On Wednesday, 25 November 2015, SKAT published two new control signals (SKM2015.733.SKAT and SKM2015.734.SKAT). The control signals are published in continuation of two cases, C-464/12 (ATP PensionService A/S) and C-94/10, (Danfoss and Sauer-Danfoss), which have set aside SKAT's previous practice. The control signals describe the rules and the procedure for resumption and recovery of VAT collected contrary to EU law and affect both pension funds etc. and companies, which might have made deliveries to pension funds, which are exempt from VAT according to the case law of the European Court of Justice (the "ECJ").

SKM2015.734.SKAT - APPLICATION FOR RESUMPTION FOR THE PURPOSE OF REPAYMENT BASED ON SKAT'S CHANGE OF PRACTICE

SKAT acknowledges in the control signal that pension funds etc. may be considered ”investment funds” covered by the VAT exemption in section 13 (1), no. 11, paragraph of the VAT Act, and that all the services provided specifically by ATP PensionService A/S to pension funds etc. constitute ”management” of ”investment funds".

The consequence is that all the services which have specifically been provided by ATP PensionService A/S to pension funds etc. are to be VAT-exempt financial services covered by section 13 (1), no. 11, paragraph f of the VAT Act. This sets aside SKAT's previous practice where pension funds were not considered to be covered by the concept "investment funds" within the meaning of the VAT Act.
SKAT further acknowledges in the control signal that all the services which have specifically been provided by ATP PensionService A/S to pension funds etc. shall also be considered VAT-exempt "transactions" concerning payments and transfers" covered by section 13 (1), no. 11, paragraph c.

SKAT hereby confirms that this type of services will be VAT-exempt, notwithstanding who they are provided to as the VAT position of the recipient of the service is of no importance to the application of section 13 (1), no. 11, paragraph c of the VAT Act. This also sets aside SKAT's previous practice as SKAT, prior to the ECJ's decision, did not acknowledge that the services could be exempt from VAT under section 13 (1), no. 11, paragraph c, of the VAT Act.

The ECJ's setting aside of SKAT's previous practice enables affected companies which have either provided or received services covered by the control signal to apply for a resumption of the VAT liability for previous settlement periods according to the rules on extraordinary resumption, cf. section 32 (1), no. 1 of the Tax Administration Act.

Tax-liable entities - i.e. suppliers - may, provided that the VAT cannot be considered finally passed on to the buyers - apply for a resumption back to the beginning of 2004 as the resumption applications are only limited in time by the 10-year limitation period in section 34 a (4), counted from the time of the ECJ's decision of 13 March 2014. The application for resumption must be submitted to SKAT within six months of the publication of the control signal, 25 November 2015, i.e. no later than 24 May 2016.

Subsequent distributors/buyers (i.e. pension funds etc.), which have ended up carrying the financial burden of the VAT due to passing on from the supplier may make a claim for repayment against SKAT. However, according to the control signal, claims from subsequent distributors/buyers are time-barred already after three years; however, counted from 11 September 2014 when SKAT suspended the time-barring. Claims for repayment from subsequent distributors/buyers must be submitted to SKAT within three months of the publication of the control signal, 25 November 2015, i.e. no later than 24 February 2016.

As far as both tax-liable entitles and subsequent distributors/buyers are concerned, a reduction must be made in the claim for repayment of the derived tax savings realised due to the VAT liability on the services, including exemption from payroll tax and deduction of input VAT on products.

On recovery, the claim for repayment must be capable of being documented via relevant accounting records (as listed in the control signal) and other relevant bookkeeping material, which in the company's opinion may contribute to documenting the claim for each VAT period.

SKM2015.733.SKAT - SKAT'S GUIDELINES FOR REPAYMENT OF AMOUNTS COLLECTED CONTRARY TO EU LAW

While the control signal in SKM2015.734.SKAT specifically addresses recovery relating to the ECJ's decision in C-464/12 (ATP PensionService A/S), the control signal in SKM2015.733.SKAT contains more general guidelines for recovery of tax amounts collected contrary to EU law based on the ECJ's decision in C-94/10 (Danfoss and Sauer-Danfoss) and the subsequent judgment by the Western High Court of 3 April 2013 (SKM2014.44.VLR).

