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The Commission is taking seven EU members to the European Court of Justice (ECJ) for failing to respond to various warnings concerning VAT and corporate tax.

Austria is in the dock over double taxing car buyers, a practice ruled illegal by theaECJ in 2006. Austrian motor suppliers continue to charge customers VAT on the full price of a car - including suppliers' registration tax, which is eventually recouped by the supplier himself. The country received a second warning in 2008 to change the VAT laws, but failed to do so.

Austria is also being brought to book with France, Germany and Luxembourg for applying a reduced VAT rate to race horses, a practice that breaches EU rules, which only allow for special charges on animal and foodstuffs for human consumption.

Spain is being taken to court for applying VAT exemptions on profits made by selling holiday packages to other tour operators, instead of to a single customer. The Commission suggested in 2002 that the VAT margin scheme be extended to include sales to other agents, but as Council has not yet reached an agreement on the proposal, Spain must be brought to book.

The country is also facing charges on exit tax, alongside Portugal. The two member states continue to impose uneven capital gains tax on companies that shift their business to another EU country.

Meanwhile, the UK is in the dock over corporate tax, after failing to properly implement a former court decision concerning Marks & Spencer, a major British retailer. In 2005 the ECJ ruled that Marks & Spencer should be allowed to deduct losses belonging to its foreign daughter companies (when those companies had failed to get financial relief in their home countries). However, the UK continues to impose restrictive practices on loss relief, says the Commission.

France, Austria, Finland, Greece, Hungary and Belgium are being given final warnings on VAT exemptions and tax on share dividends.

The Commission is telling France to stop applying super-reduced VAT rates to first performances of plays. This second notice means that France will have two months to comply or risk being brought to court.

The Commission has brought Austria and Finland to book over the VAT Directive (2006/112/EC), chastising the latter for not exempting certain "public interest" companies from payments, and the former for letting too many sports and cultural clubs off paying VAT.

Greece is being sent two reasoned opinions to amend its rules for the repayment of VAT to citizens who have paid too much. The cases relate to freelance translators for government departments and members of the Greek Automobile Club.

There is also a second warning for Hungary on VAT rebates on products or services that have not gone through the VAT chain.

Belgium has been told to do away with a tax preference for Belgian bearer shares (shares whose ownership is not registered and where dividends are paid upon the presentation of a certificate) or face a case at the ECJ.

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Publication:European Report
Date:Oct 9, 2009

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