Source Curia
On 3 March 2020 the European Court of Justice gave its judgment in case C-75/18 (Vodafone), regarding a turnover tax other than VAT.
Decision
1. Articles 49 and 54 TFEU must be interpreted as not precluding the legislation of a Member State that establishes a progressive tax on turnover, the actual burden of which is mainly borne by undertakings controlled directly or indirectly by nationals of other Member States or by companies that have their registered office in another Member State, due to the fact that those undertakings achieve the highest turnover in the market concerned.
2. Article 401 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding the introduction of a tax which is based on the overall turnover of the taxable person and which is levied periodically, and not at each stage of the production and distribution process, there being no right to deduct tax paid at an earlier stage of that process.
Facts (simplified):
Vodafone Magyarország Mobil Távközlési Zrt. (‘Vodafone’), is a public limited company governed by Hungarian law. The sole shareholder is Vodafone Europe B.V., registered in the Netherlands.
Vodafone’s principal activity is on the telecommunications market. According to the referring court, it was the third largest undertaking on the Hungarian telecommunications market in the years at issue.
Vodafone paid a special tax, which is a turnover-based special tax for undertakings operating in certain sectors. According to the Hungarian tax authorities, Vodafone did not pay enough, and they raised an assessment.
The Hungarian court asked the following questions to the European Court of Justice:
‘(3) Must the special tax be considered a tax on turnover? In other words, is this tax compatible or not with the VAT Directive?’
Decision
1. Articles 49 and 54 TFEU must be interpreted as not precluding the legislation of a Member State that establishes a progressive tax on turnover, the actual burden of which is mainly borne by undertakings controlled directly or indirectly by nationals of other Member States or by companies that have their registered office in another Member State, due to the fact that those undertakings achieve the highest turnover in the market concerned.
2. Article 401 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding the introduction of a tax which is based on the overall turnover of the taxable person and which is levied periodically, and not at each stage of the production and distribution process, there being no right to deduct tax paid at an earlier stage of that process.
Source Curia
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