CJEU – Recent Developments in Value Added Tax 2020

S. 481. Introduction

Both from a conceptual and a practical perspective, the EU VAT treatment of financial services has been less than ideal. Financial services are notoriously difficult to tax under any VAT or VAT-like tax on consumption or expenditure. Exemptions without credit are distortive and an infringement on the broad-based nature of EU VAT. These two characteristics have made the EU VAT treatment of financial services to be a source of legal uncertainty, cause for litigation, and an administrative burden for taxpayers and tax administrations alike. On top of that, since the 1970s’ introduction of the current rules for financial services in EU VAT, the financial services industry has radically changed from a local money market to an integrated global power of haute finance that most recently finds itself in a tech-fuelled state of reinvention. In this light, over the last 30 years, the Court of Justice of the European Union (CJEU) has faced the challenging task of gluing the changing landscape and increasingly outdated rules together. As a result, the case for modernization of the EU VAT treatment of financial services seems simple enough. However, a 2007 attempt at such moderni...