Table of Contents. Contributors Introduction 543

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1 Table of Contents Contributors Introduction Taxable Persons VAT grouping Austria Belgium Cyprus Czech Republic Denmark Estonia Finland Germany Hungary Ireland Latvia Netherlands Slovak Republic Sweden United Kingdom Joint VAT registration France Italy Romania Spain Supply of new immovable property New buildings Occasional supplies Registration threshold Taxable Events Transfer of businesses Intra-Community acquisitions of goods Consignment goods and call-off stocks Consignment goods Call-off stocks Simplification measure Place and Time of Taxation Distance selling thresholds Place-of-supply rules for services Place of supply from 2010, 2011 and Place of supply prior to Effective-use-and-enjoyment criterion Effective use and enjoyment in a Member State IBFD

2 VAT Options Exercised by the Member States (situation on 1 January 2014) Effective use and enjoyment outside European Union Time of supply Issue of invoices Cash accounting Taxable Amount Open-market value Bad-debt relief Reduced Rates Exemptions Letting of immovable property Letting of residential property Letting of commercial property Options for taxation Letting of immovable property Financial services Supplies of immovable property Standstill exemptions Admission to sporting events Artists and liberal professionals Supply of new buildings Passenger transport Zero Rating Provisioning of sea vessels, etc Goods under customs control Goods and services supplied to exporters VAT warehousing Deduction of Input Tax Immediate deduction Exclusions Excess input tax Pro rata Adjustments of input tax deductions Non-payment and stolen goods Capital goods Adjustment period Capital goods Services Refunds to non-resident businesses Refund procedure Refund thresholds Reciprocity principle Refund offices Liability To Pay VAT Reverse charge mechanism Optional reverse charge mechanism Non-resident suppliers IBFD 538

3 Table of Contents Optional permanent reverse charge mechanism Specific transactions Optional temporary reverse charge mechanism Specific transactions Simplified intra-community triangulation VAT representatives Third party s joint and several liability Cross-border relationships Specific transactions VAT on importation postponed accounting Assessment and refund application periods Administrative Obligations Registration VAT invoices VAT invoices relating to exempt supplies Time limits Invoices drawn up by the customer Customer s identification number Clauses on VAT invoices Storage of invoices VAT returns Tax periods Electronic VAT returns Filing of VAT returns and payment of VAT Recapitulative statements Additional details Filing frequency Quarterly filing Annual filing Filing format Intra-Community acquisitions of goods Receipt of cross-border services Special Schemes Flat-rate farmers Margin scheme Information Offices Thresholds and Tax Rates IBFD

4 Deduction of Input Tax 9.5. Adjustments of input tax deductions Input tax that has initially been deducted must be adjusted if it appears that the initial deduction was higher or lower than that to which the taxable person was entitled or where, after the return was made, some change occurs in the factors used to determine the amount to be deducted, in particular where purchases were cancelled or price reductions were obtained 96. In principle, no adjustments must be made in the event of transactions remaining totally or partially unpaid and of destruction, loss or theft of property duly proved or confirmed, nor in the case of application of goods for the purpose of making low-value gifts and giving samples. However, Member States may require adjustment of the input tax that has been deducted where transactions remain totally or partially unpaid, and in the case of theft Non-payment and stolen goods Where taxable persons do not pay the price, in full or in part, for goods or services received from third parties, Austria, Belgium, Germany, Ireland 1, Latvia 2, Luxembourg, Malta, the Netherlands, Portugal, Romania and the United Kingdom 3 require adjustment of the initially deducted input tax. However, in France and Finland, the adjustment is not required in respect of certain unpaid debts. In Italy (under certain conditions) and in Portugal, the adjustment is made at the supplier s discretion. In Romania, a final administrative or court decision is necessary to make the adjustment. 1. In Ireland, taxable persons who have not paid their supplier within six months of the tax period in which the related invoice was issued must in principle reverse the initial input tax deduction. 2. In Latvia, the customer must repay the initially deducted tax to the tax authorities before 31 July of the year in which the supplier informed him, before 1 March, that he will treat the debt as being irrecoverable (see 5.2.). 3. In the United Kingdom, the customer is required to repay the tax that he has initially deducted in respect of inputs where he has not paid the supplier after 6 months (except where the customer is formally insolvent), even if the supplier has not claimed bad-debt relief (see 5.2.) on the unpaid supplies. Input tax relating to stolen goods must only be repaid in the Slovak Republic and, in specific circumstances, in Bulgaria, France and Romania. In Latvia, VAT on stolen goods does not have to be repaid if the theft is duly proven Capital goods Adjustment period Another type of adjustment of input tax concerns the fluctuating use of capital goods for taxed and non-taxed purposes over a number of years, the so-called adjustment period, following their acquisition or first use. The length of the 96. Articles 184 and 185 of the VAT Directive IBFD

