ECJ C-288/19 (QM) – Judgment – Definition of short term hiring of vehicles, company car provided to an employee is not a service provided for consideration

On January 20, 2021, the ECJ issued its decision in the case C-288/19 (QM). This case is about the definition of short term hiring of vehicles. Previous posts about this case can be found HERE

Articles in the EU VAT Directive

Articles 2(1)(c), 26 (1)(b), 56(2) of Council Directive 2006/112/EC

Article 2 (Taxable transaction)
1. The following transactions shall be subject to VAT:

Article 26 (Taxable transaction)
1. Each of the following transactions shall be treated as a supply of services for consideration:
(b) the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.

Article 56 (Place of supply)
2. The place of hiring, other than short-term hiring, of a means of transport to a non-taxable person shall be the place where the customer is established, has his permanent address or usually resides.
However, the place of hiring a pleasure boat to a non-taxable person, other than shortterm hiring, shall be the place where the pleasure boat is actually put at the disposal of the customer, where this service is actually provided by the supplier from his place of business or a fixed establishment situated in that place.

Facts

The applicant is an NV under Luxembourg law with its registered office in Luxembourg.
Two employees who work in her company in Luxembourg and live in Germany have a company car that belongs to the business assets, also for private purposes.
During the disputed years, she withheld a contribution to the costs of the company car from the wages of one of the employees. The applicant is taxed in Luxembourg under the so-called “simplified tax scheme” where no input tax can be deducted. That is why it did not deduct input tax for the costs of both company cars.
Conversely, in Luxembourg, under the simplified tax regime, no tax is charged on the posting of vehicles to employees.
In November 2014, the applicant registered with the defendant tax authorities for the provision of vehicles in Germany for VAT purposes. In its VAT returns for the disputed years, the applicant declared various services taxable at a rate of 19% for the provision of vehicles from 2013, amounting to € 7,904 (2013) and € 20,767 (2014), as well as the sales tax due.
The applicant lodged an objection against the VAT assessments for both years that the defendant rejected as unfounded. By her action, the applicant requests that the turnover tax for 2013 and 2014 be set at zero euros. Defendant requests that the appeal be dismissed as unfounded.

Questions

Is Article 56(2) of the VAT Directive to be interpreted as meaning that ‘hiring of a means of transport to a non-taxable person’ should also be understood as referring to the provision of a vehicle (company car) forming part of the assets of the business of a taxable person to his staff, if the employee does not provide consideration for it that does not consist in (part of) the work performed by him, and thus does not make any payment, does not use any of his cash remuneration for it, and also does not choose between various benefits offered by the taxable person under an agreement between the parties according to which the entitlement to use the company car is contingent on the forgoing of other benefits?

AG Opinion

On September, 17 2020, the AG Opinion issued his conclusion.

‘(1) Articles 2 (1) (c) and 26 (1) (b) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax, as as amended by Directive 2008/8 / EC of 12 February 2008, must be interpreted as meaning that there is no service provided for consideration within the meaning of those provisions when a taxable person makes a vehicle belonging to his business available to an employee for the private purposes of this employee and this employee does not pay any compensation, does not waive part of his wages or other benefits due to him by the taxpayer and does not perform additional work by virtue of the provision of that vehicle.

(2) If the referring court finds that the provision by a taxable person of a vehicle belonging to his business for the private use of one of his employees is made for a period of more than 30 days for consideration within the meaning of Article 2 (1) (c) of Directive 2006/112 and the case-law of the Court on that provision, Article 56 (2) of that directive must be interpreted as meaning that such making available is covered by the concept of ‘other than short-term hiring of a means of transport’ falls. ”

Decision

On a proper construction of the first subparagraph of Article 56(2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2008/8/EC of 12 February 2008, the act of making a vehicle forming part of the assets of the business of a taxable person available to one of that taxable person’s employees does not fall within the scope of that provision if that transaction does not constitute a supply of services for consideration within the meaning of Article 2(1)(c) of that directive. By contrast, the first subparagraph of Article 56(2) of Directive 2006/112 does apply to such a transaction if it involves a supply of services for consideration within the meaning of Article 2(1)(c) of that directive and if that employee has a permanent right to use that vehicle for private purposes and to exclude other persons from using it, in exchange for rent and for an agreed period of more than 30 days.

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