EC puts rogue member states on notice over VAT

The European Commission will send letters of formal notice to several member states about their VAT legislation, giving them two months to reply regarding applications of certain exemptions which are against the VAT directive laid down in Article 226 of the EC Treaty.

Exemptions with no basis in the VAT directive could lead to distortions of competition and would make it impossible to ensure that member states contribute on an equal basis to the community's own resources, Tax-News.com reports.

The EC revealed it had taken issue with exemptions under the Danish VAT regime, which exempts all supplies sold to charitable and other non-profit associations when running their business.

Furthermore, implementation of the exemption in Austria for supplies of certain services closely linked to sport or physical education by non-profit organisations to those taking part in sport or physical education is too wide, according to EC.

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