5 VAT Options Exercised by the Member States (situation on 1 January 2014) adjustment period 97 depends in almost all Member States on whether the capital goods are movable or immovable. In respect of movable capital goods, the adjustment period is 5 years in all Member States, with the exception of Finland and Ireland. In the latter two Member States, rules for the adjustment of VAT on movable capital goods have never been introduced. Instead, those assets are subject to self-supply rules, whose application is limited in Finland to the general assessment period of 3 years following the end of the financial year during which the adjustment took place. There is no time limit to the application of the self-supply rules in Ireland. In respect of immovable capital goods, the adjustment period is: 5 years in Greece 1 ; 10 years in Austria 2, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, Germany, Greece 3, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Spain, Sweden and the United Kingdom; 15 years in Belgium 4 ; and the maximum of 20 years in Austria 5, Bulgaria, France, Hungary, Ireland, Malta, Portugal, Romania, the Slovak Republic 6 and Slovenia. 1. In Greece, the adjustment period is 5 years, unless, from 1 January 2007, the option for taxation (see 7.2.) is taken up. In the latter case, the adjustment period is 10 years. 2. In Austria, the adjustment period of 10 years applies to immovable property (including capitalized expenses and major repairs) taken into use prior to 1 April 2012 or, in the case of the letting of residential property, the lease contract was concluded prior to that date. 3. In Greece, from 1 January 2007, the adjustment period is 10 years, where the option for taxation (see 7.2.) is taken up. 4. In Belgium, the adjustment period of 15 years begins on 1 January of the year in which the capital goods were taken into use. 5. In Austria, the adjustment period of 20 years applies to immovable property (including capitalized expenses and major repairs) taken into use on or after 1 April 2012 or, in the case of the letting of residential property, the lease contract was concluded on or after that date. 6. In the Slovak Republic, the adjustment period remains 10 years in respect of immovable property purchased before 1 January 2011, if at least the first adjustment was made before that date Capital goods Services Until May 2001, it was generally assumed that adjustment of initial deduction of input tax relating to capital goods was limited to situations in which the goods had been supplied to the taxable person. However, in Fischer/Brandenstein 98, the ECJ declared that also VAT relating to specific services may be subject to adjustment under the capital goods scheme. Several years later, Article 20(4) of the 97. Article 187(1) of the VAT Directive. 98. ECJ judgment of 17 May 2001 in Hans-Georg Fischer v. Finanzamt Burgsdorf and Klaus Brandenstein v. Finanzamt Düsseldorf-Mettmann, Cases C-322/99 and C-323/99, [2001] ECR I IBFD 664

