1. VAT Sharing Systems in Europe Gottfried Schellmann

2. 2 Constitution – Federal Concepts Belgium Art 1 of the Belgium Constitution; Belgium is a Federal State made up of Communities and Regions Germany Art 20 of the German Constitution; the Federal Republic of Germany is a democratic and social Federal State Austria Art 2 of the Austrian Constitution; Austria is a Federal State

3. 3 Constitution – Federal Concepts Switzerland Art 1 of the Swiss Constitution; The Citizens of Switzerland and the Kantons for the Swiss Confederation. Other Member States have no federal concept

4. 4 Revenue sharing of VAT proceeds Switzerland No revenue sharing concept; proceeds of VAT may only expensed by the State; 5% of the revenues have to be spent for the benefit of less wealthy citizens. Any MS pays his share pursuant to Art 2 (1)(c) of the Council Decision of 29 September 2000 on the system of the European Communities own resources (2000/597/EC, Euratom); ceiling of 0.5 percent of the basis

5. 5 Revenue sharing of VAT proceeds Belgium The revenue sharing rules provide that proceeds of VAT have to be divided between the Federal and the Walloon and Flemish Region (Sec. 2 of the law of 16 January 1989). Austria Revenue sharing rules provide a participation of each of the territorial bodies. The percentage is 73,204% for the State, 15, 191 % for the Länder; 11,605 % for municipalities (§ 9 (1) of the law of 30 December 2004).

6. 6 Revenue sharing of VAT proceeds Germany, Revenue sharing rules provide 5,63% percent upfront for the Federal and from the reduced basis 2,2% for the Municipalities; the remainder has to be shared 50,5%: 49,5% between the State and the Länder (§ 1 of the law from 20. December 2001).

7. 7 Refund system Many MS compensate regional bodies like municipalities for suffered VAT (e.g. UK, The Netherlands, France, Finland, Sweden, Denmark; Austria for health service sector). UK reimburse incurred VAT of local government bodies. Museums and galleries are within the scope of the refund procedure as well as the National Health Service bodies. Additionally, incurred VAT in connection with incidental acitivities, which are exempt, are also eligible for a refund.

8. 8 Refund system Technical approach Technical approach While UK govern its refund concept within the VATA (Sec 33(1), 33(2) 33A and 41(3)), but outside of the scope of VAT, Austria, for instance provide any refund for the healthcare system totally outside of VAT legislation out of the regular funds. Historically, Austria was allowed to continue its concept of zero rating health care services until the end of 1996. However, transitional rules where considered to be State Aid (ECJ C-172/03 Heiser).

9. 9 Outsourcing Capital Expenditures Buildings: If lease fees are recoverable within the scope of a refund system, no further opportunity If recovery system is not implemented, it depends on whether the lessor is entitled to opt for VAT or not; most of the MS require that the lessor must be entitled for a input deduction (e.g. Germany)

10. 10 Outsourcing Outsourcing of services (e.g. IT services) Framework of Art 13A (1)(f) available to a limited extent, requires minimum two participants, cost ceiling, Not totally in line with procurement law (ECJ C-26/03) Not implemented in many MS For PPP models not eligible, because outside parties are not considered as referenced bodies