which are not objectively comparable,
or (ii) it is justified by an overriding reason in the public
interest.
As regards comparability, AG Wathelet made reference
to his previous reasoning developed in the Timac Agro
case (see EUTA 151, C-388/14 of 17 December 2015).
Notably, the AG highlighted that the decisive criterion for
determining whether national situations and cross-border
situations are comparable is whether or not the Member
State in question has a right to tax in both situations. In
the present case, and according to the AG, in the context
of a purely domestic situation, all acquisitions, including
the previous acquisition and a subsequent acquisition,
will fall under German tax jurisdiction. Differently, in a
cross-border situation, such as that at issue in the main
proceedings, Germany does not have any right to tax the
previous acquisition, its tax jurisdiction extending only to
the subsequent acquisition. This means that Germany is
not granting a more favourable inheritance tax treatment to
national assets than to the foreign assets that it also taxes,
because in this case, it is not taxing the foreign asset.
destination principle, the Commission considers that
Member States could be granted greater autonomy on
setting VAT rates, subject to appropriate safeguards
to prevent excessive complexity and distortion of
competition, and to ensure that the operation of the
Single Market is not affected.
State Aid/WTOGeneral Court annuls Frucona decision a second timeOn 16 March 2016, the General Court annulled the second
(2013) Commission decision ordering the recovery of
unlawfully aid granted to Frucona Kosice (T-103/14). The
first (2006) decision had been annulled by the Court of
Justice in 2013 because of the Commission’s failure to
apply the private creditor test to the case at hand. In this
case, local tax authorities waived about two thirds of their
tax claim as part of a creditor settlement in 2004, instead
of starting either a bankruptcy procedure or a tax collection
procedure which - in the Commission’s view - would have
led to a better result for the government. The General
Court found that, as the CJ’s judgment implied that the
aforementioned test had to be taken into consideration,
the Commission had not provided material evidence that
would support its claim that a private creditor would have
had a preference for taking the tax procedure concerning
settling the matter via a settlement.
Direct TaxationAG Wathelet considers that German rules on inheritance tax are not in breach of the free movement of capital (Feilen)On 17 March 2016, AG Wathelet delivered his Opinion in
case Max-Heinz Feilen v Finanzamt Fulda (C-123/15). The
case deals with the German rules providing for a reduction
in inheritance tax where the estate includes an asset that
has already, in the previous ten years, formed part of an
estate subject to inheritance tax in that same Member
State, where such benefit is not available in the case of an
asset inherited and taxed in another Member State.
Mr Feilen, who is resident in Germany, is the sole heir of
his mother, who died in 2007 in Germany, where she was
last resident. His mother’s estate consisted mainly of her
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AG Kokott started by confirming that all measures which
prohibit, impede or render less attractive the exercise of
the freedom to provide services must be regarded as a
restriction. Therefore, the freedom of a service-provider
(KBC) to provide services is restricted if a national rule
makes the provision of services between Member States
more difficult than the provision of services purely within
a Member State. The fact that KBC, which is resident in
Ireland, suffers disadvantageous taxation of its interest
income in Portugal in comparison with resident loan
providers, because it is subject to tax calculated in a
different way and deducted at source, could constitute
an impediment to cross-border services. AG Kokott
considered that two different aspects of the rules applicable
to non-resident creditors in comparison with taxation of
interest income in the case of resident creditors are to be
distinguished and discussed separately: first, the different
techniques for charging tax, and second, the different ways
of calculating the amount of the tax charged.
As regards the different technique as for charging tax,
AG Kokott recalled the CJ’s previous case law which has
already held on a number of occasions that the specific
technique of deducting tax at source for non-resident
service providers in principle does not infringe the freedom
to provide services. This is because the restriction on
freedom to provide services which arises from this charging
technique is justified by the need to ensure the efficient
collection of tax.
