Place of supply of storage services

Minister Finansów v RR Donnelley Global Turnkey Solutions Poland sp. Z o.o. (C-155/12)

Advocate General Kokott delivered his opinion in this case on 31 January 2013. The point at issue was whether the service of storing goods constituted a supply of property related services (the place of supply is where the property is located); or was the supply covered by the general business to business rule (the place of supply is where the recipient is established)?

The Court has ruled previously that in order for a service to be a property related service, there must be a “sufficiently direct” connection between the service and the property. The Advocate General opined that it was compelling to regard the actual storage of the goods as the principal supply and the admission, placement, issuing etc of the goods as ancillary supplies, on the basis that the latter are not an end in themselves, but are to facilitate the storage of the goods.

The Advocate General, in considering the place of supply, indicated that the Court should follow the proposal of the referring court that “a sufficiently direct connection between a service and immovable property should be found if specific immovable property is the subject matter of the service”. In summary, the AG indicated that the supply of storage services can display a sufficiently close connection with property “only if it is linked with a right to use a specific property or a specific part of a property. Only then is the subject matter of the service the immovable property itself”. If this link is not present, then the subject matter of the supply is merely the goods to be stored. The full judgment can be found by clicking here.

VAT Groups

European Commission v Ireland (C-85/11) – VAT Groups.

The ECJ published its decision on 9 April 2013 in this case which concerned the Irish VAT grouping rules, in particular, the admission of non-taxable persons as members of a VAT group. The EU Commission requested the Court to declare that Ireland failed to fulfill its obligations under the VAT Directive (Articles 9 and 11) by allowing non-taxable persons to be members of a VAT group.

The Court held that it could not be inferred from the words ‘as a single taxable person’ that Article 11 of the VAT Directive only allows a number of taxable persons to be dealt with as a single entity. The wording used relates to the outcome of the provision rather than being a condition of the provision. The Court held that “it is not apparent from the wording of Article 11 of the VAT Directive that non-taxable persons cannot be included in a VAT group”. To access the full judgment, click here.

Calculation of the deductible proportion of VAT

Le Crédit Lyonnais v Ministre du Budget, des Comptes publics et de la Réforme de l’État (C-388/11) 

The ECJ published its judgment in this case on 12 September 2013. Le Crédit Lyonnais sought to include the interest on loans granted by its principal establishment to its branches established outside France, in the numerator and the denominator of the deductible proportion in calculating its rate of input VAT recovery.

The Court found that “Article 17(2) and (5) and Article 19(1) of the Sixth Directive must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in other Member States.”

In addition, it held that “Article 17(3)(a) and (c) and Article 19(1) of the Sixth Directive must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in third States” and Article 17(5) of the Sixth Directive must be interpreted as not permitting a Member State to adopt a rule for the calculation of the deductible proportion per sector of business of a company subject to tax which authorises that company to take into account the turnover of a branch established in another Member State or in a third State.” Click here for the full judgment.

Abuse of rights and supply of services

HMRC v Paul Newey trading as Ocean Finance (C-653/11)

The ECJ delivered its judgment in this case on 20 June 2013. It related to the abuse of rights principle and the extent to which contractual terms are decisive in identifying the supplier and recipient in the context of a supply of services. The Court held that whilst the contractual terms are a factor to be taken into account, such terms are not decisive in identifying the supplier and recipient of a supply of services. “They may in particular be disregarded if it becomes apparent that hey do not reflect economic and commercial reality, but constitute a wholly artificial arrangement which does not reflect economic reality and was set up with the sole aim of obtaining a tax advantage” and this is for the national court to decide. The full judgment can be accessed here.

Reduced rate of VAT for Horses & Greyhounds

EU Commission v Ireland (C-108/11)

This case related to the application of the reduced rate of VAT of 4.8% to supplies of greyhounds and horses not intended for the preparation of foodstuffs, to the hire of horses and certain insemination services. On 14 March 2013 the ECJ published its decision.

Article 110 of the VAT Directive provides that Member States which zero-rated or applied reduced rates lower than the minimum at 1 January 1991 may continue to do so, but they must have been adopted for “clearly defined social reasons” and be “for the benefit of the final consumer”.

The Commission argued that the reduced rates were not adopted for clearly defined social reasons and were not for the benefit of the final consumer i.e. the two cumulative conditions set out in Article 110 were not satisfied. The Court held that the conditions were not fulfilled. There may be changes to such VAT rates in the imminent Finance Bill. Read the full judgment here.

Insurance Services

BGŻ Leasing sp. Z o.o. v Dyrektor Izby Skarbowej w Warszawie (C-224/11) 

 The judgment of the Court was delivered on 17 January 2013 and dealt with the VAT treatment of insurance cover in the context of leasing services. BGŻ Leasing provided leasing services together with insurance for a leased item and where it acquired cover from an insurer and recharged the cost to the customer, it treated the recharges as being exempt from VAT.

The first question was whether the leasing and insurance services were a single supply of services. The Court held that in this case the services must in principal be regarded as distinct and independent supplies of services for VAT purposes. But it is up to the referring court to decide if it is a single supply or independent supplies. Where the services are regarded as separate independent supplies then the same taxable amount is not applicable to both.

The second question, on the assumption that the services are distinct, was whether re-invoicing of the insurance services was exempt from VAT. The Court held that “where the lessor insures the leased item itself and re-invoices the exact cost of the insurance to the lessee, such a transaction constitutes, in circumstances such as those at issue in the main proceedings, an insurance transaction within the meaning of Article 135(1)(a) of the VAT Directive”.

So in the circumstances of the case, a supply of leasing services and a supply of insurance services were supplied, each with their own VAT treatment and taxable amount. The full judgment can be found by clicking here.