VATupdate

Recharging cost of repair of goods under warranty: consideration for services or ‘outside the scope of VAT’?

Jeroen Bijl, EU VAT Specialist (PhD), EY NL CP&R VAT Leader, Assistant Professor at Leiden University, Hon. Judge (Court of Appeal) about the pending Case C-605/20 (Suzlon Wind Energy Portugal)

According to the business that incurred the repair costs, recharging these costs does not constitute consideration for a supply, simply because no supply was made. The costs were recharged without any mark-up. The only reason that the costs were incurred by the Portuguese business is because it wanted a quick solution for solving the issues created by the faulty products it purchased from the manufacturer, a group company, and sold to its customers.

The Portuguese tax authorities disagree. They argue that the payment should be qualified as a consideration for services provided by the Portuguese business to the manufacturer of the goods, amongst other things because the repair was based on a separate agreement, and because the Portuguese business, instead of ‘making a claim’ to have the components replaced, undertook to repair the blades and to import new components himself.

Source: LinkedIn

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