Below you can find the answer keys to the questions of the EVAT exam 2012/2013.
We note that these answer keys should only be used for didactic purposes (i.e. for
learning purposes). No rights can be derived from this document
Exam: total 100 points
The exam contains essay questions that you have to answer. One can get a maximum
of 100 points (the points are divided over the questions, as indicated in the exam). Since
the course is taught in English, all answers in different languages will be disregarded.
Question 1 (40 points)
A large pharmaceutical company, Pills-R-US, is established in the US. This company
produces drugs and supplies these drugs to drug stores. Up until now, Pills-R-US has
been active on the US market exclusively. However, it now envisages selling a new
product on the EU market. This new product is a drug that can cure patients suffering
from exam stress. In order to be allowed to sell the drug on the EU market, Pills-R-US
must proof to the various EU authorities that its product meets the EU safety
requirements. Therefore, Pills-R-US hires a French laboratory that will carry out a study
on the effects of the drugs on healthy humans (volunteers). The laboratory pays these
volunteers – coincidentally, they are all students in EU VAT law – for studying hard,
taking the pills and making 6 exams during a period of 6 months.
Questions
1a. Are the volunteers to be considered as taxable persons? (5 points)
Assume healthy volunteers (no patients suffering from exam stress)
Art. 9 VAT Directive: any person, independently, economic activity
Any person: yes.
Economic activity?
o The scope of the term economic activities is very wide
o The term is objective in character, in the sense that the activity is
considered per se and without regard to its purpose or results.
o In order to determine whether an activity is an 'economic activity' in
respect of Art. 9 VAT Directive, account must be taken of all
circumstances. Relevant criteria are: the actual length of the period
for which the activity is carried out, the number of customers and
the amount of earnings. See Renate Enkler.
o From Slaby it follows that it is relevant that the activities are carried
in a manner in which a producer, a trader or a person supplying
services would do so, i.e. he must take active steps, to market its
activities by mobilising resources similar to those deployed by a
producer, a trader or a person supplying services.
o An activity is generally categorized as economic where it is
permanent (not incidental) and is carried out in return for
remuneration which is received by the person carrying out the
activity.
1
, o In this case: period = 6 months. Arguably that is ‘permanent’ (not
incidental).
o Term 'volunteer' does not imply that the students carry out their
activities for free. It means that the students voluntarily take pills,
even though they are healthy (and that they take exams - even
though they are healthy). Therefore, the students receive a
remuneration for their activities. Hong Kong not applicable in this
situation.
o There is a direct link between the payments and the activities (See
Tolsma).
Independent?
o See Art. 10 VAT Directive.
o Activities do not seem to be carried out under a contract of
employment.
o The case does not suggest that the volunteers are in another way
dependent on the laboratory as regards working conditions,
remuneration and the employer's liability.
o However, one could argue that since the use of the pills must be
monitored by the laboratory, the students are required to study and
the students must take the pills at set times, there is not an absolute
independency as regards the working conditions. Nonetheless, the
requirement of studying and making exams seems to constitute an
activity that is carried out independently.
If volunteers are to be considered as taxable persons: special scheme for
small enterprises may apply if Member State in question implemented this
scheme.
1b. Should the French laboratory charge VAT on its invoice to Pills-R-US? (5
points)
French Laboratory a taxable person?
Yes (any person, independent, economic activity = contract research for
remuneration)
Research = service (art. 24) for consideration (art. 2) and therefore taxable
Supply of service is not VAT exempt. Exemption of Art. 132(1)(b) does not
seem to apply (not closely related, see Ygeia). Taxed supply.
Pills-R-US taxable person?
Yes (any person, independent, economic activity = supplies of drugs)
Note: supply of drugs = legal (supply of narcotics = illegal, not an
economic activity)
2
We note that these answer keys should only be used for didactic purposes (i.e. for
learning purposes). No rights can be derived from this document
Exam: total 100 points
The exam contains essay questions that you have to answer. One can get a maximum
of 100 points (the points are divided over the questions, as indicated in the exam). Since
the course is taught in English, all answers in different languages will be disregarded.
Question 1 (40 points)
A large pharmaceutical company, Pills-R-US, is established in the US. This company
produces drugs and supplies these drugs to drug stores. Up until now, Pills-R-US has
been active on the US market exclusively. However, it now envisages selling a new
product on the EU market. This new product is a drug that can cure patients suffering
from exam stress. In order to be allowed to sell the drug on the EU market, Pills-R-US
must proof to the various EU authorities that its product meets the EU safety
requirements. Therefore, Pills-R-US hires a French laboratory that will carry out a study
on the effects of the drugs on healthy humans (volunteers). The laboratory pays these
volunteers – coincidentally, they are all students in EU VAT law – for studying hard,
taking the pills and making 6 exams during a period of 6 months.
Questions
1a. Are the volunteers to be considered as taxable persons? (5 points)
Assume healthy volunteers (no patients suffering from exam stress)
Art. 9 VAT Directive: any person, independently, economic activity
Any person: yes.
Economic activity?
o The scope of the term economic activities is very wide
o The term is objective in character, in the sense that the activity is
considered per se and without regard to its purpose or results.
o In order to determine whether an activity is an 'economic activity' in
respect of Art. 9 VAT Directive, account must be taken of all
circumstances. Relevant criteria are: the actual length of the period
for which the activity is carried out, the number of customers and
the amount of earnings. See Renate Enkler.
o From Slaby it follows that it is relevant that the activities are carried
in a manner in which a producer, a trader or a person supplying
services would do so, i.e. he must take active steps, to market its
activities by mobilising resources similar to those deployed by a
producer, a trader or a person supplying services.
o An activity is generally categorized as economic where it is
permanent (not incidental) and is carried out in return for
remuneration which is received by the person carrying out the
activity.
1
, o In this case: period = 6 months. Arguably that is ‘permanent’ (not
incidental).
o Term 'volunteer' does not imply that the students carry out their
activities for free. It means that the students voluntarily take pills,
even though they are healthy (and that they take exams - even
though they are healthy). Therefore, the students receive a
remuneration for their activities. Hong Kong not applicable in this
situation.
o There is a direct link between the payments and the activities (See
Tolsma).
Independent?
o See Art. 10 VAT Directive.
o Activities do not seem to be carried out under a contract of
employment.
o The case does not suggest that the volunteers are in another way
dependent on the laboratory as regards working conditions,
remuneration and the employer's liability.
o However, one could argue that since the use of the pills must be
monitored by the laboratory, the students are required to study and
the students must take the pills at set times, there is not an absolute
independency as regards the working conditions. Nonetheless, the
requirement of studying and making exams seems to constitute an
activity that is carried out independently.
If volunteers are to be considered as taxable persons: special scheme for
small enterprises may apply if Member State in question implemented this
scheme.
1b. Should the French laboratory charge VAT on its invoice to Pills-R-US? (5
points)
French Laboratory a taxable person?
Yes (any person, independent, economic activity = contract research for
remuneration)
Research = service (art. 24) for consideration (art. 2) and therefore taxable
Supply of service is not VAT exempt. Exemption of Art. 132(1)(b) does not
seem to apply (not closely related, see Ygeia). Taxed supply.
Pills-R-US taxable person?
Yes (any person, independent, economic activity = supplies of drugs)
Note: supply of drugs = legal (supply of narcotics = illegal, not an
economic activity)
2
