- The European Court has ruled that a free gift offered to new magazine subscribers does not require a correction of the VAT deduction through a self-supply.
- The case involved Deco Proteste
- Editores, Lda. (Deco), a company that sells magazines via a subscription system and offers welcome gifts to new subscribers.
- The Portuguese Tax Authorities disagreed with Deco’s claim that there was no ‘delivery without consideration’ and that the threshold for “low value gifts” had not been exceeded.
- The Court ruled that the gift is an ancillary service to the main supply, which is the delivery of magazines.
- The Court’s decision was based on the fact that the gift is part of the company’s commercial strategy to attract new subscriptions and does not have an independent purpose from the perspective of the average consumer.
- The Court concluded that the gift is part of a single transaction for consideration, namely the delivery of magazines, and should not be regarded as a separate “free of charges” supply.
- Therefore, the company does not have to make a taxable self-supply and the whole transaction is subject to the reduced VAT rate applicable to publications.
- The Court’s ruling applies the “ancillary supply” doctrine to avoid a taxable self-supply and reasons from the perspective of the supplier, not the consumer.
- The judgment recalls previous European case law, such as the Kuwait Petroleum case and the GE Aircraft Engine Services case.
- The Court’s decision may lead to new discussions among EU member states within the VAT Committee.
Source: vat-consult.be
See also
- ECJ C-505/22 (Deco Proteste – Editores, Lda) – Judgment – A gift for a subscription is not a free transfer of goods and is ”incidental service” to the main supply
- Summary of the ECJ Case C-505/22: A subscription gift in exchange for a periodical subscription is considered an ancillary supply
- Roadtrip through ECJ Cases – Focus on ”Free Products” (Art. 16)
- Join the Linkedin Group on ECJ VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
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