On October 28, 2021, the ECJ issued its decision in the case C-324/20 (Finanzamt B) related to the Tax point for one-off services that are billed in phases.
Context: Reference for a preliminary ruling – Taxation – Value added tax – Supply of services – One-time supply – Payment in instalments – Directive 2006/112/EC – Article 63 – Chargeability of tax – Article 64(1) – Concept of transactions ‘giving rise to successive payments’ – Article 90(1) – Reduction of the taxable amount – Concept of ‘non-payment’
Article in the EU VAT Directive
Articles 63, 64(1), 66(1), 90 of the EU VAT Directive 2006/112/EC
The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.
Where it gives rise to successive statements of account or successive payments, the supply of goods, other than that consisting in the hire of goods for a certain period or the sale of goods on deferred terms, as referred to in point (b) of Article 14(2), or the supply of services shall be regarded as being completed on expiry of the periods to which such statements of account or payments relate
By way of derogation from Articles 63, 64 and 65, Member States may provide that VAT is to become chargeable, in respect of certain transactions or certain categories of taxable person at one of the following times:
(a) no later than the time the invoice is issued;
(b) no later than the time the payment is received;
(c) where an invoice is not issued, or is issued late, within a specified period from the date of the chargeable event.’
(1) In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be
reduced accordingly under conditions which shall be determined by the Member States
(2) In the case of total or partial non-payment, Member States may derogate from paragraph 1.
In the tax year 2012 at issue, the applicant provided a taxable brokerage service for T-GmbH on the basis of a fee agreement. T-GmbH had instructed the applicant to act as an intermediary in the context of an agreement to purchase a plot of land. In return, the applicant would receive a fee of € 1,000,000, plus VAT, from T-GmbH. The applicant had fully complied with its obligations under this contract. The agreed fee was to be paid in five annual installments of € 200,000 plus sales tax. In the following years, the applicant drew up invoices indicating the tax on the respective installments, received those amounts and paid tax on the basis of the amount received. After an audit of the turnover tax, the defendant (tax authorities, hereinafter: FA) assumed that the applicant had to pay tax on the full fee for her mediation because of the mediation service. FA has amended the 2012 sales tax determination by decision. The objection to this has been rejected. In contrast, the tax court at first instance has largely upheld the appeal. The applicant already provided her brokerage service during the tax year at issue, as is apparent from the fee agreement. In view of the Court’s case law on the VAT Directive and taking into account the case law of the Bundesfinanzhof, except for the first amount received in 2013, the other amounts must be considered irrecoverable.
The referring court has doubts about the interpretation of Article 64 (1) of the VAT Directive. That provision excludes a installment agreement – as in the present case – from its scope in the case of supplies of goods sold on installment. There is no provision in national law corresponding to Article 64 (1) of the VAT Directive. Furthermore, the question arises whether it is compatible with the duty of the tax collector that, in respect of a service already provided on 7 November 2012, it must be assumed for that year that the tax (if the answer to the first question is answered in the negative) is due without any reduction in the taxable amount,
Further, a PDF with more background information can be found HERE.
Does a service provided on a single occasion and therefore not in relation to a certain period of time give rise to successive statements of account or successive payments within the meaning of Article 64(1) of the VAT Directive 1 merely on the basis of an agreement to pay in instalments?
Alternatively, if the first question is answered in the negative: Is non-payment within the meaning of Article 90(1) of the VAT Directive to be assumed if the taxable person, when providing his service, agrees that the service is to be paid for in five annual instalments and the national law relating to cases of subsequent payment provides for an adjustment by which the previous reduction in the taxable amount is cancelled again in accordance with that article?
1) Article 64 (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 it is not applicable to an operation consisting of a one-off provision of services for which the taxable person is remunerated by means of installment payments.
2) Article 90 (1) of Directive 2006/112 must be interpreted as meaning that the hypothesis in which the taxable person has agreed with the customer that his provision of one-off services will be remunerated by means of payments installments does not amount to non-payment within the meaning of that provision.
1. Article 64(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 a service supplied on a single occasion remunerated by way of instalment payments does not fall within the scope of that provision.
2. Article 90(1) of Directive 2006/112 must be interpreted as meaning that, in the case of an agreement on payment in instalments, the fact that an instalment of the remuneration has not been paid before its term cannot be regarded as non-payment of the price, within the meaning of that provision, and, as a result, cannot lead to a reduction of the taxable amount.
In 2012, X-Beteiligungsgesellschaft (hereinafter: X) acted as an intermediary for T-GmbH in the sale of a plot of land by T to a third party. It is apparent from an agreement concluded between X and T on 7 November 2012 that X had already fulfilled its contractual obligations by that date. That agreement fixed the compensation at EUR 1 000 000, plus VAT, and provided that that amount was to be paid in installments of EUR 200 000, plus VAT. One installment amount had to be paid each year and the first installment amount had to be paid on June 30, 2013. On the due date of each installment, X has invoiced the amount due, received that amount, and paid the relevant VAT. Finanzamt B has, after a tax audit, established by decision of 22 December 2016 that the services had been provided in 2012 and that X should therefore have paid the VAT on the total amount of the fee in that year. X appealed against that decision, which was rejected.
According to the ECJ, a one-off provision of a service that is reimbursed in installments does not fall within the scope of Article 64(1) of the VAT Directive. In the event that payment in installments has been agreed, the failure to pay part of the compensation on the due date cannot be regarded as non-payment of the price within the meaning of Article 90(1) of the VAT Directive according to the ECJ, and may not lead to a reduction in the taxable amount.
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