The primary purpose of the control signal is to specify the fact that subsequent distributors/buyers who, due to passing on, have carried the economic burden of unlawfully collected taxes (including VAT) are able to raise a direct (civil) claim for repayment against SKAT. The ECJ's decision in C-94/10 (Danfoss and Sauer-Danfoss) set aside SKAT's previous practice as SKAT did not acknowledge before the ECJ's decision that subsequent distributors could raise a claim for repayment against SKAT.

According to the control signal, it will often not be the tax-liable entity, but rather subsequent distributors/buyers, who, due to passing on, end up carrying the economic burden of unlawfully collected taxes and in these situations it is the subsequent distributors/buyers who may raise a claim for recovery against SKAT.

Similar to the specific control signal concerning C-464/12 (ATP PensionService A/S), the general control signal assumes that different rules apply depending on whether the claim for recovery is raised either by the tax-liable entity or by subsequent distributors/buyers who have carried the economic burden due to passing on.

Provided that the VAT cannot be considered as having finally passed on to the buyers, direct tax-liable entities may apply for resumption of the tax liability for previous settlement periods according to the rules concerning extraordinary resumption, cf. section 32 (1), no. 1 of the Tax Administration Act. This implies that, subject to the ultimate 10-year limitation period in section 34 a (4) of the Tax Administration Act, a resumption may be applied for with regard to all the tax periods which were reviewed in the specific case, which resulted in dismissal of SKAT's previous practice. The resumption application must be submitted to SKAT within six months of the publication of the control signal announcing the dismissal of the previous practice.  

However, according to the control signal, claims for repayment from subsequent distributors/buyers are time-barred already three years after the date of the direct tax-liable entity's payment of the unlawfully collected tax.

As far as both tax-liable entitles and subsequent distributors/buyers are concerned, a reduction must be made in the claim for repayment of the derived tax savings realised due to the VAT liability on the services, including exemption from payroll tax and deduction of input VAT on products.

WHAT SHOULD I DO AS SUPPLIER OR BUYER COVERED BY THE CONTROL SIGNALS?

Irrespective of whether you are a supplier or a buyer of services which are or may be covered by the control signals, efforts should be made to protect yourself to best effect.

We therefore recommend, if this has not already been done, to make a claim for repayment against SKAT within the time limits, 25 February 2016 and 25 May 2016, as fixed in the control signals. The claim should be stated gross, i.e. without any reduction for consequential changes and for a period of 10 years.

SKAT must be expected to object to a gross statement and reject the part of the tax periods for subsequent distributors/buyers which lies before the three-year limitation period, i.e. which had become time-barred 11 September 2011. However, as it must be considered non-clarified at present whether the claim for a reduction for consequential changes and the assumed differential treatment of tax-liable entities and subsequent distributors/buyers is in accordance with EU law, a gross claim should nevertheless be stated for 10 years back in time to ensure that the legal right is not forfeited.

As the control signal in SKM2015.734.SKAT only considers the services which were specifically provided by ATP PensionService A/S in the matter considered by the ECJ, C-464/12 (ATP PensionService A/S), there is still uncertainty as to the scope of the concept ”management” in section 13 (1), no. 11, paragraph f of the VAT Act.

It must therefore be expected that SKAT will reject claims for recovery concerning a number of other services, which have been provided by sub-suppliers to either ATP PensionService A/S or directly to pension funds etc., which are now acknowledged as being VAT-exempt investment funds.

However, to ensure the best possible legal position, we recommend to include the following in the statement of a claim for recovery in addition to traditional asset management services:

(i) IT deliveries
(ii) accounting and administrative services and
(iii) marketing services

to the extent the said services are special or are of specific importance to pension activities and/or securities management.

NEED FOR ADVICE?

The content of the control signals gives rise to a number of considerations and problems with regard to delimitation. We therefore recommend seeking specific advice concerning the handling of this.

Horten's tax team has wide operational experience advising on the consequences of the ECJ's decision in C-464/12 (ATP PensionService A/S) as we have assisted a number of clients in the period until the control signals were published.   

We would be pleased to assist you with the handling of the process, including the identification of the pension funds etc. and services that will be covered by the VAT exemption, the preparation of statements of claims for repayment, the dialogue with SKAT and/or other buyers/suppliers in the sales circle.

contacts

Anne Becker-Christensen

Specialist Attorney