Report on the functioning of the European carbon market of 18 November 2015 invokes following circumstances as regards the fiscal treatment of emission allowances issued and traded under rules of the European Union Emission Trading Scheme (EU ETS):
- a low number of the EU Member States reported that value added tax (VAT) applies to the issuance of emission allowances;
- emission allowances are subject to VAT as they are a taxable supply of services;
- VAT is being due on transaction of emission allowances on the secondary market in 24 Member States;
- a majority of the EU Member States reported on the application of the reverse-charge mechanism on transactions involving emission allowances (the reverse charge moves the responsibility for the payment of the VAT transaction from the seller to the buyer of a good or service);
- emission allowances for corporations can additionally be taxed, sixteen EU Member States reported that there was no taxation on emissions allowances or corporate emission allowances.
Report of 23 November 2017 from the Commission to the European Parliament and to the Council, Report on the functioning of the European carbon market (COM(2017) 693 final (p. 30) provides the following updates in the pertinent area:
- only three EU Member States report that VAT applies to the issuance of emission allowances;
- in contrast, VAT is due on transaction of emission allowances on the secondary market in most participating countries (all except CY, EE, IS, LI);
- the majority of countries report that they apply the reverse-charge mechanism on domestic transactions involving emission allowances;
- emission allowances for corporations can additionally be taxed (e.g. via the application of a corporate tax or a corporate income tax), fifteen EU countries reported that there was no such taxation.
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