European Value Added Tax
VAT Determination Scheme
1. Who (taxable person) art. 9-13
2. What (taxable transacton) art. 14-30
3. Where (place of supply) art. 31-61
4. When and how art. 62-71
5. How much art. 72-92 and 93-129
6. Exemptons art. 131-166
7. Deductons art. 167-192
8. Liability art. 192a-212
9. Administratie obligatons art. 213-280
10. Special schemes and derogatons art. 281-369 and 370-396
Week 1
Learning goals:
1. How do terms such as 'consumpton taax’ ‘nd‘rect taax’ turnover taax and value
added taa' relate to each other?
Consumpton tax taxes that aim at taxing the priiate consumpton of goods and/or
seriices of priiate indiiiduals.
Indirect tax A tax that is not leiied on the fnal consumer, but on the supply side of the
consumpton in order to reduce administratie costs.
Turnoier tax refers to a collecton of diierent forms of consumpton tax, of which the
ialue added tax is one manifestaton.
Value added tax Consumpton tax / turnoier tax.
2. What are the advantages and the d‘sadvantages of turnover taaes?
The adiantages:
- There is a steady income for the goiernment
- It is relatiely easy to collect the taxes
Disadiantages:
- Without a proper system the competton could be distorted.
3. Why d‘d the EU Member States dec‘de to harmon‘ze the‘r turnover taaes?
,Because it was a burden for goods to haie taxes on taxes when being exported.
Multple stage goods haie therefore higher prices because of more taxes, which is difcult in
a compettie market.
There were multple systems, which made it difcult for the countries.
4. Why d‘d the EU Member States choose a VAT system over other forms of taa‘ng
consumpton?
Because this system is beter for the export positon of goods than other systems and
multple stage goods do not haie taxes on taxes in this system.
5. What are the (key) sources of EU VAT Law’ what ‘s the‘r scope and how should they
be appl‘ed?
There is the First and Second VAT Directies
The Sixth VAT Directie
6. How ‘s EU VAT law 'translated' to natonal VAT law ‘n the 28 EU Member States?
The tax laws are by eiery member state themselies translated into natonal law.
The Regulatons howeier are directly applicable.
7. How does the VAT D‘rectve’ the VAT Regulaton and natonal VAT law relate to each
other?
Regulatons are directly applicable and take precedence oier natonal law if necessary.
Directies must be implemented in natonal law. This does not haie to be literally, but they
need to achieie the same result.
8. How has the EU VAT system been des‘gned and how does ‘t functon?
At each stage in the supply system the VAT is being taxed.
In this system there are deductons for preiiously payed taxes before.
9. What ‘s the legal character of EU VAT?
To generally tax the consumpton of priiate consumers. This is in the form of a transacton
tax. Therefore, only consumpton for which priiate consumers haie paid is taxed.
10. How’ and to what eatent’ do the fundamental pr‘nc‘ples underly‘ng the EU VAT
system afect the appl‘caton of EU VAT ‘n real-l‘fe cases?
,– Principle of neutrality
- Principle of prohibiton of abuse Community law (‘fraus legis’)
- Principle of prohibiton of tax fraud
11. What are the bas‘c features of the EU VAT system?
- What ‘s the role of the taaable person ‘n EU VAT law?
The taxable person is any person who independently carries out in any place any economic
activity, whatever the purpose or result of that activity.
Article 9(1) VAT Directive.
- What types of taaable transactons can be d‘stngu‘shed and what are the‘r
respectve functons?
Artcle 2 VAT Directie:
- Supply of goods
- Intra-Community acquisitons
- Supply of seriices
- Importaton of goods
- Why does EU VAT law conta‘n rules on the place of supply and what are the
ma‘n rules?
Because otherwise both countries want to tax the same consumpton, which causes double
taxaton.
Also, to make sure that there is no distorton of competton and that the consumers cannot
make abuse of this system in order to pay less VAT (think about the diierent VAT rates in
the Member States).
- What ‘s the taaable amount ‘n EU VAT?
