April 2016 - edition 154EU Tax Alert

The EU Tax Alert is an e-mail newsletter to inform you of recent developments in the EU that are of interest for tax professionals. It includes recent case law of the European Court of Justice, (proposed) direct tax and VAT legislation, customs, state aid, developments in the Netherlands, Belgium and Luxembourg and more.

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Highlights in this edition

CJ rules that claims settlement services performed by third party on behalf of insurance company are not VAT exempt (Aspiro SA)On 17 March 2016, the CJ delivered its judgment in the case Minister Finansów v Aspiro SA (C-40/15). The case

deals with the issue whether services in connection with the settlement of insurance claims are exempt from VAT if

an insurer does not perform this task itself, but outsources it to a third party.

Commission proposes public disclosure of tax information by multinationalsOn 12 April 2016, the Commission proposed to introduce public country-by-country reporting (CbCR) for large

multinational enterprises (MNEs). In its Anti-Tax Avoidance Package, released in January 2016, the Commission

already indicated it was looking at the issue of public CbCR. The current legislative proposal to introduce public

CbCR is published only a few weeks after the Council of the European Union reached political agreement on non-

public CbCR to national tax authorities of the EU Member States. It is yet another EU initiative aimed at enhancing

transparency and public scrutiny on corporate income tax affairs of MNEs.

Commission presents Action Plan on VATOn 7 April 2016, the Commission presented an Action Plan on VAT. The purpose of this plan is to set a pathway such

to create a single EU VAT area. This Action Plan is based on four pillars: (i) recent and ongoing policy initiatives;

(ii) urgent measures to tackle the VAT gap; (iii) create a robust single European VAT area, and (iv) modernized VAT

rates policy.

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Contents

Highlights in this edition• CJ rules that claims settlement services performed

by third party on behalf of insurance company are not

VAT exempt (Aspiro SA)

• Commission proposes public disclosure of tax

information by multinationals

• Commission presents Action Plan on VAT

State Aid / WTO• General Court annuls Frucona decision a second time

Direct taxation• AG Wathelet considers that German rules on

inheritance tax are not in breach of the free movement

of capital (Feilen)

• AG Kokott considers that Portuguese withholding

taxes on interest paid to non-resident creditors is in

breach of the freedom to provide services (Brisal)

VAT• AG opines on Belgian VAT exemption for services

supplied by lawyers (Ordre des barreaux francophones

et germanophone and Others)

• AG opines that financed public broadcasting should

not confer a right to deduct input VAT on goods and

services acquired for that activity (Český rozhlas)

• Commission publishes Report on VAT Gap Estimations

• European Court of Auditors publishes a report on

tackling VAT fraud

• Confirmation that Luxembourg VAT should apply on

Director Fees

Customs Duties, Excises and other Indirect Taxes• CJ rules on the customs classification of soya protein

concentrate (Customs Support Holland BV)

• CJ rules on the definition of ‘goods put up in sets for

retail sale’ for the customs classification of audio-video

equipment (VAD BVBA – Van Aert)

• CJ rules on the customs classification of stand-alone

device designed to retrieve, receive and stream digital

audio files in the form of amplified sound (Sonos

Europe BV)

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- provided moreover to the insurer - does not constitute

an insurance transaction within the meaning of Article

135(1)(a) of the EU VAT Directive, which would be VAT

exempt. Furthermore, in the view of the CJ, the settling of

claims by and on behalf of an insurer such as performed by

Aspiro, is not linked in any way to the finding of prospective

clients and their introduction to the insurer with a view to

the conclusion of insurance contracts. For this reason,

the settlement of claims cannot be considered as related

services performed by insurance brokers and insurance

agents.

Commission proposes public disclosure of tax information by multinationalsOn 12 April 2016, the Commission proposed to introduce

public country-by-country reporting (CbCR) for large

multinational enterprises (MNEs). In its Anti-Tax Avoidance

Package, released in January 2016, the Commission

already indicated it was looking at the issue of public

CbCR. The current legislative proposal to introduce public

CbCR is published only a few weeks after the Council of

the European Union reached political agreement on non-

public CbCR to national tax authorities of the EU Member

States. It is yet another EU initiative aimed at enhancing

transparency and public scrutiny on corporate income tax

affairs of MNEs.

According to the draft proposal:

• The annual public CbCR obligation would rest on MNEs

with a total consolidated group revenue exceeding

EUR 750 million. If the ultimate parent company is

based outside the EU, the public CbCR obligation would

apply to medium-sized or large subsidiaries or branches

in the EU, unless those subsidiaries and branches are

included and specified in a report published on the

website of the ultimate parent.

• An exemption may apply to EU ultimate parent companies

of banking groups already disclosing information under

the EU’s Capital Requirement Directive.

• The information to be published is less extensive

than under non-public CbCR requirements and would

comprise: the nature of the activities, the number of

employees, the net turnover (including with related

parties), the profit or loss before tax, the tax accrued

and paid and the amount of accumulated earnings.

The public CbCR report shall present this information

Highlights in this edition

CJ rules that claims settlement services performed by third party on behalf of insurance company are not VAT exempt (Aspiro SA)On 17 March 2016, the CJ delivered its judgment in the

case Minister Finansów v Aspiro SA (C-40/15). Aspiro SA

(‘Aspiro’) is a Polish company that supplies, in the name

and on behalf of an insurance company, comprehensive

services for the settlement of insurance claims. Under the

contract, Aspiro performs or delegates to an external sub-

contractor multiple tasks, among which are the receipt of

damage reports, the performing of damage investigations

and the further administrative processing. Aspiro is

remunerated in accordance with a flat rate, depending on

the type of claim concerned and does not have a liability

toward the insured persons.

