VAT Legislation Research Articles

A Brand-New Italian VAT Decree – Italy Is Looking Forward to a Closer Harmonization with EU VAT Principles

On 16 March 2023, the Italian government was delegated to perform a substantial revision of the Italian VAT Decree by 29 August 2025 and a formal reorganization by 31 December 2025. The revision is aimed at making the Italian VAT Decree fully harmonized with European VAT principles in light of the criteria provided by the Court of Justice of the European Union, while the reorganization is aimed at granting more efficient accessibility to the Italian VAT legislation.

The “Broken” Fixed Establishment Concept

The fight to balance national budgets in the European Union has seen more aggressive interpretations of the VAT legislation by national tax authorities. The existence of the “fixed establishment” is an easy fight to pick. Given the unwillingness of the European Commission to provide substantive guidance, interpretation of the FE concept has been left to the ECJ. The author in this article examines the angle whereby the human and technical resources used by one group company in supplying services to another group company, are considered by tax authorities to constitute the FE of that latter company. In doing so, the author analyses the latest case from the ECJ and explains why the judgment should definitively close the door to such practices.

Digital Transformation of EU Customs: eCommerce VAT Legislation and a Proposed Customs Clearance Application

In the digital world, borders between countries are fading, and many people keep making more and more online purchases, often from offshore vendors. Cross-border e-commerce is a game-changer for international trade but poses serious challenges for traditional customs procedures. As the number of parcels continues to grow rapidly, customs authorities around the world strive to balance between effective revenue collection, trade facilitation, and proper safety controls. At the EU level, significant revenue losses and competition distortion have led to changes in VAT rules with a key policy objective to fight tax fraud in e-commerce and reduce the administrative burden of VAT collection. The VAT e-commerce package that came into force on July 1, 2021, includes measures on imports of low-value goods from third countries. The adopted solution imposes liability on digital platforms that play a crucial role in the rise of B2C internet sales. This article provides an overview of e-commerce global trends and challenges, international organizations’ initiatives, emerging technology pilots, as well as best practices. It also offers a critical description of the new EU VAT provisions that have a severe effect on customs. Moreover, it describes the design, functional, and interoperability specifications of a proposed web-based application that enables buyers to lodge customs declarations themselves, aiming for improved transparency on import-related charges and more effective e-government at a more general level through the digital transformation of customs clearance. Doi: 10.28991/ESJ-2024-08-01-024 Full Text: PDF

Second and Subsequent Supplies of Buildings – Exemption under the VAT Directive and the Spanish VAT Act

In this article, the author aims to explain the configuration of the VAT exemption on the second or subsequent supplies of buildings under the VAT legislation in Spain to analyse its compatibility with the provisions of the VAT Directive related to these situations.

VAT Wrongly Charged by the Supplier and Right of the Customer to Deduct, from an Italian and EU Perspective: Where Are We?

A very common issue in the economic relationships between suppliers and customers is the application of excessive VAT in the invoices issued by the former to the latter. Since 2017, Italian VAT legislation has provided that the customer has the right to deduct the tax applied “in excess of the effective amount” in such cases, provided that such VAT has been paid by the supplier to the Italian tax authorities, outside a context of tax fraud. The customer will, however, be subject to a fixed, non-proportional, penalty. In this article, the authors seek to illustrate how the application of the principles of “neutrality”, “effectiveness” and “proportionality” established by the case law of the ECJ could lead to a possible application of the said provision, not only in cases where a higher VAT rate was applied in a taxable transaction, but more generally where undue VAT has been charged to the customer (and so also in transactions that are exempt – with or without right to deduction – or outside the scope of VAT).

The Elongated Shadow of the Use and Enjoyment Rule

The “use and enjoyment” place-of-supply rule remains one of the most intricate provisions of the EU VAT legislation because after initial qualification of a supply as taxable outside the EU territory it relocates the taxing rights to the Member State in which the services were performed. Its effects are a constant source of controversies, and in this Column the author reflects on the basis for the legal uncertainty it causes.

Quantitative Research Regarding the Impact of Amending the VAT Legislation on the Business Environment and on the Population

This paper is based on quantitative research regarding the impact of amending the VAT legislation on the business environment and on the population, illustrates the methodology behind the research, analysis and interpretation of results, and determines the main objectives and assumptions of the research. This paper is intended mainly for economic agents, as we considered it to be quite important, being useful both in the current economy and future economy. In order for the economy to develop from several points of view (extensively, intensively), tax consultants but also economic agents should approach and analyze in a deeper way their preferences and desires.

NBR’s Tax Policy on Minimizing the VAT Burden in the Construction and Real Estate Industry in Bahrain

In this article, the author clarifies the approach taken by Bahrain’s National Bureau for Revenue (NBR) in relation to the VAT treatment of transactions in the construction and real estate industry. The author also analyses the provisions of the VAT legislation to minimize the VAT burden on taxable persons in the construction and real estate industry.

