Rækkevidden af momsfritagelsen af sikkerheds- og garantistillelse

Monica Frese Hansen

Student thesis: Master thesis

Abstract

This thesis concerns the VAT treatment of credit guarantees and other security for money. The principle objective of this thesis is to analyze and interpret the scope of the VAT exemption for credit guarantees and other security for money in the provision in Article 135(1)(c) of the VAT Directive (2006/112/EC) in order to describe the law as it exists – de lege lata. The thesis is commenced with an introduction to the EU VAT system, its nature and its inherent characteristics, including the complex of problems arising from having VAT exemptions in a VAT system with the purpose of setting the proper context for the analysis of the present thesis. In this commencing chapter also the aim of the thesis, the subjects covered and the limits to the study are outlined. This is followed by a chapter concerning the methodological considerations, the sources of the law and the principles of interpretation applied by the European Court of Justice. Here the method of jurisprudence takes both a Danish national law perspective and an EU law perspective, which is due to the supremacy and direct effect of the EU law along with the EU member states’ obligation to interpret the national laws in conformity with the EU law. The different aspects of the Danish national sources of law and the EU sources of law which are relevant for the present thesis are described in the succeeding section. The chapter is concluded with an examination of the principles of interpretation applied by the European Court of Justice and includes both the general principles of interpretation and the principles of interpretation that particularly relates to the interpretation of VAT legislation. The next chapter of the thesis concerns the VAT exemption for credit guarantees and other security for money. This chapter begins with a description of the history and purpose with the VAT exemption for credit guarantees and other security for money, where the exemption can be traced back to the adoption of the sixth directive (77/388/EEC), and where the purpose of the VAT exemption is found to be avoidance of an increase in the costs of consumer credit and alleviation of the difficulties connected with determining the taxable amount in financial transactions. From this, the implementation of the VAT exemption provision in the Danish VAT Act is analyzed and it is concluded that the provision has been implemented correctly despite linguistic differences. This is followed by an analysis of the European Court of Justice’s rulings in the cases C-455/05, Velvet & Steel, and C-242/08, Swiss Re, which both concern the provision in Article 135(1)(c) in the VAT Directive. Also the ruling in case C-266/01, TIARD, is analyzed despite the fact that this ruling does not concern the interpretation of VAT legislation. The ruling has been considered relevant for the aim of the present thesis, because the European Court of Justice in the ruling pronounces a definition of a “credit guarantee” in an EU law perspective. This is succeeded by a section of the immediate scope of the VAT exemption and covers the scope of the dealings in credit guarantees and other security for money, the scope of the negotiation of credit guarantees and other security for money and the scope of the management of credit guarantees by the person who is granting the credit as lined out in the provision in the Article 135(1)(c). Hereafter other relevant provisions in the Danish national legislation are analyzed, where particular the legislation concerning the payroll duty is relevant, as this duty only applies to transactions exempt from VAT. This chapter is terminated with a short description of the EU Commission’s proposal to amend the VAT Directive (COM(2007) 747, final) and proposal for a new regulation (COM(2007) 746, final). In the succeeding chapter the different variations and instruments to secure financial obligations are examined and evaluated with the purpose of determining their VAT treatment. Here different guarantees, mortgaging, letters of comfort, credit insurances and credit derivatives are analyzed, where the relevant transaction is identified as the transaction, where security is provided against consideration and not the transaction where the security might be effectuated. If the security is provided without consideration, then the transaction falls outside the scope of VAT, and the transaction is not subject to VAT nor payroll duty. The result of the analysis is that only guarantees for pecuniary obligations fall within the scope of the VAT exemption for credit guarantees and other security for money contrary to guarantees originating from supplies of goods and services. The same applies for security in the form of mortgaging. It is also found that when it comes to letters of comfort, then a distinction needs to be made between those comfort letters, which are legally binding and those which are only binding in honor, where only the former falls within the scope of the present VAT exemption. Regarding the credit insurances, these seem to both fulfill the requirements to fall within the scope of the present VAT exemption and also within the scope of the VAT exemption for insurance transactions. Thus, there is an overlap of the application of the two different VAT exemptions. Concerning credit derivatives, credit default swaps are analyzed and the result hereof is that these do not fall within the scope of the VAT exemption for credit guarantees and other security for money. However, these might be exempt according to the provision in Article 135(1)(f) in the VAT Directive regarding transactions in securities. The continuing chapter is an analysis of the consequences associated with falling inside and outside the scope of the VAT exemption, respectively along with the consequences of falling outside the scope of VAT. This analysis is based on an example, where a company member, who is regarded as a taxable person, receives consideration for joining the company as a member with unlimited liability. In this scenario the characteristic of the transaction does not seem straight forward. If the transaction is regarded as being VAT exempt security for money, then the consequences are that the transaction is not subject to VAT, but to payroll duty. Furthermore the company member will only be entitled to partial VAT deductions. If the transaction on the other hand, qualifies as a supply of administration and management for consideration, then the transaction is subject to VAT and not to payroll duty. Also, the company member will not incur any limitations to the right to deduct input VAT arising from this transaction. Lastly, if the transaction qualifies as a consideration only obtained in the capacity of being a company member, then the transaction is similar to dividends on shares, and the transaction falls outside the scope of VAT, with the result that no VAT or payroll duty liability will arise. The chapter is terminated with the qualification of the transaction as falling within the last category. The next chapter of the thesis contains the conclusion of the thesis, which to a large extent mainly is an executive summary of the thesis. In the last chapter a broader perspective on the issues relating to the VAT exemption for credit guarantees and other security for money is given from both a judicial and economical perspective.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2013
Number of pages87