VAT Sharing Systems in EuropeVAT Sharing Systems in Europe

Gottfried SchellmannGottfried Schellmann

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Constitution – Federal ConceptsConstitution – Federal Concepts

BelgiumBelgium

Art 1 of the Belgium Constitution; Belgium is a Federal State Art 1 of the Belgium Constitution; Belgium is a Federal State made up of Communities and Regionsmade up of Communities and Regions

GermanyGermany

Art 20 of the German Constitution; the Federal Republic of Art 20 of the German Constitution; the Federal Republic of Germany is a democratic and social Federal StateGermany is a democratic and social Federal State

AustriaAustria

Art 2 of the Austrian Constitution; Austria is a Federal StateArt 2 of the Austrian Constitution; Austria is a Federal State

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Constitution – Federal ConceptsConstitution – Federal Concepts

SwitzerlandSwitzerland

Art 1 of the Swiss Constitution; The Citizens of Switzerland Art 1 of the Swiss Constitution; The Citizens of Switzerland and the Kantons for the Swiss Confederation.and the Kantons for the Swiss Confederation.

Other Member States have no federal conceptOther Member States have no federal concept

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Revenue sharing of VAT proceedsRevenue sharing of VAT proceeds

SwitzerlandSwitzerland

No revenue sharing concept; proceeds of VAT may only No revenue sharing concept; proceeds of VAT may only expensed by the State; 5% of the revenues have to be spent expensed by the State; 5% of the revenues have to be spent for the benefit of less wealthy citizens.for the benefit of less wealthy citizens.

Any MS pays his share pursuant to Art 2 (1)(c) of the Any MS pays his share pursuant to Art 2 (1)(c) of the Council Decision of 29 September 2000 on the system of Council Decision of 29 September 2000 on the system of the European Communities own resources (2000/597/EC, the European Communities own resources (2000/597/EC, Euratom); ceiling of 0.5 percent of the basisEuratom); ceiling of 0.5 percent of the basis

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Revenue sharing of VAT proceeds Revenue sharing of VAT proceeds

BelgiumBelgium

The revenue sharing rules provide that proceeds of VAT have The revenue sharing rules provide that proceeds of VAT have to be divided between the Federal and the Walloon and to be divided between the Federal and the Walloon and Flemish Region (Sec. 2 of the law of 16 January 1989). Flemish Region (Sec. 2 of the law of 16 January 1989).

Austria Austria

Revenue sharing rules provide a participation of each of the Revenue sharing rules provide a participation of each of the territorial bodies. The percentage is 73,204% for the State, 15, territorial bodies. The percentage is 73,204% for the State, 15, 191 % for the Länder; 11,605 % for municipalities (§ 9 (1) of 191 % for the Länder; 11,605 % for municipalities (§ 9 (1) of the law of 30 December 2004) .the law of 30 December 2004) .

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Revenue sharing of VAT proceedsRevenue sharing of VAT proceeds

Germany,Germany,

Revenue sharing rules provide 5,63% percent upfront for the Revenue sharing rules provide 5,63% percent upfront for the Federal and from the reduced basis 2,2% for the Federal and from the reduced basis 2,2% for the Municipalities; the remainder has to be shared 50,5%: 49,5% Municipalities; the remainder has to be shared 50,5%: 49,5% between the State and the Länder (§ 1 of the law from 20. between the State and the Länder (§ 1 of the law from 20. December 2001).December 2001).

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Refund systemRefund system

Many MS compensate regional bodies like municipalities Many MS compensate regional bodies like municipalities for suffered VAT (e.g. UK, The Netherlands, France, for suffered VAT (e.g. UK, The Netherlands, France, Finland, Sweden, Denmark; Austria for health service Finland, Sweden, Denmark; Austria for health service sector). sector).

UK reimburse incurred VAT of local government bodies. UK reimburse incurred VAT of local government bodies. Museums and galleries are within the scope of the refund Museums and galleries are within the scope of the refund procedure as well as the National Health Service bodies. procedure as well as the National Health Service bodies. Additionally, incurred VAT in connection with incidental Additionally, incurred VAT in connection with incidental acitivities, which are exempt, are also eligible for a refund.acitivities, which are exempt, are also eligible for a refund.

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Refund systemRefund system

Technical approachTechnical approach

While UK govern its refund concept within the VATA (Sec While UK govern its refund concept within the VATA (Sec 33(1), 33(2) 33A and 41(3)), but outside of the scope of 33(1), 33(2) 33A and 41(3)), but outside of the scope of VAT, Austria, for instance provide any refund for the VAT, Austria, for instance provide any refund for the healthcare system totally outside of VAT legislation out of healthcare system totally outside of VAT legislation out of the regular funds. the regular funds.

Historically, Austria was allowed to continue its concept of Historically, Austria was allowed to continue its concept of zero rating health care services until the end of 1996. zero rating health care services until the end of 1996. However, transitional rules where considered to be State However, transitional rules where considered to be State Aid (ECJ C-172/03 Heiser).Aid (ECJ C-172/03 Heiser).

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Outsourcing Outsourcing

Capital ExpendituresCapital Expenditures

Buildings: If lease fees are recoverable within the scope of a Buildings: If lease fees are recoverable within the scope of a refund system, no further opportunityrefund system, no further opportunity

If recovery system is not implemented, it depends on whether If recovery system is not implemented, it depends on whether the lessor is entitled to opt for VAT or not; most of the MS the lessor is entitled to opt for VAT or not; most of the MS require that the lessor must be entitled for a input deduction require that the lessor must be entitled for a input deduction (e.g. Germany) (e.g. Germany)

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OutsourcingOutsourcing

Outsourcing of services (e.g. IT services)Outsourcing of services (e.g. IT services)

Framework of Art 13A (1)(f) available to a limited extent, Framework of Art 13A (1)(f) available to a limited extent, requires minimum two participants, cost ceiling, requires minimum two participants, cost ceiling,

Not totally in line with procurement law (ECJ C-26/03)Not totally in line with procurement law (ECJ C-26/03)

Not implemented in many MSNot implemented in many MS

For PPP models not eligible, because outside parties are not For PPP models not eligible, because outside parties are not considered as referenced bodiesconsidered as referenced bodies