According to Aspiro, the services performed by it constitute

insurance services. In its view, the services form a

distinct whole and constitute a singly supply of services,

of a complex nature, which must be VAT exempt as a

whole. The Finance Minister only partially confirmed

Aspiro’s position. He considered that only the settling of

substantive claims, including the analysis of the relevant

documents and the decision as to whether the claim was

covered, was an insurance activity. All other services did

not constitute insurance services and did not benefit from

the VAT exemption, because they were of a technical and

administrative nature and could be performed in the context

of other activities than insurance services. The Supreme

Administrative Court was uncertain whether the exemption

of Article 135(1)(a) of the EU VAT Directive was applicable

to the activities at issue in the main proceedings and

referred to the CJ for a preliminary ruling in this respect.

First, according to the CJ, it must be considered whether

the settlement of claims by Aspiro consist of making

‘insurance transactions’ or is to be regarded as ‘related

services performed by insurance brokers and insurance

agents’. The CJ ruled that a provider of services such as

Aspiro does not itself undertake to ensure that the insured

person is covered in respect of a risk and is not connected

in any way to the insured person through a contractual

relationship. Consequently, the CJ ruled that the service

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The Action Plan is then based on the need to reform

and reboot the current VAT system and to come with a

legislative proposal that puts in place a definitive VAT

system. The Action Plan is based on four major pillars:

1. Recent and ongoing policy initiatives: the Commission

will present a legislative proposal by the end of 2016

such to modernize and simplify VAT for cross-border

e-commerce. The purpose is to extend the current one-

stop-shop concept to all cross-border e-commerce,

including distance sales; introduce common EU-

wide simplifications measures to help small start-

up e-commerce businesses; streamline audits in

this sector and remove the VAT exemption for the

importation of small consignments from suppliers in

third countries.

In addition, the Commission is also preparing

a simplification package for SMEs as they bear

proportionally higher VAT compliance costs than large

businesses. The proposal is expected by the end of

2017.

2. Urgent measures to tackle the VAT gap: the

Commission will present, during 2016, measures to

improve cooperation between tax administrations,

including from non-EU countries, and with customs

and law enforcement bodies and to strengthen tax

administrations’ capacity for a more efficient fight

against fraud. Furthermore, it plans to submit an

evaluation report of the Directive on mutual assistance

for the recovery of tax debts. In 2017, the Commission

will present a proposal to enhance VAT administrative

cooperation.

3. Towards a robust single European VAT area: the

Commission will present, in 2017, a legislative proposal

for a definitive VAT system for cross-border trade. This

definitive VAT system will be based on the principle

of taxation in the country of destination of the goods.

The Commission is of the view that in the definitive

VAT system, the taxation rules according to which

the supplier of goods collects VAT from his customer

should be extended to cross-border transactions. This

will ensure consistent treatment of domestic and cross-

border supplies along the entire chain of a production

and distribution, and re-establish the basic features of

the VAT in cross-border trade.

4. Towards a modernised VAT rates policy: upon the

adoption of the definitive VAT system based on the

for each EU Member State where the MNE is active

(country-by-country basis), whereas the information

regarding activities outside the EU will in principle be

presented for all jurisdictions combined. However, for

non-EU tax jurisdictions which do not comply with certain

good governance standards in taxation, a breakdown

will be required if transactions take place with affiliates

in the EU.

• Reports are to be published in a business register and

on companies’ websites where they need to remain

publicly available for at least five years. The reports

will need to be audited and responsibility for drawing

up and publishing the report on tax information will lie

collectively with the members of the administrative,

management and supervisory board of the reporting

entity or the head office of the branch.

It has not yet been indicated when and for which period EU

Member States would need to apply the proposed rules

for the first time. The proposal needs to be approved by

both the Council of the European Union and the European

Parliament and may be amended.

Commission presents Action Plan on VATOn 7 April 2016, the Commission presented an Action

Plan on VAT. The purpose of this plan is to set a pathway

such to create a single EU VAT area. According to the

Commission, the current VAT system has been unable to

keep pace with the challenges of today’s global, digital and

mobile economy. From the outset, it has been intended

to be a transitional system and currently, it is fragmented,

complex for the growing number of businesses operating

cross-border, and leaves the door open to fraud: domestic

and cross-border transactions are treated differently and

goods or services can be bought free of VAT within the

single market. Therefore, the Commission acknowledges

the urgent need for a reform in order to:

a) Make the system easier to use as compliance costs

are higher in a single market trade than in domestic

trade;

b) Address the growing risk of VAT fraud;

c) Make the system more efficient, in particular at

exploiting the opportunities of digital technology and

reducing the costs of revenue collection;

d) Increase the trust between business and tax

administrations and between EU tax administrations.

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share in the estate of her deceased daughter, who died in

2004 in Austria, where the mother had also lived until the

daughter’s death. The distribution of the daughter’s estate

did not take place in Austria until after the mother’s death

and so the inheritance tax on that succession was paid

by Mr Feilen. In his tax return relating to his inheritance

from his mother, which he prepared in Germany, Mr Feilen

claimed the inheritance tax paid in Austria as a liability

of the estate and applied for a reduction, in the amount

of German inheritance tax due. In its assessment, the

German tax authorities deducted the inheritance tax paid in

Austria from the basis of assessment, but refused to allow

any reduction in the inheritance tax. Mr Feilen appealed

from this decision and the case ended up with a reference

before the CJ.