Different and as regards the calculation of tax and, in
particular, the impossibility to deduct costs, it is, in principle,
an infringement of the freedom to provide services if non-
resident taxpayers (subject to limited taxation) - by contrast
with resident taxpayers (subject to unlimited taxation) - are
precluded from deducting expenses directly connected
to the activity which is being taxed. According to AG
Kokott, the concept of ‘direct link’ is not to be interpreted
narrowly. Therefore, such a link also exists in the case of
financing costs which are necessary for carrying out an
activity. Furthermore, AG Kokott considered that not only
financing costs with a direct link to the grant of a specific
loan count as direct costs but also overheads which can be
directly attributed to the taxed activity in this case should
be allowed deduction.
Therefore, and since the situations are not comparable,
AG Wathelet concluded that the difference in tax treatment
does not constitute a restriction on the free movement of
capital.
In any event the AG considered that even if the Court
concludes that the situations are comparable and that
there is therefore a restriction, such restriction would be
justified either by the need to preserve the coherence of the
German tax system and the need to ensure the balanced
allocation of powers of taxation.
AG Kokott considers that Portuguese withholding taxes on interest paid to non-resident creditors is in breach of the freedom to provide services (Brisal) On 17 March 2016, AG Kokott delivered her Opinion in
case Brisal - Auto Estradas do Litoral SA, KBC Finance
Ireland v Fazenda Publica (C-18/15). The case deals with
the Portuguese legislation concerning deduction of tax on
interest at source whereas interest paid to non-resident
creditors are subject to withholding tax and the tax is
calculated differently when compared to interest paid to
resident creditors.
According to the Portuguese Corporate Income Tax
rules, interest paid to non-resident creditors is subject to
a 20% withholding tax rate or the otherwise reduced rate
provided in an applicable Double Tax Treaty. No deduction
of operating costs is possible. Differently, in the case of
identical income paid to resident companies, there is a
taxation of 25% after deduction of operating costs. The
Portuguese company Brisal and the Irish bank KBC were
contract partners under a finance contract (‘loans’). Within
that framework, in certain months in the years 2005 to
2007, Brisal was obliged to pay interest to KBC. From the
payments, Brisal withheld tax and paid it to the Portuguese
tax authority on behalf of KBC.
Both Brisal and KBC challenge this obligation to withhold
part of the interest in order to pay Portuguese corporation
tax, because, they claim, it discriminates against non-
resident financial institutions in comparison with resident
ones in a manner which is unlawful under EU law. In
particular, KBC asked for its re-financing costs for the loan
to be taken into account for tax purposes.
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cost of litigation breaches various guarantees of the right
of access to justice. In order to decide on these arguments,
the Constitutional Court requested a preliminary ruling on
the interpretation and validity of certain provisions of the
EU VAT Directive.
First of all, the AG opined that a Member State which,
in accordance with Article 371 EU VAT Directive, has
continued to exempt from VAT the supply of services by
lawyers, may limit the scope of that exemption without
abolishing it in its entirety. However, having once abolished
the exemption in its entirety, such a Member State may
not reintroduce the same exemption with a more limited
scope. Furthermore, in the view of the AG, Member States
are not authorized, based on the EU VAT Directive, to
exempt from VAT the supply of services by lawyers under
a national legal aid scheme as services which are closely
linked to welfare and social security work.
AG opines that financed public broadcasting should not confer a right to deduct input VAT on goods and services acquired for that activity (Český rozhlas)On 17 March 2016, AG Szpunar delivered his Opinion
in the case Český rozhlas (C-11/15). Český rozhlas is
the Czech public broadcasting body created by law and
financed, in particular, by the radio fee established under
national law. By supplementary VAT returns, Český rozhlas
applied a further increase to its right to deduct VAT by
excluding the radio fees paid to it from the calculation of
the coefficient (pro rata) used for calculating the deductible
VAT on supplies. In that regard, Český rozhlas argued that
those fees did not constitute (a VAT exempt) remuneration
for the public broadcasting service provided.
The Czech tax authorities did not accept the position
taken by Český rozhlas and, by supplementary VAT
assessments, rejected the exclusion of those supplies
from the calculation of the pro rata. Following this rejection,
Český rozhlas challenged the tax authorities’ decisions
before the Municipal Court, which annulled those decisions.
