VATupdate

ECJ C-846/19 (EQ) – Decision – Mandates in connection with custody and guardianship cases is an Economic activity – principle of the protection of legitimate expectations?

On April 15, 2021, the ECJ issued its decision in the case C-846/19 (Administration de l’Enregistrement, des Domaines and de la TVA). See below.


Article in the EU VAT Directive

Artciles 9(1) and 132(1)(g) of the EU VAT Directive 2006/112/EC

Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.

Article 132 (Exemptions for certain activities in the public interest)
1. Member States shall exempt the following transactions:

(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people’s homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;


Facts

A Luxembourg referral asking whether, inter alia, the concept of taxable activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive is to be interpreted as including or excluding supplies of services provided in the context of a ‘triangular relationship’ in which the provider of the services is appointed to provide those services by an entity which is not the same person as the recipient of the supply?


Question

1.    Is the concept of ‘economic activity’ within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112/EC  to be interpreted as including or excluding supplies of services provided in the context of a triangular relationship in which the provider of the services is appointed to provide those services by an entity which is not the same person as the recipient of the supplies of services?

2.    Is the answer to the first question different according to whether the supplies of services are provided in the context of a role entrusted to the provider by an independent judicial authority?

3.    Is the answer to the first question different according to whether the remuneration of the service provider is borne by the recipient of the services or by the State, an entity of which appointed the service provider to provide those services?

4.    Is the concept of ‘economic activity’ within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112/EC to be interpreted as including or excluding supplies of services where the remuneration of the service provider is not a legal requirement and the amount of the remuneration, where it is awarded, (a) is based on a case-by-case assessment, (b) is always dependent on the financial position of the recipient of the services and (c) is calculated by reference to a fixed amount, a percentage of the income of the recipient of the services or the services performed?

5.    Is the concept of ‘the supply of services and of goods closely linked to welfare and social security work’ contained in Article 132(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax to be interpreted as including or excluding services performed in the context of a scheme for the protection of adults established by law and subject to the control of an independent judicial authority?

6.    Is the concept of ‘bodies recognised … as being devoted to social wellbeing’ contained in Article 132(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax to be interpreted, in view of the recognition of the social character of the body, as laying down certain requirements vis-à-vis the way in which the service provider operates or as regards the not-for-profit or profit-making objective of the activity of the service provider, or more generally as restricting by other criteria or conditions the scope of the exemption provided for in Article 132(1)(g), or is the performance of services ‘linked to welfare and social security work’ alone sufficient to give the body at issue a social character?

7.    Is the concept of ‘bodies recognised … as being devoted to social wellbeing’ contained in Article 132(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax to be interpreted as requiring a recognition process based upon a pre-defined procedure and pre-determined criteria, or is ad hoc recognition possible on a case-by-case basis, where appropriate by a judicial authority?

8.    Does the principle of legitimate expectations as interpreted by the case-law of the Court of Justice of the European Union allow the authority responsible for recovering VAT to require that a person liable to VAT pays the VAT on economic transactions relating to a period which had ended when the authority’s decision to apply VAT was made after that authority has, for an extended time prior to that period, accepted VAT returns from that taxable person which do not include economic transactions of the same kind in its taxable transactions? Is that possibility on the part of the authority responsible for recovering VAT subject to certain conditions?


AG Opinion

1) Article 132 (1) (g) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax is to be interpreted as including: social security, those provided under a legal protection scheme for adults incapacitated by law and subject to the control of an independent judicial authority; that the status of a body recognized as social in nature may be conferred on a lawyer under a protection regime; for adults incapable of legal action, provided that the person is engaged in stable social mobilization,in the sense that activities of a social nature are significantly superior to other activities; by a judicial authority, where the lack of recognition by the national legislature or the administrative authorities exceeds the limits of the discretion left by the Directive in the Member States.where the lack of recognition by the national legislature or by the administrative authorities exceeds the limits of the discretion left by the Directive in the Member States.where the lack of recognition by the national legislature or by the administrative authorities exceeds the limits of the discretion left by the Directive in the Member States.

(2) To that end, it is for the national court to determine whether the activities of the power of attorney, the custodian and the legal aid exercised by EQ are closely linked to social welfare and, taking into account the content of the services provided, whether the EQ may be recognized as a social organization in the exercise of the powers of attorney, custodian and adult legal aid, and if the lack of recognition by the legislature and national administrations exceeds the limits of the discretion left by the Directive in the Member States. members.


Decision 

1.      Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the supply of services for the benefit of adults lacking legal capacity and intended to protect them in civil matters, the performance of which is entrusted to the person supplying services by a judicial authority in pursuance of the law and remuneration for which is fixed by the same authority as a fixed amount or is based on a case-by-case assessment by taking into account in particular the financial situation of the person lacking legal capacity – and such remuneration may moreover be borne by the State in the event that that person is indigent – where that supply is for consideration, the person supplying services obtains income therefrom on a continuing basis and the overall amount of the compensation for that activity is determined on the basis of criteria intended to ensure that the operating costs incurred by the person supplying services are covered, constitutes an economic activity within the meaning of that provision.

2.      Article 132(1)(g) of Directive 2006/112 must be interpreted as meaning, first, that the supply of services for the benefit of adults lacking legal capacity and intended to protect them in civil matters constitutes a ‘supply of services closely linked to welfare and social security work’, and, secondly, that it is not excluded that a lawyer supplying such services of a social nature may benefit, for the purposes of the business he or she operates and within the limits of those supplies, from recognition as a body devoted to social wellbeing, and such recognition must however necessarily be granted by a judicial authority only if the Member State concerned, by refusing that recognition, exceeded the limits of the discretion which it enjoys in that regard.

3.      The principle of the protection of legitimate expectations does not preclude the tax authority from imposing value added tax (VAT) on certain transactions relating to a previous period, in a situation where that authority has, over a number of years, accepted the taxable person’s VAT returns which do not include transactions of the same kind in its taxable transactions and where the taxable person is unable to recover the VAT due from those who have remunerated those transactions, with the remuneration already paid then deemed to include this VAT already.


Source


Remarks

As mentioned before, this case reminds us of case C‑246/08 – Republic of Finland regarding public legal aid offices, where the court found that the payment could not be seen as  consideration for legal aid services provided by public offices and that those services should not be regarded as economic activities.


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