November was another busy month for the European Commission, which is taking action against a number of Member States for various breaches of EU law. According to the Commission, France and Latvia have failed to correctly transpose the Directive on Administrative Co-operation while Cyprus and Italy have breached aspects of the VAT Directive, and a provision of Greece’s inheritance tax laws is an obstacle to the free movement of capital.

France and Latvia – Directive on Administrative Cooperation

The Commission has requested France and Latvia to fully transpose the Directive on administrative cooperation into national law. This Directive contains measures to increase transparency, improve information exchange and tighten cross-border cooperation for the purposes of countering tax evasion.

Member States were legally obliged to apply this Directive from 1 January 2013, but according to the Commission, France and Latvia have not yet notified their complete transposition of the new rules. In the absence of a satisfactory response within two months, the Commission may refer the two countries to the EU’s Court of Justice.

Cyprus and Italy – VAT Directive

The Commission has formally requested Cyprus to transpose EU rules on VAT invoicing into national law. New rules regulating VAT invoicing entered into force on 1 January 2013. Member States were obliged to transpose this Directive by the beginning of 2013, but Cyprus has not notified the Commission of any measures it has taken to do so. The request is in the form of a Reasoned Opinion.

The Commission has formally requested that Italy bring its national tax rules for ancillary costs of import such as transport and insurance, into line with the EU’s VAT Directive. Under EU law, ancillary costs of import, especially transport costs, should be included in the tax base of the import and exempt from VAT until they reach their first destination. According to the Commission, under Italian law this VAT exemption for ancillary costs is only granted if these costs have already been taxed at the border and is therefore not in line with EU rules. The request is in the form of a Reasoned Opinion.

Greece – Inheritance Tax Provisions

The Commission has requested Greece to change two discriminatory inheritance tax rules. The first relates to a tax exemption which Greek law allows on real estate inheritances which is only given to EU nationals who reside in Greece and who do not own a primary residence. The Commission considers this to discriminate against EU and EEA nationals residing outside Greece, and is therefore an obstacle to the free movement of capital as set out in the Treaties. The second request relates to a discriminatory provision whereby Greece allows a preferential tax rate for bequests to non-profit organisations in other EU/EEA States, solely on condition of reciprocity. The Commission considers that applying a condition of reciprocity results in discriminatory treatment that is an obstacle to the free movement of capital. The Commission’s requests take the form of Reasoned Opinions.