The matter ended up before the Supreme Administrative
Court which decided to stay the proceedings and to refer
to the CJ for a preliminary ruling on the VAT qualification of
the financed public sector broadcasting.
Subsequently AG Kokott dealt with the issue whether the
restriction to the freedom to provide services arising from
the impossibility to deduct costs could be compensated by
the lower tax rate applicable to non-residents (15%) when
compared to resident taxpayers (25%). According to the
AG a proper interpretation of the CJ’s case law allows to
conclude that the refusal in the deduction of operating
costs directly linked to the taxed activity of a person subject
to limited taxation in itself infringes the freedom to provide
services. The additional issue of the different tax rate is,
by itself, a separate question. Therefore, the deduction
of expenses and the amount of the tax rate are always
to be assessed separately for their compatibility with the
fundamental freedoms.
In this context, AG Kokott concluded that in this case, what
is in principle an infringement of the freedom to provide
services arising out of the inability to deduct financing costs
directly linked to the taxed activity cannot be balanced
out by a tax rate that is lower by comparison with that
for residents. The AG rejected any possible justification
either based on the balanced allocation of the powers
to tax between Member States, the double deduction of
operating costs, efficient tax collection or tax supervision.
VAT AG opines on Belgian VAT exemption for services supplied by lawyers (Ordre des barreaux francophones et germanophone and Others)On 10 March 2016, AG Sharpston delivered her
Opinion in the case Ordre des barreaux francophones
et germanophone and Others (C-543/14). By virtue of
a transitional provision dating from the EU Sixth VAT
Directive, which provision is still present in the EU VAT
Directive, Belgium (as the only EU Member State),
services supplied by lawyers were exempted from VAT
until 31 December 2013.
A number of Belgian bar councils, together with several
human rights and humanitarian associations and a
number of individuals, have brought proceedings before
the Constitutional Court challenging the abolition of that
exemption effective as from 1 January 2014. The main
thrust of their arguments is that the resulting increase in the
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all of the legislative measures for exchanging information
proposed by the European Commission, there is in the
view of the European Court of Auditors a need for new
legislative and other initiatives. In this respect, it suggested
fourteen recommendations.
Confirmation that Luxembourg VAT should apply on Director FeesAt the beginning of the year 2016, it had been indicated
in a press release that the Director of the Luxembourg
VAT Authorities had confirmed that, based on the current
Luxembourg VAT provisions, Director Fees should be
subject to Luxembourg VAT.
Following this press release, a parliamentary question was
raised to the Minister of Finance, Mr. Pierre Gramegna. In
his answer dated 9 March 2016, the Minister of Finance
confirmed the general principle that Director Fees should
be subject to Luxembourg VAT and announced that a
working group would be set up to clarify the topic and to
make recommendations.
Luxembourg VAT principles
Article 4 of the Luxembourg VAT law provides that, “any
person who independently carries out, on a regular basis,
in any place any economic activity, whatever the purposes
or results of that activity, qualifies as taxable person for
VAT purposes”.
Based on this provision, company’s Directors providing
services in consideration of which they receive Director
Fees may qualify as a taxable person for Luxembourg
VAT purposes. One of the consequence of qualifying as
a VAT taxable person is that Luxembourg based Directors
or residents in Luxembourg should have to register for
VAT purposes and consequently will have to invoice
Luxembourg VAT (17%).
Additionally, it becomes clear that where the place of
supplies of services performed by Directors is deemed
to be located in Luxembourg, those services should be
subject to Luxembourg VAT.
Consequently, Director Fees should be subject to
Luxembourg VAT in the following situations:
The AG Opined that the activity of a public broadcasting
body that is financed from a compulsory fee laid down
by statute and payable by anyone in possession of a
radio receiver does not constitute an activity carried on
for consideration and does not confer a right to deduct
VAT due or paid on goods and services acquired by that
body and used for the purposes of that activity. Moreover,
according to the CJ, the determination of the methods and
criteria for apportioning input VAT between that activity and
the activity conferring a right to deduct is in the discretion
of the EU Member States, which, when exercising that
discretion, must have regard to the aims and broad logic
of the EU Sixth VAT Directive. On that basis, the Member
States must provide for a method of calculation which
objectively reflects the part of the input expenditure actually
to be attributed, respectively, to those two types of activity.
