Tag Archives: ECJ

VAT e-books to be reduced rated?

By   10 October 2018
0

The EC will put forward a proposal to permit EU Member States to introduce a reduced rate for the supply of e-books to bring them into line with traditional books (which, uniquely, are zero rated in the UK). Details of the latest court decision and reasoning here and an ECJ decision on the matter here

What are e-books for this proposal?

e-book is short for “electronic book.” It is a digital publication that can be read on a computer, e-reader, or other electronic device. e-books are available in several different file formats. There are many types of e-book formats, all of which support text, images, chapters, and page markers . An e-book may be a novel, magazine, newspaper, or other publication. However, the electronic versions of magazines and newspapers are often called “digital editions” to differentiate them from electronic books. It is likely that digital editions will be included in the proposed reduce rate proposal.

Timeframe

It is likely that the proposal will be adopted quite quickly once the formalities have been completed, so watch this space.

HMRC stance

Previous cases have underlined HMRC’s position that they view traditional physical books and online supplies as two different supplies, even if the content is similar, or even identical. It will be interesting to see how they react to the EC’s adoption of these proposals, especially in the current political environment.

Action

If you, or your clients, supply e-books, it is important to monitor this position. Failure to respond to any changes may mean too much VAT being accounted for and an EU-wide commercial competitive disadvantage. We will report on the latest on e-books as soon as possible any final decisions are made.

VAT: The ECJ decides that bridge is NOT a sport

By   27 October 2017
0

Latest from the courts

The English Bridge Union Limited (EBU) case

Further to my article on contract (or duplicate) bridge here which covered the Advocate General’s opinion that it could be considered a sport, the Court of Justice of the EU has ruled that it does not qualify as a sport and therefore certain supplies by The EBU are subject to UK VAT.

The court decided that “…the fact that an activity promotes physical and mental health is not, of itself, a sufficient element for it to be concluded that that activity is covered by the concept of ‘sport’ within the meaning of that same provision….

The fact that an activity promoting physical and mental well-being is practised competitively does not lead to a different conclusion. In fact, the Court has ruled that Article 132(1)(m) of Directive 2006/112 does not require, for it to be applicable, that the sporting activity be practised at a particular level, for example, at a professional level, or that the sporting activity at issue be practised in a particular way, namely in a regular or organised manner or in order to participate in sports competitions…

In that respect, it must also be noted that the competitive nature of an activity cannot, per se, be sufficient to establish its classification as a ‘sport’, failing any not negligible physical element.”

As my aged father has always said; it can only be sport if the players wear shorts and sweat…

He may not have been far off you know. I still have difficulty considering pub games as sport, but I am sure there will be many who think that darts and pool are indeed sport.  It is also interesting that, inter alia, HMRC consider; baton twirling, hovering (not “hoovering as I first read it) octopush, dragon boat racing and sombo as sport.

VAT: Is the card game bridge a sport?

By   21 June 2017
0

Latest from the courts: Advocate General’s (AG) opinion* on the English Bridge Union (EBU) case.

Certain supplies of services closely connected to sport are exempt from VAT.  Consequently the EBU (a non‐profit making membership‐ funded organisation committed to promoting the game of duplicate bridge) appealed to the ECJ wanting certain fees paid to it to be exempt.  HMRC consider that contract bridge is not a sport so that output tax was due on the supply.  This view was supported by the First Tier and Upper Tribunals. So, the simple question is: Is bridge a sport?  The ECJ hearing has come about due to a referral from the British courts in reference to how it should be applied to bridge.

The AG has looked at how the term “sport” should be defined.  As a starting point, it is clear that games such as football, cricket, tennis and squash are sport.  However, this does not mean that activities which are less strenuous cannot be a sport, and the examples of archery and badminton were given.  The AG was also of the view that sport does not need to include any physical element, meaning that any activity which is characterised by:

  • competition
  • an effort to overcome a challenge or obstacle
  • results in physical or mental wellbeing

may qualify as a sport.

In connection with contract bridge; as a card game it:

  • is dependent on skill and training rather than luck
  • requires considerable mental effort and training to compete at an international level
  • is recognised by the International Olympic Committee as a sport

such that the AG concluded that bridge can indeed be defined as a sport.

This, if followed by the ECJ, means that the EBU will be due a refund of output tax declared on competition entry fees charged to its members.

