Memorandum on the Allocation of Taxing Rights on VAT in the EU:Research Issues in Light of the Precedents of the Court of Justice of the European Union in the Era of the Sixth Directive

As a common predecessor to many VAT systems, we have referred frequently to VAT in the European Union (EU). It is natural that there are some aspects we should learn from and others we should not. Nevertheless, the position of VAT in the history of the EU is naturally shaped by the ideals pursued by the EU and its political context. This paper focuses on the distribution of the right to levy VAT among EU member states.In doing so, this paper examines trends in the Court of Justice of the European Union (CJEU), which is one of the actors that implements Community law. By reviewing and organizing its precedents, especially those concerning fixed establishments and transactions between head offices and branches, this paper aims to enrich the ground for discussing the design of a VAT system for multinational enterprises. Specifically, we will observe how the CJEU has dealt with the major theme of the allocation of taxing rights. Such work is not future-oriented, but rather retrospective, and thus does not bring any immediate recommendations into the context of Japanese law. However, we recognize several challenges in studying the taxation of VAT with respect to multinational enterprises. For example, questions such as which country has the primary right to tax cross-border corporations, or whether internal transactions among corporations can be considered from the VAT point of view, and so on. These questions highlight the need for research on the allocation of taxing rights across both income taxation and VAT.