Commission publishes Report on VAT Gap EstimationsIn March 2016, the Commission published a report on VAT
Gap Estimations. This report, prepared by the Fiscalis
2020 Tax Gap Project Group, is intended to serve as a
guide in the world of tax gap estimations. Accordingly, the
report provides an introduction to the currently applied
methodologies of tax gap estimations. Its focus is on VAT
gap estimations because VAT is one of the main sources
of government revenue and several EU Member States
have developed a different practice in estimating the VAT
gap. The scope of the report is also limited to EU Member
States which participated in the TGPG and reflects the
facts and circumstances in 2015.
European Court of Auditors publishes a report on tackling VAT fraudOn 3 March 2016, the European Court of Auditors
published a report on tackling VAT fraud. The audit
addressed the question of whether the EU is tackling intra-
Community VAT fraud effectively. A large majority of EU
Member States, who are the main beneficiaries of VAT
revenue, have expressed satisfaction with how the current
system has been set up and they appreciate benefits
from mutual cooperation. However, EU Member States
have indicated areas of the system that require further
improve ment. Moreover, the audit has found important
weaknesses which indicate that the system is insufficiently
effective. As EU Member States have not yet accepted
10
Customs Duties, Excises and other Indirect TaxesCJ rules on the customs classification of soya protein concentrate (Customs Support Holland BV)On 3 March 2016, the CJ delivered its judgment in the
case Customs Support Holland BV (C-144/15). The case
concerns the classification in the combined nomenclature
(CN) of soya protein concentrate.
It is apparent from the order for reference that Imcosoy
62 is a soya protein concentrate obtained following two
industrial processes.
According to the order for reference, after being dehulled,
ground and steamed, the soya beans first undergo an oil-
extraction process, after which the residue is so-called
soya meal. This meal is then treated with ethanol and
water to extract the residual fat, reduce the content of
components other than proteins, primarily carbohydrates
or food fibre, and eliminate certain harmful substances. The
soya protein concentrate obtained in this way contained no
trace of the ethanol used. It consists, inter alia, of proteins,
representing 62% by weight, and starch, representing less
than 10% by weight.
According to the order for reference, because of its high
concentration of carbohydrates, soya meal, although
used in animal feed, cannot be used as an ingredient in
compound feeds for very young calves. By contrast, the
soya protein concentrate obtained from soya meal can
constitute an ingredient in compound feeds for very young
calves due to its reduced concentration of carbohydrates
and food fibre.
On 7 September 2010, in response to a request from
Customs Support Holland BV, the Netherlands customs
authorities issued a Binding Tariff Information which
classified Imcosoy 62 under CN subheading 2309 90 31.
On 3 April 2012, the District Court, Haarlem, which was
dealing with an action brought by Customs Support
Holland BV, declared that action to be well-founded and
• The company paying the Director Fees and the Director
have established their business activities in Luxembourg
- The Director may have to apply Luxembourg VAT on
its invoices;
• The company paying the Director Fees qualifies as a
VAT taxable person and the Director has established its
business activities outside Luxembourg - The company
should self-assess Luxembourg VAT on those services.
This is also the case if the Luxembourg based company
only supplies exempt activities (e.g. financing activities).
Where the Director Fees are paid by a Luxembourg based
company not qualifying as a VAT taxable person (e.g.
passive holding companies), the place of taxation should
be deemed to be located at the place where the Director
has established his business. Consequently, in the case the
Director has established his business within the European
Union, the country of establishment or residency of the
Director is competent to tax. One should analyse Member
State per Member State how the country of residency is
treating Director Fees. The view on that point differs from
Member State to Member State.
Consequences
By his answer, the Minister of Finance confirmed the
intention to apply Luxembourg VAT on Director Fees,
whereas the previous market practice was unclear on this
topic.
