On October 27, 1993, the ECJ issued its decision in the case C-281/91 (Muys’ en De Winter’s Bouw- en Aannemingsbedrijf BV).
Context: Tax provisions — Harmonization of laws — Turnover taxes — Common system of value added tax — Exemptions provided for by the Sixth Directive — Exemptions in respect of transactions relating to the granting of credit — rant, by the supplier of goods or services, of deferral of paymerit of the price in return for the payment of interest — Exemption — Grant of deferral until delivery — Taking account of the interest as part of the consideration — Taxation (Council Directive 77/388, Arts 11(A)(1)(a) and 13(B)(d)(1))
Article in the EU VAT Directive
Articles 13(B)(d)(1), 11(A)(1)(a) of the Sixth VAT Directive (Art. 73 & 135(1)(b) of the EU VAT Directive 2006/112/EC).
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.
Article 135 (Exemption)
1. Member States shall exempt the following transactions:
(b) the granting and the negotiation of credit and the management of credit by the person granting it;
Facts
- The appellant in the main proceedings is a building company which concludes ‘purchasing and works contracts’ under which it essentially undertakes either to supply a plot of land and construct a dwelling or, in certain cases, complete the construction of a dwelling, or else to construct a building divided into flats and supply to the customer part of the building and of the land associated therewith together with a right to the exclusive user of that part of the building for the purposes of habitation.
- Under those contracts, the price of constructing the building is paid by instalments depending on the progress of the work. The price of the land is paid either when the contract is concluded or shortly thereafter or else by instalments concurrently with the price of the construction.
- However, under those contracts a customer may defer payment of the amount due in respect of the land and/or the construction until the date when property in the land and the completed building is transferred to him. Such deferral of payment is generally made conditional on the customer’s paying a deposit of 10% of the total price of the land and the construction. In such case, the purchaser has to pay interest on the amount of the deferred payment.
- As far as concerns the interest payable on instalments of the price of the construction which fell due, the Netherlands tax authorities applied Article ll(l)(j)(l) of the Wet op Omzetbelasting 1968 (Law on Turnover Tax 1968), transposing Article 13(B)(d)(l) of the Sixth VAT Directive, which exempts ‘the granting and the negotiation of credit and the management of credit by the person granting it’.
- However, they refused to apply the exemption to the interest due on the price of the land at the date of delivery where it was stipulated that the price should be paid at that date. Consequently, they notified to the appellant in the main proceedings an adjustment of turnover tax amounting, after an abatement, to HFL 37 269.86 for the period from 1 January 1981 to 31 December 1984.
- The appellant in the main proceedings brought an action against that decision in the Gerechtshof (Regional Court), The Hague. That court confirmed the view taken by the tax authorities on the ground that, in this case, the interest charged between the conclusion of the contract and the transfer of property in the land could not be regarded as consideration for the granting of credit but was part of the actual consideration for the supply of the land.
Questions
Where a purchase and construction agreement between a building contractor and a buyer provides that payment for the supply of the land pursuant to the agreement must be made on or shortly after conclusion of the agreement, but may be deferred to the time of the supply on payment of interest, is that interest to be regarded as being in the nature of consideration for a loan, as provided for in Article 13(B)(d)(1) of the Sixth Directive, or is that interest part of the payment for the supply of the land?
AG Opinion
None
Decision
Article 13(B)(d)(1) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization 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 a supplier of goods or services who authorizes his customer to defer payment of the price, in return for payment of interest, is in principle making an exempt grant of credit within the meaning of that provision. However, where a supplier of goods or services grants his customer deferral of payment of the price, in return for payment of interest, only until delivery, that interest does not constitute consideration for the grant of credit but part of the consideration obtained for the supply of goods or services within the meaning of Article 11(A)(1)(a) of the Sixth VAT Directive.
Summary
Grant of deferred payment against consideration of interest, by supplier of goods or services
A supplier of goods or services who grants a deferral of payment to his client against payment of interest, in principle grants an exempt credit. However, where a supplier of goods or services grants his customer deferral of payment in return for interest only until the time of delivery, that interest is not consideration for a grant of credit, but an element of the consideration received for the supply of the goods or the provision of services.
Source
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