VAT on charges for the breach of parking conditions

The European Court of Justice held in the case C-90/20 (Apcoa Parking) that penalties and other fees levied in the event of failure by the motorists to comply with the terms and conditions for use of private car parks are subject to value added tax (VAT). According to the Court, the charge payable when a car is parked in a parking space in breach of the terms and conditions for use of the car park is subject to VAT in the same way as a normal parking service. The dispute arose because a Danish company, managing car parks situated on private land, argued that the charge for the infringement of the terms and conditions for use of the car park was penalty under Danish law and should not be subject to VAT. A similar approach has been applied also in Estonia.

The Court reasoned that surcharge (incl. contractual penalties) levied by a company, tasked with the operation of private car parks, in the event of failure by the customer to comply with the standard terms and conditions for use of those car parks must be regarded as consideration for a supply of services and, as such, subject to VAT. A supply of services is carried out ‘for consideration’ if there is a legal relationship between the provider of the service and the recipient, expressed in a link between the service supplied and the consideration received. This is a consideration for the provision of a parking space and this is also the case if the driver chose to make excessive use of it and which in this case gives rise to an increased fee.

The Tax and Customs Board has issued a guideline to VAT payers, operating private car parks in Estonia to bring their VAT calculation into line with this court decision as soon as possible, but no later than on 1 January 2023.

The position of the Estonian Tax and Customs Board is available here (in Estonian).

Further information: Tax Advisor Merike Oja,

Submission of a printout of a personal bank account, using two court decisions as examples

In two recent cases, the tax authority requested statements of personal bank accounts to understand and verify the content of transactions.

In administrative case No. 3-21-362, the appellant considered the tax authority's order disproportionate because, according to the appellant, the tax authority failed to sufficiently justify why it was not possible to collect evidence in a way that would be less detrimental to the appellant's privacy and to ask for information for example in a limited form, instead of an unfiltered printout of the bank account. However, the tax authority stressed that one way to ensure the reliability and truthfulness of the certificate is to ask for an unfiltered printout of the bank account. The Tallinn Administrative Court upheld the tax authority's position and dismissed the appeal, but the Tallinn Court of Appeal disagreed with these opinions.

The Court of Appeal allowed the appeal and stressed that in this particular dispute it was also possible for the tax authority to verify the transactions by requesting a statement of only the appellant's income and cash withdrawals in order to establish when the cash was withdrawn. The Court of Appeal concluded that, because the tax authority required with its order more information than was actually needed in the case, the order of the Tax and Customs Board (TCB) was disproportionate.

In administrative case No. 3-20-2132, the appellant found that the required bank statements and questions about transactions could not provide the tax authority with sufficient information to assess what transactions were involved. The Tallinn Administrative Court dismissed the appeal and confirmed that the tax authority has the right to decide what evidence needs to be collected in tax proceedings. The appellant then pointed out that the transactions were made for personal reasons which he did not wish to disclose to the tax authorities.

Contrary to the case described above, in which the TCB requested unfiltered statements for a longer period of time, here the tax authority asked for statements for only three months. Therefore, the TCB found that the interference with the appellant’s private life was proportionate. The TCB also mentioned that the tax authority has an obligation to maintain tax and banking secrecy and that personal data received from the appellant can only be processed for the purpose for which it was collected.

Unlike the final decision in the previous case, the Tallinn Court of Appeal in this case took a view that the tax authority is entitled to request information and documents inter alia from third parties, in order to establish the facts relevant to the tax proceedings, and the appeal was therefore dismissed.

The decisions are available here and here (in Estonian).

Further information: Tax Advisor Einar Rosin,


Determination of the payable amount of tax by estimation

Supreme Court judgment No. 3-20-678 concerns determination of the turnover by estimation. Although the court cannot prescribe the methodology on the basis of which the tax authority may determine the tax, in such a situation the burden of proof transfers to the company and it must be able to show that the methodology for calculating the tax amount is incorrect.

The court decision concerned a tax decision made against a company, according to which the turnover declared during the control period did not correspond to the reality and the documents submitted in the tax proceedings were incomplete, contradictory and confirmed the existence of hidden turnover. The company had not kept the necessary cashier program reports or sales data. The Tax and Customs Board (TCB) concluded that the prices of card payments were significantly higher on invoices paid for in cash than those stated in the price list. Also, the amounts reported in cash invoices were below cost price and did not correspond to the company's price class. The TCB found that the cash invoice data had been altered and reduced in order to reduce the turnover to be reported.

When comparing the prices, the TCB used the method of comparison and analogy and proceeded from the identified reliable proportion of cash compared to the proportion of cash turnover at the company's other points of sale.

The Chamber of the Supreme Court took a view that the tax authority did not err in choosing the methodology in violation of subsection 94 (2) of the Taxation Act. In accordance with this provision, estimation shall be based on the information collected in a matter, as well as on the business indicators and expenditure and comparisons with information ascertained in other similar tax matters. Therefore, the burden of proof transferred to the company that was the subject of the tax decision. As the company had not demonstrated that the amount of the tax was determined incorrectly, its appeal was dismissed.

The decision is available here (in Estonian).

Further information: Tax Advisor Merike Oja,