- Prevention of Tax Evasion: Article 80 of the EU VAT Directive 2006/112/EC allows Member States to establish that the taxable amount for transactions involving closely related parties should reflect the open market value, thus preventing tax evasion and avoidance in cases where consideration is below market value or when VAT deductions are limited.
- Flexibility for Member States: The article provides Member States with the flexibility to implement measures that can restrict categories of suppliers or recipients affected by these rules, allowing for tailored approaches to VAT compliance while ensuring that tax authorities can maintain oversight on potentially abusive practices involving related parties.
- Judicial Clarification and Ongoing Cases: The significance of Article 80 is underscored by various ECJ rulings and pending cases, which help clarify the application of taxable amounts and VAT deductions in complex intercompany transactions, thereby shaping the interpretation and enforcement of VAT regulations across the EU.
Relevant articles in the EU VAT Directive 2006/112/EU
Article 80 (Taxable amount)
Article 80
1. In order to prevent tax evasion or avoidance, Member States may in any of the following cases take measures to ensure that, in respect of the supply of goods or services involving family or other close personal ties, management, ownership, membership, financial or legal ties as defined by the Member State, the taxable amount is to be the open market value:
(a) where the consideration is lower than the open market value and the recipient of the supply does not have a full right of deduction under Articles 167 to 171 and
(b) where the consideration is lower than the open market value and the supplier does not have a full right of deduction under Articles 167 to 171 and Articles 173 to 177 and the supply is subject to an exemption under Articles 132, 135, 136, 371, 375, 376, 377, 378(2), 379(2) or Articles 380 to 390c;
(c) where the consideration is higher than the open market value and the supplier does not have a full right of deduction under Articles 167 to 171 and Articles 173 to 177.
For the purposes of the first subparagraph, legal ties may include the relationship between an employer and employee or the employee’s family, or any other closely connected persons.
2. Where Member States exercise the option provided for in paragraph 1, they may restrict the categories of suppliers or recipients to whom the measures shall apply.
3. Member States shall inform the VAT Committee of national legislative measures adopted pursuant to paragraph 1 in so far as these are not measures authorised by the Council prior to 13 August 2006 in accordance with Article 27 (1) to (4) of Directive 77/388/EEC, and which are continued under paragraph 1 of this Article.
ECJ Cases Decided
- C-621/10 & C-129/11 (Balkan and Sea Properties and Provadinvest) – Opting for normal value is not allowed in cases that are not listed in Art. 80 of the VAT Directive
- C-549/11 – Orfey Balgaria EOOD – When the consideration for a transaction is made up entirely of goods or services, the taxable amount of the transaction is the open market value of the goods or services supplied
- C-19/12 (Efir) – Obligation in the event of early payment of full consideration upon the establishment of the right of superficies in exchange for construction services provided
- C-142/12 (Marinov) – Cessation of the taxable economic activity
- C-153/12 (Sani treyd) – Obligation in the event of early payment of full consideration upon the establishment of the right of superficies in exchange for the construction of a residential complex
- C-267/15 (Gemeente Woerden) – Deduction all of the VAT paid in respect of the construction of building
- C-171/23 (UP CAFFE d.o.o) – Judgment – Formation of a company to exploit VAT exemptions constitutes an abusive practice
ECJ Cases Pending
- C-527/23 (Weatherford Atlas Gip) – Questions – Refusal of the right to deduct if services are not used for taxable transactions
- C-726/23 (Arcomet Towercranes) – Questions – Are Transfer Pricing Settlement invoices a Supply of Services?
- C-808/23 (Högkullen) – Questions – Taxable amount of services provided by a parent company to its subsidiaries
- C-603/24 (Stellantis Portugal) – Questions – Does “supply of services” include contractual vehicle sale price adjustments?
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