AG Wathelet started by affirming that the different

tax treatment in the present case demonstrates the

existence of a restriction to the free movement of capital

as the tax relief is only granted if the assets have been

previously taxed in Germany. This means that there is a

more favourable tax treatment of domestic assets when

compared to foreign assets. Therefore, a difference in

treatment may be regarded as consistent with the Treaty

provisions on the free movement of capital only where (i) it

concerns situations which are not objectively comparable,

or (ii) it is justified by an overriding reason in the public

interest.

As regards comparability, AG Wathelet made reference

to his previous reasoning developed in the Timac Agro

case (see EUTA 151, C-388/14 of 17 December 2015).

Notably, the AG highlighted that the decisive criterion for

determining whether national situations and cross-border

situations are comparable is whether or not the Member

State in question has a right to tax in both situations. In

the present case, and according to the AG, in the context

of a purely domestic situation, all acquisitions, including

the previous acquisition and a subsequent acquisition,

will fall under German tax jurisdiction. Differently, in a

cross-border situation, such as that at issue in the main

proceedings, Germany does not have any right to tax the

previous acquisition, its tax jurisdiction extending only to

the subsequent acquisition. This means that Germany is

not granting a more favourable inheritance tax treatment to

national assets than to the foreign assets that it also taxes,

because in this case, it is not taxing the foreign asset.

destination principle, the Commission considers that

Member States could be granted greater autonomy on

setting VAT rates, subject to appropriate safeguards

to prevent excessive complexity and distortion of

competition, and to ensure that the operation of the

Single Market is not affected.

State Aid/WTOGeneral Court annuls Frucona decision a second timeOn 16 March 2016, the General Court annulled the second

(2013) Commission decision ordering the recovery of

unlawfully aid granted to Frucona Kosice (T-103/14). The

first (2006) decision had been annulled by the Court of

Justice in 2013 because of the Commission’s failure to

apply the private creditor test to the case at hand. In this

case, local tax authorities waived about two thirds of their

tax claim as part of a creditor settlement in 2004, instead

of starting either a bankruptcy procedure or a tax collection

procedure which - in the Commission’s view - would have

led to a better result for the government. The General

Court found that, as the CJ’s judgment implied that the

aforementioned test had to be taken into consideration,

the Commission had not provided material evidence that

would support its claim that a private creditor would have

had a preference for taking the tax procedure concerning

settling the matter via a settlement.

Direct TaxationAG Wathelet considers that German rules on inheritance tax are not in breach of the free movement of capital (Feilen)On 17 March 2016, AG Wathelet delivered his Opinion in

case Max-Heinz Feilen v Finanzamt Fulda (C-123/15). The

case deals with the German rules providing for a reduction

in inheritance tax where the estate includes an asset that

has already, in the previous ten years, formed part of an

estate subject to inheritance tax in that same Member

State, where such benefit is not available in the case of an

asset inherited and taxed in another Member State.

Mr Feilen, who is resident in Germany, is the sole heir of

his mother, who died in 2007 in Germany, where she was

last resident. His mother’s estate consisted mainly of her

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AG Kokott started by confirming that all measures which

prohibit, impede or render less attractive the exercise of

the freedom to provide services must be regarded as a

restriction. Therefore, the freedom of a service-provider

(KBC) to provide services is restricted if a national rule

makes the provision of services between Member States

more difficult than the provision of services purely within

a Member State. The fact that KBC, which is resident in

Ireland, suffers disadvantageous taxation of its interest

income in Portugal in comparison with resident loan

providers, because it is subject to tax calculated in a

different way and deducted at source, could constitute

an impediment to cross-border services. AG Kokott

considered that two different aspects of the rules applicable

to non-resident creditors in comparison with taxation of

interest income in the case of resident creditors are to be

distinguished and discussed separately: first, the different

techniques for charging tax, and second, the different ways

of calculating the amount of the tax charged.

As regards the different technique as for charging tax,

AG Kokott recalled the CJ’s previous case law which has

already held on a number of occasions that the specific

technique of deducting tax at source for non-resident

service providers in principle does not infringe the freedom

to provide services. This is because the restriction on

freedom to provide services which arises from this charging

technique is justified by the need to ensure the efficient

collection of tax.

Different and as regards the calculation of tax and, in

particular, the impossibility to deduct costs, it is, in principle,

an infringement of the freedom to provide services if non-

resident taxpayers (subject to limited taxation) - by contrast

with resident taxpayers (subject to unlimited taxation) - are

precluded from deducting expenses directly connected

to the activity which is being taxed. According to AG

Kokott, the concept of ‘direct link’ is not to be interpreted

narrowly. Therefore, such a link also exists in the case of

financing costs which are necessary for carrying out an

activity. Furthermore, AG Kokott considered that not only

financing costs with a direct link to the grant of a specific

loan count as direct costs but also overheads which can be

directly attributed to the taxed activity in this case should

be allowed deduction.

Therefore, and since the situations are not comparable,

AG Wathelet concluded that the difference in tax treatment

does not constitute a restriction on the free movement of

capital.

In any event the AG considered that even if the Court

concludes that the situations are comparable and that

there is therefore a restriction, such restriction would be

justified either by the need to preserve the coherence of the

German tax system and the need to ensure the balanced

allocation of powers of taxation.