6 Deduction of Input Tax former Sixth Directive was amended 99 to the effect that the Member States were authorized to apply the capital-goods scheme to services which have characteristics similar to those normally attributed to capital goods 100. In the Netherlands, a proposal to treat capital services, i.e. services that must be depreciated for income tax, on the same footing with capital goods was presented to the parliament on 1 April 2005; that proposal is still pending. In Austria, Bulgaria, Denmark, Hungary, Italy, Latvia, Lithuania, Malta, Portugal, Slovenia and Spain, VAT on services is not subject to adjustment on the ground of variation of their use for taxed and exempt purposes in the years of the adjustment period or their disposal during that period. The following Member States apply the capital-goods scheme to the following services: Capital goods include services BE Services to be written off for income tax purposes over a minimum period of 5 years CY Copyrights, patents, licences, trademarks and similar rights, including goodwill, provided that they are used for more than one accounting period and their value is not less than EUR 17, each. CZ Long-term intangible assets (including services) whose acquisition price exceeds CZK 60,000 (EUR 2,180). DE Services which are not consumed when received, which are performed on and for a tangible asset and are appropriate to serve the use and the maintenance of this asset. In relation to immovable fixed assets, these are particularly refurbishment, painting and construction services. EE Letting of immovable property. EL The right to use copyrights, patents, licences, trademarks and similar rights, provided that they are used for more than 1 fiscal year. FI Construction of new buildings and construction of immovable property that must be capitalized. FR The national legislation refers to the term assets, which includes both tangible and intangible assets (services). GB Construction and refurbishment services with a value of more than GPB 250,000 (EUR 301,860) 1. HR Construction and refurbishment services relating to immovable property which are normally capitalized. IE Construction and refurbishment services relating to immovable property (including certain professional services) that are normally capitalized. LU The capital-goods scheme applies to business assets subject to depreciation, regardless of whether they are goods or services. 99. Council Directive 2006/69/EC of 14 February 2006 amending Directive 77/388/EEC as regards certain measures to simplify the procedure for charging value added tax and to assist in countering tax evasion or avoidance, and repealing certain Decisions granting derogations, OJ L 221 of 12 August See Article 190 of the VAT Directive IBFD

7 VAT Options Exercised by the Member States (situation on 1 January 2014) PL RO SE SK Capital goods include services Services that, for income tax purposes, are covered by the concept of fixed assets and other intangible assets, provided that their initial value exceeds PLZ 15,000 (EUR 3,600). Construction services and refurbishment of immovable property that are capitalized. Construction services and refurbishment of immovable property that normally are capitalized. Construction services for which a building permit is required. 1. In the United Kingdom, both goods and services are within the capital-goods scheme if the standard-rates cost is, in the case of movable goods (computer equipment, ships and aircraft) more than GBP 50,000 (EUR 61,400)or, in the base of immovable goods (land and buildings) more than GBP 250,000 (EUR 307,100) Refunds to non-resident businesses Under the procedures laid down by Directive 2008/9 101 and the Thirteenth Directive 102, Member States must refund VAT to non-resident businesses, which are not and must not be registered for VAT in the Member State of refund. Directive 2008/9 is the successor to the Eighth Directive 103. For a comparison of the procedure applicable to refund applications made before 1 January 2010 or after 31 December 2009 by businesses established in another Member State, see Refund applications must be made before expiry of the application deadline (see 10.6.) and are refused if they do not exceed certain thresholds (see ). The refunds are made by refund offices (see ) Refund procedure With effect from 1 January 2010, the procedure for refunds of VAT to businesses established in another Member State, who are not and must not be registered in the Member State of refund, is laid down by Directive 2008/9. The new procedure applies to refund applications submitted after 31 December 2009, which means that it also applies to refund applications relating to, for example, the fourth quarter of 2009 or the entire year Council Directive 2008/9/EC of 12 February 2008 laying down detailed rules for the refund of value added tax, provided for in Directive 2006/112/EC, to taxable persons not established in the Member State of refund but established in another Member State, OJ L 44 of 20 February Thirteenth Council Directive 86/560/EEC of 17 November 1986 on the harmonization of the laws of the Member States relating to turnover taxes Arrangements for the refund of value added tax to taxable persons not established in Community territory, OJ L 326 of 21 November Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes Arrangements for the refund of value added tax to taxable persons not established in the territory of the country, OJ L 331 of 27 December IBFD 666