edition 168 eu tax alert - microsoft … · with the new tax regime introduced in the uk in 2014...
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EU Tax Alert
RECENT DEVELOPMENTS FOR TAX SPECIALISTS
EDITION 168
- Commission proposal for Council Directive introducing mandatory disclosure rules concerning aggressive tax arrangements
- CJ rules that Gibraltar and UK are a single Member State for the purposes of provision of services (Gibraltar Betting and Gaming Association)
- CJ rules Belgian national tax exemption on savings deposits are in violation of the freedom to provide Services (Van der Weegen)
- CJ rules that right to deduct input VAT cannot be claimed for VAT undue (Tibor Farkas)
- Commission proposal for Council Directive introducing mandatory disclosure rules concerning aggressive tax arrangements
- CJ rules that Gibraltar and UK are a single Member State for the purposes of provision of services (Gibraltar Betting and Gaming Association)
- CJ rules Belgian national tax exemption on savings deposits are in violation of the freedom to provide Services (Van der Weegen)
- CJ rules that right to deduct input VAT cannot be claimed for VAT undue (Tibor Farkas)
Highlights in this edition
3EU Tax Alert
Highlights in this edition
- Commission proposal for Council Directive introducing
mandatory disclosure rules concerning aggressive tax
arrangements
- CJ rules that Gibraltar and UK are a single Member
State for the purposes of provision of services (Gibraltar
Betting and Gaming Association)
- CJ rules Belgian national tax exemption on savings
deposits are in violation of the freedom to provide
Services (Van der Weegen)
- CJ rules that right to deduct input VAT cannot be
claimed for VAT undue (Tibor Farkas)
State Aid / WTO
- Block Exemption Regulation relaxed
VAT
- CJ rules that zero percent VAT rate applies to loading
and unloading of cargo by subcontractors (A Oy)
- CJ rules that Luxembourg has transposed VAT
exemption for independent groups too widely
(Commission v Luxembourg)
- CJ rules that supply of restaurant and entertainment
services to third parties may be regarded as ‘closely
related’ to the principal VAT exempt supply of
education (Brockenhurst College)
- CJ rules that transaction providing property for the
purpose of discharging a tax debt cannot be subject to
VAT (Posnania Investment SA)
- CJ rules on right to apply margin scheme where invoice
refers both to margin scheme and VAT exemption
(Litdana UAB)
- Council authorizes Italy to require that VAT due on
supplies to public authorities is to be paid to a separate
and blocked bank account
Customs Duties, Excises and other Indirect Taxes
- CJ rules on the customs debt resulting from the
unlawful removal of goods from customs supervision
(case ‘Latvijas Dzelzceļš’ VAS)
- CJ rules on inclusion of costs of transport in the
customs value of goods (‘The Shirtmakers BV)
- CJ rules on CN classification of implant screws (Stryker
EMEA Supply Chain Services BV)
Contents
4
Highlights in this editionCommission proposal for Council Directive introducing mandatory disclosure rules concerning aggressive tax arrangements
On 21 June 2017, the Commission submitted a proposal
for a Council Directive (the ‘proposal’) introducing
mandatory disclosure rules for intermediaries concerning
reportable cross-border tax arrangements. The proposal
also provides for an automatic exchange of the reported
information to other Member States.
The proposal should be viewed in the light of the many
transparency initiatives that have been launched by the EU
with as principal goal to curb the use of alleged aggressive
tax planning arrangements. It places an obligation on
intermediaries to report potentially aggressive tax planning
arrangements which have a cross-border dimension,
i.e., situations in either more than one Member State or a
Member State and a third country. Some countries (such
as the UK and the US) are already using similar mandatory
reporting systems.
List of features (hallmarks)
The proposal does not provide for a definition of
aggressive tax planning. Instead, it includes a long and
very extensive list of features, elements and examples of
arrangements that present, according to the Commission,
a strong indication of aggressive tax planning. The features
– referred to as ‘hallmarks’ – are both general and specific
and also include arrangements which do not conform with
the arm’s length principle or with the OECD transfer pricing
guidelines. It suffices that an arrangement falls within the
scope of one of those hallmarks in order to be treated as
a reportable arrangement to the tax authorities. For certain
categories of hallmarks, a ‘main benefit test’ is applied.
Disclosure obligation
The disclosure obligation applies to individuals and entities
identified as ‘intermediaries’, who are resident or based
in a Member State or registered with a professional
association related to legal, tax or consultancy services
in a Member State. The definition of intermediaries is very
broad, comprising any person responsible for designing,
marketing, organizing and managing the implementation of
the tax aspects of a reportable cross-border arrangement.
Also persons who provide, directly or indirectly, material
aid or assistance in connection with the arrangement fall
within the scope of intermediaries. In the case there is no
intermediary because a taxpayer designs and implements
a scheme in-house, the intermediary is not within the EU,
or is under legal profession privilege, the obligation to
disclose shifts to the taxpayer who uses the arrangement.
Disclosure within five days
The proposal provides that intermediaries must disclose
the arrangements within five days beginning on the day
after such arrangements become available to a taxpayer
for implementation. In the case the disclosure is shifted
to the taxpayer, the arrangement must be reported within
five days beginning on the day after such arrangement
has been implemented. The failure to comply with the
disclosure rule will be subject to penalties determined in
accordance with the domestic law of Member States.
The subsequent automatic exchange of information on
the targeted arrangements among tax authorities will take
place every quarter.
Entry into force
According to the text of the proposal, the entry into force
is scheduled for 1 January 2019. However, it may apply
5EU Tax Alert
Highlights in this edition
retroactively to arrangements that have already been
implemented between a starting date still subject to
political agreement and 31 December 2018.
The proposal has the legal form of an amendment to
the Directive on administrative cooperation in the field of
taxation (2011/16/EU, of 15 February 2011). The proposal
will now be the subject of discussions within the ECOFIN
Council.
CJ rules that Gibraltar and UK are a single Member State for the purposes of provision of services (Gibraltar Betting and Gaming Association)
On 13 June 13 2017, the CJ issued its judgment in case
The Gibraltar Betting and Gaming Association Limited v
Commissioners for Her Majesty’s Revenue and Customs
and Her Majesty’s Treasury (C-591/15). The case deals
with the new tax regime introduced in the UK in 2014
concerning gambling duties, and the greater question of
the status of Gibraltar and whether it is part of the UK.
