Collective Commentary about the New Package Travel Directive

THE TAX IMPLICATIONS OF COMBINED TRIPS 605 to pronounce the Court of Justice of the European Communities in Judgment of June 12, 2008 (Fourth Chamber), Case of the Commission of the European Communities v Portugal (ECJ /2008/129). The purpose was to determine whether the application of a reduced rate of 5% since January 1, 1995 for existing tolls to cross the Tagus River through Lisbon, especially through the Basque Gama Bridge and the Bridge, was appropriate with the VAT Directive April 25th. Already between March 24, 1992 and December 31, 1994, the general rate of Portuguese VAT was applied. Before January 1, 1991, a reduced rate of 8% was applied, the type to which they were subject to highway tolls. The first thing to do is to determine if toll service should or shouldn’t be subject to this taxation. According to art. 4.5 of the Sixth Directive which states that “ States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions. However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as nontaxable persons would lead to significant distortions of competition. In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible ”. Well, according to the criteria of the Court in its sections 34 to 42, to determine the non-subjection of the provision of services in question, its exercise must be carried out by a public law body, performed functions in its capacity as public authority. When this activity is entrusted to an independent third party or is carried out by entities not integrated in the organization of the Public Administration, as an independent economic activity, the operation remains as subject. And so, in the case of the tolls in question, the provision of onerous services is provided by a consortium in the form of a limited company, whose owners are Portuguese, French and United Kingdom companies. In this situation, the toll operation on the access bridges to Lisbon is a subject of onerous service provision. The debate then focuses on whether the application of a reduced rate of 5% to tolls infringed art. 12, paragraph 3 letter a) of the Sixth Directive, as they are not incorporated in Annex H of the Directive. But art. 28, paragraph 2, of the Sixth Directive, establishes a transitional regime, allowing Member States that on January 1, 1991 were applying reduced tax rates not covered by Annex H could continue to apply the reduced rate or one of the reduced rates of Article 12 (3), provided it is not less than 12%. Regardless, the Judgment is clear, given that