(1)

The financial service industry makes an important contribution to growth, competitiveness and job creation but can fulfil its role only under neutral conditions of competition in an internal market. It is necessary to provide a framework which provides legal certainty as to the value added tax (VAT) treatment of financial products and their marketing and management.

(1)

The financial service industry makes an important contribution to growth, competitiveness and job creation but can fulfil its role only under neutral conditions of competition in an internal market. It is necessary to provide a framework which provides such neutral conditions in regard to the value added tax (VAT) treatment of financial products and their marketing and management.

(2)

The existing rules governing the exemptions from VAT for financial and insurance services laid down in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax are out of date and have led to uneven interpretation and application. The complexity of the rules and the variation in administrative practices generates legal uncertainty for economic operators and tax authorities. This uncertainty has led to considerable litigation and has increased the administrative burden. It is therefore necessary to clarify which insurance and financial services are exempt and thereby create greater legal certainty and reduce the administrative burden for operators and authorities.

(2)

The existing rules governing the exemptions from VAT for financial and insurance services laid down in Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax are out of date and have led to uneven interpretation and application. The complexity of the rules and the variation in administrative practices generates legal uncertainty for economic operators and tax authorities and fails to secure a level playing field in the EU . This uncertainty has led to considerable litigation and has increased the administrative burden. It is therefore necessary to clarify which insurance and financial services are exempt and thereby create greater legal certainty and a level playing field in the EU and reduce the administrative burden for operators and authorities.

(5)

Insurance services and financial services require similar forms of intermediation. It is therefore appropriate for intermediation in insurance and intermediation in financial services to be treated in the same way.

(5)

Insurance services and financial services require similar forms of intermediation. It is therefore appropriate for intermediation in insurance and intermediation in financial services to be treated in the same way , including intermediation by an agent who has neither a contractual relationship nor any other direct contact with any of the parties to an insurance or financial transaction to whose conclusion the agent has contributed. In such cases the tax exemption should uniformly cover all activities that are typical of an insurance or financial services agent, including all activities preparatory and subsequent to concluding a contract .

(5a)

(7)

Suppliers of insurance and financial services are increasingly able to allocate input VAT on costs incurred by them precisely to the output to be taxed. Where the services they supply are fee-based, they can establish the taxable amount for these services easily. It is therefore appropriate to extend the possibility to opt for taxation for such operators.

(7)

Suppliers of insurance and financial services are increasingly able to allocate input VAT on costs incurred by them precisely to the output to be taxed. Where the services they supply are fee-based, they can establish the taxable amount for these services easily. It is therefore appropriate to extend the possibility to opt for taxation for such operators , preventing any double taxation concerns that may arise by coordinating such taxation with national taxes on insurance and financial services .

(8a)

(a)

insurance and reinsurance;

(a)

insurance , including reinsurance;

(d)

exchange of currency and provision of cash;

(d)

exchange of currency , provision of cash and cash claims transactions ;

(e)

supply of securities;

(e)

transactions concerning trading in securities;

(ga)

(1)

‘insurance and reinsurance ’ means a commitment whereby a person is obliged, in return for a payment, to provide another person , in the event of materialisation of a risk, with an indemnity or a benefit as determined by the commitment;

(1)

‘insurance’ means a commitment whereby one or more persons is or are obliged, in return for a payment, to provide one or more other persons , in the event of materialisation of a risk, with an indemnity or a benefit as determined by the commitment;

(8)

‘ supply of securities’ means the supply of tradable instruments other than an instrument establishing title to goods or to the rights referred to in Article 15(2), representing financial value and reflecting any one or more of the following:

(8)

‘ transactions concerning trading in securities’ means the sale of tradable instruments other than an instrument establishing title to goods or to the rights referred to in Article 15(2), representing financial value and reflecting any one or more of the following:

(c)

unit ownership in undertakings for collective investment in the securities referred to in points (a) or (b), in other exempted financial instruments referred to in points (a) to (d) of Article 135(1) or in other undertakings for collective investment;

(c)

unit ownership in investment funds, as defined in point 10, or in undertakings for collective investment in other undertakings for collective investment;

(ca)

(9)

‘intermediation in insurance and financial transactions’ means the supply of services rendered to, and remunerated by, a contractual party as a distinct act of mediation in relation to the insurance or financial transactions referred to in points (a) to (e) of Article 135(1), by a third party intermediary ;

(9)

‘intermediation in insurance and financial transactions’ means the supply of services rendered as a distinct , direct or indirect act of mediation in relation to the insurance or financial transactions referred to in points (a) to (e) of Article 135(1), by third-party intermediaries, provided that none of the intermediaries is a counterparty to those insurance or financial transactions ;

(10)

‘investment funds’ means undertakings for collective investment in the exempted financial instruments referred to in points (a) to (e) of Article 135(1) and in real estate ;

(10)

‘investment funds’ means specially constituted investment vehicles created for the sole purpose of gathering assets from investors and investing those assets in a diversified pool of assets, including pension funds and vehicles used to implement and execute collective pension schemes ;

(11)

‘management of investment funds’ means activities aimed at realising the investment objectives of the investment fund concerned.

(11)

‘management of investment funds’ means activities aimed at realising the investment objectives of the investment fund concerned and shall include at least strategic and tactical asset management and asset allocation, including advisory services, as well as currency and risk management .

(3)

(1)

the group itself and all its members are established or resident in the Community;

(1)

the group itself is established in the Community;

(3)

members of the group are supplying services which are exempt under Article 135(1)(a) to (g) or other services in respect of which they are not taxable persons;

(3)

members of the group are supplying services which are exempt under Article 135(1)(a) to (ga) or other services in respect of which they are not taxable persons;

(4)

the services are supplied by the group only to its members and are necessary to allow members to supply services which are exempt pursuant to Article 135(1)(a) to (g);

(4)

the services supplied by the group are necessary to allow members to supply services which are exempt pursuant to Article 135(1)(a) to (ga);

(5)

the group claims from its members only the exact reimbursement of their share of the joint expenses , excluding any transfer-pricing adjustments made for the purposes of direct taxation.

(5)

the group claims from its members only the exact reimbursement of their share of the joint expenses ; transfer-pricing adjustments made for the purposes of direct taxation shall not affect the group's exemption from turnover tax .

(4a)