- The Court of Justice has pointed to this itself: see Case C-349/96 CPP [1999] ECR I-973, para 27, and Case C-41/04 Levob [2005] ECR I-09433, para 18.
- The Court has consistently held that there must be a direct and immediate link between acquisitions and output activities that provide for the right to deduct in order for the VAT on an acquisition to be deductible. See eg Case C-124/12 AES-3C Maritza East [2013] ECR I-0000 and judgments referred to in that case. If composite supply is classified as a transaction that entails the right to deduct, VAT will be deductible provided that the acquisition is linked to the supply. On the other hand, if the composite supply is classified as entailing both transactions entailing the right to deduct and transactions not entailing that right, only a proportion is deductible.
- As noted above, most supplies are composite in the sense that they entail more than a single feature or act. To distinguish exactly what level of complexity or number of features or acts is required to be deemed a composite supply for the purposes of the discussion is neither possible nor desirable. The doctrine discussed in this article is always relevant when the tax object is defined in European VAT.
- Case C-117/11 Purple Parking [2012] ECR I-0000, paras 26–31. See Case C-392/11 Field Fisher Waterhouse [2012] ECR I-0000, paras 14–19.
- Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (as amended, latest by Council Directive 2013/42/EU of 22 July 2013 amending Directive 2006/112/EC on the common system of value added tax, as regards a Quick Reaction Mechanism against VAT fraud and Council Directive 2013/42/EU of 22 July 2013 amending Directive 2006/112/EC on the common system of value added tax, as regards a Quick Reaction Mechanism against VAT fraud).
- Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax.
- See Ben Terra and Julie Kajus, A Guide to the European VAT Directives (IBFD, 2013) 350–61 for an outline of when a direct link is present.
- Case C-37/08 RCI Europe [2009] ECR I-7533. See also Case C-270/09 Macdonald Resorts [2010] ECR I-13179.
- Art 78 VAT Directive.
- The provisions were dealt with in Case 73/85 Kerrutt v Finanzamt Mönchengladbach-Mitte [1986] ECR 2219, where the Court found (for the first time) that there could be no artificial grouping of transactions. The Court furthermore stated in paras 13 and 14 of the case that ‘[i]t is clear from the words “supply of buildings… and the land on which they stand” that such a single transaction can be said to have taken place only where the two categories of goods supplied, namely the building and the land, are, for the purposes of the law governing the sale of property, the subject of a single delivery inasmuch as the delivery is of land which has been built on. That view corresponds to the aim of the Sixth Directive. As the Federal Government stressed, in order to render tax non-discriminatory from the point of view of competition, the directive is intended to make separate taxable transactions which cannot be grouped together in a single transaction individually liable to VAT.’
- Case C-353/85 Commission v United Kingdom [1988] ECR 00817; Case C-76/99 Commission v France [2001] ECR I-00249; Case C-45/01 Dornier [2003] ECR I-12911; Joined Cases C-394/04 and C-395/04 Ygeia [2005] ECR I-10373; Case C-262/08 CopyGene [2010] ECR I-05053; Case C-86/09 Future Health Technologies [2010] ECR I-05215. The exemption for health care is the topic of a recent PhD thesis in Denmark: see Karin Schwarz Revsbeck Rasmussen, Momsfritagelsen af transaktioner indenfor sundhedsområdet—i et EU-retligt og nationalt perspektiv (Aarhus University, 2013). Ms Rasmussen diligently discusses the cases above and what constitutes a closely related activity.
- Dornier (n 11) para 33.
- Ibid, paras 33–34.
- Joined Cases C-308/96 and C-94/97 Commissioners of Customs and Excise v Madgett and Baldwin [1998] ECR I-06229, para 24; CPP (n 1) para 30. See further section 4 below.
- Madgett and Baldwin (n 14) para 24; CPP (n 1) para 30.
- See AG Stix-Hackl's opinion in Dornier (n 11) paras 36–37.
- What constitutes an ancillary service for the purposes of Art 53 has been set out in Art 33 of the Implementing Regulation, effectively defining them as those that are directly related to the main service but supplied separately. (This indicates that it needs first to be assessed whether the service should receive the same treatment based on a CPP analysis. Only if the answer is in the negative may it constitute a ‘similar service’ covered by the provision on its own merit.)
- The provision has been dealt with in various cases. Madgett and Baldwin (n 14) concerns not the definition of a travel service but when several services can be said to have been supplied by the travel operator, ie the issue dealt with in this paper. On what constitutes a travel service, see Case C-163/91 Van Ginkel [1992] ECR I-5723; Case C-31/10 Minerva Kulturreisen [2010] I-12889; Case C-220/11 Star Coaches [2012] ECR I-0000; Case C-557/11 Maria Kozak [2012] ECR I-0000.
