On 3 October 2019, the European Court of Justice gave its judgment in case C-42/18 (Cardpoint). The case deals with the question if technical and administrative assistance for cash withdrawals fall under the VAT exemption for financial services.
Article 13B(d)(3) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that services supplied to a bank operating cashpoints, consisting in operating and maintaining those cashpoints, replenishing them, installing computer hardware and software necessary to read the data from bank cards, sending a cash withdrawal authorisation request to the bank which issued the bank card used, providing the cash requested and registering withdrawal transactions, do not constitute a transaction concerning payments which is exempt from value added tax for the purposes of that provision.
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 tax authorities 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?’
The ECJ rules as follows:
Services provided to a bank which operates ATMs, which consist of making and keeping those ATMs ready for use, supplying them, installing hardware and software to read bank card data, sending an approval request for withdrawing cash to the bank that issued the bank card used for this withdrawal, providing the requested cash and registering withdrawal transactions are not covered by transactions exempt from value added tax on payments such as referred to in that provision.