The request for a preliminary ruling concerned the judicial
review of the new tax regime in the light of EU law. It
argues in that context that the taxes payable under the
regime are extraterritorial taxes, that they constitute
an obstacle to freedom to provide services and that
they discriminate against service providers established
outside the United Kingdom. Moreover, it is contended
that such taxes cannot be justified by the objectives
claimed by the United Kingdom, which are essentially
of an economic nature. As a consequence, the new
tax regime is incompatible with Article 56 TFEU. The
referring court considered that it was necessary to clarify
the constitutional status of Gibraltar under EU law and,
in particular, whether economic operators, such as the
members of the Gibraltar Betting and Gaming Association,
established in Gibraltar, may rely on EU law to challenge
the legislation adopted by the United Kingdom establishing
the new tax regime and, if so, whether such legislation is at
odds with the requirements of Article 56 TFEU.
In dealing with this question, the CJ noted that Gibraltar
is a European territory first whose external relations the
United Kingdom is responsible and that European law is
applicable to that territory. The Court stated that the Act
dealing with the conditions of accession of the Kingdom of
Denmark, Ireland and the United Kingdom of Great Britain
and Northern Ireland and the adjustments to the Treaties
(OJ 1972 L 73, p. 14) (‘the 1972 Act of Accession’) do not
apply to Gibraltar.
The Court looked at the case Jersey Produce Marketing
Organisation (C-293/02, EU:C:2005:664) which dealt
with whether the Channel Islands - specifically, Bailiwick
of Jersey which forms part of the United Kingdom. The
CJ observed that in that case, it relied on the fact that the
UK is responsible for the external relations of the islands.
Because of this, EU rules and customs applied to the
islands. Nevertheless, that did not prevent the CJ from
concluding that, for the purposes of the application of
those rules, those islands and the United Kingdom are to
be treated as a single Member State.
As regards Gibraltar, the CJ stated that it is a part of
the EU because of Article 355(3) TFEU. In that regard,
Article 355(3) TFEU extends the applicability of the
provisions of EU law to the territory of Gibraltar, subject
to the exclusions expressly provided for in the 1972 Act
of Accession, which do not, however, cover freedom to
provide services. The CJ observed that is common ground
that it is the United Kingdom that has assumed obligations
towards the other Member States under the Treaties in so
far as the application and transposition of EU law in the
territory of Gibraltar is concerned. Therefore, the CJ stated
that the provision of services by operators established in
Gibraltar to persons established in the United Kingdom
constitutes, under EU law, a situation confined in all
respects within a single Member State.
Overall, the CJ concluded that the provision of services by
operators established in Gibraltar to persons established in
the United Kingdom constitutes - via EU law - a situation
confined in all respects within a single Member State.
CJ Rules Belgian National Tax Exemption on savings deposits are in violation of the freedom to provide services (Van der Weegen)
On 8 June 2017, the CJ delivered its judgment in case
Van der Weegen (C-580/15). The case concerned the
interpretation of Article 56 TFEU and Article 36 of the EEA
Agreement as regards the Belgian State’s refusal to grant
a tax exemption for remuneration received from a savings
deposit other than in Belgium.
The facts surrounding this request involve Mr Johannes
Van der Weegen and Ms Pot who, in the tax years 2010-
6
2013, had five savings deposits with financial institutions
established in a Member State other than in Belgium. They
applied for the Belgian tax exemption in accordance with
Belgian domestic law.
The Belgian authorities refused the tax exemption,
because none of the five institutions had demonstrated
that they had the savings deposits in accordance with
the Belgian rules and regulations. Following this refusal,
Mr Johannes Van der Weegen and Ms Pot challenged the
Belgian tax authority’s decision. The Court of First Instance
for West Flanders, Bruges Division, decided to refer the
question to the CJ. In essence, the question referred was
whether the Belgian rules which, although applicable
without distinction to domestic and foreign service
providers, require compliance with conditions which are de
facto specific to the Belgian market, amount to a breach
of Articles 56 and 63 TFEU and Articles 36 and 40 of EEA
Agreement.
As a preliminary issue, the CJ indicated that although the
Belgian legislation at stake was capable of coming within
the scope of the two fundamental freedoms, the fact
remains that any restrictive effects which that legislation
may have on the free movement of capital are merely a
consequence of the restriction to the freedom to provide
services. Therefore, it considered that the legislation at
stake should only be analysed in the light of the freedom to
provide services under Article 56 TFEU and Article 36 EEA
Agreement.
The CJ started by stating that the legislation at issue
establishes a tax system which is applicable without
distinction to the remuneration received from a savings
deposit paid by banks in Belgium and to that paid by
banks established in another Member State. However,
even legislation that is applicable without distinction may
constitute a restriction to the freedom to provide services
in so far as it reserves an advantage solely to users of
services which complies with certain conditions which are
de facto specific to the national market and thus deny that
advantage to users of other services which are essentially
similar but do not comply with the specific conditions
provided for in that legislation. Such legislation affects the
situation of users of services as such and is thus liable
to discourage them from using the services of certain
providers, given that the services offered by them do not
comply with the conditions laid down in that legislation,
thus directly affecting access to the market.
The Belgian rules state that that deposits must meet
certain criteria which provide, inter alia, that withdrawals
from such deposits must be limited in order to distinguish
them from a current account and that the remuneration
received on savings deposits must necessarily and
exclusively consist of basic interest and a fidelity premium.
According to the CJ, it appears that that method of
remuneration is specific to the Belgian banking market.
Therefore, the CJ concluded that the national legislation
at issue, although applicable without distinction to
remuneration received from savings accounts opened
with institutions established in Belgium and from those
opened in other Member States of the EEA, first, has the
effect of discouraging, in fact, Belgian residents from using
the services of banks established in those other Member
States and from opening or keeping savings accounts
with those latter banks, since the interest paid by those
banks cannot benefit from the tax exemption at issue,
in particular, because the remuneration of the savings
accounts does not consist of a rate of basic interest and a
fidelity premium.
Furthermore, the CJ considered that the Belgian domestic
legislation discourages holders of savings accounts with
a Belgian bank, which complies with the exemption
conditions, from transferring their account to a bank
established in another Member State that does not offer
accounts meeting those conditions.
The Court, therefore, held that the Belgian domestic
legislation impeded the freedom to provide services in
accordance with Article 56 TFEU.
The CJ then examined whether it was necessary to
verify whether an impediment could be justified based on
consumer protection and the public interest. According to
the Belgian Government, it is crucial that Belgian residents
should have a savings account that is sustainable,
protected, stable, sufficient and risk-free such to be able
to cover their significant or unforeseen expenses. As
regards these arguments, the CJ considered that it is up
to the domestic court to determine if the legislation at
issue addresses such an overriding reason in the public
interest. In all events, the CJ concluded that the legislation
at issue went beyond what was necessary to attain that
objective as it considered that any of the arguments
submitted relating to the remuneration of deposits would
be necessary to attain that objective.
The CJ, therefore, concluded that the Belgian legislation is
not in line with the freedom to provide services pursuant to
Articles 56 TFEU and 36 EEA Agreement.
