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Weekly VAT News - 13/03/2017


Poland: e-books do not qualify for lower rate – CJEU judgment
The Polish Commissioner for Civic Rights could not see why the standard rate of VAT should be applied to e-books, while traditional books qualified for the lower rate of VAT. However,
the CJEU has now rejected two arguments for eradicating this difference. It rejected an argument that the legislative process had not been followed correctly in 2009, when the Principal VAT Directive was changed to extend the lower rate to “books on all physical means of support”. It went on to note that e-books and paper books both promoted reading, and should therefore be treated equally for VAT purposes unless any difference was ‘duly justified’. In this case, however, the decision to exclude e-books from the lower rate had been considered necessary in order to make electronically supplied services subject to clear, simple and uniform rules. In that context, the difference fell within the broad discretion enjoyed by the legislature, and could not be challenged on the basis that it infringed the principles of fiscal neutrality or equal treatment. To discuss the case, or its implications, please contact Barney Horn on 0121 695 5902.

Belgium: oxygen concentrators do not qualify for lower rate – CJEU judgment
Oxycure Belgium SA supplies machines which concentrate oxygen drawn from the ambient air, and provide it through a mask or cannula to patients suffering from respiratory insufficiency. Its concentrators therefore perform exactly the same function as machines which dispense liquid or compressed oxygen to patients, albeit by a slightly different method.
The CJEU has now ruled that this difference means that, unlike oxygen provided through cylinders, Oxycure’s concentrators do not qualify for the Belgian lower rate of VAT. The lower rate applies to ‘pharmaceutical products’ which, although it can cover more than just medicinal products, cannot extend to Oxycure’s devices. In addition, Oxycure could not demonstrate that the devices were for “the exclusive personal use of the disabled” and they could not qualify for lower rating on that basis. The judgment confirms the potential limitations of the principle of fiscal neutrality: it cannot extend a lower rate in the absence of clear wording to that effect. To discuss the case, or its implications, please contact Simon Atkins on 0207 007 2348.

Taxpayers entitled to allocate payments to current VAT periods
Swanfield Ltd and three associated companies entered the default surcharge regime in 2009 when they fell behind on paying VAT. HMRC assessed them for a series of default surcharges (many at the maximum rate of 15%) totalling over 290,000. That amount would have been very substantially reduced if HMRC had allocated the payments that the companies did make to the most recent debts, rather than to old amounts which had already been the subject of a surcharge. The
Upper Tribunal has found that the taxpayers were entitled to allocate their payments to amounts which would become due on sales in the current VAT period, even though the due date had not yet arrived. HMRC do not have the power to allocate payments to historical liabilities as they see fit, where a taxpayer has explicitly made those payments in relation to current periods. In the absence of an express allocation, however, the Tribunal thought that HMRC would be free to allocate payment without any obligation to minimise default surcharges. The Upper Tribunal has remitted the appeal to the First-tier Tribunal to determine whether, as a matter of fact, the taxpayers had made the necessary allocations. For further information about the case or to discuss the operation of HMRC’s penalty regime, please contact Glen Harling on 0207 303 8687.

The Link between Transfer Pricing and Customs Valuation
The Link Between Transfer Pricing and Customs Valuation — 2017 Country Guide" compiles essential information on customs-related implications of related party pricing and retroactive transfer pricing adjustments in 53 jurisdictions around the world. This year’s guide has been expanded to include Croatia and Slovakia. To discuss the guide, please contact Caroline Barraclough on 020 7007 9287.


This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

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