ECJ Judgement Puts Paid To Dutch Supermarket's VAT Minimisation Plan

by Ulrika Lomas, for LawAndTax-News.com, Brussels

14 July 2008

The European Court of Justice has ruled that the Dutch authorities have the right to prevent retailers from basing VAT payments on individual items in a transaction.

The ruling centred on the case of Dutch supermarket firm, Albert Heijn, which decided, on a trial basis, to depart from the normal practice of rounding VAT up or down on the entire transaction, and to perform this calculation per individual item, thereby reducing its VAT liability substantially.

Delivering its decision, the ECJ gave EU member states the right to come to their own decision with regard to such matters, meaning that the government of the Netherlands is within its rights to forbid the practice of rounding up or down on individual products.

The decision is expected to have implications for retailers in other EU member states, and the UK's HM Revenue and Customs commented that: "HMRC’s existing policy and published guidance are correct and therefore remain unchanged."

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