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ECJ Case C-726/23 (Arcomet Towercranes) – Questions – Are Transfer Pricing Settlement invoices a Supply of Services?

The ECJ issued the facts and questions in the case C-726/23 (Arcomet Towercranes).


Article in the EU VAT Directive

Charter of Fundamental Rights of the European Union: Article 41(1) and (2)(a).

Article 2(1)(c) and Articles 168 and 178 of the EU VAT Directive 2006/112/EC

Article 2
1. The following transactions shall be subject to VAT:
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.

Article 178
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.


Facts

The requesting party in the dispute is ‘SC Arcomet Towercranes SRL’ (hereinafter: Arcomet). There are two defendants, including the Romanian tax authorities. Arcomet is part of a group of companies involved in crane rental. In December 2010, a tax consultant for Arcomet Belgium carried out a transfer pricing investigation, including for the relationship with (requesting party) Arcomet. In Romania, the findings of the investigation were converted into an agreement concluded on January 24, 2012 between Arcomet Belgium and Arcomet. Acromet recorded a profit surplus in 2011, 2012 and 2013, for which it received three settlement invoices without VAT from Arcomet Belgium. Tax inspectors later denied the right to deduct VAT on two of these invoices and withheld the VAT collected on the grounds that no supply of services had been demonstrated and no need to provide them for taxable transactions had been demonstrated.

Consideration:

The referring court questions whether the settlement invoices formally corrected the operating result and whether those invoices relate to any provision of services within the meaning of Article 2(1)(c) of Directive 2006/112. If the payment is seen as a payment for a service provided, it falls within the scope of VAT. The judge also wonders whether the request for additional documents (other than invoices) from the tax inspectorate is in accordance with the principle of proportionality and the objectives of the VAT Directive.


Questions

1. Must Article 2(1)(c) of Council Directive 2006/112/EC on the common system of value added tax be interpreted as meaning that the amount paid by a company (the principal) to an affiliated company (the operating company) and which is equal to the amount by which the profit of the operating company is brought into line with the activities performed and the risks assumed according to the margin method of the OECD Transfer Pricing Guidelines, is a payment for a service and therefore falls within the scope of VAT?

2) If the first question is answered in the affirmative, can the tax authorities, as regards the interpretation of Articles 168 and 178 of Council Directive 2006/112/EC on the common system of value added tax, request documents (such as activity reports or work statements) proving the use of the services purchased for the taxable transactions of the taxable person, or should this analysis of the right to deduct VAT be based solely on the direct link between the acquisition and the supply/ transaction or on the entire economic activity of the taxpayer?


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