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A written agreement between two VAT registered persons regarding the supply of goods or services, which can be considered as a tax invoice for the recovery of input credits
Photos for illustration purposes. – Profile photo
The European Court of Justice (ECJ) is one of the leading judicial bodies, and its decisions are accepted as authoritative precedent by tax authorities worldwide. In this week’s tax conversation, let’s discuss key ECJ decisions for global tax insights. I must caution that the background and facts of each case must be checked to see if the jurisprudence of the ECJ is also applicable in the GCC region.
1. Replace tax invoices with written contracts
In Raiffeisn Leasing, the European Court of Justice held that a written agreement between two VAT registered persons regarding the supply of goods or services can be regarded as a tax invoice for the recovery of input credits. The contract should contain all the information required by the tax authority to determine that the substantive conditions for the recovery of the right to VAT credits have been met.
2. Communications between the head office and branches in different countries
In the FCE Bank case, the European Court of Justice held that transactions between a head office and its branches located in different countries should not be considered as supplies for VAT purposes, since the head office and its branches constitute a single legal entity.
However, in a subsequent decision, the ECJ held that if the head office or branch is part of a VAT group, the transaction should be considered a taxable supply. For VAT purposes, VAT groups should be considered as separate taxpayers, superseding the individuality of the group members.
As the UAE is an attractive investment and economic destination for multinational corporations, it is imperative to ensure tax compliance of branches.
3. Places of education service supply
In the case of Srf konsulterna AB, a company based in Sweden offered paid accounting and management courses in the form of seminars. For seminars held outside Sweden, the question is whether the VAT is to be paid in Sweden or in the country where the seminar is actually held.
Admission services to cultural, artistic, sporting, scientific, educational, entertainment or similar events are usually where those events actually take place. The ECJ held that “services related to admission to the event” included services provided in the form of a five-day accounting and management course.
With the increase in online courses/events offered by providers outside the UAE to those within the UAE, the ECJ decision could have a significant impact on overseas service providers.
4. The company issues shares
Should the issue of shares by a company be considered an exempt supply? If yes, companies will not be able to recover input tax credits for costs related to IPOs, share issues, listings and other related costs.
These questions are important as IPO activity in the UAE continues to increase.
In several cases, the European Court of Justice has dealt with the exact question of whether a company can recover incoming credits in connection with a share issue/IPO.
5. Places where casting services are provided
Although not a decision of the European Court of Justice, the decision of the English courts is of special importance. My work experience in the UK started with reviewing the decisions of this court regarding European taxation.
In Saffron Burrows, an English court examined the location of a film actor’s services and their VAT implications. The tribunal held that performance services should be deemed to have been provided in the country where the performance took place, not in the actor’s place of residence.
Therefore, if an Indian or American film actor is performing in the UAE, the actor may be subject to UAE VAT on his performance fees.
conclusion
Taxes are a lot more interesting and complex than is commonly believed. It is important that business owners and their financial teams ensure that their tax positions are adequately tested and supported by judicial precedent.
(Pankaj S. Jain is the Managing Director of AskPankaj Tax Advisors. For feedback and inquiries you may write to info@AskPankaj.com. The views expressed are his own and do not reflect the policy of the newspaper.)
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