A written agreement concerning the supply of goods or services, between two persons subject to VAT, could be considered as a tax invoice for the recovery of an upstream credit
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The European Court of Justice (ECJ) is one of the main judicial authorities whose decisions are accepted as authoritative precedents by tax authorities around the world. In this week’s Tax Conversation, let’s discuss important ECJ rulings for global tax information. I must caution that one must examine the context and facts of each case to determine whether the case law of the ECJ will also be applicable in the GCC region.
1. A written contract instead of a tax invoice
In the Raiffeisn Leasing case, the ECJ ruled that a written agreement concerning the supply of goods or services, between two persons subject to VAT, could be considered as a tax invoice for the recovery of an input credit . The contract must contain all the information necessary for the tax administration to determine that the material conditions for the right to recover the VAT credit are met.
2. Transaction between head office and branch in different countries
In the FCE Bank case, the CJEU ruled that transactions between the head office and its branches located in different countries should not be considered as a supply for VAT purposes because the head office and its branches form a single entity. legal.
However, in subsequent rulings, the ECJ has held that if the head office or branch is part of a VAT group, the transactions should be recognized as a taxable supply. For VAT purposes, a VAT group must be recognized as a separate taxable person which replaces the individuality of the members of the group.
As the UAE is an attractive investment and economic destination for multinational companies, tax compliance of branch operations must be ensured.
3. Place of delivery of educational services
In the Srf konsulterna AB case, a company based in Sweden offered accounting and management courses in the form of seminars against remuneration. For seminars held outside Sweden, the question arose whether VAT is due in Sweden or in the country where the seminars physically took place.
Services relating to admission to cultural, artistic, sporting, scientific, educational, recreational or similar events are usually the place where these events actually take place. The CJEU ruled that the “event admission benefit” includes a benefit in the form of a five-day accounting and management course.
With the increase in online courses/events provided by non-UAE based providers to UAE-based individuals, the CJEU ruling could have significant implications for overseas service providers.
4. Issuance of shares by a company
Should the issuance of shares by a corporation be considered an exempt supply? If so, corporations would not be able to recoup the input tax credit on costs related to IPO, share issuance, listing and other related costs.
With the steady increase in IPO activities in the UAE, the above-mentioned issue takes on considerable importance.
In several cases, the CJEU has addressed the exact question to determine whether or not companies can recover the input credit linked to the issuance of shares/IPO.
5. Place of performance of an actor’s services
Although not a ruling by the ECJ, a ruling by a UK court is of particular significance. My work experience in the UK began with the review of this court’s decision on EU taxation.
In the Saffron Burrows case, the UK court considered the place of supply of services by film actors and the VAT implications. The Tribunal held that acting services should be treated as provided in the country where they were performed, not at the actor’s place of residence.
Therefore, if a film actor based in India or the United States performs an acting assignment in the UAE, the actor may be liable to pay UAE VAT on his acting fees.
Taxation is much more intriguing and complex than is otherwise generally perceived. It is important for business owners and their finance teams to ensure that their tax positions are well tested and supported by legal precedents.
(Pankaj S. Jain is the managing director of AskPankaj Tax Advisors. For comments and questions, you can write to info@AskPankaj.com. The opinions expressed are his own and do not reflect the policy of the newspaper.)