Artcle 73 VAT Directie
the taxable amount for supplies of goods and seriices is eierything which consttutes
consideraton obtained or to be obtained by the supplier, in return for the supply, including
subsidies directly linked to the price of the supply.
- What ‘s the taa rate structure ‘n EU VAT? How do reduced rates relate to the
legal character and the bas‘c des‘gn of EU VAT? How’ and to what eatent’
does the pr‘nc‘ple of neutral‘ty afect the appl‘caton of VAT rates?
There is a minimum tax rate that should be applied. Every country can choose this
themselves. There is also the possibility to have a lower and a higher tax rate. Most of the
times the lower then is for goods like food or medicines, that are of necessity.
, - Why does the VAT D‘rectve conta‘n eaemptons? What types of eaemptons
ea‘sts? How do the eaemptons of Art. 132 and 135 relate to the legal
character and the bas‘c des‘gn of EU VAT?
Some supplies are exempt because they are in the public interest, or are by nature difcult
to tax, or relate to immoiable property which is difcult to consume in full.
Another category are the cross-border transactons.
Actiites in the public interest:
- public postal seriices
- medical care
- educaton
- sports
- cost sharing (hospitals and … )
- What person ‘s l‘able to pay the VAT to the taa author‘tes? How does th‘s
relate to the ‘nd‘rect character of EU VAT?
As a main rule the person liable to pay is the supplier of the seriice or good, according to
Artcle 193 VAT Directie. Howeier, there are exemptons on this main rule indicatng that
the recipient of the supply is liable to pay the taxes. This is called the reierse charge
mechanism and can be found in Artcle 194 and 196 VAT Directie.
- What ‘s the functon of the r‘ght of deducton? What are the ma‘n rules?
The right of deducton makes sure that the burden of the VAT is with the indiiidual
consumers of the goods and seriices, eien though the suppliers pay the VAT to the tax
authorites. This is done by giiing deductons to the supplier of their input VAT. In this way,
they do not actually haie a burden of the VAT other than administratie.
VAT Determination Scheme
1. Who (taxable person) art. 9-13
2. What (taxable transacton) art. 14-30
3. Where (place of supply) art. 31-61
4. When and how art. 62-71
5. How much art. 72-92 and 93-129
6. Exemptons art. 131-166
7. Deductons art. 167-192
8. Liability art. 192a-212
9. Administratie obligatons art. 213-280
10. Special schemes and derogatons art. 281-369 and 370-396
Week 1
Learning goals:
1. How do terms such as 'consumpton taax’ ‘nd‘rect taax’ turnover taax and value
added taa' relate to each other?
Consumpton tax taxes that aim at taxing the priiate consumpton of goods and/or
seriices of priiate indiiiduals.
Indirect tax A tax that is not leiied on the fnal consumer, but on the supply side of the
consumpton in order to reduce administratie costs.
Turnoier tax refers to a collecton of diierent forms of consumpton tax, of which the
ialue added tax is one manifestaton.
Value added tax Consumpton tax / turnoier tax.
2. What are the advantages and the d‘sadvantages of turnover taaes?
The adiantages:
- There is a steady income for the goiernment
- It is relatiely easy to collect the taxes
Disadiantages:
- Without a proper system the competton could be distorted.
3. Why d‘d the EU Member States dec‘de to harmon‘ze the‘r turnover taaes?
,Because it was a burden for goods to haie taxes on taxes when being exported.
Multple stage goods haie therefore higher prices because of more taxes, which is difcult in
a compettie market.
There were multple systems, which made it difcult for the countries.
4. Why d‘d the EU Member States choose a VAT system over other forms of taa‘ng
consumpton?
Because this system is beter for the export positon of goods than other systems and
multple stage goods do not haie taxes on taxes in this system.
5. What are the (key) sources of EU VAT Law’ what ‘s the‘r scope and how should they
be appl‘ed?
There is the First and Second VAT Directies
The Sixth VAT Directie
6. How ‘s EU VAT law 'translated' to natonal VAT law ‘n the 28 EU Member States?
The tax laws are by eiery member state themselies translated into natonal law.
