The ECJ Tracker (12 of May)
This week was not very rich in tax cases in the ECJ. Nevertheless, I should highlight 1 Judgment (C-452/03) and 1 opinion of the Advocate General (C-512/03) dealing with tax issues.
The ECJ judgment on the RAL case deals with a situation of eventual VAT abuse relating to the operation of gaming machines sited in amusement arcades in the UK. Under the scheme, the machines were leased to a newly-formed Channel Islands subsidiary, which purported to operate them from its base in Guernsey. The scheme was based on the fact that the place of supply of such gaming services to customers would be deemed to take place outside the territory of the Community for VAT purposes, therefore escaping liability for VAT on the gaming machine services and recovering input VAT on supplies received on the basis of the 13th Directive.
The ECJ followed the opinion of the ECJ Advocate General Poiares Maduro issued on 27 January 2005 in finding that the supply of services consisting of enabling the public to use, for consideration, slot gaming machines installed in amusement arcades established in the territory of a Member State must be regarded as constituting entertainment or similar activities within the meaning of Art. 9(2)(c) of Sixth VAT Directive. It is interesting to note that in this particular case and although the High Court of Justice did not raise the issue of the possible application of Article 9(2)(c) of the Sixth VAT Directive, the ECJ considered that such issue should be examined from the outset. In its decision, the ECJ referred to its previous decisions in the cases of SARPP (C-241/89), Clinique (C-315/92) and Trojani (C-456/02) and repeated that it is for ECJ to provide the national court with all those elements for the interpretation of Community law, whether or not that court has specifically referred to them in its questions. With regards to the issue whether the supplies of services, such as those of the present case, could be characterized as entertainment or similar activities, the ECJ held that Art. 9(2)(c) of the Sixth VAT Directive does not require artistic input by the supplier of the services, and therefore making available slot gaming machines to customers constitutes entertainment or similar activities within the meaning of Art. 9(2)(c).
The opinion of the Advocate General on the Blanckaert case deals on the other hand with the freedom of capital, namely the application of the Schumacker test to a situation of a foreign taxpayer deriving only savings and investments from the Netherlands, and therefore not obliged to pay social security contributions, who is claiming he is entitled under EC law to Netherlands tax credits for national insurance schemes in the calculation of his taxable income from savings and investments.
The Hoge Raad asked the ECJ a preliminary question whether a foreign taxpayer, who is a resident of a Member State and does not receive any income from employment in the Netherlands, but only from savings and investments, and who is therefore not obliged to pay, and does not pay, any social security contributions to the Netherlands national insurance schemes, is entitled under EC law to Netherlands tax credits for national insurance schemes in the calculation of his taxable income from savings and investments. According to the Dutch court resident taxpayers are entitled to those tax credits in the calculation of their taxable income from savings and investments because they are regarded as insured and as obliged to pay social security contributions to the Netherlands national insurance schemes, even if they do not receive any income in the Netherlands from employment, but only from savings and investments, and for that reason do not pay any social security contributions in the Netherlands.
The Advocate General held that non-residents only deriving income from savings and investments in the Netherlands are not in a comparable situation with residents only deriving income from savings and investments, as only the latter are subject to general social security. The Advocate General further indicated that the Netherlands regulations are coherent and therefore the different treatment is objectively justified and not incompatible with the freedom of capital (Art. 56 & 58 of the EC Treaty).
For sake of completeness, I should also mention two further opinions by the Advocate General on VAT cases:
The Levob Verzekeringen case deals with the qualification of a bundled acquisition of software (software plus customization), namely whether such transaction must be regarded as a single supply. The MyTravel case deals with the use of the market value method by a tour operator on certain VAT transactions.
The ECJ judgment on the RAL case deals with a situation of eventual VAT abuse relating to the operation of gaming machines sited in amusement arcades in the UK. Under the scheme, the machines were leased to a newly-formed Channel Islands subsidiary, which purported to operate them from its base in Guernsey. The scheme was based on the fact that the place of supply of such gaming services to customers would be deemed to take place outside the territory of the Community for VAT purposes, therefore escaping liability for VAT on the gaming machine services and recovering input VAT on supplies received on the basis of the 13th Directive.
The ECJ followed the opinion of the ECJ Advocate General Poiares Maduro issued on 27 January 2005 in finding that the supply of services consisting of enabling the public to use, for consideration, slot gaming machines installed in amusement arcades established in the territory of a Member State must be regarded as constituting entertainment or similar activities within the meaning of Art. 9(2)(c) of Sixth VAT Directive. It is interesting to note that in this particular case and although the High Court of Justice did not raise the issue of the possible application of Article 9(2)(c) of the Sixth VAT Directive, the ECJ considered that such issue should be examined from the outset. In its decision, the ECJ referred to its previous decisions in the cases of SARPP (C-241/89), Clinique (C-315/92) and Trojani (C-456/02) and repeated that it is for ECJ to provide the national court with all those elements for the interpretation of Community law, whether or not that court has specifically referred to them in its questions. With regards to the issue whether the supplies of services, such as those of the present case, could be characterized as entertainment or similar activities, the ECJ held that Art. 9(2)(c) of the Sixth VAT Directive does not require artistic input by the supplier of the services, and therefore making available slot gaming machines to customers constitutes entertainment or similar activities within the meaning of Art. 9(2)(c).
The opinion of the Advocate General on the Blanckaert case deals on the other hand with the freedom of capital, namely the application of the Schumacker test to a situation of a foreign taxpayer deriving only savings and investments from the Netherlands, and therefore not obliged to pay social security contributions, who is claiming he is entitled under EC law to Netherlands tax credits for national insurance schemes in the calculation of his taxable income from savings and investments.
The Hoge Raad asked the ECJ a preliminary question whether a foreign taxpayer, who is a resident of a Member State and does not receive any income from employment in the Netherlands, but only from savings and investments, and who is therefore not obliged to pay, and does not pay, any social security contributions to the Netherlands national insurance schemes, is entitled under EC law to Netherlands tax credits for national insurance schemes in the calculation of his taxable income from savings and investments. According to the Dutch court resident taxpayers are entitled to those tax credits in the calculation of their taxable income from savings and investments because they are regarded as insured and as obliged to pay social security contributions to the Netherlands national insurance schemes, even if they do not receive any income in the Netherlands from employment, but only from savings and investments, and for that reason do not pay any social security contributions in the Netherlands.
The Advocate General held that non-residents only deriving income from savings and investments in the Netherlands are not in a comparable situation with residents only deriving income from savings and investments, as only the latter are subject to general social security. The Advocate General further indicated that the Netherlands regulations are coherent and therefore the different treatment is objectively justified and not incompatible with the freedom of capital (Art. 56 & 58 of the EC Treaty).
For sake of completeness, I should also mention two further opinions by the Advocate General on VAT cases:
The Levob Verzekeringen case deals with the qualification of a bundled acquisition of software (software plus customization), namely whether such transaction must be regarded as a single supply. The MyTravel case deals with the use of the market value method by a tour operator on certain VAT transactions.
posted by Talk Tax Blog at 2:48 pm
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