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60 Tax VAT matters David Duffy highlights the latest VAT cases and discusses recent VAT developments. Irish Revenue update Revenue advance opinions: Revenue eBrief No. 79/16, issued in September 2016, confirmed that the standard period for which Revenue advance opinions remain valid would reduce from seven years to five years. eBrief 08/17, issued in January 2017, further confirmed that all advance opinions issued by Revenue have a five-year time period (or less if specified by Revenue). This applies to VAT and other taxes. Taxpayers who received Revenue opinions before 1 January 2012 and wish to continue to rely on those rulings after 1 January 2017 must submit a copy of the opinion and a full application for the renewal of the opinion to the relevant Revenue district by 30 June 2017. EU VAT updates VAT treatment of road tolls: the Court of Justice of the European Union (CJEU) held that the National Roads Authority (NRA), in directly operating certain toll roads, is not in competition with private operators of other Irish toll roads. It follows that the NRA is not obliged to charge VAT on the tolls collected on roads directly operated by it, namely the M50 Westlink Bridge and Dublin Port Tunnel. The decision came in the case of the NRA versus the Revenue Commissioners (C-344/15), which was a referral from the Appeal Commissioners. As well as being of obvious interest to Irish motorists, the judgment considers important principles on the VAT status of public bodies. Under EU VAT law, a public body such as the NRA is generally not obliged to charge VAT on its income, except in respect of specified activities or where there would be a distortion of competition with private operators who must charge VAT. As private toll-road operators in Ireland must charge VAT on their toll income, the CJEU was asked whether treating the NRA’s tolls as VAT-free would distort competition. The CJEU held that there was no distortion of competition by treating the NRA’s tolls as VAT-free. There is currently no distortion of competition as the privately operated toll roads are in different locations to the NRA-operated roads. ACCOUNTANCY IRELAND APRIL 2017
Tax 61 Furthermore there was no realistic threat of competition in future from private operators constructing a toll road in competition with the existing NRA toll roads. VAT recovery on holding company costs: CJEU case law on the entitlement of holding companies to VAT recovery on costs continues to evolve. Recent case law has supported a holding company’s right to VAT recovery on its costs where it provides management services to its subsidiaries. However, the judgment in the MVM case (C-28/16) clarifies that the right to recover VAT on costs relating to the holding of shares does not arise where the management services are provided free of charge. In these circumstances, the management services were not an economic activity. MVM argued for VAT recovery on the grounds that these costs were general overheads linked to its overall VATable economic activities (which involved taxable leasing activities). The CJEU indicated that it was up to the national court to conclude on this point based on the facts, but cast doubt on whether there was such a link. Zero-rating of intra-Community supply of goods: the CJEU held in the Euro Tyre case (C-21/16) that an EU member state could not refuse the zero-rating of an intra- Community supply of goods where the substantive conditions were met, but the customer’s VAT number did not appear as valid on the EU’s VAT Information Exchange System (VIES) website. Euro Tyre supplied tyres from Portugal to a customer established in Spain. The Spanish customer had provided its Spanish VAT number to Euro Tyre. However, in Spain (unlike Ireland), traders with domestic operations only are given a domestic only VAT number which does not appear as valid on the VIES website. Euro Tyre received a domestic only VAT number from its customer. The CJEU ruled that Euro Tyre’s sale should be zero-rated for VAT purposes on the basis that substantive conditions were met. These conditions are that there is a transfer to a business customer of the right to dispose of goods as an owner and there is cross-border movement of these goods from one member state to another. The validation of the VAT number on the VIES is a formal step, but it absence alone should not prevent the zero rate applying. While this judgment helps clarify the requirements, it is nonetheless strongly recommended that sellers of goods or services to business customers in other EU member states validate their customers’ VAT number on the VIES website, as the seller is at risk if that number is invalid or if the customer is engaged in fraudulent activity. Second-hand goods: in the Sjelle case (C-471/15), the CJEU considered whether spare motor parts taken from a single motor vehicle bought from a private individual could qualify for the VAT margin scheme for second-hand goods. The margin scheme is a special VAT accounting scheme which applies to sales by a dealer of second-hand goods principally bought from private individuals. As VAT has already been borne and not recovered by the private individual when it acquired the goods, the dealer is only required to charge VAT on its margin from the sale. Otherwise, there would be double taxation. Based on the EU VAT Directive, second-hand goods are defined as movable goods which are suitable for further use as they are or after repair. The Court concluded that the spare parts qualified as second-hand goods and Taxpayers who received Revenue opinions before 1 January 2012 and wish to rely on those rulings after 1 January 2017 must submit a copy of the opinion and a full application for the renewal of the opinion to the relevant Revenue district by 30 June 2017. therefore, were capable of coming within the margin scheme. The fact that the parts were acquired as part of a single vehicle rather than individually did not rule out the application of the margin scheme where the conditions were met. Cultural services: in the British Film Institute case (C-592/15), the CJEU considered whether recognised bodies could directly rely on the EU VAT Directive to exempt all their cultural services in the absence of a specific national law to that effect. However, the CJEU ruled that the VAT Directive only required the exemption of certain rather than all cultural services. Therefore, EU member states have discretion as to which types of cultural services they treat as VAT exempt or not. DAVID DUFFY David Duffy ACA, AITI Chartered Tax Advisor, is a VAT Director at KPMG. www.accountancyireland.ie
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VOLUME 49 NUMBER 2 APRIL 2017 Diver
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Comment 3 President’s comment Apr
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Contents 5 Spotlight 30 Pay gap, or
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Page 21 and 22: Interview 21 Serving the public goo
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Page 25 and 26: Diversity 25 Diversity... is it goo
Page 27 and 28: Diversity 27 fact that diversity an
Page 29 and 30: LONGBOAT ANALYTICS WINNER FINANCIAL
Page 31 and 32: Diversity 31 than half agreed that
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Page 37 and 38: Diversity 37 The road to inclusion
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Page 43 and 44: Audit 43 insights for stakeholders
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Page 49 and 50: LEADING PROFESSIONAL PUBLISHING
Page 51 and 52: Restructuring Trends 51 The 2016 re
Page 53 and 54: Restructuring Trends 53 insolvency
Page 55 and 56: Audit Quality 55 should be written
Page 57 and 58: Tax 57 BRASS TAX Current developmen
Page 59: Tax 59 entrepreneurial and favourin
Page 63 and 64: Tax 63 Tax deadlines David Fennell
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Page 69 and 70: Membership 69 Quigley, Keith Rice,
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