On November 21, 2013, the ECJ issued its decision in the case C-494/12 (Dixons Retail).
Context: Directive 2006/112/EC – Value added tax – Supply of goods – Concept – Fraudulent use of a bank card
Article in the EU VAT Directive
- Articles 2(1), 5(1) and 11A(1)(a) of Sixth Council Directive 77/388/EEC
- Articles 2(1)(a), 14(1) and 73 of Council Directive 2006/112/EC
Article 2 (Taxable transaction)
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
Article 14 (Taxable transaction)
1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.
Facts
- Dixons is the representative member of a VAT group which sells electrical items.
- Dixons had an agreement with American Express Europe Ltd (‘AmEx’) under which, if one of Dixon’s customers used a card issued by AmEx as a means of payment, Dixons was obliged to accept the card and AmEx undertook, subject to compliance with the procedures laid down, to pay it the price of the goods purchased by that customer with the card, after deduction of a charge.
- In the case of transactions paid for with cards other than those issued by AmEx, Dixons had a similar agreement with National Westminster Bank plc, acting under the name Streamline (‘Streamline’).
- After declaring and paying the VAT relating to transactions carried out between 13 November 2005 and 30 November 2008, Dixons claimed repayment of that tax from the Commissioners, who rejected its claim.
- Dixons brought an appeal before the First-tier Tribunal (Tax Chamber) against the Commissioners’ decision in order to obtain repayment of the VAT.
- The appeal brought before the referring tribunal concerns card transactions in respect of which, although they subsequently turned out to have been paid for by means of cards used in a fraudulent manner, Dixons, in accordance with the procedures laid down by the agreements concluded with AmEx and Streamline, received payment of the price from the latter.
- In this connection, it is apparent from the order for reference that, despite the fraudulent use of cards, neither AmEx nor Streamline respectively exercised recourse against Dixons or made a chargeback, as they were authorised to do by those agreements if the procedures laid down by the agreements were not complied with. Dixons therefore retained the payments made by AmEx and Streamline, which included a VAT element.
Questions
- Is Article 14.1 of Council Directive of 28 November 2006 (2006/112/EU) to be interpreted as applying when the physical transfer of goods is obtained by fraud in that the payment provided by the transferee is by means of a card which the transferee knows he has no authority to use?
- When the physical transfer of goods is obtained by fraudulent use of a card, is there a “transfer of the right to dispose of tangible property as owner” within Article 14.1?
- Is Article 73 to be interpreted as applying when payment is obtained by the transferor of goods under an agreement with a third party to make such payment in respect of a card transactions notwithstanding that the transferee of the goods knows that he has no authority to use the card?
- When payment is made by a third party pursuant to an agreement between the transferor of the goods an the third party as a consequence of the presentation to the transferor of a card which the transferee of the goods has no authority to use is the payment obtained from the third party “in return for the supply” within Article 73?
AG Opinion
None
Decision
Articles 2(1), 5(1) and 11A(1)(a) 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 and Articles 2(1)(a), 14(1) and 73 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in circumstances such as those at issue in the main proceedings, the physical transfer of goods to a purchaser who fraudulently uses a bank card as a means of payment constitutes a ‘supply of goods’ within the meaning of Articles 2(1) and 5(1) of Directive 77/388 and Articles 2(1)(a) and 14(1) of Directive 2006/112 and that, in the context of such a transfer, the payment made by a third party, under an agreement concluded between it and the supplier of those goods by which the third party has undertaken to pay the supplier for the goods sold by the latter to purchasers using such a card as a means of payment, constitutes ‘consideration’ within the meaning of Article 11A(1)(a) of Directive 77/388 and Article 73 of Directive 2006/112.
Summary
Fraudulent use of payment card
The physical transfer of goods to a buyer who fraudulently uses a payment card to pay the sale price is a ‘supply of goods’, and the payment made by a third party under such transfer under an agreement between made to him and the supplier of the good, in which that third party undertook to pay to that supplier the price of the goods sold by the latter to buyers who paid the sale price with such a card, constitutes ‘consideration’.
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