CJEU – Recent Developments in Value Added Tax 2021

S. 1041. Introduction

Timing is an indispensable element of all taxes, including a value-added tax (VAT) or a goods and services tax (GST), as it is called in some jurisdictions, such as Australia. Unlike an income tax, VAT, as a tax on final consumption, is generally imposed on transactions before consumption takes place. There are exceptions where certain transactions are taxed when consumption occurs, such as on-the-spot performance or entertainment. From an economic perspective, VAT is implemented with a prepayment system via the proxy of transactions to ensure this tax is ultimately applied to consumption. This is to overcome the cumbersome problem of actually taxing consumption each time when goods or services are consumed over a period of time. By taxing the present value of the goods or services supplied to the customer, VAT is imposed on future consumption. The tax is, thus, prepaid on the present value of future consumption that would be paid over the life of purchase, if the customer actually paid the tax at the time of consumption. It is because of the feature that the VAT is considered predictive.

VAT liability may be affected by events occurred after completion of a transacti...