On 24 October 2012, the European Commission published MEMO/12/794 and two press releases concerning infringement procedures in the field of taxation against nine EU Member States.
For each case, the Member State(s) involved and the policy area are briefly mentioned below. See also EC website for more details.
- Belgium, income from foreign shares; Wallonia’s inheritance taxation of non-residents;
- France, VAT on electronic books;
- Italy, discrimination against cheaper tobacco products;
- Luxembourg, VAT on electronic books;
- Poland, EU rules on the recovery of claims;
- Portugal, EU rules on the recovery of claims;
- Romania, legislation on excise warehouses;
- Spain, VAT on certain notary services;
- United Kingdom, taxation of capital gains (IP/12/1146); taxation of assets abroad (IP/12/1147); inheritance taxation of spouses.
Taxation: Commission requests that Belgium cease discriminating against certain income from foreign shares
The Commission has formally asked Belgium to amend provisions of its tax legislation relating to dividend taxation which are judged to be discriminatory. In Belgium, dividends on quoted shares are subject to a reduced rate of withholding tax. However, where the shares concerned are quoted on a foreign stock market, only dividends related to securities issued after 1 January 1994 benefit from the reduced rate. This restriction does not apply to dividends on shares quoted in Belgium.
In addition, the first tranche of dividends or interest paid by cooperative societies or those pursuing a social objective which are authorised in Belgium are exempt from capital gains tax. On the other hand, there is no exemption on the first tranche of dividends or interest paid by an equivalent foreign society (cooperative or pursuing a social objective).
These discriminations impose a heavier tax burden on investors established in Belgium wishing to invest their capital in other Member States. They are contrary to the free movement of capital established by the treaties.
The Commission’s request takes the form of a reasoned opinion (which constitutes the second stage in the infringement procedure). If there is no satisfactory reply within two months, the Commission may decide to refer the Kingdom of Belgium to the Court of Justice of the European Union. (Reference: IN/2008/4802).
Taxation: VAT on electronic books in France and Luxembourg
The European Commission is asking France and Luxembourg to amend their VAT rates on electronic books (e-books).
Since 1 January 2012, France and Luxembourg have applied a reduced rate of VAT to e-books, which is incompatible with the current rules under the VAT Directive. Under the Directive, e-books constitute electronically supplied services, and application of a reduced rate to this type of services is excluded.
This situation is creating a serious distortion of competition to the disadvantage of operators in the 25 other Member States of the Union, as e-books can be easily purchased in a Member State other than that in which the consumer is resident, and current rules provide for application of the VAT rate in the Member State of the provider rather than that of the customer. The Commission has received complaints from a number of Ministers of Finance highlighting the negative effect on book sales in their domestic markets.
The Commission is aware of the different treatment being applied to e-books and printed books and notes the importance of e-books. Under the new VAT strategy, the Commission has opened this debate with the Member States and should put forward proposals before the end of 2013 (see IP/11/1508).
In the meantime the Commission, as guardian of the treaties, requires Member States to respect the VAT rules they themselves unanimously approved.
The Commission has therefore issued reasoned opinions to the two Member States. This is the second stage in the infringement procedure following the letters of formal notice sent in July 2012 (). The two Member States have one month in which to bring their legislation into compliance with EU law. Otherwise, the Commission may refer the matter to the European Court of Justice. (References: IN/2012/2098 and IN/2012/4080).
Taxation: Commission requests Italy to cease discrimination against cheaper tobacco products
The European Commission requests Italy to apply excise duty to tobacco products without discrimination. This means that Italy cannot impose a minimum excise duty on cheaper cigarettes and fine cut tobacco, which is higher than the tax imposed on more expensive products competing on the market.
Under Italian legislation, excise duties for tobacco products are based on a combination of a specific tax and a proportional tax. Where the application of those two elements does not yield enough tax, EU law allows Italy to set and collect a fixed amount of euros (the so-called minimum excise duty). This higher minimum is only applied to the less expensive cigarettes and fine cut tobacco. As a result more expensive products being taxed at a lower level than such minimum are less taxed than the cheaper alternatives. EU rules on excise duties do not allow taxing certain categories of products less than others. Such a national practice runs against the principle of fair competition and distorts the market.