As regards the practical details concerning the effective
application of Luxembourg VAT, a working group should
be set up by the Ministry of Finance. In terms of timing,
it is expected that the Luxembourg VAT Authorities would
become less tolerant as from 1 January 2017. With respect
to this date, a particular point of attention would be the date
of payment and the invoicing date of these Directors Fees.
It is recommended that companies and Directors, which
may be impacted by these provisions, now contact their
VAT advisors in order to check what the potential VAT
impact on their businesses could be.
11
refer the following questions to the Court of Justice for a
preliminary ruling:
‘(1) Must heading 2304 of the CN be interpreted as
meaning that that tariff heading also covers a soya
protein concentrate obtained following the removal
of residual fats, carbohydrates (or food fibres) and
harmful substances from solid residues (so-called soya
meal) resulting from the extraction of oil from soya
beans, which, by means of that removal, has been
made suitable for use as an ingredient in compound
feeds for very young calves?
(2) If Question 1 is answered in the negative, is CN
heading 2308 or CN heading 2309 then applicable
to a soya protein concentrate obtained in the manner
described in Question 1?’
The CJ ruled as follows:
The Combined Nomenclature set out in Annex I to Council
Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff
and statistical nomenclature and on the Common Customs
Tariff, as amended by Commission Regulation (EC)
No 948/2009 of 30 September 2009, must be interpreted
as meaning that a soya protein concentrate, such as that
at issue in the main proceedings, comes under heading
2309 of that nomenclature.
CJ rules on the definition of ‘goods put up in sets for retail sale’ for the customs classification of audio-video equipment (VAD BVBA - Van Aert) On 10 March 2016, the CJ delivered its judgment in the
case VAD BVBA - Van Aert (C-499/14). The case concerns
the interpretation of the definition of ‘goods put up in sets for
retail sale’ for the classification of audio-video equipment in
the Combined Nomenclature (CN).
It is clear from the order for reference that VAD, of which
Mr van Aert is the managing director, on 10 January 2008,
11 January 2008 and 23 January 2008, in its capacity as
a customs agent in its own name but acting on behalf
of Zicplay s.a. and under the instructions of Transmar
Logistics, submitted three IM4 import declarations for
validation by the competent customs authorities in Antwerp
for the release into free circulation and the release for
consumption of combined video-audio systems named
‘micro Z 99DVBT’ and composed, first, of a system
held that Imcosoy 62 had to be classified under subheading
2304 00 00 of the CN. The Netherlands customs authorities
appealed against that judgment to the Gerechtshof (Court
of Appeal) Amsterdam, which declared the appeal to be
unfounded. The Staatssecretaris van Financiën thereupon
brought an appeal on a point of law before the referring
court against the judgment of the Gerechtshof Amsterdam.
In the order for reference, the Supreme Court of the
Netherlands took the view, first, that CN heading 2304
covers only products resulting directly from the oil-
extraction process and, second, that, although soya meal
is a direct result of the oil-extraction process and must
therefore be considered to come under CN heading 2304,
by contrast, the purpose of processing soya meal to obtain
the soya protein concentrate is not to extract soya bean
oil but to make the residues from that extraction suitable
for a particular use in animal feeding. The referring court
inferred from this that the soya protein concentrate is
processed into a different kind of product.
The referring court was of the view that a product can be
classified under CN heading 2309 only if it results from
a final processing of a product, with the exception of
agglomerated products or a mixture of a product with other
products. In addition, it must be suitable for use solely in
animal feeding.
In that regard, the Supreme Court of the Netherlands noted
that the extraction of carbohydrates, food fibre and harmful
substances from soya meal constituted final processing
which makes the product thus processed suitable for use
as an ingredient in compound feeds for very young calves.
However, it stated that, according to the Explanatory Note
to HS heading 2309, that heading is not to be applied to a
product made from a single material, or from a mixture of
several materials which is classified as such in one specific
heading, or to by-products covered by HS heading 2308.
