Flashback on ECJ cases C-108/00 (SPI) – An advertising service ia also a services supplied indirectly to the advertiser

On March 15, 2001, the ECJ issued its decision in the case C-108/00 (SPI).

Context: Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Second indent of Article 9(2)(e) of the Sixth VAT Directive – Determination of relevant place for tax purposes – Advertising services – Inclusion of services provided through the intermediary of a third party.

Article in the EU VAT Directive

Article 9(1) and 9(2) of the Sixth VAT Directive

Article 9(1)

The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

Article 9(2)

However:

(e) the place where the following services are supplied when performed for customers established outside the Community or for taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides:

– advertising services,

Facts

The SPI is a professional body established in France which represents producers of films, including advertising films. The documents before the Court show that tax inspections of the books of various of its members were carried out, resulting in disputes with the French tax authorities. Those disputes concerned the interpretation to be applied to the notion of the supply of advertising services with a view to determining the place in which that supply takes place for tax purposes in accordance with the Sixth Directive.
The French tax authorities consider, on the basis of the instruction of 5 November 1998, that producers of advertising films supply advertising services within the meaning of Article 9(2)(e) of the Sixth Directive when they invoice those services direct to the advertisers, but that they do not supply such services when they invoice them to advertising agencies who in turn invoice then to the advertisers. It follows that the exemption from VAT enjoyed in principle by film producers when the recipient of the services is established outside France is not recognised by the French tax authorities where the service is supplied through the intermediary of an advertising agency.
The SPI considers that that administrative practice is contrary to the Sixth Directive. For that reason, it brought proceedings before the Conseil d’État challenging the instruction of 5 November 1998 on the ground that it is ultra vires.

Questions

Are advertising services, as referred to in Article 9(2)(e) of Directive 77/388/EEC of 17 May 1977, to be understood, as regards operations designed to promote the sale of goods or services, as meaning only services supplied directly and invoiced by the supplier of services to a taxable advertiser, to the exclusion of services of the same kind supplied indirectly to the advertiser and invoiced to a third party who in turn invoices them to that advertiser?

AG Opinion

The second indent of Article 9(2)(e) 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, concerning ‘advertising services, applies not only to services supplied directly and invoiced by the supplier to a taxable advertiser, but also to services supplied indirectly to the advertiser and invoiced to a third party who in turn invoices them to the advertiser.

Decision

The second indent of Article 9(2)(e) 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 applying not only to advertising services supplied directly and invoiced by the supplier to a taxable advertiser but also to services supplied indirectly to the advertiser and invoiced to a third party who in turn invoices them to the advertiser.

Summary

An advertising service is not only an advertising service when it is supplied directly and invoiced by the supplier to a taxable advertiser but also to services supplied indirectly to the advertiser and invoiced to a third party who in turn invoices them to the advertiser.

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