Unholy row over Spanish Church's VAT loophole

16th December 2005, Comments 0 comments

16 December 2005, BRUSSELS — The European Commission has threatened to take Spain to court if does not end a tax loophole which allows the Roman Catholic Church to evade paying millions of euros in VAT.

16 December 2005

BRUSSELS — The European Commission has threatened to take Spain to court if does not end a tax loophole which allows the Roman Catholic Church to evade paying millions of euros in VAT.

In Spain, supplies of "immovable and movable goods" related to religious activity that are made by traders to the Catholic Church are exempt from VAT.

But the EC wants Spain to come into line with the rest of Europe and to close this loophole.

Under an agreement signed in 1979, Madrid exempted the Church from paying VAT, saving it millions of euros.

But the EC claims it flouts European law and threatens to take Madrid to the European Court of Justice if nothing is done within two months.

However, the Spanish authorities claim the exemption was made in an agreement between Madrid and the Vatican.

They say it was an international agreement concluded prior to the accession of Spain to the EC and that the exemption is therefore covered by EC law.

This law says rights and obligations arising from pre-accession international agreements concluded by a Member State with a third country are not affected by the EC Treaty.

But the EC claims countries are obliged to change laws to bring them in line with EC law.

Spain could compensate the Church if it is forced to close the loophole.

[Copyright EFE with Expatica]

Subject: Spanish news

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