AG Kokott considers that Portuguese withholding taxes on interest paid to non-resident creditors is in breach of the freedom to provide services (Brisal) On 17 March 2016, AG Kokott delivered her Opinion in

case Brisal - Auto Estradas do Litoral SA, KBC Finance

Ireland v Fazenda Publica (C-18/15). The case deals with

the Portuguese legislation concerning deduction of tax on

interest at source whereas interest paid to non-resident

creditors are subject to withholding tax and the tax is

calculated differently when compared to interest paid to

resident creditors.

According to the Portuguese Corporate Income Tax

rules, interest paid to non-resident creditors is subject to

a 20% withholding tax rate or the otherwise reduced rate

provided in an applicable Double Tax Treaty. No deduction

of operating costs is possible. Differently, in the case of

identical income paid to resident companies, there is a

taxation of 25% after deduction of operating costs. The

Portuguese company Brisal and the Irish bank KBC were

contract partners under a finance contract (‘loans’). Within

that framework, in certain months in the years 2005 to

2007, Brisal was obliged to pay interest to KBC. From the

payments, Brisal withheld tax and paid it to the Portuguese

tax authority on behalf of KBC.

Both Brisal and KBC challenge this obligation to withhold

part of the interest in order to pay Portuguese corporation

tax, because, they claim, it discriminates against non-

resident financial institutions in comparison with resident

ones in a manner which is unlawful under EU law. In

particular, KBC asked for its re-financing costs for the loan

to be taken into account for tax purposes.

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cost of litigation breaches various guarantees of the right

of access to justice. In order to decide on these arguments,

the Constitutional Court requested a preliminary ruling on

the interpretation and validity of certain provisions of the

EU VAT Directive.

First of all, the AG opined that a Member State which,

in accordance with Article 371 EU VAT Directive, has

continued to exempt from VAT the supply of services by

lawyers, may limit the scope of that exemption without

abolishing it in its entirety. However, having once abolished

the exemption in its entirety, such a Member State may

not reintroduce the same exemption with a more limited

scope. Furthermore, in the view of the AG, Member States

are not authorized, based on the EU VAT Directive, to

exempt from VAT the supply of services by lawyers under

a national legal aid scheme as services which are closely

linked to welfare and social security work.

AG opines that financed public broadcasting should not confer a right to deduct input VAT on goods and services acquired for that activity (Český rozhlas)On 17 March 2016, AG Szpunar delivered his Opinion

in the case Český rozhlas (C-11/15). Český rozhlas is

the Czech public broadcasting body created by law and

financed, in particular, by the radio fee established under

national law. By supplementary VAT returns, Český rozhlas

applied a further increase to its right to deduct VAT by

excluding the radio fees paid to it from the calculation of

the coefficient (pro rata) used for calculating the deductible

VAT on supplies. In that regard, Český rozhlas argued that

those fees did not constitute (a VAT exempt) remuneration

for the public broadcasting service provided.

The Czech tax authorities did not accept the position

taken by Český rozhlas and, by supplementary VAT

assessments, rejected the exclusion of those supplies

from the calculation of the pro rata. Following this rejection,

Český rozhlas challenged the tax authorities’ decisions

before the Municipal Court, which annulled those decisions.

The matter ended up before the Supreme Administrative

Court which decided to stay the proceedings and to refer

to the CJ for a preliminary ruling on the VAT qualification of

the financed public sector broadcasting.

Subsequently AG Kokott dealt with the issue whether the

restriction to the freedom to provide services arising from

the impossibility to deduct costs could be compensated by

the lower tax rate applicable to non-residents (15%) when

compared to resident taxpayers (25%). According to the

AG a proper interpretation of the CJ’s case law allows to

conclude that the refusal in the deduction of operating

costs directly linked to the taxed activity of a person subject

to limited taxation in itself infringes the freedom to provide

services. The additional issue of the different tax rate is,

by itself, a separate question. Therefore, the deduction

of expenses and the amount of the tax rate are always

to be assessed separately for their compatibility with the

fundamental freedoms.

In this context, AG Kokott concluded that in this case, what

is in principle an infringement of the freedom to provide

services arising out of the inability to deduct financing costs

directly linked to the taxed activity cannot be balanced

out by a tax rate that is lower by comparison with that

for residents. The AG rejected any possible justification

either based on the balanced allocation of the powers

to tax between Member States, the double deduction of

operating costs, efficient tax collection or tax supervision.

VAT AG opines on Belgian VAT exemption for services supplied by lawyers (Ordre des barreaux francophones et germanophone and Others)On 10 March 2016, AG Sharpston delivered her

Opinion in the case Ordre des barreaux francophones

et germanophone and Others (C-543/14). By virtue of

a transitional provision dating from the EU Sixth VAT

Directive, which provision is still present in the EU VAT

Directive, Belgium (as the only EU Member State),

services supplied by lawyers were exempted from VAT

until 31 December 2013.

A number of Belgian bar councils, together with several

human rights and humanitarian associations and a

number of individuals, have brought proceedings before

the Constitutional Court challenging the abolition of that

exemption effective as from 1 January 2014. The main

thrust of their arguments is that the resulting increase in the

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all of the legislative measures for exchanging information

proposed by the European Commission, there is in the

view of the European Court of Auditors a need for new

legislative and other initiatives. In this respect, it suggested

fourteen recommendations.

Confirmation that Luxembourg VAT should apply on Director FeesAt the beginning of the year 2016, it had been indicated

in a press release that the Director of the Luxembourg

VAT Authorities had confirmed that, based on the current

Luxembourg VAT provisions, Director Fees should be

subject to Luxembourg VAT.

