Roadtrip through ECJ Cases – ECJ Cases on ”Warranty/ies”

The EU Court of Justice has ruled that the acts performed by SWEP constitute a service for consideration. It is immaterial that the compensation for the actual equivalent value of those services consists of debit notes.
The Portuguese Suzlon Wind Energy Portugal – Energia Eólica Unipessoal, Lda is active in the energy sector. The shares of SWEP are owned by the Danish Suzlon Wind Energy A/S.
In 2006 SWE concludes an agreement for the supply of wind turbines with the Indian Suzlon Energy Limited. SEL will supply wind turbines to SWEP in 2007 and 2008.
However, the wind turbines have defects, which are subject to a warranty scheme.
SWEP and SEL then conclude an agreement for the repair and replacement of 63 defective blades. SWEP then repairs and replaces the defective blades and various parts of the wind turbines and sends debit notes to SEL.
However, no VAT is stated on the invoices. According to the Portuguese tax authorities, this is incorrect. The Portuguese court is asking questions for a preliminary ruling in this case.
The EU Court of Justice has ruled that the acts performed by SWEP constitute a service for consideration. It is immaterial that the compensation for the actual equivalent value of those services consists of debit notes. It is also irrelevant that the taxable person may not make a profit and that there is a guarantee on the goods in respect of which the service has been provided.

Rádio Popular, a company selling household appliances and electronics, also sells extended warranties and acts as an intermediary between customers and insurance companies.
The company does not charge VAT on the sale of warranties but deducts VAT on all goods and services it acquires.
However, a VAT audit by the AT determined that the transactions related to extended warranties cannot be considered financial transactions and are not excluded from the calculation of the deduction pro rata. Rádio Popular argues that its intermediary activities are ancillary and should be excluded from the pro rata calculation. The AT claims that the viability of the company depends on the sale of extended warranties, which are not financial transactions.
The question is whether such intermediation transactions constitute financial transactions for the purposes of exclusion from the deductible proportion calculation.
The court ruled that such transactions do not qualify for exclusion under Article 174(2)(b) and (c) of Council Directive 2006/112/EC.

X imports cars from a Japanese manufacturer and sells them to dealers in the EU.
The customs value of the cars is based on the purchase price paid by X to the manufacturer. After the cars are released for free circulation, some defects are discovered and repairs are made under warranty. X applies for partial repayment of customs duties based on the lower customs value resulting from the warranty reimbursements.
The application is rejected by the Inspecteur, who argues that the warranty reimbursements constitute an adjustment of the purchase price and that the time limit for reimbursement has expired.
X brings an action which is dismissed by the rechtbank Noord-Holland.
On appeal, the referring court is uncertain about the interpretation of Article 145(2) of the implementing regulation in relation to defective goods and manufacture-related risks.
ECJ Decision: Article 145(2) of Commission Regulation (EEC) No 2454/93, as amended by Commission Regulation (EC) No 444/2002, along with Article 29(1) and (3) of Council Regulation (EEC) No 2913/92, must be interpreted as applying in cases where goods carry a risk of becoming defective in use at the time of acceptance of the declaration for entry to free circulation, and the seller grants the buyer a price reduction in the form of reimbursement of costs incurred by modifying the goods to exclude that risk according to a contractual warranty.

Sale of second-hand car + warranty by a third party = distinct and independent services
The service consisting of an economic operator independent of the seller of a second-hand car providing a guarantee against payment of a fixed sum in the event of a mechanical defect in certain parts of that car constitutes an exempt insurance act.
The provision of such a supply and the sale of the second-hand car are in principle to be regarded as distinct and independent supplies to be treated separately from the point of view of VAT.