The Bulgarian company rented tourist apartments and applied a reduced 9% VAT rate when it had the appropriate certificate. The tax authority disagreed and required the company to apply the standard 20% VAT rate when it did not have the certificate. The Court ruled that the requirement of having a certificate for applying the reduced VAT rate is not permissible. It stated that the rental of apartments falls under “accommodation provided in hotels and similar establishments” which allows for a reduced VAT rate. The Court also emphasized that the requirement of a certificate does not constitute a “concrete and specific aspect” and may violate the principle of neutrality. Additionally, it highlighted that tax evasion and avoidance concerns should not be used to justify the requirement of a certificate for applying the reduced VAT rate.
Source Pawel Mikula
See also
- C-733/22 (Valentina Heights) – Judgment – The eligibility for a reduced VAT rate for hotels cannot be contingent upon possessing a categorization certificate
- Roadtrip through ECJ cases: Focus on ”VAT rates” (Art. 96-99)
Other sources
- Valentine Heights Case Overview: The ECJ reviewed the Valentine Heights case, where the company applied a reduced VAT rate for accommodation services without a valid certificate required by Bulgarian law. The Bulgarian tax authorities argued for the standard VAT rate due to the lack of certification, prompting the company to challenge the legality of this national requirement under the European VAT Directive.
- ECJ Ruling on VAT Conditions: The Court ruled that while Member States can impose conditions for applying reduced VAT rates, such as requiring a valid classification certificate, these conditions must align with the principle of tax neutrality. This principle ensures uniform taxation of similar services to prevent competitive distortions.
- Implications for Tax Neutrality: The decision underscores the importance of maintaining fair competition in the VAT system, indicating that disparate treatment of similar services based on administrative requirements can lead to unfair market advantages. Member States may need to revise their VAT regulations to comply with the ruling, enhancing legal certainty and potentially reducing administrative burdens for businesses.
Source Accace
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