The Regulatons howeier are directly applicable.
7. How does the VAT D‘rectve’ the VAT Regulaton and natonal VAT law relate to each
other?
Regulatons are directly applicable and take precedence oier natonal law if necessary.
Directies must be implemented in natonal law. This does not haie to be literally, but they
need to achieie the same result.
8. How has the EU VAT system been des‘gned and how does ‘t functon?
At each stage in the supply system the VAT is being taxed.
In this system there are deductons for preiiously payed taxes before.
9. What ‘s the legal character of EU VAT?
To generally tax the consumpton of priiate consumers. This is in the form of a transacton
tax. Therefore, only consumpton for which priiate consumers haie paid is taxed.
10. How’ and to what eatent’ do the fundamental pr‘nc‘ples underly‘ng the EU VAT
system afect the appl‘caton of EU VAT ‘n real-l‘fe cases?
,– Principle of neutrality
- Principle of prohibiton of abuse Community law (‘fraus legis’)
- Principle of prohibiton of tax fraud
11. What are the bas‘c features of the EU VAT system?
- What ‘s the role of the taaable person ‘n EU VAT law?
The taxable person is any person who independently carries out in any place any economic
activity, whatever the purpose or result of that activity.
Article 9(1) VAT Directive.
- What types of taaable transactons can be d‘stngu‘shed and what are the‘r
respectve functons?
Artcle 2 VAT Directie:
- Supply of goods
- Intra-Community acquisitons
- Supply of seriices
- Importaton of goods
- Why does EU VAT law conta‘n rules on the place of supply and what are the
ma‘n rules?
Because otherwise both countries want to tax the same consumpton, which causes double
taxaton.
Also, to make sure that there is no distorton of competton and that the consumers cannot
make abuse of this system in order to pay less VAT (think about the diierent VAT rates in
the Member States).
- What ‘s the taaable amount ‘n EU VAT?
Artcle 73 VAT Directie
the taxable amount for supplies of goods and seriices is eierything which consttutes
consideraton obtained or to be obtained by the supplier, in return for the supply, including
subsidies directly linked to the price of the supply.
- What ‘s the taa rate structure ‘n EU VAT? How do reduced rates relate to the
legal character and the bas‘c des‘gn of EU VAT? How’ and to what eatent’
does the pr‘nc‘ple of neutral‘ty afect the appl‘caton of VAT rates?
There is a minimum tax rate that should be applied. Every country can choose this
themselves. There is also the possibility to have a lower and a higher tax rate. Most of the
times the lower then is for goods like food or medicines, that are of necessity.
, - Why does the VAT D‘rectve conta‘n eaemptons? What types of eaemptons
ea‘sts? How do the eaemptons of Art. 132 and 135 relate to the legal
character and the bas‘c des‘gn of EU VAT?
Some supplies are exempt because they are in the public interest, or are by nature difcult
to tax, or relate to immoiable property which is difcult to consume in full.
Another category are the cross-border transactons.
Actiites in the public interest:
- public postal seriices
- medical care
- educaton
- sports
- cost sharing (hospitals and … )
- What person ‘s l‘able to pay the VAT to the taa author‘tes? How does th‘s
relate to the ‘nd‘rect character of EU VAT?
As a main rule the person liable to pay is the supplier of the seriice or good, according to
Artcle 193 VAT Directie. Howeier, there are exemptons on this main rule indicatng that
the recipient of the supply is liable to pay the taxes. This is called the reierse charge
mechanism and can be found in Artcle 194 and 196 VAT Directie.
- What ‘s the functon of the r‘ght of deducton? What are the ma‘n rules?
The right of deducton makes sure that the burden of the VAT is with the indiiidual
consumers of the goods and seriices, eien though the suppliers pay the VAT to the tax
authorites. This is done by giiing deductons to the supplier of their input VAT. In this way,
they do not actually haie a burden of the VAT other than administratie.
