New ECJ VAT Case C-594/23 – Denmark vs. Lomoco Development and Others

Date of the lodging of the application initiating proceedings
26/09/2023

Procedural Analysis Information
Source of the question referred for a preliminary ruling
Vestre Landsret – Denmark

Subject-matter
Taxation
– Value added tax

Although we were not able to fully verify this, a source says that this case concerns the question of whether or not payments made by customers to businesses in the event of a premature termination of a contract are subject to VAT. In a similar case in 2020, the ECJ ruled that payments made by customers to their contractual partners in the event of premature termination of a contract are subject to VAT (Vodafone Portugal, Case C-605/18). However, the Lomoco Development case raises some new questions. One of the key questions in the Lomoco Development case is whether the payments made by customers are considered to be compensation for a breach of contract or whether they are considered to be part of the original contract price. If the payments are considered to be compensation, then they would not be subject to VAT. However, if the payments are considered to be part of the original contract price, then they would be subject to VAT. Another key question in the Lomoco Development case is whether the payments are made for services that have already been rendered or whether they are made for services that will not be rendered in the future. If the payments are made for services that have already been rendered, then they would be subject to VAT. However, if the payments are made for services that will not be rendered in the future, then they may not be subject to VAT.

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Source Curia