CJEU – Recent Developments in Value Added Tax 2015

I. S. 136VAT and Direct Taxes in the EU

Besides the distinct nature and purpose of both taxes, value added tax (VAT) and direct taxes have also been treated differently within the EU legal system from the very beginning. Harmonization of national VAT rules was considered as indispensable to ensure the establishment and the functioning of the EU internal market. Therefore, indirect taxes (including ‘turnover taxes’) were (and are still) explicitly mentioned in the provisions of the EEC Treaty/EC Treaty/TFEU. A special legal basis for the harmonization of laws with respect to VAT can be found particularly in Art. 113 TFEU. In contrast, direct taxes are not specifically addressed by the EU Treaties and are only encompassed within the general harmonization provision of Art. 115 TFEU. Member States were and continue to be reluctant to relinquish national tax sovereignty in the area of direct taxes. The different standard with respect to sovereignty of Member States is also emphasized by the fact that, for harmonization of VAT, all forms of secondary law (in particular also regulations having direct effect) may be utilized; in contrast, harmonization of direct taxes is limited to the use of dir...