On 29 November 2018 the European Court of Justice made a decision in case C‑264/17 (Harry Mensing) regarding the special VAT arrangements for works of art.
Facts (simplified):
- Harry Mensing trades in art objects in various cities in Germany. He acquired art objects from makers from other member states. These deliveries were exempt from VAT in the Member State of origin, but Mensing did pay tax on the intra-Community acquisitions in Germany. He did not make use of the right to deduct the input VAT.
- Mensing requested to apply the VAT profit margin scheme, which exists for works of art acquired from its creators. However, the Germany tax authorities denied him the right to apply this scheme.
- By using this scheme, Mensing would have been able to only charge VAT on its profit margin, instead of on the full sales price.
The Geman Tax Court asked the following questions to the ECJ
- Can the profit margin scheme be applied on the intra-Community acquisition of works of art that have acquired from persons, other than mentioned in article 314 of the VAT Directive?
- If yes, can the input VAT deduction be denied on the basis of article 322 of the VAT Directive, even if this article has not been implemented in the national VAT Law?
Judgment:
The European Court of Justice rules that:
- A taxable dealer may opt for the application of the margin scheme to the input supply of works of art which were supplied in the context of an exempt intra-Community supply, by the creator or his successors in title, also when those persons do not fall within the categories of persons listed in Article 314 of the VAT Directive.
- A taxable dealer may not opt for the application of the margin scheme to an input supply of works of art that were supplied to him in the context of an exempt intra-Community supply and, at the same time, claim a right to deduct input VAT in the situations in which such a right is precluded under Article 322(b) of the VAT Directive, if that latter provision has not been transposed into national law.
Source: Curia
The Opinion of the AG can be found HERE
