VAT Newsletter 1/2012

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The European Court of Justice („ECJ”) has ruled on the case Klub OOD (C-153/11).

The dispute in this case concerns the right to deduct the input VAT paid for the acquisition of an immovable property allocated to the assets of a business, not yet brought into use for the company’s business activities.

Klub is a company which operates a hotel in Varna. The company purchased an apartment for residential use in Sofia. The VAT on that purchase was deducted. Although the apartment was intended for bussiness use, Klub presented an evidence in this regard only at a later stage.

The tax authorities considered that the apartment was intended for residential use. Therefore, they considered that the VAT related to the acquisition of the apartment was not deductible.

The ECJ considered that a taxable person who has acquired capital goods while acting as such and who has allocated the goods to the assets of the business is entitled to deduct the TVA on the acquisition of those goods during the tax period in which the tax become due, regardless of the fact that the goods are not immediately used for business purposes.

In this respect, it is for the national court to ascertain whether the taxable person did acquire the capital goods for the purposes of its economic activity and to assess, if the case, whether there is a fraudulent practice.

The European Court of Justice („ECJ”) has ruled on the case Veleclair SA (C-414/10).

The dispute in this case concerns the conditioning of the right to deduct the VAT related to an import, to the actual payment by the person liable to pay VAT, of the VAT due.

Veleclair imported bicycles, for which it did not pay the related VAT in customs. Subsequently, Veleclair filled an application for the refund of the VAT corresponding to the VAT due for the import.

The application was rejected on the ground that, based on the national regulations in France, the deductibility of VAT related to importats is conditional upon its actual payment.

The ECJ considered that the right to deduct the VAT related to import cannot be conditional upon the actual payment of the VAT by the taxable person liable to pay the VAT, where that person is also the holder of the right to deduction.

The European Court of Justice („ECJ”) has ruled on the case Etat belge against BLM SA(C-436/10).

The case regards the right to deduct the VAT paid as input tax on immovable property used partialy for the private use of the staff of a company.

BLM received a contribution from its managing director, in the form of the right to use a building, for which the related input VAT was deducted.

The managing director of BLM was partially using that buiding, for personal purposes.

Based on Belgium national law, the private use, by a manager or a member of a company, of an immovable property which has been fully allocated to the assets of that bussiness, is treated as a VAT exempt rental.

Consequently, further to a tax audit, the fiscal administration of Belgium has challenged the deductibility of the VAT pertaining to the part of the building used for non-business purposes.

ECJ considered that the private use, by the staff of a taxable legal person, of a part of a building constructed or owned by such, when the related input VAT was deducted, shall not be treated as a VAT exempt supply of services, if the characteristics of a VAT exempt lease or rental of immovable property are not present.

The reffering court has the competence to determine whether such characteristics are present.

EU Council Decision no. 181 of 26 March 2012 was published in EU Official Journal on 30.03.2012.

Based on EU Council Decision 2012/181/EU, Romania is authorised to increase the level of the threshold for VAT exemption from the obligation to register for VAT purposes to EUR 65,000, at the convertion rate valid on 01/01/2007. Specifically, the new threshold for the VAT exemption shall be RON 221,000, as compared to RON 119,000.

The new threshold shall be implemented in the Fiscal Code and shall be applicable as of the date when the ordinance amending the Fiscal Code enters into force.

Decision 2012/181/UE shall apply until the date of entry into force of a Directive amending the current amounts of the VAT exemption threshold, or until 31 December 2014, whichever date is earlier.

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