France and Spain in hot water over VAT
France and Spain breach EU law by reducing VAT on government-assisted purchases
France and Spain have been found in breach of European Union (EU) law by
effectively reducing the amount of VAT due on purchases assisted by government
subsidies.
The European Court of Justice (ECJ) said the two countries are breaking the
EU’s sixth VAT directive of 1977.
Both countries argued their systems were fairer, preventing distortions of
competition, however, the ECJ said VAT had to be levied and deducted in full
regardless.
It highlighted a previous legal opinion that stated: ‘member states are
required to apply the sixth directive even if they consider it to be less than
perfect’.