- Levob (n 1); Case C-242/08 Swiss Re Germany Holding [2009] ECR I-10099, Case C-88/09 Graphic Procédé [2010] ECR I-01049, Case C-44/11 Deutsche Bank [2012] ECR I-0000.
- Levob (n 1) para 24.
- ibid, para 25.
- Swiss Re Germany Holding (n 19) paras 12–14.
- ibid, para 52.
- Graphic Procédé (n 19) para 25.
- Deutsche Bank (n 19) paras 15–16.
- ibid, para 22.
- ibid, para 23.
- ibid, paras 24–25.
- ibid, para 26.
- ibid, para 27.
- ibid, para 28. An interesting conclusion drawn from this reasoning was that the service could not be exempt, as exemptions ought to be applied strictly. See further paras 41–43 of the judgment.
- Case 126/78 Nederlandse Spoorwegen [1979] ECR 02041 concerns the Second VAT Directive (67/228/EEC) but the reasoning is, as I see it, confirmed by later case law, notably Case C-380/99 Bertelsmann [2001] ECR I-05163.
- CPP (n 1) para 30, discussed above at n 18.
- Purple Parking (n 4).
- ibid, para 33. Presumably the obviousness of the issue caused this to be a Court order.
- ibid, para 34.
- ibid, para 35.
- ibid, para 36.
- Case C-18/12 Město žamberk [2013] ECR I-0000.
- ibid, para 34, see also 33.
- Case C-155/12 RR Donnelley Global Turnkey Solutions Poland [2013] ECR I-0000.
- ibid, para 24.
- ibid, para 26. The reference to the AG (in para 24 of the judgment) includes a reference to the statement, in para 23 of the AG's opinion, that ‘A different outcome might be reached overall if the loading and unloading of the goods to be stored involved a substantial transport service on the part of the taxable person. If collecting the goods from one place and, after a brief period of storage, taking them to another place forms part of the service, then the transport may be the principal supply while the interim storage does not serve any end in itself for the customer and is therefore merely an ancillary supply.’
- Levob (n 1) para 19, where this statement was originally made. It is a slight reformulation of the statement in Case C-231/94 Faaborg-Gelting Linien [1996] ECR I-2395, para 13—it has been clarified, as compared to the latter mentioned case, that it first needs to be assessed whether there is one or more supplies made and secondly, whether a single supply is a supply of goods or services.
- Levob (n 1) para 27.
- Faaborg-Gelting Linien (n 44) para 13. Note the detail in which the Court describes the services and that clearly it is not a description of a fast food restaurant!
- ibid, para 14.
- Joined Cases C-497/09, C-499/09, C-501/09 and C-502/09 Bog and others [2011] ECR I-01457.
- ibid, paras 66–80.
- Art 6 of the Implementing Regulation contains an implementation of the Faaborg-Gelting Linien doctrine. Bog and others (n 48) clarifies the application to a further extent than the provision in the Implementing Regulation.
- Levob (n 1).
- ibid, paras 28–29.
- Graphic Procédé (n 19). It was noted above that the Court found that the printing, compilation and sorting etc of customers' copies constituted a single, indivisible economic supply that it would be artificial to split: see para 25 of the judgment.
- ibid, para 29.
- ibid, paras 31–32.
- Case C-111/05 Aktiebolaget NN [2007] ECR I-02697.
- ibid, para 18.
- ibid, paras 25–26.
- ibid, para 29.
- ibid, para 33.
- See (now) Art 36 VAT Directive and Aktiebolaget NN (n 56) para 35.
- Aktiebolaget NN (n 56) para 36.
- ibid, para 37.
- ibid, para 38.
- ibid, para 39.
- Nederlandse Spoorwegen (n 32).
- Case C-276/09 Everything Everywhere [2010] ECR I-12359.
- Case C-18/92 Bally [1993] ECR I-02871.
- Case C-34/99 Primback [2001] ECR I-03833.
- See Art 42 of the Implementing Regulation.
- Case C-175/09 AXA UK [2010] ECR I-10701.
- ibid, para 19.
- ibid, para 23.
- Case C-453/05 Ludwig [2007] ECR I-05083.
- ibid, para 19.
- CPP (n 1).
- See the House of Lords' judgment of 31 January 2001 in Card Protection Plan Ltd v Commissioners of Customs and Excise [2001] UKHL 4.
- Case C-224/11 BGŻ Leasing [2013] ECR I-0000. The English translation of the case is unusually unfortunate. In the following, the description of the case may therefore not always be reflected in the references to the judgment in its English version.
- ibid, para 39.
- ibid, para 42.
- ibid, para 45.
- ibid, para 47.