Following this press release, a parliamentary question was

raised to the Minister of Finance, Mr. Pierre Gramegna. In

his answer dated 9 March 2016, the Minister of Finance

confirmed the general principle that Director Fees should

be subject to Luxembourg VAT and announced that a

working group would be set up to clarify the topic and to

make recommendations.

Luxembourg VAT principles

Article 4 of the Luxembourg VAT law provides that, “any

person who independently carries out, on a regular basis,

in any place any economic activity, whatever the purposes

or results of that activity, qualifies as taxable person for

VAT purposes”.

Based on this provision, company’s Directors providing

services in consideration of which they receive Director

Fees may qualify as a taxable person for Luxembourg

VAT purposes. One of the consequence of qualifying as

a VAT taxable person is that Luxembourg based Directors

or residents in Luxembourg should have to register for

VAT purposes and consequently will have to invoice

Luxembourg VAT (17%).

Additionally, it becomes clear that where the place of

supplies of services performed by Directors is deemed

to be located in Luxembourg, those services should be

subject to Luxembourg VAT.

Consequently, Director Fees should be subject to

Luxembourg VAT in the following situations:

The AG Opined that the activity of a public broadcasting

body that is financed from a compulsory fee laid down

by statute and payable by anyone in possession of a

radio receiver does not constitute an activity carried on

for consideration and does not confer a right to deduct

VAT due or paid on goods and services acquired by that

body and used for the purposes of that activity. Moreover,

according to the CJ, the determination of the methods and

criteria for apportioning input VAT between that activity and

the activity conferring a right to deduct is in the discretion

of the EU Member States, which, when exercising that

discretion, must have regard to the aims and broad logic

of the EU Sixth VAT Directive. On that basis, the Member

States must provide for a method of calculation which

objectively reflects the part of the input expenditure actually

to be attributed, respectively, to those two types of activity.

Commission publishes Report on VAT Gap EstimationsIn March 2016, the Commission published a report on VAT

Gap Estimations. This report, prepared by the Fiscalis

2020 Tax Gap Project Group, is intended to serve as a

guide in the world of tax gap estimations. Accordingly, the

report provides an introduction to the currently applied

methodologies of tax gap estimations. Its focus is on VAT

gap estimations because VAT is one of the main sources

of government revenue and several EU Member States

have developed a different practice in estimating the VAT

gap. The scope of the report is also limited to EU Member

States which participated in the TGPG and reflects the

facts and circumstances in 2015.

European Court of Auditors publishes a report on tackling VAT fraudOn 3 March 2016, the European Court of Auditors

published a report on tackling VAT fraud. The audit

addressed the question of whether the EU is tackling intra-

Community VAT fraud effectively. A large majority of EU

Member States, who are the main beneficiaries of VAT

revenue, have expressed satisfaction with how the current

system has been set up and they appreciate benefits

from mutual cooperation. However, EU Member States

have indicated areas of the system that require further

improve ment. Moreover, the audit has found important

weaknesses which indicate that the system is insufficiently

effective. As EU Member States have not yet accepted

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Customs Duties, Excises and other Indirect TaxesCJ rules on the customs classification of soya protein concentrate (Customs Support Holland BV)On 3 March 2016, the CJ delivered its judgment in the

case Customs Support Holland BV (C-144/15). The case

concerns the classification in the combined nomenclature

(CN) of soya protein concentrate.

It is apparent from the order for reference that Imcosoy

62 is a soya protein concentrate obtained following two

industrial processes.

According to the order for reference, after being dehulled,

ground and steamed, the soya beans first undergo an oil-

extraction process, after which the residue is so-called

soya meal. This meal is then treated with ethanol and

water to extract the residual fat, reduce the content of

components other than proteins, primarily carbohydrates

or food fibre, and eliminate certain harmful substances. The

soya protein concentrate obtained in this way contained no

trace of the ethanol used. It consists, inter alia, of proteins,

representing 62% by weight, and starch, representing less

than 10% by weight.

According to the order for reference, because of its high

concentration of carbohydrates, soya meal, although

used in animal feed, cannot be used as an ingredient in

compound feeds for very young calves. By contrast, the

soya protein concentrate obtained from soya meal can

constitute an ingredient in compound feeds for very young

calves due to its reduced concentration of carbohydrates

and food fibre.

On 7 September 2010, in response to a request from

Customs Support Holland BV, the Netherlands customs

authorities issued a Binding Tariff Information which

classified Imcosoy 62 under CN subheading 2309 90 31.

On 3 April 2012, the District Court, Haarlem, which was

dealing with an action brought by Customs Support

Holland BV, declared that action to be well-founded and

• The company paying the Director Fees and the Director

have established their business activities in Luxembourg

- The Director may have to apply Luxembourg VAT on

its invoices;

• The company paying the Director Fees qualifies as a

VAT taxable person and the Director has established its

business activities outside Luxembourg - The company

should self-assess Luxembourg VAT on those services.

This is also the case if the Luxembourg based company

only supplies exempt activities (e.g. financing activities).

Where the Director Fees are paid by a Luxembourg based

company not qualifying as a VAT taxable person (e.g.

passive holding companies), the place of taxation should

be deemed to be located at the place where the Director

has established his business. Consequently, in the case the

Director has established his business within the European

Union, the country of establishment or residency of the

Director is competent to tax. One should analyse Member

State per Member State how the country of residency is

treating Director Fees. The view on that point differs from

Member State to Member State.

Consequences

By his answer, the Minister of Finance confirmed the

intention to apply Luxembourg VAT on Director Fees,

whereas the previous market practice was unclear on this

topic.

