The new edition of the EU Tax Alert is available. With this publication we would like to keep you informed of the latest developments on EU tax law.
HIGHLIGHTS IN THIS EDITION
Commission proposes transformation of EU economy and society to meet climate ambitions and postpones digital levy
Fit for 55 package
In EU Tax Alert 189 (
Digital levy postponed
In the communication for the 21st century, the Commission stated that the proposal for the EU Digital Levy would be released in
General Court opening decision in
Nike and Converce filed an appeal with the General Court to have the Commission's decision to open a formal state aid investigations into some of their rulings annulled. On
CJ rules on VAT treatment of services provided by insurance intermediary (Radio Popular)
On
Rádio Popular - Electrodomésticos SA ('Radio') is a supplier of consumer electronics. Radio also acts as an insurance intermediary for consumers wishing to extend the warranty on purchased products. The insurance contract will be concluded directly between a third-party insurer and the consumer. In return for its brokerage services, Radio charged a brokerage fee to the consumers. Radio did not take the brokerage fees into account when calculating the VAT recovery on general costs, because it argued that the brokerage services were incidental financial transactions. The Portuguese tax authority argued that the brokerage services did not qualify as incidental financial transactions, resulting in a lower VAT recovery right for Radio with regard to general costs.
In its judgment, the CJ first assessed whether the brokerage services are VAT exempt under the insurance exemption. The insurance exemption applies to insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents. The CJ considered that the brokerage services rendered by Radio fulfilled the essential aspects of the work of an insurance agent (such as the finding of prospective clients and their introduction to the insurer, with the view of concluding insurance contracts). Because of this, the CJ ruled that Radio's brokerage services were VAT exempt. Due to the VAT exempt brokerage turnover, Radio will in principle be limited in its right to recover VAT on general costs.
When calculating the VAT recovery ratio for general costs, the turnover realized in connection with 'incidental financial transactions' does not have to be taken into account based on the EU VAT Directive. Radio argued that the brokerage services qualified as incidental financial transactions. The CJ did not follow this line of reasoning because 'insurance transactions' are not synonymous with 'financial transactions'. Because of this, the CJ ruled that the VAT exempt brokerage turnover should be taken into account by Radio for the computation of the VAT recovery ratio relating to general costs.
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