M O L N A R AG Legal Tax Advisory’s Post

FYI. See updated story.

📢 New ECJ Ruling Clarifies VAT on Free-of-Charge Supplies The Court of Justice of the European Union (ECJ) has recently issued a significant ruling on the application of VAT to free-of-charge (FOC) supplies in Case C-207/23 (Y KG). This decision impacts how businesses handle VAT when goods or services are provided without charge. Key Points: - VAT Applicability: VAT must be applied to FOC supplies regardless of the recipient’s VAT usage. - Cost Calculation: The taxable base for deemed supplies should be the cost price, including direct and indirect costs, mirroring the market value of similar goods. - Comparison with Previous Cases: This ruling differs from previous ECJ cases (like C-528/19), emphasizing that the direct benefit to the provider is crucial in determining VAT implications. Practical Implications: - Ensure Inclusion: Businesses must include costs benefiting third parties in their output prices. - Ancillary Benefits: Benefits to third parties should be ancillary and essential to the business's taxable activities. - Analyze Specifics: Each case should be evaluated on its facts to determine VAT obligations accurately. - Understanding these nuances is crucial for maintaining compliance and optimizing VAT strategies. ECJ Today’s #AI service always alerts you with a concise summary when the verdict is out. Accurate, easy to understand and in English language.   SIGN UP: https://lyfx.ai/ecj-today/ #VAT #ECJ #TaxLaw #BusinessCompliance #EuropeanLaw #ECJToday

🔍 EU Court about direct reimbursement of indirect taxes unlawfully paid in Italy: NO, but YES!   When national tax laws are in conflict with EU directives, can individuals recover unjustified tax payments wrongly passed on by electricity suppliers? The EU Court of Justice says: "No, but Yes" Case C-316/22 – Gabel Industria Tessile and Canavesi vs. A2A Energia, Energit and Italy's Customs and Monopolies Agency   Key Points: 🚫 NO: as long as an EU directive has not been transposed into national law, the consumer cannot demand reimbursement of indirect taxes from an electricity supplier, even if the payments were based on national rules in conflict with that EU Directive, and even if that Directive's national transposition is overdue because the EU Member State failed to meet the transposition deadline … ✔️ BUT YES: the "principle of effectiveness" requires in such cases that the final consumer can get reimbursement directly from the Member State   📢 Always be informed about the EU judicial developments. Sign up to ECJ Today, your rapid updates on the EU Court's decisions – always with our concise summary of main points. Accurate, easy to understand and in English language.   https://lyfx.ai/ecj-today/   #CJEU #EUlaw #TaxCompliance #LegalInsight #RegulatoryAffairs #EuropeanUnion #Agenzia Dogane e Monopoli - ADM

A long long time ago, when international tax rules were created, they separated business profits from passive income. Taxing rights on business profits were allocated under a single unifying principle: the arm’s length principle (ALP). Taxing rights on passive income was diced up by income type. This created issues for businesses with lots of traditionally passive income types (eg https://lnkd.in/eku4N8Xw). IP related income was also easily mistaken for passive royalties. Most businesses have some form of IP and double tax treaties (DTTs) allowing royalty withholding taxes (WHT) creates weird cliff edges of gross taxation within a tax system based on net income. Because IP is intertwined with operations, MNEs structured their operations in such a way that there was no direct payment for royalties from countries with royalty WHT. Rather than licensing IP to a local sales entity, the MNE would sell a fully finished branded product to a local entity with all IP related costs already internalised (an embedded royalty). The result is that within an MNE group, there’ll never be royals (https://lnkd.in/erPKauYp): it doesn’t run through their blood and they create a different kind of buzz. Most of this happens within business profits, so taxing it only under ALP feels correct (don’t like it? Challenge the TP instead). In line with this, the OECD recommends reducing royalty WHT to zero in DTT contexts. Some countries didn’t get the brief, kept royalty WHT even under DTTs and started disentangling embedded royalties. Australia scored a recent win here (https://lnkd.in/eKxEemjD). Other countries seek to expand the royalty definition too: South Centre wants software payments included (https://lnkd.in/eR7qiXWh) and the Pakistani Supreme Court now agrees (https://lnkd.in/eVMG7dDX). It is the nature of modern business that almost everything has IP in it. So almost everything has embedded royalties in it. But it’s also the nature of modern business that MNE profits are increasingly economic rents driven by IP that requires very little (re)investment (https://lnkd.in/eVyBG6G5). So perhaps we have come full circle and IP related income is actually passive again? Rather than complicated Pillar 1 or a ‘location specific rent’ tax base (https://lnkd.in/ei4H5fem) should we just open the gates for royalty WHT on all hidden royalties? But if countries manage to find all hidden royalties, they’ll see they’re taxing basically everything. So they’ll say “that’s a little much for me. It’s a liability.” So they pull back and make other plans. Because the truth is: royalty WHT is a toy that they enjoy until all the tricks no longer work anymore. Obvious disclaimers: this is not advice. These views are my own and do not necessarily represent my employer.

ViDA will ultimately digitize the European VAT system. Details regarding the changes may be complex. Learn more below.

Our next study circle session will be on - 8th MAY 2024 by CA Babitha G and below are the details Topic: Sec. 43B(h) aspects and reporting under Income Tax #akshara #studycircle #caprofessionals #professionalupdates Link to join the session - https://lnkd.in/gx_Gmt8S SRIKANTHA RAO T CA Sujatha G Akshay Hiregange CHINMAYA HEGDE CA B.U Aneesh .

Our WU Tax Law Technology Center conference was very successful. we gained many new insights and topics to talk about. #WUTLTC #BłażejKuźniacki #taxcompliance https://lnkd.in/eecEvkP4

Common sense prevails.... https://lnkd.in/eiEeTkKh

An interesting article by my partners, Edmund Leow and Ng Chun Ying.

A recent Tax Court of Canada decision serves as a reminder for taxpayers that there is no accountant-client privilege in Canada, and that documents prepared by accountants may be producible to tax authorities. Brian Kearl and Hannah Bourgeois analyze the Court’s decision in Gaudreau v. The King. Read more: https://lnkd.in/gYXtgqQM #Tax #TaxLaw #Accounting #TaxCourtofCanada