7EU Tax Alert
CJ rules that right to deduct input VAT cannot be claimed for VAT undue (Tibor Farkas)
On 26 April 2017, the CJ delivered its judgment in the case
Tibor Farkas (C-564/15, ‘Farkas’). As part of an electronic
auction organized by the Hungarian tax authorities,
Mr Farkas purchased a mobile hangar from a company
with an outstanding tax liability. The seller issued an
invoice, which included VAT relating to that transaction.
Mr Farkas paid the auction selling price and the VAT
charged to it to the seller. The seller paid the VAT to the tax
authorities. Mr Farkas deducted the VAT mentioned on the
invoice as input VAT.
The tax authorities carried out checks on the VAT refunds
requested by Mr Farkas. They found that the rules
governing the reverse charge mechanism, according to
which it fell to Mr Farkas as purchaser to pay the VAT
directly to the Treasury, had not been complied with. The
tax authorities found that Mr Farkas was liable for the tax
difference, rejected his request for a refund of the VAT
paid to the vendor and imposed a fine of 50% of the VAT
payable amount. Mr Farkas submitted that the decision
making him liable for the tax difference is unjustified
because the seller in question paid the VAT in question
to the Treasury. The case ended up before the Hungarian
Administrative and Labour Court who decided to stay
the proceedings and to refer a question to the CJ for a
preliminary ruling. In its question the referring court asked
whether the provisions of the EU VAT Directive and the
principles of fiscal neutrality and proportionality must be
interpreted to the effect that they preclude the purchaser
of an item of property from being deprived of the right to
deduct the VAT which he paid to the seller when that VAT
was not due, as the transaction came under the reverse
charge mechanism and the seller had paid that VAT to
the Treasury. Furthermore, the referring court questions
whether the principle of proportionality must be interpreted
to the effect that it precludes national tax authorities
from imposing a fine in such a situation, when those tax
authorities had suffered no loss of tax revenue and there
was no evidence of tax evasion.
According to the CJ, the deduction rules established are
intended to free the VAT taxable person completely of
the burden of the VAT accruing or paid in all its economic
activities. However, it must be stated that the right to
deduct can be exercised only in respect of VAT actually
due. The VAT paid by Mr Farkas to the seller was not
due. The CJ ruled that since the VAT was not due and
the payment was made in breach of a substantive
requirement of the reverse charge mechanism, Mr
Farkas cannot claim the right to deduct that VAT, but he
may claim reimbursement of the VAT unduly paid to the
seller in accordance with national law. However, in those
circumstances, to the extent that reimbursement of the
VAT unduly invoiced by the seller to Mr Farkas becomes
impossible or excessively difficult, in particular, in the case
of the insolvency of the seller, Mr Farkas must be able
to address his application for reimbursement to the tax
authorities directly. Furthermore, the CJ ruled that since
there was an infringement of an administrative nature
and no evidence of fraud, the imposition of a fine of 50%
appears to be disproportionate.
State Aid/WTO
Block Exemption Regulation relaxed
On 17 May 2017, the Commission decided to relax the
block exemption regulation. Some categories of State aid
will not have to be notified to the European Commission
for prior approval if they comply with this regulation, such
as certain forms of environmental aid and aid to SMEs.
As limits apply to amounts of State aid in order to be
cleared this way, certain tax schemes could not always
comply with the regulation, as the actual financial benefit
should be established ex ante. The revised regulation will
no longer require this for tax benefits that are to be claimed
in tax declarations. However, Member States will be
obliged to take (at least) regular ex post samples to check
whether limits are complied with. If it turns out ex post that
limits have not been complied with, Member States must
‘draw the necessary conclusions’, which might lead to
recovery of tax benefits after all. Thus, it is still uncertain
whether Member States will actually avail themselves of
this option once the amendment comes into force.
New categories of aid were also added to the regulation,
including aid to ports and (regional) airports.
VAT
CJ rules that zero percent VAT rate applies to loading and unloading of cargo by subcontractors (A Oy)
On 4 May 2017, the CJ delivered its judgment in the
case A Oy (C-33/16). A Oy is an entrepreneur whose
services consist of the loading and unloading of the
8
cargo of sea-going vessels. In practice, the loading and
unloading is carried out by a subcontractor which invoices
those services to A Oy. A Oy subsequently re-invoices
those services to its customers. A Oy made a request
for a tax ruling from the Finnish Central Tax Board asking
whether the loading and unloading of cargo carried out
by subcontractors acting on behalf of its customers are
eligible for VAT exemption.
According to the Finnish Central Tax Board, the services of
loading and unloading cargo are not to be regarded as VAT
exempt services. A Oy appealed against that decision. The
case ended up before the Finnish Supreme Administrative
Court who decided to stay the proceedings and to refer
questions to the CJ for a preliminary ruling. With its
question the referring court asked whether Article 148(d)
of the EU VAT Directive must be interpreted as meaning
that the loading and unloading of cargo are services to
meet the direct needs of the cargo of the vessels referred
to in Article 148(a) EU VAT Directive. Furthermore, the
referring court questions whether Article 148(d) of the EU
VAT Directive must be interpreted as meaning that only
the loading and unloading of cargo carried out at the
end of the commercial chain of such service covered by
Article 148(a) EU VAT Directive thereof are VAT exempt,
or whether services performed at an earlier stage, such
as services supplied by the subcontractor, are also VAT
exempt. Lastly, the referring court asked whether Article
148(d) of the EU VAT Directive must be interpreted as
meaning that services for loading and unloading cargo
supplied to the holder of that cargo, such as the exporter
or importer, are also VAT exempt.
On 4 July 1985, the CJ had ruled in the case Berkholz (C-
168/84) that a service meets the direct needs of a vessel if
there is a direct link between the supplied service and the
operation of the vessel. According to the CJ, the services
of loading and unloading of cargo satisfy that requirement,
since in order for cargo to be transported and thus for a
vessel to be operated, it is necessary for that cargo to be
transported from the port of departure and then unloaded
at the port of arrival. Furthermore, in the view of the CJ, the
zero percent VAT rate also applies to services in an earlier
stage of the supply chain if the final use of the services
can be guaranteed by the nature of the activities from the
moment that these are carried out. Only services that are
liable to be diverted and used for purposes other than
those originally intended do not fall within the scope of the
zero percent VAT rate. Finally, because the loading and
unloading relates directly to the transported cargo, the CJ
held that services made to holders of cargo may also be
zero rated.
CJ rules that Luxembourg has transposed VAT exemption for independent groups too widely (Commission v Luxembourg)
On 4 May 2017, the CJ delivered its judgment in the case
European Commission v Grand Duchy of Luxembourg
(‘Commission v Luxembourg’, C-274/15). By letter of
formal notice, the Commission informed Luxembourg of
the fact that the VAT regime applicable to independent
groups of persons (‘IGPs’ or ‘IGP’) did not appear to be
compatible with several provisions of the EU VAT Directive.
