Indirect tax news from the past week
VAT and e-commerce: Commission guidelines published
The European Commission has published explanatory notes which clarify the new VAT e-commerce rules that will come into force from 1 July 2021, and which provide practical examples for suppliers, marketplaces and platforms involved in e-commerce transactions. The notes provide further guidance on, amongst other things, the marketplace facilitation criteria and the use of simplification schemes. The Commission estimates that the new rules will generate an additional €7 billion annually, by ensuring that all e-commerce sales from outside the EU are subject to VAT. To hear more about the new rules and their implications for your business, please register for our webcast on 8 October 2020. (Contact: Jane Curran).
Trader Support Service launched
With fewer than 100 days until the end of the transition period, the government has launched the Trader Support Service (TSS), which will help traders moving goods that are affected by the Northern Ireland Protocol (including movements of goods between GB and NI) from 1 January 2021. As well as guidance, online training and webinars, the TSS will provide a free end-to-end support package to manage import declarations and safety and security declarations on behalf of traders. HMRC have written to businesses who might benefit from the TSS, and updated their online guidance. (Contact: Zoe Hawes).
Vos Aannemingen: recovery of VAT on costs incurred by developer – CJEU
Can a developer recover input tax on costs which partly benefit his partners in a development? Vos Aannemingen built apartments on land owned by third parties, with both parties named on the deed of sale as sellers (of the building and the land respectively) when the development was completed. The landowners’ role was passive – Vos Aannemingen incurred not only the construction costs, but also other advertising, administration, and estate agents’ costs. The CJEU has ruled that the existence of a direct and immediate link between Vos Aannemingen’s costs of selling the apartments and its taxable supplies was not broken simply because the costs might also have had an ancillary benefit for the landowners. Having said which, the CJEU also recognised that part of the costs incurred by Vos Aannemingen might have related not to the sales of the buildings, but instead to the sale of the land. The Belgian courts will have to identify whether the link which permitted Vos Aannemingen to recover VAT on the sales costs has been partially broken, by considering the contracts and the commercial and economic reality. This could include consideration of whether Vos Aannemingen could have passed on some of the costs to the landowners. (Contact: Oliver Jarratt).
X: foodstuffs must have nutritional value – CJEU
Are aphrodisiacs food? X sold aphrodisiac powders and capsules from his shop in Amsterdam, and accounted for VAT at the reduced rate applicable to foodstuffs. The CJEU has ruled that he was probably wrong to do so. The question was whether the capsules contained nutrients which generated energy for the body to function and develop, not simply whether it was regulated as fit for human consumption. Provided that products had some nutritional value, they could be foodstuffs and any claims about their aphrodisiac qualities became irrelevant. This approach, focusing on nutritional value, is consistent with the EU legislature’s intention to reduce the VAT burden on essentials. It meant that X’s products, which were edible but appeared to have negligible nutritional content, probably did not qualify for the reduced rate. (Contact: Donna Baker).