- ibid, para 49
- For an overview of the cases, see Terra and Kajus (n 7) ch 10.4. Case C-530/09 Inter-Mark Group [2011] ECR I-0000 could be mentioned, both because it contains a discussion of what constitutes ancillary services and also because it shows the level of detail one must go into when determining where a supply is made. The rules have since been changed, but at the material time services related to fair stands could, as shown in the case, receive three different treatments depending on the exact conditions surrounding the supply at issue.
- Case C-429/97 Commission v France [2001] ECR I-00637.
- ibid, paras 42–48.
- ibid, para 49.
- See eg Case C-572/07 RLRE Tellmer Property [2009] ECR I-04983, para 16.
- Case 173/88 Skatteministeriet v Henriksen [1989] ECR 02763.
- ibid, para 14.
- ibid, para 15.
- ibid, para 16.
- Tellmer Property (n 88).
- ibid, para 21.
- ibid, para 22.
- ibid, para 23.
- ibid, para 24.
- Field Fisher Waterhouse (n 4).
- Reference to the case law on composite supplies with regard to the leasing of immovable property was also made by the Court in Case C-102/08 SALIX Grundstücks- Vermietungsgesellschaft [2009] ECR I-04629, paras 38–39. In Case C-428/02 Fonden Marselisborg Lystbådehavn [2005] ECR I-01527, Advocate General Kokott discussed whether the combined renting of mooring berths and storage sites for boats constituted one single supply or two separate supplies: see paras 25–27 of the opinion. She concluded that they were two separate supplies. The Court did not deal with the issue.
- Case C-251/05 Talacre Beach Caravan Sales [2006] ECR I-06269.
- ibid, para 4.
- ibid, paras 6–7.
- ibid, para 11.
- ibid, para 25.
- See Case C-384/01 Commission v France [2003] ECR I-4395, para 27; Case C-442/05 Zweckverband zur Trinkwasserversorgung ond Abwasserbeseitigung Torgau-Westelbien [2008] ECR I-01817, paras 41–42; Case C-94/09 Commission v France [2010] ECR I-04261, para 25.
- Commission v France (n 105).
- ibid, paras 15–16.
- ibid, para 33.
- ibid, para 34.
- Aktiebolaget NN (n 56) paras 18, 36–37.
- Město Žamberk (n 39) paras 35–36.
- This is repeated in several cases: see eg Levob (n 1) para 25.
- eg Purple Parking (n 4) para 34.
- BGŻ Leasing (n 78) para 45.
- Purple Parking (n 4) para 36.
- Bog and others (n 48) para 63.
- I have advocated that marketing ought to be important, from a customer perspective, in a commentary on the CPP case: Oskar Henkow, ‘Mervärdesskatt: Ett eller flera tillhandahållanden?’ [2002] SkatteNytt 24. But the Court only explicitly referred to it as important in Purple Parking (n 4).
- Reduced rates and country specific exclusions are two examples discussed above. Yet another example is Maria Kozak (n 18), where the fact that a self-produced service (personal transport) was an essential element of the overall tourist service was irrelevant, as the ‘single service’ of travel consists of the services bought in.
- BGŻ Leasing (n 78) paras 65–66.
- Everything Everywhere (n 67) para 31.
- Tellmer Property (n 88) has been overruled by Field Fisher Waterhouse (n 4) para 26, in this regard as pointed out above.
- See eg Purple Parking (n 4) para 35, where this is explicitly stated but it is actually evident from most of the case law discussed in this article—as well as from case law of the Court in general defining the tax object.
- That being said, the Court does not always follow the contract: see Case C-185/01 Auto Lease Holland [2003] ECR I-01317. See also further below.
- Field Fisher Waterhouse (n 4) para 23. In Skatteministeriet v Henriksen (n 89) para 15 the Court referred to the ‘economic transaction’, in AXA UK (n 71) para 23 the ‘economic purpose of the transaction’, and so forth.
- Case C-409/98 Mirror Group [2001] ECR I-07175; Case C-108/99 Cantor Fitzgerald International [2001] ECR I-07257. See paras 27–32 of the opinion.
- Mirror Group (n 125) and Cantor Fitzgerald International (n 125) para 27 of the opinion.
- The Court has also explicitly stated that the agreement is a reflection of economic and commercial reality in the normal course of events: see Case C-653/11 Paul Newey [2013] ECR I-0000, paras 42–43. It goes beyond the limits of the topic of this paper, but it should nevertheless be pointed out that this way of looking at all the circumstances to find the purpose of the transaction has similarities with the approach of the Court when determining the extent of the right to deduct input VAT. See eg Case C-26/12 PPG Holdings [2013] ECR I-0000, paras 24–27.
- See eg Aktiebolaget NN (n 56) para 33.
- There are several examples: see eg Bog and others (n 48) and Město Žamberk (n 39).
World Journal of VAT/GST Law
Volume 2, 2013 - Issue 3