National and International Fiscal Regulations on Value Added Tax (I)

This paper aims to analyze national and international tax regulation on VAT. The reason why we chose this topic is the fact that in recent years the legislative changes on VAT have seen numerous updates on the Romanian economic market, which leads us to think that there are fluctuations in the activity of a company, both from an economic and an operational perspective. Taking into account the economic potential of our country, which is not very well exploited, we believe that this paper can bring into discussion a challenging topic. The main purpose is to analyze and reflect the impact of the change in VAT legislation on the business environment, as well as on the final consumer.

VAT ADMINISTRATION SYSTEM IN UKRAINE: ADAPTATION TO THE REQUIREMENTS OF EUROPEAN LEGISLATION

The article overviewed the fundamental problems of the development and reformation of VAT in the EU Member States, the principles and procedure for calculating VAT, as well as the issues of harmonization of VAT according to the EU's requirements. The economic nature of the VAT, its fiscal nature and the shortcomings, features and rates of VAT in the tax systems of Ukraine and European countries are revealed. The main aspects of improving VAT according to the EU requirements are outlined, as well as changes in VAT rates and tax breaks that have been transformed in response to economic turmoil or political instability. The VAT legislation of the Member States of the EU and Ukraine, the features of the application of standard and reduced tax rates are analyzed. The application of VAT rates to certain types of goods and services is compared. Emphasis is placed on the need to take into account the experience of European countries' in regulating the mechanism of VAT collection in Ukraine. Methodologically research is based on the inductive method as a way of obtaining conclusions based on analysis of existing statistical material.Key words: indirect taxes; VAT Tax Code of Ukraine; EU legislation; reform.

Tax Reforms and Debt in Greece after the Financial and Economic Crisis: Insights and Challenges for Tax Policymaking in Times of Emergency

In the area of tax and taxation the European Union, EU Member State Greece has consistently faced non-compliance by its citizens. Greece has, therefore, in the last years, under supervision of the European Union and the International Monetary Fund (IMF), taken steps to reform its tax administration and confront tax evasion. These reforms have taken place in combined EU and IMF programmes to manage Greece’s recovery from its financial and economic crisis, with substantial financial assistance from the European Stability Mechanism. Numerous tax reforms have occurred, including the adoption of the Income Tax and Tax Procedure Codes and a major reform of VAT legislation. Nonetheless, Greece’s shadow economy has been and remains a factor of concern for tax compliance. Furthermore, economic hardship and the financial crisis have hindered Greek taxpayers’ ability to pay their tax due and propelled government debt. A substantial part of the Greek population has lived and still lives in poverty, while the Greek government continuous to deal with the task of paying the debt owed to its bailout creditors. The current worldwide COVID-19 (corona virus) crisis will certainly also impact the Greek government’s ability to continue with tax reforms and debt sustainability.

Who pays taxes on basic foodstuffs? Evidence from broadening the VAT base

We exploit the introduction of a 5% VAT on very essential food products (like fresh milk, coffee, yogurt, cheese) that occurred when an EU member state had to harmonize its VAT legislation with the EU VAT legislation. Preceding this reform, there was a removal of the zero VAT rate and imposition of 5% VAT rate on other food items that were considered less essential (juices, bottled water). We adopt a difference-in-difference approach as the price data support the common trends identifying assumption. On average, the tax was shifted fully to the consumer within the first month after the reform. However, there are differences even across seemingly related goods as some of them experienced overshifting of the pass through effect. The prices of goods in the control group did not change. These estimates are robust to alternative specifications and can be useful to other countries considering to broaden their VAT base by taxing basic groceries.

Fixed Establishment: From Berkholz and DFDS to Welmory and Dong Yang

The concept of “fixed establishment”, initially undefined in EU VAT legislation, has always led to disputes over the boundaries of its meaning. The Court of Justice of the European Union has created its definition in its case law and this definition was eventually “copy-pasted” in the Implementing Regulation. In this article, the author discusses recent cases that have revealed how this definition still creates interpretation issues in the world of new technologies and economic reality.

Anti-Fraud Provisions in the UAE VAT Law

The United Arab Emirates has enforced a VAT law for the taxation of goods and services since 1 January 2018. As VAT systems are susceptible to frequent VAT fraud, the author, in this article, explores provisions in the UAE VAT Law that could solidify VAT legislation against the occurrence of VAT fraud, provided they are implemented fully.

Towards an [Unlawful] Modernized EU VAT Rate Policy

In late 2015, the European Commission announced a monumental U-turn on Value Added Tax rates policy. After decades of advocating the benefits of harmonization of VAT rates across the EU Member States, and after many failed legislative attempts at achieving it, the Commission declared its intention to do the opposite, namely to disharmonize VAT rates across Europe. The announcement was followed by a VAT Action Plan, and a public consultation on the reform of VAT rates, which, under the guise of modernization and consistency with the destination principle, presented two options for reform, both of which would give Member States further freedom and flexibility in the application of reduced rates. Against this background, the aim of this article is not to restate the benefits of VAT rate harmonization, but to assess whether the EU has legislative competence to approve disharmonizing VAT legislation. The article concludes that Article 113 TFEU could not be used as a legal basis for a Directive aimed at disharmonizing VAT rates, and that any such Directive, would lack legal basis and, consequently, be unlawful under the EU constitutional principle of conferral of powers.