The EBU has always maintained that bridge is a sport and point to the UK Charity Commission which recognises bridge as a sport.  It adopted Parliament’s most recent definition in the Charities Act, updated by Parliament in 2011, which specifically included Mind Sports in the definition of ‘sport’, stating that sports are “activities which promote health or wellbeing through physical or mental skill or exertion”.  Additionally, bridge is seen as an excellent way of improving mental acuity and delaying the onset of dementia, and the social and partnership aspects of bridge are of great benefit to those who may otherwise become isolated.

We now await the court’s decision on whether one needs to wear shorts and get sweaty to be participating in sport.

*  The most important work performed by the Advocates General is to deliver a written Opinion, named “reasoned submission”. The role of the Advocate General is to propose an independent legal solution. It is important to note that the Court is not obligated to follow the Opinion delivered by the Advocate General. Even though the Opinion does not bind the Court it has an impact on the decision in many cases, and in fact, in most cases the ECJ follows it.

VAT – Trading in Bitcoin ruled exempt by ECJ

By   22 October 2015
0

VAT – Trading in Bitcoin ruled exempt by ECJ

Further to my article of 13 March 2014 here

The European Court of Justice (ECJ), the highest court of appeal for EC matters, has ruled that trading in digital, such as bitcoin, is exempt. this is on the basis that they are a method of payment with no intrinsic value, like goods or commodities.  They are therefore covered by the exemption relating to “currency, bank notes and coins used as legal tender” – (Article 135 (1) of the VAT directive). 

This confirms that the UK authority’s approach is correct and that the VAT treatment applied in Germany, Poland and Sweden where those authorities treated the relevant transactions as subject to VAT, is erroneous.

This is good news for the UK as it is a big (if not the biggest) player in the bitcoin sector.

VAT – Are e-books books? Update on ECJ’s decision 5 March 2015

By   5 March 2015
0

Books are zero rated for VAT purposes, but only (currently) if they are of the traditional dead tree variety. The zero rating does not extend to e-books which are standard rated for VAT. There has been a long standing argument between EC Member States (and between other interested parties) that similar content should not be taxed at different rates solely depending on the method of delivery. This argument is about to be tested in the courts. The UK is not permitted by the EC to extend its current zero rating for printed matter, however, it is expected that the contention in this case will be that the inclusion of new products will not extend the zero rating, but rather the development of technology has created a supply that should be covered by the existing zero rating legislation.

If it is accepted by the courts that all types of book should attract the same rate of VAT, it may mean that the rate will be equalised upwards. So, by the end of the year we could be looking at VAT of 5% being added to books, newspapers and other printed matter which was hitherto VAT free – A “tax on learning” as previous protests had it when there was a threat to tax free books.

UPDATE

The European Court of Justice (ECJ) has today ruled that France and Luxembourg must raise their reduced VAT rates on sales of  e-book. This will conclude ongoing disputes (see above) between EC countries over whether e-books may be treated similarly to printed books at the nil or reduced rates.  The UK and Germany were the main protagonists in challenging those Member States where e-books have been treated the same as printed versions.

Initially, Luxembourg and France began reclassifying e-books at the same rate as printed books – 3% and 5.5% in 2012. Subsequently, Italy and Malta joined them at the start of 2015, reducing the rates to 4% and 5%.

These rates where challenged by the UK and Germany who asked the EC to impose rules to ensure that e-books could not take advantage of the printed book rates.  Today, the ECJ published its ruling, stating that since e-books do not have the same physical characteristics as printed books and therefore cannot benefit from the printed book reduced VAT rules.

This decision does seem to go against common sense,but the ECJ’s hands were somewhat tied by the VAT rules which were introduced before e-books existed.

VAT – Domestic legislation versus EC law – a new case

By   4 March 2015
0

In the recent case of VDP Dental Laboratory NV & ors (C-144/13) the ECJ has decided that a Dutch exemption for a supply which is ultra vires in respect of EC VAT legislation does not give a right to input tax deduction via EC legislation.  The exemption precludes input VAT recovery, but has the effect of exempting imports and acquisitions into The Netherlands. The ECJ held that a taxable person who is not obliged to charge VAT on the supply of goods because national law (in contravention of Community law) provides for exemption, cannot however, rely on Community law to claim input tax deduction of VAT incurred on purchases incurred in respect of that supply.  What this means though is that the exemption in Dutch domestic legislation means that the taxpayer will not be taxed on importations or acquisitions, irrespective of the VAT treatment in the Member State of an EU supplier.

Broadly, this means that a business cannot take advantage of domestic legislation and/or EC law in circumstances where it may benefit.