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Flashback on ECJ Cases C-11/15 (Český rozhlas) – Public broadcasting activities by Czech Radio outside scope of VAT

On June 22, 2016, the ECJ issued its decision in the case C-11/15 (Český rozhlas).

Context: Reference for a preliminary ruling — Sixth Directive 77/388/EC — Value added tax — Article 2(1) — Supply of services effected for consideration — Definition — Public broadcasting — Financing from a compulsory statutory fee


Article in the EU VAT Directive

Article 2(1) and 13A(1)(q) of the Sixth Council Directive 77/388/EEC (Articles 2(1) and 132(1)(q) of the EU VAT Directive 2006/112/EC)

Article 2(1) (Subject matter and scope of VAT)

‘The following shall be subject to [VAT]:

1.      the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such’.

Article 13A(1)(q) (Exemption)

‘A. Exemptions for certain activities in the public interest

1.      Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:

(q)      activities of public radio and television bodies other than those of a commercial nature.’


Facts

  • Český rozhlas is a legal person created by law whose principal activity is the public broadcasting of radio programmes.
  • By supplementary tax returns covering the period from March to December 2006, Český rozhlas applied for a further increase to its right to deduct VAT by excluding from the calculation of the coefficient used for deducting VAT supplies covered by the radio fees paid to it, which it had initially declared as supplies exempt from VAT and not conferring a right to deduction from VAT. In that regard, Český rozhlas argued that those fees did not constitute remuneration for the public broadcasting service provided.
  • By 10 supplementary tax assessments relating to the VAT payable by Český rozhlas for that period, the Finanční úřad pro Prahu 10 (Prague City Tax Office No 10, Czech Republic) refused to exclude those services.

Questions

Can public sector broadcasting, financed by compulsory statutory charges of the amount set by the law, on the basis of ownership of a radio receiver, possession thereof or entitlement to use it on other legal grounds, be regarded as the ‘provision of a service against payment’ within the meaning of Article 2(1) of the Sixth Council Directive 77/388/EEC  on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, which must be exempted from VAT in accordance with Article 13A(1)(q) of that directive, or is it a non-economic activity which is not subject to VAT at all under Article 2 of the Sixth Directive, and to which exemption from VAT in accordance with Article 13A(1)(q) of that directive does not therefore apply?


AG Opinion

(1)      Article 2(1) 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 must be interpreted as meaning that the activity of a public broadcasting body that is financed from a compulsory fee laid down by statute and payable by anyone in possession of a radio receiver does not constitute an activity carried on for consideration within the meaning of that provision and does not confer a right to deduct VAT due or paid on goods and services acquired by that body and used for the purposes of that activity.

(2)      The determination of the methods and criteria for apportioning input VAT between that activity and the activity conferring a right to deduct is in the discretion of the Member States, who, when exercising that discretion, must have regard to the aims and broad logic of Sixth Directive 77/388, and, on that basis, provide for a method of calculation which objectively reflects the part of the input expenditure actually to be attributed, respectively, to those two types of activity.


Decision

Article 2(1) 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 must be interpreted as meaning that public broadcasting activities, such as those at issue in the main proceedings, funded by a compulsory statutory charge paid by owners or possessors of a radio receiver and carried out by a radio broadcasting company created by law, do not constitute a supply of services ‘effected for consideration’ within the meaning of that provision and therefore fall outside the scope of that directive.


Summary

A public broadcasting activity financed by a statutory fee paid by owners or owners of a radio set and performed by a broadcaster established by law is not a service for consideration and therefore does not fall within the scope of the VAT Directive.


Source


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