ECJ C-452/03 (RAL (Channel Islands) Ltd) – Judgment – Place of supply of the exploitation of gaming machines

On May 12, 2005, the ECJ his decision in the case C-452/03 (RAL (Channel Islands) Ltd).

Article in the EU VAT Directive

Article 9(2)(c) of the Sixth Council Directive 77/388/EEC

Facts

Questions

(1)In the circumstances of the present case and

(2)having regard to the Sixth Council Directive (77/388/EEC)¹ 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, in particular Articles 2, 4, and 9, the Thirteenth Council Directive (86/560/EEC)² of 17 November 1986 on the harmonisation of the laws of the Member States relating to turnover taxes – arrangements for the refund of value added tax to taxable persons not established in Community territory, in particular Articles 1 and 2, and the general principles of Community law:

1.How is the expression “fixed establishment” in Article 9 of the Sixth Directive to be interpreted?

2.What are the factors to be considered in determining whether the supply of slot gaming services is from the business establishment of a company such as Cl or from any fixed establishments that a company such as Cl might possess?

3.In particular:

a) Where the business of a company (“A”) is structured in circumstances such as those of the present case so that a connected company (“B”), whose business establishment lies outside the territory of the Community, supplies slot gaming services and the sole purpose of the structure is to eliminate A’s liability to pay VAT in the State in which it is established:

(i)can the slot gaming services be regarded as supplied from a fixed establishment in that Member State; and, if so,

(ii)are the slot gaming services to be deemed to be supplied from the fixed establishment or are they deemed to be supplied from the place where B has established its business?

b) Where the business of a company (“A”) is structured so that, for the purposes of the place of supply rules, a connected company (“B”), in circumstances such as those of the present case, purports to supply slot gaming services from a business establishment outside the territory of the Community and has no fixed establishment, from which those services are provided, in the Member State in which A is established and the sole purpose of the structure is to eliminate A’s liability to pay VAT in that State on those services:

(i)do the transactions between B and connected companies within the Member State (“A”, “C” and “D”) qualify for VAT purposes as supplies made by or to those companies in the course of their economic activities; if not,

(ii)what factors should be considered in determining the identity of the supplier of the slot gaming services?

4.a) Is there a principle of abuse of right which (independently of the interpretation given to the VAT Directives) is capable of precluding the advantage sought in a case such as the present?

b) If so, how does it operate in the circumstances such as the present?

5.a) What significance, if any, should be attached to the fact that A, C and D are not subsidiaries of B and that B does not control A, C and D either legally or economically?

b) Would it make a difference to any of the answers given above if the type of management undertaken by B at its business establishment outside the territory of the Community were necessary for the provision of slot gaming services to customers and neither A, C nor D performs those activities?

AG Opinion

Where a company established outside the territory of a Member State provides gaming machine services to customers in that Member State, through gaming
machines it leases and operates there, it should be regarded as physically carrying out the supply of entertainment services in that Member State within the meaning of Article 9(2)(c) of the 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, and therefore as being liable to account for VAT in that Member State for the supply of those services.

Decision

The supply of services consisting of enabling the public to use, for consideration, slot gaming machines installed in amusement arcades established in the territory of a Member State must be regarded as constituting entertainment or similar activities within the meaning of the first indent of Article 9(2)(c) 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, so that the place where those services are supplied is the place where they are physically carried out.

Personal comments/VATupdate

The RAL case concerned the exploitation of gaming machines and whether they could constitute an FE of a non-resident company. The CJEU did not comment on the FE issue in its judgment but applied the VAT rules on entertainment and similar activities. An interesting point was made in the Opinion of Advocate General, who said that the RAL Group’s gaming machines in the United Kingdom satisfied the “minimum-requirements test” for the existence of an FE.

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