In its letter, the Commission stated that the national
provision under which services supplied by IGPs for the
benefit of their members are VAT exempt, including where
those services are used for the purposes of the taxed
transactions of those members where the annual turnover
excluding VAT in relation to those taxed transactions
does not exceed 30%, or even 45% in certain cases,
of their total annual turnover excluding VAT, appeared
to be incompatible with Articles 2(1)(c) and 132(1)
(f) of the EU VAT Directive. The Commissions second
ground of complaint was that the national legislation
was incompatible with the EU VAT Directive in so far as
it provides that the members of an IGP who carry out
taxable activities up to a maximum of 30% of their total
annual turnover excluding VAT may deduct the VAT
invoiced to the IGP in respect of the goods and services
supplied to it from the VAT for which they themselves
are liable. The third and last ground was directed at the
fact that, where a member of an IGP requires goods and
services from third parties in his own name, but on behalf
of the IGP, the national legislation excluded from the scope
of VAT the transaction consisting, for that member, of
allocating to the IGP the expenses thus incurred, contrary
to the EU VAT Directive.
With respect to the first ground of complaint, the CJ
stated that Article 132(1)(f) of the EU VAT Directive does
not provide for an exemption for the supply of services
which are not directly necessary for the exercise of an
IGP’s members’ exempt activities or those in relation to
which they are not VAT taxable persons. The first ground
of complaint, therefore, is well founded, according to the
CJ. With respect to the second ground of complaint of the
Commission, the CJ recalled that under Article 168(a) of
the EU VAT Directive, a VAT taxable person is entitled to
deduct from the VAT which he is liable to pay the VAT due
9EU Tax Alert
or paid in respect of supplies to him of goods or services
carried out by another VAT taxable person. According
to the CJ, it follows that it is contrary to that provision to
permit the members of an IGP to deduct from the VAT
which they are liable to pay the VAT due or paid in respect
of goods and services supplied to the IGP. With respect
to the third ground, the CJ stated that the IGP is a VAT
taxable person in its own right, separate from its members,
who are also VAT taxable persons. Consequently, the
transactions between the IGP and one of its members are
to be regarded as transactions between two VAT taxable
persons which fall within the scope of VAT. The third
ground for complaint, therefore, is also well founded, in
the view of the CJ. Given the aforementioned, the CJ ruled
that Luxembourg has failed to fulfil several of its obligations
under the EU VAT Directive.
CJ rules that supply of restaurant and entertainment services to third parties may be regarded as ‘closely related’ to the principal VAT exempt supply of education (Brockenhurst College)
On 5 May 2017, the CJ delivered its judgment in the
case Brockenhurst College (C-699/15, ‘Brockenhurst’).
Brockenhurst is a higher education establishment which
offers courses in catering and hospitality and in the
performing arts. In this matter, Brockenhurst paid VAT
at the standard rate on the price charged for the meals
and the entertainment services supplied. The making
of those supplies is facilitated by the students (who are
the recipients of the principal supply of education) in the
course of their education and as an essential part of their
education.
Brockenhurst considered that the supplies of services
should have been VAT exempt on the basis that they are
‘closely related’ to the provision of education. Accordingly,
Brockenhurst claimed reimbursement of the VAT. The
British tax authorities, however, rejected that claim.
Brockenhurst brought an appeal against that decision.
The matter ended up with the Court of Appeal, which
decided to stay the proceedings and to refer a question
to the CJ for a preliminary ruling. This referring court
asked, in essence, whether Article 132(1)(i) of Directive
2006/112 must be interpreted as meaning that activities
carried out in circumstances such as those at issue,
consisting of students of a higher education establishment
supplying, for consideration and as part of their education,
restaurant and entertainment services to third parties, may
be regarded as supplies ‘closely related’ to the supply
of education within the meaning of that provision and
accordingly be VAT exempt.
The CJ ruled that the application of the VAT exemption
for activities ‘closely related’ to education is, in any event,
subject to three conditions, laid down, in part, in Articles
132 and 134 of the EU VAT Directive. At first, both the
principal supply and the supplies of services closely related
to it must be provided by bodies referred to in Article
132(1)(i) of the EU VAT Directive. Secondly, those supplies
of services must be essential to the VAT exempt activities.
Thirdly, the basic purpose of those supplies of services
must not be to obtain additional income for those bodies
by carrying out transactions which are in direct competition
with those of commercial enterprises liable for VAT.
Considering these conditions, the CJ ruled that activities
carried out in circumstances such as those at issue may
be regarded as supplies ‘closely related’ to the principal
supply of education and accordingly, be VAT exempt,
provided that the second and third conditions are met,
which it is for the national court to determine.
CJ rules that transaction providing property for the purpose of discharging a tax debt cannot be subject to VAT (Posnania Investment SA)
On 11 May 2017, the CJ delivered its judgment in the case
Posnania Investment SA (‘Posnania’, C-36/16). Posnania
is a company governed by Polish law and qualifies as VAT
taxable person. Posnania is economically active in the field
of property transactions. In order to discharge arrears for
non-payment of a tax for which it was liable, the company
applied to a Polish municipality with a view to concluding a
contract for the transfer of the ownership of undeveloped
land held by it to the municipality. Parties concluded
a contract which resulted in the partial discharge of
Posnania’s tax debt concurrently with the transfer of
ownership of the immovable property to the municipality.
Posnania lodged an application for an individual tax ruling
in order to determine whether the transaction concluded
was subject to VAT and whether it had to issue a
corresponding invoice.
Posnania submitted that the transaction at issue ought not
to be subject to VAT on the basis of case law, according
to which, the transfer of ownership of an asset to the State
Treasury in settlement of tax arrears in respect of taxes
constituting State budget revenues is a transaction that is
not subject to VAT. However, the Minister expressed the
view that as the municipality had acquired all the rights
10
of an owner and, therefore, that transfer of ownership
constituted a supply of goods for consideration and was,
in principle, subject to VAT. The case ended up before
the Polish Supreme Administrative Court who decided to
stay the proceedings and to refer a question to the CJ for
a preliminary ruling. With its question, the referring court
asked whether Articles 2(1)(a) and 14(1) of the EU VAT
Directive must be interpreted as meaning that the transfer
of ownership of immovable property by a person subject to
VAT, for the benefit of the State Treasury or local authority
of an EU Member State, in payment of tax arrears,
constitutes a supply of goods for consideration that is
subject to VAT.
