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.