As regards the practical details concerning the effective

application of Luxembourg VAT, a working group should

be set up by the Ministry of Finance. In terms of timing,

it is expected that the Luxembourg VAT Authorities would

become less tolerant as from 1 January 2017. With respect

to this date, a particular point of attention would be the date

of payment and the invoicing date of these Directors Fees.

It is recommended that companies and Directors, which

may be impacted by these provisions, now contact their

VAT advisors in order to check what the potential VAT

impact on their businesses could be.

11

refer the following questions to the Court of Justice for a

preliminary ruling:

‘(1) Must heading 2304 of the CN be interpreted as

meaning that that tariff heading also covers a soya

protein concentrate obtained following the removal

of residual fats, carbohydrates (or food fibres) and

harmful substances from solid residues (so-called soya

meal) resulting from the extraction of oil from soya

beans, which, by means of that removal, has been

made suitable for use as an ingredient in compound

feeds for very young calves?

(2) If Question 1 is answered in the negative, is CN

heading 2308 or CN heading 2309 then applicable

to a soya protein concentrate obtained in the manner

described in Question 1?’

The CJ ruled as follows:

The Combined Nomenclature set out in Annex I to Council

Regulation (EEC) No 2658/87 of 23 July 1987 on the tariff

and statistical nomenclature and on the Common Customs

Tariff, as amended by Commission Regulation (EC)

No 948/2009 of 30 September 2009, must be interpreted

as meaning that a soya protein concentrate, such as that

at issue in the main proceedings, comes under heading

2309 of that nomenclature.

CJ rules on the definition of ‘goods put up in sets for retail sale’ for the customs classification of audio-video equipment (VAD BVBA - Van Aert) On 10 March 2016, the CJ delivered its judgment in the

case VAD BVBA - Van Aert (C-499/14). The case concerns

the interpretation of the definition of ‘goods put up in sets for

retail sale’ for the classification of audio-video equipment in

the Combined Nomenclature (CN).

It is clear from the order for reference that VAD, of which

Mr van Aert is the managing director, on 10 January 2008,

11 January 2008 and 23 January 2008, in its capacity as

a customs agent in its own name but acting on behalf

of Zicplay s.a. and under the instructions of Transmar

Logistics, submitted three IM4 import declarations for

validation by the competent customs authorities in Antwerp

for the release into free circulation and the release for

consumption of combined video-audio systems named

‘micro Z 99DVBT’ and composed, first, of a system

held that Imcosoy 62 had to be classified under subheading

2304 00 00 of the CN. The Netherlands customs authorities

appealed against that judgment to the Gerechtshof (Court

of Appeal) Amsterdam, which declared the appeal to be

unfounded. The Staatssecretaris van Financiën thereupon

brought an appeal on a point of law before the referring

court against the judgment of the Gerechtshof Amsterdam.

In the order for reference, the Supreme Court of the

Netherlands took the view, first, that CN heading 2304

covers only products resulting directly from the oil-

extraction process and, second, that, although soya meal

is a direct result of the oil-extraction process and must

therefore be considered to come under CN heading 2304,

by contrast, the purpose of processing soya meal to obtain

the soya protein concentrate is not to extract soya bean

oil but to make the residues from that extraction suitable

for a particular use in animal feeding. The referring court

inferred from this that the soya protein concentrate is

processed into a different kind of product.

The referring court was of the view that a product can be

classified under CN heading 2309 only if it results from

a final processing of a product, with the exception of

agglomerated products or a mixture of a product with other

products. In addition, it must be suitable for use solely in

animal feeding.

In that regard, the Supreme Court of the Netherlands noted

that the extraction of carbohydrates, food fibre and harmful

substances from soya meal constituted final processing

which makes the product thus processed suitable for use

as an ingredient in compound feeds for very young calves.

However, it stated that, according to the Explanatory Note

to HS heading 2309, that heading is not to be applied to a

product made from a single material, or from a mixture of

several materials which is classified as such in one specific

heading, or to by-products covered by HS heading 2308.

The Supreme Court of the Netherlands, therefore, did not

rule out the possibility that the soya protein concentrate,

composed of soya meal from which certain specific

components have been extracted, did not come under CN

heading 2309.

In those circumstances, the Supreme Court of the

Netherlands decided to stay the proceedings and to

12

as was clear from the documentation relating to them,

obviously belonged together as a unit to be marketed

together.

The goods constituted, according to the court of appeal,

a set for retail sale if it were established that they would

be offered for retail sale in a single package, of such a

nature that they were intended to be presented together as

a unit in the context of that means of marketing. That was

so in the present case, as a range of facts demonstrated,

namely, the importation, transportation, invoicing and

handling together of the goods, the fact that the consignee

was identical, the visual presentation of the system and the

fact that the number of pairs of loudspeakers imported was

exactly the same as the number of audio/visual systems.

Thus the audio/visual systems and the loudspeakers

constituted, at the time of their classification, a set for retail

sale. The fact that those goods were not, at the time of

customs clearance, presented in a single package did not

affect that finding.

VAD and Mr van Aert lodged an appeal in cassation against

that judgment with the referring court.

In that context, the referring court wondered, in particular,

whether goods put up in sets for retail sale that are

correctly presented to customs authorities in separate

packages but in respect of which it is clear that they belong

together and are intended to be offered as a single unit on

the retail market, must be considered to be ‘goods put up

in sets for retail sale’, within the meaning of Rule 3(b) of

the General Rules for the interpretation of the Combined

Nomenclature, even if those goods are packed together

only after the declaration with a view to being offered for

sale on the retail market.