According to the CJ, it should be noted that a supply of
a good is made ‘for consideration’ only if there is a legal
relationship between the supplier and purchaser entailing
reciprocal performance, and the price received by the
supplier constitutes the value actually given in return
for the goods supplied. In the view of the CJ, a legal
relationship between Posnania and the municipality does
exist. However, the obligation of the taxpayer, as a debtor
owing a tax debt, to make payment to the tax authorities,
as creditor of that debt, is unilateral in nature inasmuch as
the payment of the tax by that taxpayer results only in the
statutory discharge of its tax debt, even if this is done as in
the present case by means of the provision of immovable
property. Consequently, there is no legal relationship
entailing reciprocal performance. As such, a transaction
providing property in lieu of payment, the purpose of which
is to discharge a tax debt, cannot be considered to be a
transaction effected for consideration within the meaning
of Article 2(1)(a) of the EU VAT Directive and therefore
cannot be subject to VAT.
CJ rules on right to apply margin scheme where invoice refers both to margin scheme and VAT exemption (Litdana UAB)
On 18 May 2017, the CJ delivered its judgment in the case
Litdana UAB (‘Litdana’, C-624/15). Litdana is engaged in
the activity of selling second-hand vehicles on a constant
basis. It acquired second-hand vehicles from a Danish
company which it resold to natural and legal persons. All
the invoices relating to the acquired second-hand vehicles
referred to the margin scheme as laid down in the Danish
VAT law and indicated that the vehicles being sold were
VAT exempt. Litdana applied the margin scheme to the
vehicles at issue when they were resold.
Litdana was subject to a tax audit. The Tax Inspectorate
found that Litdana had not been justified in applying the
margin scheme to the 25 second-hand vehicles that it
acquired from the Danish company and resold to natural
and legal persons given that that Danish company had not
applied the margin scheme to the vehicles sold. The case
ended up before the Lithuanian Regional Administrative
Court who decided to stay the proceedings and to refer
questions to the CJ for a preliminary ruling. With its
questions the referring court asked whether Article 314
of the EU VAT Directive must be interpreted as precluding
the competent authorities of an EU Member State from
denying a VAT taxable person the right to apply the
margin scheme when he received an invoice that includes
references relating both to the margin scheme and to the
VAT exemption if it is apparent from a subsequent audit
carried out by those authorities that the taxable dealer
supplying the second-hand goods had not actually applied
that scheme to the supply of those goods.
The CJ ruled that Article 314 of the EU VAT Directive
precludes the competent authorities of an EU Member
State from denying a VAT taxable person the right to apply
the margin scheme when he had received an invoice that
included references relating both to the margin scheme
and to exemption from VAT, even if it was apparent from a
subsequent audit carried out by those authorities that the
taxable dealer supplying the second-hand goods had not
actually applied that scheme to the supply of those goods.
This would be different if it had been established by the
competent authorities that the VAT taxable person did not
act in good faith or did not take every reasonable measure
in his power to satisfy himself that the transaction carried
out by him did not result in his participation in tax evasion.
The latter is a matter which it is for the referring court to
determine.
Council authorizes Italy to require that VAT due on supplies to public authorities is to be paid to a separate and blocked bank account
The Council has authorized Italy to require that VAT due
on supplies to public authorities is to be paid by those
authorities to a separate and blocked bank account of the
tax authorities. This measure constitutes a derogation from
Articles 206 and 226 of the EU VAT Directive in relation to
the VAT payment and invoicing rules. Italy had introduced
additional control measures to allow the tax authorities
to cross-check the different operations declared by the
11EU Tax Alert
operators and to monitor the VAT payments into the
blocked State accounts.
The reason for the measure is that Italy had detected
evasion with regard to supplies of goods and services to
other entities controlled by public authorities. One of the
effects of the measure is that suppliers, being VAT taxable
persons, are not able to offset the input VAT against the
output VAT. They may be consistently in a credit position,
and may need to ask the tax authorities for VAT refunds.
According to the Council, the measure is proportionate to
the objectives pursued as it is limited in time and restricted
to sectors which pose considerable problems of tax
evasion. In addition, the derogation measure does not give
rise to the risk that evasion would shift to other sectors or
other EU Member States. The decisions shall apply from
1 July 2017 to 30 June 2020.
Customs Duties, Excises and other Indirect Taxes
CJ rules on the customs debt resulting from the unlawful removal of goods from customs supervision (case ‘Latvijas Dzelzceļš’ VAS)
On 18 May 2017, the CJ delivered its judgment in the
‘Latvijas Dzelzceļš’ VAS case (C-154/16). The case
concerns the customs debt resulting from the unlawful
removal of goods from customs supervision and the
persons liable for payment of the debt.
The order for reference states that on 25 February 2011,
the LDz, acting as principal, placed a group of tank
wagons under the external Community transit procedure,
within the meaning of Article 91 of the Customs Code, by
producing a rail freight waybill. The cargo in transit, namely
solvent, was to be transported by its carrier, Baltijas
Tranzīta Serviss, to the customs office at its destination,
which was the border control post at the port of Ventspils
(Latvia).
During the transportation of that cargo on Latvian territory,
a leak from the lower unloading device was found in one
of the tank wagons. On 28 February and 1 March 2011,
standard reports, namely an inspection report and a
technical assessment report, on the defects of the tank
concerned and the measures taken to prevent damage,
were drawn up. On 1 March 2011, it was also recorded
in a report of loss that 2,448 kilograms (kg) of cargo was
missing from the tank concerned.
On 10 March 2011, the Customs office of destination
found a loss of cargo of 2,488 kg due to the fact that
the lower unloading device of one of the wagon tanks
in question had not been correctly closed or had been
damaged. As the documents relating to the presentation of
missing cargo and to completion of the transit procedure
without irregularity had not been presented to the customs
office and in the absence of evidence that the cargo deficit
resulted from an act by the sender, the VID adopted a
decision by which it calculated the LDz’s customs debt in
the sum of Latvian Lats (LVL) 63.26 (around EUR 90.01)
and its VAT debt in the sum of LVL 228.01 (around
EUR 324.44). The LDz challenged that decision. The
Director General upheld that decision by a decision of
16 September 2011.
The LDz then brought an action before the administratīvā
rajona tiesa (District Administrative Court, Latvia) seeking
annulment of that decision submitting that, in the subject
case, many persons could be jointly liable for the customs
debt, in particular, those responsible for the technical
operation of the carriage and the correct drawing up of
the damage report. Furthermore, the LDz submitted that
the VID had not taken into account the fact that the cargo
deficit found had resulted from the total destruction or
irretrievable loss of the goods concerned as a result of the
actual nature of the goods or unforeseeable circumstances
or force majeure.
By judgment of 6 August 2013, that court dismissed the
LDz’s action.
By a judgment of 8 December 2014, the Administratīvā
apgabaltiesa (Regional Administrative Court, Latvia)
dismissed the appeal brought by the LDz against the first
instance judgment.
