News - tax cases

Illegal scheme

Austrian turnover tax law gives a right to international passenger transport providers not established in Austria and with a turnover of under €22 000 not to submit invoices in respect of services provided in Austria and instead to claim as deductible input tax a sum equal to 10% of their turnover on those services. The result was that providers were exempt from VAT since passenger transport services were taxed at 10%.
The European Commission claimed that Austria was in default of its obligations under the Sixth Directive. The Austrian Government said that the scheme was permitted by virtue of article 24. This article allows states which find it difficult to apply VAT in the normal way to small undertakings to apply a simplified procedure.
The European Court of Justice said that three criteria had to be satisfied for article 24 to apply:

• the scheme had to...