1. Right to deduct VAT from an invoice received prior to the date of submitting an application for VAT registration
On 5 January 2006, Voivodeship Administrative Court in Olsztyn approved a taxpayer's entitlement to deduct VAT from invoices received prior to the date of submitting the VAT registration form. In its ruling signed I SA/Ol 445/05 the Court referred to the principle of VAT neutrality and the opinion that an entity preparing to initiate business activity is a VAT payer, since such status is an objective fact, independent from registration. Thus, the Court agreed that the active (registered) VAT-payer status is necessary at the moment of recognizing the deduction, but not as of the day when the taxable activities take place resulting in deductible VAT.
2. Fairs and exhibitions according to ECJ
In its judgment of 9 March 2006, the ECJ stated that complex services rendered to exhibitors by organizers of fairs or shows are considered to be activities defined in Art. 9(2)(c) indent one of the Sixth Directive, taxable in the place where the services are actually rendered. Application to have the regulation interpreted was submitted in the course of dispute between French Ministry of Finance and a company with its registered seat in the UK concerning a refund of VAT which that company paid on purchases of goods and services in France in connection with the organization of two boat shows in this country. According to the ECJ, Article 9(2)(c) indent one includes not only services relating, in particular, to artistic, sporting and entertainment activities, but also services relating merely to similar activities that fall within its scope. ECJ stated that a show or a fair, whatever its theme, seeks to provide to a number of different recipients, as a rule in a single place and on a single occasion, a variety of complex services, with the purpose, in particular, of presenting information, goods or events in such a way as to promote them to the visitors. Under these circumstances, a show or a fair should be deemed to be a similar activity subject to Art. 9(2)(c) indent one of the Sixth Directive.
3. Is IRAP contradictory to the Sixth Directive?
On 14 March, the Advocate General re-confirmed that the Italian regional tax on production (IRAP) is contradictory to the Sixth Directive. In his opinion regarding Case C-475/03 (Banca Popolare di Cremona), the Advocate supported the statement presented in the first opinion of 17 March 2005 that a tax with IRAP characteristics, as bearing material characteristics of VAT, is non-compliant with the Sixth Directive. According to the Advocate, ECJ may wish to restrict the effect of its decision in light of the potential damage to the Italian Treasury. The Advocate suggested that the ECJ makes its decision take effect at the end of the tax period in which it will be issued. Nevertheless, according to the Advocate, claims of taxpayers who initiated litigation regarding refund of IRAP before the first Advocate's opinion was issued, i.e. prior to 17 March 2005, should be accepted. The judgment of ECJ, if it confirms the Advocate's stance, will be valid for all taxes bearing characteristics similar to IRAP, introduced in the Member States.
4. Advocate General on services regarding immovable property
In his opinion C-166/05, the Advocate General of European Court of Justice presented a view that services involving sales of fishing permits are not related to immovable property and therefore should be taxed according to the general rule, in the country where the service provider has its registered office. The case concerned a German company which sold fishing permits regarding a defined stretch of Gmunder Traun river in Austria, previously purchased from an Austrian company, to entities from various EU states. Austrian tax authorities denied the company a refund of input VAT arguing that re-sale of fishing rights is a service related to immovable property, which should be taxed with Austrian VAT. In his opinion, Advocate General stated that concept of services related to immovable property should not be interpreted too widely and that it referred only to services aimed at legal or physical alteration of immovable property. According to the Advocate, services similar to the ones considered in the case, involving the use of immovable property, do not fall within the scope of services connected with property and therefore are not taxable according to the property location. Judgment on the case C-166/05, despite being related to a narrow scope of activity, may have a wider bearing on the definition of place of rendering services connected to immovable property.