During its examination of the appeal in cassation brought
by the LDz, the Augstākās tiesas Administratīvo lietu
departaments (Supreme Court, Administrative Cases
Department, Latvia) entertained doubts, first of all, as
to whether the VID and the lower courts were correct in
law to have applied, in the present case, Article 203(1)
of the customs code concerning the unlawful removal
of goods from customs supervision. That court stated in
that regard that, on the one hand, the VID considered that
paragraph 2.2 of the ‘Transit manual’ of the Commission’s
Directorate General ‘Taxation and Customs Union’
(Working Document Taxud/2033/2008-LV Rev. 4) of
15 September 2009 applies in all cases where a deficit
in goods is found by the customs office of destination,
12
whilst, on the other hand, the LDz emphasised the findings
establishing, in the present case, that there was a leak of
solvent from the tank concerned for a technical reason and
refers to the measures taken to repair that damage.
In that context, the referring court questioned whether,
in circumstances such as those at issue in the main
proceedings, it would not be more appropriate to apply
Article 204(1)(a) of the Customs Code, read in conjunction
with the derogation laid down in Article 206(1) of that
Code, which permits the customs debt on importation
not to be calculated if it is proved that the goods have
been totally destroyed, which precludes the entry of those
goods into EU economy.
Next, the referring court recalled that the question of
exoneration from the payment of duties on importation
is linked to that of exoneration from VAT. In that regard, it
took as its starting point the principle that, because the
application of the Customs Code does not require the
calculation of customs duties on importation for goods
which were destroyed while they were under the external
Community transit procedure, and which, for that reason,
did not enter the EU economy, VAT should also not be
paid.
Finally, that court noted that, even if it were sufficiently
clear from Article 94(1) and Article 96(1) of the Customs
Code that the principal is liable for the payment of the
customs debt and even though the Court had emphasised
in its case law the importance of the liability of the principal
in the context of safeguarding the financial interests of the
European Union and the Member States, questions remain
as to the meaning of the provisions of the Customs Code
which provide for the liability of other persons as regards
both the performance of the obligations under the external
Community transit procedure and payment of the customs
debt. Pursuant to both Article 203 and Article 204 of the
Customs Code, the circle of persons whose liability could
be engaged as a result of the leak concerned may be
wider than the principal alone.
In those circumstances, the Augstākās tiesas
Administratīvo lietu departaments (Supreme Court,
Administrative Cases Division) decided to stay the
proceedings and to refer the following questions to the
Court for a preliminary ruling:
‘(1) Must Article 203(1) of the Customs Code be interpreted
as meaning that it is applicable provided that the
complete cargo is not presented at the customs
office of destination of the external Community transit
procedure, even if it is proven to a satisfactory standard
that the goods have been destroyed or irretrievably
lost?
(2) If the reply to the first question is in the negative, may
sufficient proof of the destruction of the goods and,
consequently, the fact that the goods are excluded
from entering the economic channels of the Member
State, justify application of Article 204(1)(a) and
Article 206 of the Customs Code, so that the amount
of the goods destroyed during external transit is not
included in the calculation of the customs debt?
(3) If Article 203(1), Article 204(1)(a) and Article 206 of
the Customs Code must be interpreted as meaning
that customs duty on importation is payable on the
amount of goods destroyed during external transit,
must Article 2(1)(d), Article 70 and Article 71 of the VAT
Directive be interpreted as meaning that VAT must be
paid together with import duties, even if actual entry of
the goods into the economic network of the Member
State is excluded?
(4) Must Article 96 of the Customs Code be interpreted
as meaning that the principal is always liable for
payment of that customs debt, as stated in the
external Community transit procedure, irrespective of
whether the carrier has fulfilled its obligations under
Article 96(2)?
(5) Must Article 94(1), Article 96(1) and Article 213 of the
Customs Code be interpreted as meaning that the
customs authority of the Member State is required to
declare jointly and severally liable all those persons
who, in the specific circumstances, may be regarded
as liable for the customs debt together with the
principal, in accordance with the provisions of the
Customs Code?
(6) If the reply to the previous question is in the affirmative
and if the laws of the Member State link the obligation
to pay value added tax on importation of goods, in
general, to the procedure under which goods may be
released for free circulation, are Articles 201, 202 and
205 of the VAT Directive to be interpreted as meaning
that the Member State is required to declare jointly
and severally liable for payment of value added tax all
those persons who, in the specific circumstances, may
be regarded as liable for the customs debt under the
Customs Code?
13EU Tax Alert
(7) If the reply to questions 5 or 6 is in the affirmative, may
Article 96(1) and Article 213 of [the Customs Code],
and Articles 201, 202 and 205 of the VAT Directive be
interpreted as meaning that if the customs authority
of the Member State has, because of error, failed to
hold any of the persons responsible together with the
principal jointly and severally liable for the customs
debt, this fact alone may justify releasing the principal
from liability for the customs debt?’
The CJ ruled as follows:
1. Article 203(1) of Council Regulation (EEC) No 2913/92
of 12 October 1992 establishing the Community
Customs Code, as amended by Regulation (EC)
No 648/2005 of the European Parliament and of
the Council of 13 April 2005 must be interpreted as
meaning that it does not apply where the total volume
of the goods placed under the external Community
transit procedure has not been presented to the
customs office of destination provided for in that
procedure, owing to the total destruction or irretrievable
loss of some of the goods, which is proven to a
satisfactory standard.
2. Article 204(1)(a) of Regulation No 2913/92 of
12 October 1992, as amended by Regulation
No 648/2005 must be interpreted as meaning that
where the total volume of goods placed under the
external Community transit procedure has not been
produced at the customs office of destination laid
down in that procedure owing to the total destruction
or irretrievable loss of some of the goods, proven to a
satisfactory standard, that situation, which constitutes
the non-fulfilment of one of the obligations under that
procedure, namely to produce goods intact at the
customs office of destination, gives rise, in principle,
to a customs debt on importation for the part of the
goods which was not produced at that customs
office. It is for the national court to determine whether
a circumstance such as damage to an unloading
device meets, in the present case, the criteria of
‘force majeure’ or an ‘unforeseeable circumstance’,
within the meaning of Article 206(1) of Regulation
No 2913/92, as amended by Regulation No 648/2005,
namely, whether it is an abnormal circumstance for a
trader in the business of the transportation of liquid
substances and extraneous to that trader, and whether
the consequences could not have been avoided even
if all due care had been exercised. In the context of
that determination, that court must, in particular, take
into account compliance, by operators such as the
principal and the carrier, with the rules and obligations
in force regarding the technical condition of tanks and
the safety of transportation of liquid substances such
as a solvent.
3. Article 2(1)(d) and Articles 70 and 71 of Council
Directive 2006/112/EC of 28 November 2006 on
the common system of value added tax must be
interpreted as meaning that VAT is not due on the
totally destroyed or irretrievably lost part of goods
placed under the external Community transit
procedure.