How to Treat the Ride-Hailing Company Uber for VAT Purposes

Current proceedings in the United Kingdom give cause to take a closer look at taxi hire company Uber and its treatment for VAT purposes. In December 2017, the Court of Justice of the European Union classified Uber’s services as “services in the field of transport” and not merely “information society services”. In this article, the author outlines how Uber is to be treated with regard to European VAT legislation.

VAT and electronic commerce: the new rules as a means for simplification, combatting fraud and creating a more level playing field?

Removing obstacles to e-commerce in the Single Market and ensuring effective taxation in the context of the digital economy has been high on the political agenda both in the European Union and beyond. Recently the VAT rules on cross-border e-commerce have gone through a thorough modernisation with a package of new provisions in the EU VAT legislation coming into effect as of 2019 and 2021. Further measures with the objective of laying down solid foundations for an effective, fair, simple and fraud-resistant taxation of e-commerce transactions have been envisaged. This article helps to navigate a complex set of new provisions and offers reflections on whether the new rules will achieve their objective.

The Greek Saga of the Non-Recovery of the VAT on Bad Debts Comes to an End

The number of unpaid debts has risen dramatically in Greece over the last decade due to the economic crisis which has been looming upon the Greek market. This has made the VAT on such debts a significant burden for most of the businesses. The Greek VAT legislation as in force does not allow taxable persons to claim refund of the VAT on bad debts, which is ultimately borne by the businesses, jeopardizing their sustainability. In this article, the author discusses the recently issued Decision 355/2019 of the Greek Supreme Administrative Court, which clearly indicated the necessity for an amendment of the current legal framework regulating the recovery of VAT on non-collectable debts by ruling in favour of the taxable persons’ right to request such VAT and by interpreting the relevant legal provisions in light of ECJ case law.

Permanent Establishments in Indirect Taxation

Similarly to the significant of the concept of permanent establishment (PE) for the purpose of income taxes rules, the relevance of the concept of fixed establishment (FE) for the VAT rules can hardly be overestimated. The term plays a central role, and is consistently relied upon by the legislator, for both determining the place of supply of services in VAT, and to establish the right to VAT refund, where tax is incurred in a country other than that where the business is established. Yet, despite its significance, the term is far from clear, and in recent years the debate over its definition and scope, primarily in the context of new, globalised, economic realities, and the development of the digital economy, has intensified. The aim of this chapter is to shed light over the meaning and significance of the concept of FE for VAT purposes. It will focus first on the meaning and significance of the concept from the perspective of European VAT legislation and the jurisprudence of the Court of Justice of the European Union (CJEU). It will then discuss current challenges to the current law posed by new economic realities, discrepant application of the FE criterion at national level, and its links to the PE concept. It is argued that the case law of the CJEU highlights the challenges posed by both globalisation, and digitalisation of the world economy, and that whilst it provides short-term relief to these challenges, dealing with them on a longer term basis will require re-assessment of established jurisprudence. It considers some of the key decisions on FE by national courts, concluding that whilst a unified concept of secondary establishment for the purposes of income tax and VAT is desirable, at present equating PE to FE would likely give rise to double taxation within VAT.

South African Value-Added Tax: Place of supply rules for cross border supplies of consulting services

The South African Value-Added Tax Act, 89 of 1991 does not contain any explicit place of supply rules to determine the jurisdiction where a cross border supply of services should be taxed, except in respect of foreign electronic service providers. Inferred place of supply rules are however interwoven into various provisions of the VAT Act. The OECD developed a set of recommended rules to determine the place of taxation for cross border supplies of services and intangibles. This serves as a reference point for jurisdictions when implementing their VAT legislation, and are described in Chapter 3 of the OECD’s International VAT/GST Guidelines. The primary objective of this article is to determine whether the inferred place of supply rules in the VAT Act are in harmony with the aforementioned recommended rules in the OECD Guidelines in respect of various scenarios of cross border supplies of consulting services. The conclusion is that the inferred place of supply rules in the VAT Act are not in harmony with the recommended rules in the OECD Guidelines in all scenarios of cross border supplies of consulting services. Recommendations are made how the VAT Act can be amended to bring the aforementioned inferred place of supply rules in harmony with the OECD’s recommended rules. This article however does not consider whether the OECD Guidelines are appropriate for developing countries such as South Africa and accordingly, whether South Africa should adopt the recommended rules as proposed in the OECD Guidelines. The recommended changes should thus only be considered if it is found that the OECD model is, in fact, appropriate for South Africa.