The Supreme Court of the Netherlands, therefore, did not
rule out the possibility that the soya protein concentrate,
composed of soya meal from which certain specific
components have been extracted, did not come under CN
heading 2309.
In those circumstances, the Supreme Court of the
Netherlands decided to stay the proceedings and to
12
as was clear from the documentation relating to them,
obviously belonged together as a unit to be marketed
together.
The goods constituted, according to the court of appeal,
a set for retail sale if it were established that they would
be offered for retail sale in a single package, of such a
nature that they were intended to be presented together as
a unit in the context of that means of marketing. That was
so in the present case, as a range of facts demonstrated,
namely, the importation, transportation, invoicing and
handling together of the goods, the fact that the consignee
was identical, the visual presentation of the system and the
fact that the number of pairs of loudspeakers imported was
exactly the same as the number of audio/visual systems.
Thus the audio/visual systems and the loudspeakers
constituted, at the time of their classification, a set for retail
sale. The fact that those goods were not, at the time of
customs clearance, presented in a single package did not
affect that finding.
VAD and Mr van Aert lodged an appeal in cassation against
that judgment with the referring court.
In that context, the referring court wondered, in particular,
whether goods put up in sets for retail sale that are
correctly presented to customs authorities in separate
packages but in respect of which it is clear that they belong
together and are intended to be offered as a single unit on
the retail market, must be considered to be ‘goods put up
in sets for retail sale’, within the meaning of Rule 3(b) of
the General Rules for the interpretation of the Combined
Nomenclature, even if those goods are packed together
only after the declaration with a view to being offered for
sale on the retail market.
Accordingly, the Hof van Cassatie (Court of cassation)
decided to stay proceedings and to refer the following
question to the Court for a preliminary ruling:
‘Are goods put up in sets for retail sale that are presented
to customs authorities in separate packages because
this is justified, but in respect of which it is clear that they
belong together and are intended to be offered as a single
unit on the retail market, to be regarded as “goods put up in
sets for retail sale”, within the meaning of Rule 3(b) of the
General Rules, even if those goods are packed together
comprising a DVD player, USB connection, FM tuner, a
liquid crystal display (LCD) TFT screen, an MP3 player
and a TV tuner (‘the audio/video systems’) and, second,
removable loudspeakers.
Those goods had been disassembled for purposes of
transport and indicated separately, by component, on the
IM4 import declarations.
The ‘micro Z 99 DVBT’ systems were classified under
two separate CN codes, namely, on the one hand, the
combined audio/visual systems under CN code 8518 1095
90, subject to the payment of a 2.5% import duty, and, on
the other, the removable loudspeakers under CN code
8518 2200 90, subject to the payment of a 4.5% import
duty.
Therefore, the audio/visual systems and the removable
loudspeakers were not presented as a single unit under
CN code 8521 9000 90, subject to the payment of 13.9%
import duty.
VAD and Mr van Aert were summoned on 21 October 2011
to answer charges before the Correctionele rechtbank te
Antwerpen (Antwerp Criminal Court) for having submitted
three declarations under an incorrect designation and
incorrect tariff code for the purpose of release into free
circulation or release for consumption of the ‘micro Z
99 DVBT’ systems, within the customs territory of the
European Union.
In its judgment of 6 June 2012, that court held that the
audio/visual systems and the loudspeakers should have
been regarded as a set of goods and should have been
classified together under CN code 8521 9000 90. It ordered
VAD and Mr van Aert, jointly, to pay a fine and to pay the
import duties which had been evaded.
On an appeal brought against that judgment at the hof
van beroep te Antwerpen (Court of Appeal, Antwerp) that
judgment was upheld in a judgment of 11 September 2013.
In that regard, that court took into account the facts,
in particular, that the audio/video systems and the
loudspeakers had been presented to customs together
in the same IM4 import declarations and that the goods,
13
To establish such a connection, the Zoneplayer must be
connected to a modem or a router by means of an Ethernet
cable. Once connected to the Internet, the Zoneplayer
enables its user to listen, inter alia, to streamed music, with
the device reading digital audio files during the process
of downloading those files, without them being stored, for
that purpose, in the device’s memory. The Zoneplayer also
provides the option of listening to broadcasts streamed by
radio stations which are present on the Internet. For that
streaming, the Zoneplayer exchanges raw data with the IT
servers storing the digital audio files which the user of the
device wishes to listen to.