4. Article 96(1)(a) in conjunction with Article 204(1)(a)
and (3) of Regulation No 2913/92, as amended by
Regulation No 648/2005, must be interpreted as
meaning that the principal is liable for the payment of
the customs debt arising in relation to goods placed
under the external Community transit procedure, even
if the carrier did not fulfil the obligations to which he
was subject under Article 96(2) of that regulation, in
particular the requirement to produce those goods
intact at the customs office of destination within the
prescribed period.
5. Article 96(1)(a) and (2), Article 204(1)(a) and (3) and
Article 213 of Regulation No 2913/92, as amended
by Regulation No 648/2005, must be interpreted as
meaning that the customs authority of a Member State
is not obliged to declare the joint and several liability
of the carrier who, together with the principal, must be
regarded as liable for payment of the customs debt.
CJ rules on inclusion of costs of transport in the customs value of goods (‘The Shirtmakers BV)
On 11 May 2017, the CJ delivered its judgment in the ‘The
Shirtmakers BV case (C-59/16). The case concerns the
question whether costs of transport must be included in
the customs value of goods imported from Asia.
The Shirtmakers imports textile goods from Asia. During
the period from 1 January 2007 to 30 June 2009,
declarations for release for free circulation of textile goods
were made on several occasions in the name of and for
the account of The Shirtmakers.
The Shirtmakers had recourse to the services of Fracht
FWO BV (‘Fracht’) with a view to having the textile goods
transported to the European Union, their storage in the
Netherlands and completion of the necessary import
14
formalities. In order to carry out the transport of those
goods to the customs territory of the European Union,
Fracht concluded contracts in its own name with various
transport companies. Fracht issued to The Shirtmakers
invoices featuring the amounts which Fracht has been
charged for the actual transport, plus its own costs and
profit margin, without drawing any distinction between
those different amounts.
The customs agents who made the customs declarations
for the account of The Shirtmakers took into account, in
order to determine the customs value, the price actually
paid or payable for the textile goods, increased by the
costs invoiced by the transport companies for the actual
transport of those goods.
Following an inspection of The Shirtmakers’ accounts
after the textile goods had been imported, the Inspector
of the Netherlands Tax Authority took the position that the
customs value had been set too low. In his view, based on
Article 32(1)(e)(i) of the Customs Code, the amounts which
Fracht itself had charged to The Shirtmakers ought to have
been added to the purchase price. For that reason, the
Inspector sought payment from The Shirtmakers of the
additional customs duties which he considered to be due.
The Shirtmakers brought proceedings before the
Rechtbank te Haarlem (District Court, Haarlem,
Netherlands) concerning the requests for payment of
customs duties which had been addressed to it. Following
the dismissal of its action, it appealed to the Gerechtshof
Amsterdam (Regional Court of Appeal, Amsterdam,
Netherlands).
The Gerechtshof Amsterdam, referring to paragraph 30
of the judgment of 6 June 1990 in Unifert (C-11/89,
EU:C:1990:237), took the view that the ‘cost of transport’
in Article 32(1)(e)(i) of the Customs Code includes all the
costs, whether they are main or incidental costs, incurred
in connection with the movement of the goods, and it
therefore rejected The Shirtmakers’ contention that the
amounts relating to Fracht’s involvement, which were
included in the amounts invoiced to The Shirtmakers, do
not constitute costs of transport within the meaning of that
provision.
Hearing the appeal brought against the decision of the
Gerechtshof Amsterdam, the referring court noted that
Article 32(1)(e) of the Customs Code is based on Article 8
of the Agreement on Implementation of Article VII of the
1994 General Agreement on Tariffs and Trade (OJ 1994
L 336, p. 119). The referring court noted that the actual
carriers transferred the textile goods by air or by sea to
the customs territory of the European Union in return for
the payment of certain amounts by Fracht, which then
invoiced those amounts to The Shirtmakers and added
fees for its own involvement without, however, expressly
distinguishing between the costs charged to it by the
actual carriers and the fees for its own involvement.
The referring court, therefore, was unsure whether the
concept of ‘cost of transport’, within the meaning of
Article 32(1)(e)(i) of the Customs Code, covers solely the
amounts charged for the actual transport of the goods or
whether that concept also covers the amounts charged
by intermediaries as payment for their involvement in
organising the actual transport.
The referring court took the view that the costs of
transport of the imported goods by sea, land or air are
costs which are inherent in the actual transport of those
goods, that is to say, which are necessarily particular to
that transport. Those costs can be distinguished from
the costs of transactions which, although connected
with the actual performance of the transport, are not
indispensable. That view, the referring court found, is
supported by the Compendium of Customs Valuation
Texts (TAXUD/800/2002-EN) drawn up by the Customs
Code Committee, according to which a fee of 5% of the
transport costs received by the airline which carried out
the transport, for services relating to the recovery of costs
from the consignee, which it supplied, is not covered by
Article 32(1)(e) of the Customs Code.
However, where the importer has recourse, for the actual
transport, to the services of an intermediary, which charges
fees in that regard, it could be argued, according to the
referring court, that the obvious connection with the actual
transport requires that all such amounts charged be
classified as costs of transport, with the result that those
amounts should be added to the purchase price of the
imported goods.
The referring court also took the view that, in order to
determine whether the amount charged by the provider
of the transport services must be taken into account in
determining the customs value, a distinction should be
made according to the contract which was concluded by
the importer. Accordingly, in the context of a contract for
the carriage of goods within the meaning of Article 8:20
of the Civil Code, such a service provider may undertake
to the buyer to transport goods to the territory of the
15EU Tax Alert
European Union, without the buyer knowing whether that
transport will be carried out by that service provider or by
another operator. In that case, according to the referring
court, the entirety of the amounts charged to the buyer
by the service provider should be classified as costs of
transport and should be added to the purchase price of
the imported goods. By contrast, in the case of a freight
forwarding contract within the meaning of Article 8:60
of the Civil Code, under which the service provider
undertakes to act as an intermediary or to organise
the transport, fees in payment for that activity may not
constitute a ‘cost of transport’ within the meaning of
Article 32(1)(e)(i) of the Customs Code.
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 Article 32(1)(e)(i) of the Customs Code be
interpreted as meaning that the term ‘cost of transport’
should be understood to mean the amounts charged by
the actual carriers of the imported goods, even where
those carriers have not charged those amounts directly to
the buyer of the imported goods but to another operator
who has concluded the contracts of carriage with the
actual carriers on behalf of the buyer of the imported
goods, and who has charged the buyer higher amounts in
connection with his efforts in arranging the transport?’
