European Council Adopts Major Overhaul of VAT-Reduced Rates

The European Council has recently approved an updated list of goods and services eligible for the application of reduced VAT rates. European Union (EU) member states must apply a standard VAT rate of at least 15% and are allowed to apply two reduced VAT rates of at least 5% to items listed in Annex III of the Principal VAT Directive. Additionally, a reduced rate lower than 5% and an exemption with the right to deduct input VAT (a zero rate) can be applied by all member states on goods and services considered to cover basic needs, such as foodstuffs and water.

European Court of Justice, “Berlin Chemie A. Menarini,” Case C-333/20, Whether Supplies Via Affiliate Company Qualify as Fixed Establishment Where Parent Company Is in Another Member State

The European Court of Justice (ECJ) has ruled that Article 44 of the Principal EU VAT Directive and Article 11(1) of EU Implementing Regulation No 282/2011 must be interpreted as meaning that a company that has its registered office in one member state does not have a fixed establishment in another member state on the grounds that the company owns a subsidiary there that makes available to it human and technical resources under contracts, by means of which that subsidiary provides, exclusively to it, marketing, regulatory, advertising, and representation services that are capable of having a direct influence on the volume of its sales.

European Council Authorises Poland to Continue Applying a Split Payment Mechanism to Certain Supplies of Goods and Services

The European Council has authorised Poland to continue applying a split payment mechanism to certain supplies of goods and services that are susceptible to fraud, provided that the payment is made by electronic bank transfer.

European Court of Justice, “Happy Education,” Case C-612/20, Concept of “Organisation Recognised as Having Similar Objectives”

The ECJ has ruled that Article 132(1)(i) of the Principal EU VAT Directive must be interpreted as meaning that the concept of an “organisation recognised as having similar objectives” to those of an educational body governed by public law does not cover a private entity that carries out teaching activities in the public interest consisting of, inter alia, the organisation of activities supplementing the school curriculum, and which has obtained authorisation from the National Trade Register Office in the form of the attribution of the CAEN code “8559 – Other education n.e.c.,” where that entity does not, in any event, satisfy the conditions under national law for obtaining such recognition.

European Court of Justice, “DSAB Destination Stockholm,” Case C-637/20, City Cards May Be Regarded as Multipurpose Voucher for VAT Purposes

The ECJ has ruled that Article 30a of the Principal EU VAT Directive is to be interpreted as meaning that a “City Card,” which gives the holder the right to benefit from various services at a given place for a limited period and up to a certain amount, may constitute a “voucher” even if an average consumer cannot benefit from all the services offered because of the limited period of validity. Such a card constitutes a “multipurpose voucher,” since the value added tax due on the services to be provided is not known at the time of issuance.

EU VAT Committee—120th Meeting—VAT Treatment on Crypto Assets and E-Wallets

The EU VAT Committee has discussed the VAT treatment of crypto assets and e-wallets. It was concluded that free-of-charge supplies of crypto assets, following their creation, are generally outside the scope of VAT. Supplies of crypto assets, following their creation, that are made for consideration are within the scope of VAT but exempt. And finally, the supply of goods or services rewarded in crypto assets are subject to the same VAT treatment as any other supply.