Week 21-27.02.2022 brought 3 judgments and 1 opinion in VAT cases in the Court of Justice of the EU.

Below you will find the summaries.

My supplier failed to deliver, I purchased repair services and passed the cost onto him – such charge is subject to VAT

Suzlon Wind Energy Portugal, C-588/20, judgment of 24.02.2022

A Portuguese company was involved in the supply of turbines for wind farms in Portugal. To fulfill its customers’ orders, its Indian affiliate supplied wind turbines for it to Portugal. The turbines turned out to be defective. The Portuguese company purchased goods and services in Portugal to repair the turbines. It deducted the input VAT arising from these purchases. The Portuguese company then issued debit notes (without showing VAT) to the Indian company.

The Portuguese tax authorities considered that this debit should be subject to VAT as a supply of services for consideration performed for an Indian company.

The Portuguese company argued that this was an „outside of scope of VAT” charge because it was merely a passing on of costs of a compensatory nature (the services took place in 2008).

The Court decided that the charge in this case is remuneration for services supplied.

It noted, inter alia, that:

• Supply of services takes place when there is a legal relationship under which mutual benefits are exchanged.
• There was a contract between two parties in this case that provided for “repair and replacement services”.
• In this case, there is a legal relationship between the mentioned companies.
• There is also a charge (remuneration) here.
• The assisting in the repair of defective components of the wind farm executed by the Portugal company is indeed a service.

Tax proceedings regarding VAT deduction can be suspended until the criminal proceedings ends

SC Cridar Cons, C-582/20, judgment of 24.02.2022

A tax audit was conducted in respect of the Romanian company.

No irregularities were found. Subsequently, however, the public prosecutor requested a new tax audit on the grounds of suspected fictitious purchases, and the criminal proceedings were commenced.

The tax authority, after a new tax audit, issued a decision. It denied the right to deduct input VAT and applied additional sanctions. Further tax proceedings were suspended until final court judgment in a criminal case.

The court answered the question of whether such a suspension of tax proceedings pending resolution of a related criminal case is permissible under EU law.

The Court held that, in principle, such a suspension is permissible. It noted, inter alia, that:

• The right to deduct may be limited if it is established based on evidence that a VAT fraud has occurred.
• EU law does not interfere with how such evidence is gathered.
• However, the rules of evidence may not infringe the principle of effectiveness and the rights guaranteed by the Charter;
• As the Court has held, tax authorities may use evidence gathered in other proceedings. From this it follows that they may also halt other proceedings to gather such evidence.
• The tax authorities must also respect the right to good administration and the rule that an administrative decision should be reached within a reasonable time.

City cards are multi-purposes vouchers

DSAB Destination Stockholm, C-637/20, opinion of 24.02.2022

In Stockholm, a company was established to sell city cards.

These cards grant the right to be admitted to around 60 attractions such as sights or museums or to use transport services. The services granted are either subject to VAT at various rates or are VAT exempt. The supplier receives consideration from the issuer for each admission or use.

The Advocate General resolved that such a card constitutes a multi-purpose voucher within the meaning of the VAT rules.

This week (ending 6/03/2022) 1 new opinion is expected:

A holding company purchases services in order to transfer them to a subsidiary as a contribution – is it entitled to deduct VAT?

Finanzamt R (Déduction de TVA liée à une contribution d’associé), C-98/21, opinion, 3.03.2022

The German applicant company had 2 subsidiaries. 

They carried out construction projects consisting in the construction of buildings and their sale. These sales were to be exempt from VAT.

The applicant company acquired certain services of considerable value relating to the construction of those buildings.

It then contributed these services to the subsidiaries in return for a share in the profits.

At the same time, it was agreed that the applicant company would provide accounting and management services to the subsidiaries for remuneration.

The Advocate General’s opinion will answer the questions whether:

• The complainant company is entitled to deduct input tax on the purchase of services provided later in exchange for a share of profit in such a situation?
• Is there an abuse of rights in such a situation since the sale of the buildings would be exempt and therefore „normally” there would be no right to deduct VAT on the services purchased?