The CJ ruled as follows:
Article 32(1)(e)(i) of Council Regulation (EEC) No 2913/92
of 12 October 1992 establishing the Community Customs
Code must be interpreted as meaning that the concept of
‘cost of transport’, within the meaning of that provision,
includes the supplement charged by the forwarding agent
to the importer, corresponding to that agent’s profit margin
and costs, in respect of the service which it provided in
organising the transport of the imported goods to the
customs territory of the European Union.
CJ rules on CN classification of implant screws (Stryker EMEA Supply Chain Services BV)
On 26 April 2017, the CJ delivered its judgment in the
case Stryker EMEA Supply Chain Services BV (C-51/16).
The case concerns the classification in the Combined
Nomenclature (CN) of implant screws intended to be
inserted in the human body for the treatment of fractures
or the stabilisation of prostheses.
The dispute in the main proceedings concerns the repeal
of three Binding Tariff Informations issued to Stryker by
the customs authorities for three types of implant screws
intended for insertion in the human body for the treatment
of fractures or the stabilisation of prostheses.
It is apparent from the order for reference that those
screws have the following common characteristics:
- a diameter of 6.5 mm, 6.5 mm and 4 mm, respectively;
- a length of 25 mm, 50 mm and 16 mm, respectively;
- a specially designed screw thread;
- a screw head provided with a socket;
- they are individually packaged in a box together with an
instruction manual;
- they are supplied in a sterilised or non-sterilised
condition.
It is also apparent from the order for reference that those
screws have specific characteristics. One of them is made
of a titanium alloy, whereas the other two are made of
stainless steel. Furthermore, the stainless steel screws are
for single-use. Finally, the titanium alloy screw is used for
the fixation of an artificial joint, whereas the stainless steel
screws are used for the temporary fixation and stabilisation
of bones.
In view of those characteristics, on the basis of the Binding
Tariff Informations issued by the customs authorities, the
latter classified those three types of medical implant screw
under CN heading 9021 90 90.
Following the publication of Implementing Regulation
No 1212/2014, the customs authorities repealed those
Binding Tariff Informations by decision of 6 January
2015. The repeal was justified on the ground that, for the
purposes of that regulation, a ‘screw intended for use in
surgery, due to its objective characteristics and properties,
should be classified as a part of general use’.
Following an unsuccessful complaint lodged with the
customs authorities, Stryker brought an action against the
repeal decision before the referring court.
In support of its action, Stryker claimed, in essence, that,
given the objective characteristics and properties of the
implant screws, including their inherent intended purpose,
there is no question of their being ‘regular’ screws as
referred to in CN heading 7318. In addition, Stryker
submitted that Implementing Regulation No 1212/2014 is
invalid because it classified the medical implant screws at
issue purely on the basis of their external characteristics,
16
disregarding the inherent intended purpose of those
screws, which is contrary to the case law of the Court of
Justice.
The customs authorities maintained that the screws at
issue in the main proceedings displayed great similarities to
the screw described in that regulation and must, therefore,
be classified as ‘parts of general use’.
The referring court is of the view that, in the first place,
having regard to their objective characteristics and
properties, including their inherent intended purpose,
the implant screws at issue in the main proceedings are
eligible for classification under CN heading 9021.
Such a classification results from the objective
characteristics and properties of the medical implant
screws at issue in the main proceedings. The referring
court stated, in that regard, that those screws are
designed, manufactured and sold as orthopaedic articles
for the treatment of fractures in bone structures or the
stabilisation of prostheses, that they are supplied with
an instruction manual for the surgeon, that they can be
inserted in the body only by means of specific medical
tools, that the material used (steel or titanium alloy) is
specifically designed to minimise the risk of rejection,
that the screw thread of such screws is deeper than that
of ‘normal’ screws, that the screw head is designed to
reduce the risk of inflammation, that they comply with
the standards laid down by the International Organisation
for Standardisation guaranteeing the quality of medical
products and, finally, that they are traceable with regard to
recall actions.
It is also apparent from the order for reference that the
screws at issue in the main proceedings are individually
packaged in a small box and may be supplied in a sterile
condition.
Moreover, the referring court stated that the implant screws
at issue in the main proceedings are solely intended to be
inserted in the human body for the treatment of fractures
or the stabilisation of prostheses.
In the second place, the referring court observed that
the screws at issue in the main proceedings correspond
to the screw described in the Annex to Implementing
Regulation No 1212/2014, which precludes classification
under CN heading 9021. The referring court inferred from
that regulation that, as regards a product falling under
‘parts of general use’ within the meaning of note 2 to
Section XV of the CN, the intended purpose of a product
cannot be taken into account for the purposes of its tariff
classification.
In the third place, the referring court stressed the
importance placed by the Commission, which adopted
Implementing Regulation No 1212/2014, on the implant
screw’s outward appearance for the purpose of its
classification. That court recognised that, at first sight,
such an implant screw resembled a ‘normal’ screw.
However, it observed that a closer inspection revealed
that such implant screws have a unique character
distinguishing them from normal screws. In that regard, it
stated that the thread of the implant screws is deeper than
that of a normal screw and that the socket in the screw
head is not of the kind found in a universal tool, but is
tailored to specific medical tools.
In those circumstances, the referring court had doubts
about whether the Commission had exceeded its powers
by limiting the scope of CN heading 9021 to the reasons
provided in the Annex to Implementing Regulation
No 1212/2014.
In that context, the Rechtbank Noord-Holland (District
Court, North Holland, Netherlands) decided to stay the
proceedings and to refer the following questions to the
Court of Justice for a preliminary ruling:
‘(1) Should heading 9021 of the CN be interpreted as
meaning that implant screws [such as those at issue in
the main proceedings] which are solely intended to be
inserted in the human body for the treatment of bone
fractures or the stabilisation of prostheses may be
classified thereunder?
(2) Is Implementing Regulation No 1212/2014 valid?’
The CJ ruled as follows:
Heading 9021 of the Combined Nomenclature of the
Common Customs Tariff 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 Implementing
Regulation (EU) No 1101/2014 of 16 October 2014, must
be interpreted as meaning that medical implant screws
such as those at issue in the main proceedings fall under
that heading as those goods have characteristics which
distinguish them from ordinary goods by the finish of their
manufacture and their high degree of precision, as well
17EU Tax Alert
as by their method of manufacture and the specificity of
their purpose. In particular, the fact that medical implant
screws such as those at issue in the main proceedings can
be inserted in the body only by means of specific medical
tools, not by means of ordinary tools, is a characteristic to
be taken into consideration in order to distinguish those
medical implant screws from ordinary products.
18EU Tax Alert
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- Bruno da Silva (Loyens & Loeff Amsterdam;
University of Amsterdam)
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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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www.eutaxalert.com
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do business in or from the Netherlands, Belgium, Luxembourg or Switzerland, our home
markets. You can count on personal advice from any of our 900 advisers based in one of our
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