Accordingly, the Hof van Cassatie (Court of cassation)

decided to stay proceedings and to refer the following

question to the Court for a preliminary ruling:

‘Are goods put up in sets for retail sale that are presented

to customs authorities in separate packages because

this is justified, but in respect of which it is clear that they

belong together and are intended to be offered as a single

unit on the retail market, to be regarded as “goods put up in

sets for retail sale”, within the meaning of Rule 3(b) of the

General Rules, even if those goods are packed together

comprising a DVD player, USB connection, FM tuner, a

liquid crystal display (LCD) TFT screen, an MP3 player

and a TV tuner (‘the audio/video systems’) and, second,

removable loudspeakers.

Those goods had been disassembled for purposes of

transport and indicated separately, by component, on the

IM4 import declarations.

The ‘micro Z 99 DVBT’ systems were classified under

two separate CN codes, namely, on the one hand, the

combined audio/visual systems under CN code 8518 1095

90, subject to the payment of a 2.5% import duty, and, on

the other, the removable loudspeakers under CN code

8518 2200 90, subject to the payment of a 4.5% import

duty.

Therefore, the audio/visual systems and the removable

loudspeakers were not presented as a single unit under

CN code 8521 9000 90, subject to the payment of 13.9%

import duty.

VAD and Mr van Aert were summoned on 21 October 2011

to answer charges before the Correctionele rechtbank te

Antwerpen (Antwerp Criminal Court) for having submitted

three declarations under an incorrect designation and

incorrect tariff code for the purpose of release into free

circulation or release for consumption of the ‘micro Z

99 DVBT’ systems, within the customs territory of the

European Union.

In its judgment of 6 June 2012, that court held that the

audio/visual systems and the loudspeakers should have

been regarded as a set of goods and should have been

classified together under CN code 8521 9000 90. It ordered

VAD and Mr van Aert, jointly, to pay a fine and to pay the

import duties which had been evaded.

On an appeal brought against that judgment at the hof

van beroep te Antwerpen (Court of Appeal, Antwerp) that

judgment was upheld in a judgment of 11 September 2013.

In that regard, that court took into account the facts,

in particular, that the audio/video systems and the

loudspeakers had been presented to customs together

in the same IM4 import declarations and that the goods,

13

To establish such a connection, the Zoneplayer must be

connected to a modem or a router by means of an Ethernet

cable. Once connected to the Internet, the Zoneplayer

enables its user to listen, inter alia, to streamed music, with

the device reading digital audio files during the process

of downloading those files, without them being stored, for

that purpose, in the device’s memory. The Zoneplayer also

provides the option of listening to broadcasts streamed by

radio stations which are present on the Internet. For that

streaming, the Zoneplayer exchanges raw data with the IT

servers storing the digital audio files which the user of the

device wishes to listen to.

More than 25,000 radio stations, programmes and

podcasts are pre-programmed into the Zoneplayer and it

does not have the ability to store data.

By means of a cable, devices such as digital video

recorders, personal computers, games consoles or

Network Attached Storage (NAS) stations can be

connected via the network ports on the rear of the box

in order to connect those devices to the Internet and/or

connect the Zoneplayer to the computers present in a local

area network (‘LAN’). The content of digital audio files

present on those other terminals may also be broadcast by

means of the Zoneplayer’s loudspeakers. In that case, too,

those files are not, at the outset, stored on the Zoneplayer,

but are streamed by it during the data transfer process

between the connected devices.

Two or more Zoneplayers can transmit and receive digital

data between each other wirelessly, together forming a

wireless data network (‘the Sonos network’). The software

installed in the Zoneplayers makes it possible, within the

Sonos network, to send and stream music to each of

the Zoneplayers separately. The Sonos network thereby

functions independently of any Wi-Fi network; the system

generates itself the encryption which it uses to broadcast

digital data from one Zoneplayer to another.

The Zoneplayers were declared by Sonos Europe as

coming under CN heading 8519 89 90, subject to payment

of a customs tariff of 2%. In accordance with those

declarations, the customs authorities issued Sonos Europe

with demands for payment of the appropriate amount.

after the declaration with a view to being offered for sale

on the retail market?’

The CJ ruled as follows:

Rule 3(b) of the General Rules for the interpretation of the

Combined Nomenclature in Annex I to Council Regulation

(EEC) No 2658/87 of 23 July 1987 on the tariff and statistical

nomenclature and on the Common Customs Tariff, as

amended by Commission Regulation (EC) No 1214/2007

of 20 September 2007, must be interpreted as meaning

that goods, such as those in the main proceedings, which

are presented for customs clearance in separate packages

and are packed together only after that transaction may

nevertheless be held to be ‘goods put up in sets for retail

sale’, within the meaning of that rule and may, therefore,

come under a single tariff heading, where it is established,

having regard to other objective factors, which it is for the

national court to assess, that the goods belong together

as a unit and are intended to be presented as such in the

retail trade.

CJ rules on the customs classification of stand-alone device designed to retrieve, receive and stream digital audio files in the form of amplified sound (Sonos Europe BV) On 17 March 2016, the CJ delivered its judgment in the

case Sonos Europe BV (C-84/15). The case concerns

the classification in the combined nomenclature (CN) of

a stand-alone device designed to retrieve, receive and

stream digital audio files in the form of amplified sound.

In the period between 7 December 2009 and 4 January

2010, Sonos Europe lodged nine declarations for release

into free circulation for Zoneplayers.

That device consists of a resonance box containing five

loudspeakers, each of which features a digital amplifier.

