ECJ C-527/23 (Weatherford Atlas Gip) – Judgment – Refusal of the right to deduct if services are not used for taxable transactions

On December 12, 2024, the ECJ issued its decision C-527/23 (Weatherford Atlas Gip).

Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 168 – Right to deduct VAT – Acquisition of administrative services provided within the same group of companies – Refusal of the right to deduct)

Summary

Case Background: The case concerns the interpretation of Article 168 of Directive 2006/112/EC on VAT, with Weatherford Atlas Gip SA challenging the Romanian tax authority’s refusal to allow VAT deductions for administrative services acquired within the same group of companies.
VAT Deduction Refusal: The Romanian tax authority refused the VAT deduction, arguing that the services were not necessary for Weatherford Atlas Gip’s taxable activities and were also provided to other group companies.
Court’s Key Considerations: The Court emphasized that the right to deduct VAT is a fundamental principle of the VAT system, which cannot be limited if services are used for taxable transactions. It is not relevant if services are simultaneously provided to other companies within the group.
Assessment of Evidence: The Court highlighted that it is the taxable person’s responsibility to prove eligibility for VAT deductions, and the national courts must assess all facts and circumstances to determine the link between services acquired and taxable transactions.
Ruling: The Court ruled that national legislation or practice cannot refuse VAT deductions on the grounds that services were simultaneously supplied to other group companies or deemed unnecessary, provided the services are used for the taxable person’s own taxable transactions

Articles in the EU VAT Directive

Article 2(1), 9(1), 168, 178, 203 and 273

Article 2
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.

Article 168 (Origin and scope of right of deduction)
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.

Facts

The applicant, Weatherford Atlas Gip SA, is part of the Weatherford group which provides oil services worldwide.
After taking over Foserco SA, the tax authorities verified its obligations and decided on a new verification.
During this period, Foserco SA purchased administrative services from companies within the group, and the tax authorities refused to deduct VAT on these services as it had not been shown that they were used for taxable transactions.
The applicant has lodged an objection and questions the concept of “use of services for taxable transactions,” whether the right to deduct VAT can be refused based on subjective assessment, and whether the applicant needs to demonstrate that services were taxed for its benefit.
The interpretation of VAT Directive Articles 2 and 168 is important for resolving this dispute.

See also Ruling Tribunal of Prahova

Questions

1. Must Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principle of fiscal neutrality, be interpreted as precluding states that, in circumstances such as those of the main proceedings, the tax authorities deny a taxable person the right to deduct the value added tax paid on the administrative services received, where it has been established that all costs recorded for the services acquired are included in the general costs of the taxpayer who only carries out taxable transactions,the provision of services has been expressly confirmed by the tax authorities and the transactions have been carried out under the reverse charge mechanism (which excludes detriment to the state budget)?

2. When interpreting Article 2 and Article 168 of Directive 2006/112, in circumstances such as those of the main proceedings, can administrative and management services (that is to say assistance and advice in various areas as well as financial and legal advice) provided by undertakings within a group are carried out for the benefit of other members of that group, are regarded by each member as being used for taxable transactions or acquired for his own use?

3. When interpreting Article 2 of Directive 2006/112, if it is established that the services provided within a group were not provided for the benefit of one of the members of the group, can a company that is part of the group but not deemed to have received these services are regarded as a taxable person acting as such?

Source

ecer.minbuza.nl

AG Opinion

None

Decision

Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation or practice under which the tax authorities refuse to grant the right to deduct input value added tax, paid by a taxable person on the acquisition of services from other taxable persons forming part of the same group of companies, on the grounds that those services were simultaneously supplied to other companies in that group and that their acquisition was not necessary or appropriate, where it is established that those services are used as output services by that taxable person for the purposes of his own taxable transactions.