More than 25,000 radio stations, programmes and
podcasts are pre-programmed into the Zoneplayer and it
does not have the ability to store data.
By means of a cable, devices such as digital video
recorders, personal computers, games consoles or
Network Attached Storage (NAS) stations can be
connected via the network ports on the rear of the box
in order to connect those devices to the Internet and/or
connect the Zoneplayer to the computers present in a local
area network (‘LAN’). The content of digital audio files
present on those other terminals may also be broadcast by
means of the Zoneplayer’s loudspeakers. In that case, too,
those files are not, at the outset, stored on the Zoneplayer,
but are streamed by it during the data transfer process
between the connected devices.
Two or more Zoneplayers can transmit and receive digital
data between each other wirelessly, together forming a
wireless data network (‘the Sonos network’). The software
installed in the Zoneplayers makes it possible, within the
Sonos network, to send and stream music to each of
the Zoneplayers separately. The Sonos network thereby
functions independently of any Wi-Fi network; the system
generates itself the encryption which it uses to broadcast
digital data from one Zoneplayer to another.
The Zoneplayers were declared by Sonos Europe as
coming under CN heading 8519 89 90, subject to payment
of a customs tariff of 2%. In accordance with those
declarations, the customs authorities issued Sonos Europe
with demands for payment of the appropriate amount.
after the declaration with a view to being offered for sale
on the retail market?’
The CJ ruled as follows:
Rule 3(b) of the General Rules for the interpretation of the
Combined Nomenclature in Annex I to Council Regulation
(EEC) No 2658/87 of 23 July 1987 on the tariff and statistical
nomenclature and on the Common Customs Tariff, as
amended by Commission Regulation (EC) No 1214/2007
of 20 September 2007, must be interpreted as meaning
that goods, such as those in the main proceedings, which
are presented for customs clearance in separate packages
and are packed together only after that transaction may
nevertheless be held to be ‘goods put up in sets for retail
sale’, within the meaning of that rule and may, therefore,
come under a single tariff heading, where it is established,
having regard to other objective factors, which it is for the
national court to assess, that the goods belong together
as a unit and are intended to be presented as such in the
retail trade.
CJ rules on the customs classification of stand-alone device designed to retrieve, receive and stream digital audio files in the form of amplified sound (Sonos Europe BV) On 17 March 2016, the CJ delivered its judgment in the
case Sonos Europe BV (C-84/15). The case concerns
the classification in the combined nomenclature (CN) of
a stand-alone device designed to retrieve, receive and
stream digital audio files in the form of amplified sound.
In the period between 7 December 2009 and 4 January
2010, Sonos Europe lodged nine declarations for release
into free circulation for Zoneplayers.
That device consists of a resonance box containing five
loudspeakers, each of which features a digital amplifier.
The box is equipped with buttons for volume control
(‘mute’ and ‘volume’), a connection for headphones, an
audio input, two network ports and an electrical mains
connection for the device. In addition, the Zoneplayer has
a motherboard incorporating inter alia a central processing
unit. The software installed in the motherboard includes
inter alia the Linux operating system, which can be updated
by means of an Internet connection.
14
under those tariff headings. Nevertheless, the Zoneplayer
is distinguished from devices considered to come under
those tariff headings, account being taken in particular
of its technological development, since it implements a
new and advanced technology. The way the Zoneplayer
functions is not therefore described in that way in the CN
under any one of its tariff headings.
In those circumstances, the Hoge Raad der Nederlanden
(Supreme Court of the Netherlands) decided to stay the
proceedings and to refer the following question to the
Court of Justice for a preliminary ruling:
‘Should CN headings 8517, 8518, 8519 and 8527 be
interpreted as meaning that a product such as that
described in the present judgment (the Zoneplayer),
which receives digital information and without storing it
(streaming) reproduces it in the form of amplified sound by
means of five (integrated) loudspeakers and/or forwards it
to other devices in the local area network, is amenable to
classification under one or more of those headings and,
if so, which heading(s)? Alternatively, should CN heading
8543 be interpreted as meaning that a device such as
the Zoneplayer ought to be classified under that heading
as an electrical machine or apparatus with an individual
function?’