Consequently, Italy is requested to change its legislation within two months to bring it in line with EU law (the second stage of an infringement procedure). Failing this, the European Commission may refer the matter before the EU’s Court of Justice. (Reference: IN/2011/4175).
Taxation: Commission requests Poland and Portugal to notify transposition of EU rules on the recovery of claims
Member States had to transpose EU rules concerning mutual assistance for the recovery of claims relating to taxes, duties and other measures by 1st January 2012. Contrary to their obligations, Poland and Portugal did not notify the legal instruments transposing the Directive to the Commission. This Directive is an essential instrument to ensure that Member States can collect taxes they are due by taxpayers established in other Member States. The European Commission has requested Poland and Portugal to notify these implementation measures. In the absence of a satisfactory response within two months, the Commission may refer Poland and Portugal to the EU’s Court of Justice. (References: IN/2012/0106 and IN/2012/0116).(for more information: E. Traynor)
Taxation: Commission requests Romania to amend its legislation on excise warehouses
The European Commission has formally requested Romania to amend its legislation concerning the authorization of excise warehouses. Products subject to excise duties are generally produced, and can afterwards be stored under duty suspension, in excise warehouses. This means that products can be sent under duty-suspension from a warehouse in one Member State to a warehouse in another Member State. Authorized excise warehouses include for example refineries, distilleries, registered premises and stores, registered traders, etc. Currently in Romania, only refineries may obtain a license to run a storage excise warehouse for energy products (with the exception of warehouses located in the airport areas). This measure is not in line with EU rules on excise duty and it discriminates against energy products from other Member States. In practice it means that excise products coming from other Member States cannot be held in warehouses and benefit from the duty suspension regime.
Consequently, Romania is requested to change its legislation within two months to bring it in line with EU law (the second stage of an infringement procedure). Failing this, the European Commission may refer the matter before the EU’s Court of Justice. (Reference: IN/2010/4229).
Taxation: Commission requests Spain to levy VAT on certain notary services
The European Commission has requested Spain to levy VAT on services supplied by notaries in connection with financial transactions. Currently Spain applies an exemption to those services which is not allowed by EU VAT rules.
The VAT Directive provides for an exemption of financial services. For example, the granting of a credit or the sale of shares are transactions exempt from VAT. By contrast, the intervention of a notary consists essentially of preparing public documents which reflect civil and commercial acts and contracts, guaranteeing the authenticity and correctness of those documents. Even if these services are supplied in connection with a financial transaction, they are clearly distinct from that transaction and therefore not financial in nature.
Consequently, Spain is requested to change its legislation within two months to bring it in line with EU law (the second stage of an infringement procedure). Failing this, the European Commission may refer the matter before the EU’s Court of Justice. (Reference: IN/2011/4031).
Taxation: Commission requests the UK to review inheritance taxation of spouses
The United Kingdom legislation provides that transfers between domiciled spouses or civil partners are exempt from inheritance tax. However, transfers between domiciled and non-domiciled spouses or civil partners are not exempt from inheritance tax. Furthermore, in the latter case the rules on the nil rate band applicable to subsequent transfers differ and may result globally in a higher taxation. This difference in tax treatment of transfers between domiciled and non-domiciled spouses is of a discriminatory nature and contrary to EU rules (Article 18 TFEU).
The Commission’s request takes the form of a reasoned opinion (the second step of the infringement procedure). If there is no satisfactory reaction within two months, the Commission may decide to refer the matter to the Court of Justice of the European Union. (Reference: IN/2010/2111).
Taxation: Commission refers the UK to the European Court of Justice over taxation of capital gains
Today, the European Commission decided to refer the United Kingdom to the EU Court of Justice (ECJ) for its tax regime concerning the attribution of gains to members of non-resident companies. Under UK legislation, a parent company in the United Kingdom is taxed for the capital gains of its subsidiaries in other Member States, while no similar taxation exists when subsidiaries are located in the United Kingdom. (for more information: IP/12/1146)
Taxation: Commission refers the UK to the European Court of Justice over the taxation of assets abroad
Today, the European Commission decided to refer the United Kingdom to the EU Court of Justice (ECJ) for its regime concerning the taxation of transfers of assets abroad. UK legislation provides for a difference in treatment between domestic and cross-border transactions. (for more information: IP/12/1147