Source

Curia

Reference to other VAT cases

References to other ECJ VAT Cases in the judgment

Judgment of 8 February 2007, Investrand (C-435/05, EU:C:2007:87):
- This case was cited in relation to determining whether costs related to services acquired form part of the general costs of the taxable person and thus have a direct and immediate link with the taxable person’s economic activities as a whole.
- Paragraph 24 of this judgment was specifically mentioned as part of the reasoning for understanding the right to deduct input VAT.
Judgment of 29 June 2023, Super Bock Bebidas (C-211/22, EU:C:2023:529):
- This case was referenced to underline the principle that questions on the interpretation of EU law referred by a national court enjoy a presumption of relevance unless it is quite obvious that the interpretation of EU law sought bears no relation to the actual facts of the main action or its purpose.
Judgment of 7 March 2024, Feudi di San Gregorio Aziende Agricole (C-341/22, EU:C:2024:210):
- This judgment was cited to reinforce the principle that the right of deduction is an integral part of the VAT scheme and that it cannot, in principle, be limited. The right to deduct VAT is intended to relieve the taxable person entirely of the burden of the VAT due or paid in the course of all his economic activities.
Judgment of 20 January 2022, Apcoa Parking Danmark (C-90/20, EU:C:2022:37):
- This judgment was mentioned to explain that a supply of services is subject to VAT only if there is a legal relationship between the supplier and the recipient in the context of which reciprocal supplies are exchanged, with the remuneration received by the supplier constituting the actual consideration for an individualizable service supplied to the recipient.
Judgment of 11 January 2024, Global Ink Trade (C-537/22, EU:C:2024:6):
- This case was referenced in relation to the conditions necessary to benefit from the right to deduct input VAT, particularly emphasizing that the person concerned must be a “taxable person” and that the goods or services used as inputs must be for the purposes of the taxable person’s own taxable transactions.
Judgment of 13 June 2024, C (Receivers and liquidators) (C-696/22, EU:C:2024:499):
- This judgment was cited to clarify that the right to deduct exists even when there is no direct and immediate link between a particular input transaction and one or more output transactions, as long as the costs form part of the general costs of the taxable person and are components of the price of the goods or services provided.
Judgment of 4 October 2024, Voestalpine Giesserei Linz (C-475/23, EU:C:2024:866):
- This case was referenced to support the notion that the expenditure incurred in acquiring goods or services must form part of the taxable person’s general costs, having a direct and immediate link with their economic activity as a whole.
Judgment of 1 October 2020, Vos Aannemingen (C-405/19, EU:C:2020:785):
- This judgment was mentioned to highlight that the proportion of expenditure linked to transactions carried out by third parties cannot give rise to a right of deduction for the taxable person.
Judgment of 8 September 2022, Finanzamt R (Deduction of VAT linked to a shareholder’s contribution) (C-98/21, EU:C:2022:645):
- This case was cited in relation to the principle that the right of deduction does not arise where the expenditure incurred is linked to transactions carried out by third parties.
Judgment of 11 March 2021, Danske Bank (C-812/19, EU:C:2021:196):
- This case was referenced to explain that a VAT group is limited to the territory of one Member State, as per Article 11 of the VAT Directive.
Judgment of 9 December 2021, Kemwater ProChemie (C-154/20, EU:C:2021:989):
- This judgment was cited to emphasize that it is the responsibility of the taxable person who applies for the deduction of VAT to establish that they satisfy the conditions for benefiting from it.
Judgment of 16 February 2023, DGRFP Cluj (C-519/21, EU:C:2023:106):
- This case was referenced to highlight that tax authorities may require the taxable person to provide necessary evidence to assess whether the deduction claimed should be granted.
Judgment of 25 May 2023, Dyrektor Izby Administracji Skarbowej w Warszawie (VAT – Fictitious acquisition) (C-114/22, EU:C:2023:430):
- This case was mentioned to support the principle that the assessment of evidence must be carried out by the national court in accordance with national law, taking into account all facts and circumstances.