The box is equipped with buttons for volume control

(‘mute’ and ‘volume’), a connection for headphones, an

audio input, two network ports and an electrical mains

connection for the device. In addition, the Zoneplayer has

a motherboard incorporating inter alia a central processing

unit. The software installed in the motherboard includes

inter alia the Linux operating system, which can be updated

by means of an Internet connection.

14

under those tariff headings. Nevertheless, the Zoneplayer

is distinguished from devices considered to come under

those tariff headings, account being taken in particular

of its technological development, since it implements a

new and advanced technology. The way the Zoneplayer

functions is not therefore described in that way in the CN

under any one of its tariff headings.

In those circumstances, the Hoge Raad der Nederlanden

(Supreme Court of the Netherlands) decided to stay the

proceedings and to refer the following question to the

Court of Justice for a preliminary ruling:

‘Should CN headings 8517, 8518, 8519 and 8527 be

interpreted as meaning that a product such as that

described in the present judgment (the Zoneplayer),

which receives digital information and without storing it

(streaming) reproduces it in the form of amplified sound by

means of five (integrated) loudspeakers and/or forwards it

to other devices in the local area network, is amenable to

classification under one or more of those headings and,

if so, which heading(s)? Alternatively, should CN heading

8543 be interpreted as meaning that a device such as

the Zoneplayer ought to be classified under that heading

as an electrical machine or apparatus with an individual

function?’

The CJ ruled as follows:

The Combined Nomenclature listed in Annex I to Council

Regulation (EEC) No 2658/87 of 23 July 1987 on the

tariff and statistical nomenclature and on the Common

Customs Tariff, in the version resulting, successively,

from Commission Regulation (EC) No 1031/2008 of

19 September 2008 and Commission Regulation (EC)

No 948/2009 of 30 September 2009, must be interpreted

as meaning that a stand-alone device designed to retrieve,

receive and stream digital audio files in the form of amplified

sound, such as that at issue in the main proceedings,

must, subject to the referring court’s assessment of all of

the facts which it has available to it, be classified under

tariff heading 8519 of that nomenclature.

Sonos Europe lodged an objection against those requests

for payment. In its view, the Zoneplayer must be classified

under CN subheading 8517 62 00, subject to payment of

a customs tariff of 0%. The customs authorities rejected

that objection, whilst stating, in their decision, that the

Zoneplayer came, in principle, under CN subheading

8519 89 19, with a customs tariff of 4.5%, so that the

customs duties set in the contested demands for payment

were not set at too high an amount.

Sonos Europe brought an action against those decisions of

the customs authorities before the Rechtbank te Haarlem

(District Court, Harlem) which declared that action to

be unfounded. Sonos Europe appealed against that

judgment to the Gerechtshof Amsterdam (Court of Appeal,

Amsterdam).

The Gerechtshof found that the Zoneplayer, in view of its

objective characteristics and properties, could be classified

both under CN heading 8517 and under CN heading 8519.

On the basis of that finding, the Gerechtshof held that it

was necessary to determine the tariff classification of the

Zoneplayer by having regard to Note 3 to Section XVI of

the CN. In the view of the Gerechtshof Amsterdam, the

Zoneplayer, viewed from the consumer’s perspective,

is intended primarily for reproducing sound and that

sound reproduction function is an intrinsic part of the

device. It follows, according to the Gerechtshof, that the

reproduction of sound is the Zoneplayer’s main function,

whereas the network function is secondary. According to

the Gerechtshof, the Zoneplayer must, for that reason,

on the basis of rules 1 and 6 of the general rules for

the interpretation of the CN and by virtue of Note 3 to

Section XVI of that nomenclature, be classified under CN

subheading 8519 89 19.

Sonos Europe appealed on a point of law against that

judgment of the Gerechtshof Amsterdam to the referring

court. The referring court expressed doubts as to the tariff

classification of the Zoneplayer.

It considered that, account being taken of the wording

of CN headings 8517, 8518 and 8519 and of the HS

Explanatory Notes corresponding to that system, the

Zoneplayer has properties and characteristics in common

with the machines and devices which must be classified

15

Correspondents● Gerard Blokland (Loyens & Loeff Amsterdam)

● Kees Bouwmeester (Loyens & Loeff Amsterdam)

● Almut Breuer (Loyens & Loeff Amsterdam)

● Robert van Esch (Loyens & Loeff Rotterdam)

● Raymond Luja (Loyens & Loeff Amsterdam;

Maastricht University)

● Arjan Oosterheert (Loyens & Loeff Zurich)

● Lodewijk Reijs (Loyens & Loeff Rotterdam)

● Bruno da Silva (Loyens & Loeff Amsterdam;

University of Amsterdam)

● Patrick Vettenburg (Loyens & Loeff Rotterdam)

● Ruben van der Wilt (Loyens & Loeff Amsterdam)

www.loyensloeff.com

About Loyens & LoeffLoyens & Loeff N.V. is the first firm where attorneys at law,

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Editorial boardFor contact, mail: eutaxalert@loyensloeff.com:

● René van der Paardt (Loyens & Loeff Rotterdam)

● Thies Sanders (Loyens & Loeff Amsterdam)

● Dennis Weber (Loyens & Loeff Amsterdam;

University of Amsterdam)

Editors● Patricia van Zwet

● Bruno da Silva

Although great care has been taken when compiling this newsletter, Loyens & Loeff N.V. does not accept any responsibility whatsoever for any

consequences arising from the information in this publication being used without its consent. The information provided in the publication is intended

for general informational purposes and can not be considered as advice.

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