VAT case embeds new principle
ECJ case clarifies rules on supply of related services and VAT exemptions
ECJ case clarifies rules on supply of related services and VAT exemptions
Vendors of products that are zero-rated for VAT cannot apply the same
exemption for associated separate products sold with them which would normally
attract a standard rate of tax, the European Court of Justice (ECJ) has ruled.
The precedent follows a case involving British caravan park owner, Talacre
Beach Caravan Sales Ltd.
It sells fitted caravans at a zero rate of VAT, taking advantage of an
exemption from the European Union’s (EU) sixth VAT directive that allows member
states to retain long-established VAT exemptions for certain social reasons.
Talacre also applied this zero rate to the contents of their caravans, but
Britain’s Customs & Excise Commissioners argued this should only apply to
the vehicle itself.
The case was referred to the ECJ, which has backed the Customs & Excise,
ruling such exemptions should ‘be interpreted strictly’ and that ‘the
application of a separate rate of tax’ would not cause ‘insurmountable
difficulties’.
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