On 2 May 2019, Advocate General BOT delivered its opinion in case C-42/18 (Cardpoint) before the European Court of Justice. The case deals with the question if technical and administrative assistance for cash withdrawals fall under the VAT exemption for financial services.
Cardpoint supplied services in connection with the operation of ATMs. More specifically, Cardpoint installed operational ATMs, equipped with computer software and hardware and bearing the logo of the bank operating those ATMs, and was responsible for ensuring the smooth running thereof. To do this, it was tasked, first of all, with transporting bank notes, made available by that bank, and replenishing the ATMs. Next, it was required to install computer hardware in the ATMs in question, together with any particular software necessary to keep the hardware running smoothly. Lastly, it provided advice on the day-to-day running of the ATMs.
When the ATMs were used for cash withdrawal transactions, special software would read particular data from the bank card as soon as this was inserted into the machine. First of all, Cardpoint would verify those data and send an electronic request to Bank-Verlag GmbH to authorise the transaction requested by the cardholder. Next, Bank-Verlag would forward the request to the interbank network, which would in turn pass it on to the bank that issued the bank card concerned. That bank would verify whether the account holder had sufficient funds in his account and send back, via the same channels, an approval or refusal of the withdrawal requested. Upon receipt of the reply, Cardpoint would generate a data file on the cash withdrawal and, if authorised, implement the requested transaction and generate a data file on the withdrawal. Lastly, that data file would be sent as a payment order to Cardpoint’s contractual partner, that is to say, the bank operating the ATM in question. The latter would transmit the unedited data files to the records system of Deutsche Bundesbank (German Federal Bank). Cardpoint would also generate a daily, non-editable list of all the day’s transactions, which would also be sent to the BBK.
Since only banks are entitled to hold settlement accounts with the BBK, it was they who transmitted the data files to the BBK’s records system. That data transfer rendered legally binding the right of the bank operating the ATM in question to obtain reimbursement from the bank owning the account affected by the transaction and payment of any charges thereby incurred. Transfer of the data also had the immediate effect of recording in the accounts the clearing, as between the bank operating the ATM and the bank that issued the customer’s card, of the amount paid out plus any charges incurred for using that ATM.
Taking the view that the services supplied should be exempt from VAT, Cardpoint submitted an amended VAT return and requested that the existing tax assessment be amended, claiming that its activities were exempt from VAT.
The German rejected that request.
The German Bundesfinanzhof (Federal Finance Court) decided to refer the following question to the European Court of Justice for a preliminary ruling:
‘Is technical and administrative assistance provided by a supplier of services to a bank operating a cash point (ATM) for cash withdrawals from the bank exempt from [VAT] under Article 13B(d)(3) of [the Sixth Directive] in the case where technical and administrative assistance of the same nature provided by a supplier of services for payments by card in connection with the sale of cinema tickets is, in accordance with the judgment [in Bookit], not exempt from [VAT] under that provision?’
It should be noted that services making it possible to withdraw cash from a payment account constitute payment services within the meaning of EU law and that, consequently, a withdrawal from an ATM is a payment.
It is clear from the Court’s case-law that the considerations applicable to ‘transactions concerning transfers’ also hold good for ‘transactions concerning payments’, with the result that those two classes of transaction are treated in the same way for the purposes of the VAT exemption.
In accordance with settled case-law, the VAT exemptions laid down in Article 13 of the Sixth Directive constitute independent concepts of EU law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another and that the terms used to specify those exemptions must be interpreted strictly, given that they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person.
In the light of the previous case-law, there is in my view no reason why the Court should deviate from the approach it took in the judgment in Bookit in relation to the supply of services by Cardpoint.
In the light of those considerations, I consider that the service supplied by Cardpoint constitutes not a transaction which has the effect of transferring funds or entails legal or financial changes, but a physical, technical or administrative service, given that that service does not have the effect of actually or potentially transferring ownership of the funds in question or of fulfilling the specific and essential functions of such a transfer.
In short, since Cardpoint supplies only technical and administrative services, that supply cannot be exempted from VAT under Article 13B(d)(3) of the Sixth Directive.
The Advocate General is of the opinion that:
Article 13B(d)(3) of 6th Directive must be interpreted as meaning that the exemption from value added tax which is laid down in that provision for transactions concerning payments and transfers does not apply to supplies of services, such as those at issue in the main proceedings, consisting in operating and maintaining ATMs, replenishing them, installing computer hardware and software in them, sending a withdrawal authorisation request to the bank that issued the bank card used, dispensing money and registering withdrawal transactions, by a service provider to a bank operating an automated teller machine.