5.6.0 Inleiding

In this subsection I analyse the effects of the CJEU’s rulings and the (perceived) problems created by them, by addressing the specific elements in a chain of transactions that are affected by these rulings. I have included a description of the local rules from two EU Member States with regard to the application of these rulings, to see how these issues are dealt with practically at a local level within the EU.

First, the rulings affect the taxable amount for the supplies made by the business granting the ‘discounts’ or ‘rebates’ under the ‘money off scheme’ and the ‘cash back scheme’. As a result of the rulings, this taxable amount is reduced by the amount paid under either scheme (by an amount of 4 in the below examples).1

Second, none of the transactions in a chain that exist between the entity receiving and the entity paying ‘discounts’ or ‘rebates’, are affected by the schemes.2

Third, as part of the second point but only applicable to the ‘money off scheme’, the retailer’s taxable amount to the final consumer is the full retail price, namely the price paid by the final consumer plus the amount reimbursed to the retailer by the manufacturer (an amount of 200 in the below examples).3

Last, where the final consumer is a taxable business that is entitled to deduct VAT and that uses the goods for its business, according to the CJEU the deduction should be based on the amount charged by/paid to the retailer less the reimbursed amount because, effectively, the CJEU is of the view that this final consumer is granted a discount, which is a ‘price reduction’ obtained by that consumer (the ‘final’ deducted VAT amount is 36 in both examples below).4,5 This would be different if the payment made by the manufacturer would only be considered a ‘third-party payment’ and not (also) a discount. I will elaborate on this below.

The above can be illustrated in a diagram (in which, unlike in the prior examples, the final consumer (C) is a fully taxable business that uses the goods for its taxed business purposes) as follows:

At first sight, the adjustment of C’s initial VAT deduction in Diagram C may appear strange, because R made a supply to C of 240 (200 + 40 VAT) and R does not grant C a subsequent rebate, nor does he issue a credit invoice for part of the sales price. However, as mentioned above, in the Commission v. Germany case6, the CJEU held that “(…) where the final consumer is a trader authorised to make deductions who uses the goods in his business, any over-deduction resulting from subsequent reimbursement of a voucher may be avoided by adjusting the deduction of input tax effected in respect of that final consumer in accordance with Article 20(1)(b) of the Sixth Directive (Art. 185(1) of the EU VAT Directive, JB), which provides for the adjustment of deductions made initially in the case of a change in the matters taken into account in determining the amount of deductions occurring after the declaration has been made. Compliance with the duty to adjust deductions may be ensured in that case as well by accounting checks in respect of both the final consumer and the manufacturer”.

I will not repeat the principal problem I have with these rulings but focus on the particular issues one by one. I will first focus on issues relating to an entirely domestic chain of transactions. After that I will analyse issues related to cross-border transactions.