The influence of international accounting standards in the field of VAT: a recent ECJ judgment and its impact on VAT practice

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The influence of international accounting standards (IAS), now known as IFRS (International Financial Reporting Standards), on the question whether certain operations fall within the scope of VAT may be surprising at first sight. Indeed, they are supposedly two distinct disciplines, two autonomous sets of rules with diverging scopes: IFRS apply primarily to consolidated accounts of publicly traded companies, while VAT applies to taxable persons undertaking economic activities. Until recently, this assumption seemed uncontroversial as far as the tax and accounting community was concerned—to such a degree that the question of a possible influence of IFRS on VAT did not even occur. Nevertheless, a recent decision of the European Court of Justice (ECJ) dated 16 February 2012 stirred up trouble between these two sets of rules. In this ruling the ECJ developed an argument, based on IAS 17, concerning leasing agreements, to render an operation which would usually be analysed as a supply of services, as a supply of goods under the VAT Directive. Is it possible that this is a stand-alone case, which we could call a 'glitch' or a 'case-law mishap'? Or is it the beginning of a new trend, where VAT practitioners will systematically search IFRS to find a practical solution to a harmonised interpretation of VAT at the European level, based on an economic approach as opposed to a more legal approach, as it currently stands? The aims of this article are to analyse the aforementioned ruling, to assess the consequences of a generalised application of the IFRS rules in VAT law, and, finally, to show the intrinsic limits of such an approach. To better understand the importance of this ruling and its potential application to IFRS, this article also provides a reminder of the VAT harmonisation process and its difficulties, and outlines the importance of the connection between the VAT declaration process and the accounting principles of LuxGAAP.

Document Type: Research Article


Publication date: December 1, 2012

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  • The importance of VAT/GST in all the leading developing nations cannot be overestimated. The volume of case law and legislation pertaining to VAT has grown enormously in recent years, with a corresponding increase in interest in VAT among practising lawyers, policy-makers and academic commentators. It is therefore all the more surprising that hitherto VAT has not been the subject of the sustained attention that a Journal is able to provide. It is with this in mind that an international team of experts has assembled to provide a forum for the systematic analysis of current developments in VAT law. The Journal is intended to become the primary source of informed comment and analysis among European practitioners and scholars, and a vital source of information and discussion at the international level. It will be an essential resource for leading accountancy and law firms, scholars of VAT and tax law in Europe and worldwide, European institutions, national tax courts, and practising lawyers specialising in this area. The journal will consist of an editorial, articles (2-3 longer articles and 2-3 short articles), current developments, case reports, documentation and book reviews.

    The World Journal of VAT/GST Law is a peer-reviewed journal. For information about the peer-review process and requests for evidence of peer-review please contact the General Editor or Hart Publishing.

    The World Journal of VAT/GST Law is an online journal but printed copies are available upon request.
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