TAX NEWS - 2010

EU Tax: Reduced rate of VAT applied to legal services

The ECJ has concurred with ECJ Advocate General Jääskinen in infringement proceedings against France over the reduced rate of VAT applied to legal services funded wholly or partly out of the French legal aid budget.

Under French rules in effect since 1991, legal services paid for wholly or partly from the state's legal aid system are subject to a 5.5% reduced rate of VAT.

The European Commission challenged this practice on the grounds that the EU Member States may only apply a reduced VAT rate to goods and services listed in the VAT Directive and that list does not include legal services; instead, the standard VAT rate should apply.

The ECJ concluded the Commission's view that the reduced rating was not permitted by EU law was well founded.