The CJ ruled as follows:
The Combined Nomenclature listed in Annex I to Council
Regulation (EEC) No 2658/87 of 23 July 1987 on the
tariff and statistical nomenclature and on the Common
Customs Tariff, in the version resulting, successively,
from Commission Regulation (EC) No 1031/2008 of
19 September 2008 and Commission Regulation (EC)
No 948/2009 of 30 September 2009, must be interpreted
as meaning that a stand-alone device designed to retrieve,
receive and stream digital audio files in the form of amplified
sound, such as that at issue in the main proceedings,
must, subject to the referring court’s assessment of all of
the facts which it has available to it, be classified under
tariff heading 8519 of that nomenclature.
Sonos Europe lodged an objection against those requests
for payment. In its view, the Zoneplayer must be classified
under CN subheading 8517 62 00, subject to payment of
a customs tariff of 0%. The customs authorities rejected
that objection, whilst stating, in their decision, that the
Zoneplayer came, in principle, under CN subheading
8519 89 19, with a customs tariff of 4.5%, so that the
customs duties set in the contested demands for payment
were not set at too high an amount.
Sonos Europe brought an action against those decisions of
the customs authorities before the Rechtbank te Haarlem
(District Court, Harlem) which declared that action to
be unfounded. Sonos Europe appealed against that
judgment to the Gerechtshof Amsterdam (Court of Appeal,
Amsterdam).
The Gerechtshof found that the Zoneplayer, in view of its
objective characteristics and properties, could be classified
both under CN heading 8517 and under CN heading 8519.
On the basis of that finding, the Gerechtshof held that it
was necessary to determine the tariff classification of the
Zoneplayer by having regard to Note 3 to Section XVI of
the CN. In the view of the Gerechtshof Amsterdam, the
Zoneplayer, viewed from the consumer’s perspective,
is intended primarily for reproducing sound and that
sound reproduction function is an intrinsic part of the
device. It follows, according to the Gerechtshof, that the
reproduction of sound is the Zoneplayer’s main function,
whereas the network function is secondary. According to
the Gerechtshof, the Zoneplayer must, for that reason,
on the basis of rules 1 and 6 of the general rules for
the interpretation of the CN and by virtue of Note 3 to
Section XVI of that nomenclature, be classified under CN
subheading 8519 89 19.
Sonos Europe appealed on a point of law against that
judgment of the Gerechtshof Amsterdam to the referring
court. The referring court expressed doubts as to the tariff
classification of the Zoneplayer.
It considered that, account being taken of the wording
of CN headings 8517, 8518 and 8519 and of the HS
Explanatory Notes corresponding to that system, the
Zoneplayer has properties and characteristics in common
with the machines and devices which must be classified
15
Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)
● Kees Bouwmeester (Loyens & Loeff Amsterdam)
● Almut Breuer (Loyens & Loeff Amsterdam)
● Robert van Esch (Loyens & Loeff Rotterdam)
● Raymond Luja (Loyens & Loeff Amsterdam;
Maastricht University)
● Arjan Oosterheert (Loyens & Loeff Zurich)
● Lodewijk Reijs (Loyens & Loeff Rotterdam)
● Bruno da Silva (Loyens & Loeff Amsterdam;
University of Amsterdam)
● Patrick Vettenburg (Loyens & Loeff Rotterdam)
● Ruben van der Wilt (Loyens & Loeff Amsterdam)
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Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:
● René van der Paardt (Loyens & Loeff Rotterdam)
● Thies Sanders (Loyens & Loeff Amsterdam)
● Dennis Weber (Loyens & Loeff Amsterdam;
University of Amsterdam)
Editors● Patricia van Zwet
● Bruno da Silva
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