On August 1, 2025, the ECJ issued the AG Opinion in the case C-427/23 (Határ Diszkont).
Context: Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Article 1(2), Article 2(1)(c) and Article 78 – Refund of amounts paid as a VAT advance to customers not resident in the European Union – Administration fees – Independent supply subject to VAT – Concepts of ‘single complex supply’, ‘supply ancillary to the principal supply’ and ‘independence of supplies’ – Exemptions under Article 135(1)(d) and Article 146(1)(e) – Protection of legitimate expectations – Taxable amount)
Summary
- Context of the Case: The case involves a preliminary ruling on the application of VAT provisions concerning the management of VAT refund files for non-EU purchasers by Határ Diszkont, which had been previously classified as exempt supplies.
- Key Questions to the Court: The court was asked whether managing VAT refund files constitutes a separate supply subject to VAT, whether it falls under exempt transactions, and if the principle of legitimate expectations protects the taxpayer from retroactive VAT claims after years of acceptance by tax authorities.
- Court’s Decision on VAT Supplies: The court ruled that managing VAT refund files is an independent supply of services and is subject to VAT, thus not falling under exemptions provided for goods exports.
- Interpretation of Exemptions: It was determined that the activity of managing VAT refund files does not qualify for exemptions under Article 135(1)(d) of the VAT Directive, which pertains to financial transactions, as it is considered an administrative service.
- Protection of Legitimate Expectations: The court concluded that the principle of legitimate expectations does not prevent tax authorities from requiring VAT on services previously classified as exempt, especially when the taxpayer was informed of legislative changes and had not received binding assurances regarding their tax treatment.
Articles in EU VAT Directive 2006/112/EC
Article 78, 135(1)(d), 146(1)(e)
Article 78
The taxable amount shall include the following factors:
(a) taxes, duties, levies and charges, excluding the VAT itself;
(b) incidental expenses, such as commission, packing, transport and insurance costs, charged by the supplier to the customer.
For the purposes of point (b) of the first paragraph, Member States may regard expenses covered by a separate agreement as incidental expenses.
Article 135
1. Member States shall exempt the following transactions:
(d) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection;
Article 146
1. Member States shall exempt the following transactions:
(e) the supply of services, including transport and ancillary transactions, but excluding the supply of services exempted in accordance with Articles 132 and 135, where these are directly connected with the exportation or importation of goods covered by Article 61 and Article 157(1)(a).
Background
- VAT Refund and Administration Fees: In 2020, the applicant, a business near the Hungary-Serbia border, sold goods to Serbian residents and refunded VAT totaling HUF 298,328,000. The business charged a 15% administration fee on the refunded VAT, which it included in its VAT returns as an exempt service.
- Export and Documentation: Foreign travelers took the goods out of Hungary on the purchase date, marked “VAT paid” on invoices. The applicant refunded the VAT and issued invoices for the 15% administration fee, documented by till receipts.
- Tax Authority Inspection: During a VAT inspection for 2020, the tax authority repeatedly asked the applicant to clarify the invoices for the administration fee. The applicant maintained that the service was tax-exempt but gave inconsistent reasons for the exemption.
- Classification and Tax Authority Decision: The applicant misclassified the service statistically. The tax authority ruled that the administration service was not exempt from VAT, resulting in a tax shortfall of HUF 12,040,000. The authority noted that the service was treated separately from the supply of goods.
- Administrative and Judicial Actions: The applicant appealed the decision, which was upheld by the higher tax authority. The applicant then sought judicial review, arguing that the VAT amount should not be based on the net invoiced amount and that administration fees included VAT. The case is now before the referring court.
Questions
Is the practice of a Member State according to which the administration of VAT refunds to foreign travellers – which includes the administrative procedures from the time the standard forms for applying for the refund of VAT are submitted up to the refund of the tax – is considered to be a separate supply of services distinct from the tax-exempt supply of goods, on which VAT must be charged and paid in accordance with the general rules, compliant with Article 1(2), Article 2(1)(c), Article 78 and Article 146(1)(e) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 (‘the VAT Directive’) in a situation in which the administration fee, which is a percentage of the VAT to be refunded, is received and invoiced simultaneously with the VAT refund, at a time different from the supply and invoicing of the goods and after the customer has paid the consideration for the goods and those goods have exited for a third country?
In the event that the answer to the first question is in the affirmative, is Article 135(1)(d) of the VAT Directive infringed by the practice of a Member State whereby the fee charged for administering refunds of the VAT arising on the supply of goods to foreign travellers is not considered to be exempt from VAT as a ‘transaction concerning payments or debts’?
In the event that the answers to the first and second questions are in the affirmative, is the practice of a Member State compliant with the principle of the protection of legitimate expectations as one of the fundamental principles of the common VAT system where, according to that practice, the issuer of the invoices for the administration fee must also pay VAT retroactively even though the tax authority had already audited that person on various occasions in the years prior to the inspection and during those audits had examined the issuer’s practice of considering the administration fee to be exempt from VAT and had not raised any objection or informed the issuer of any change in the Member State legislation in force until 31 December 2007, which expressly included ‘refunds of the tax to foreign travellers processed by the trader under specific legislation’ as services exempt from tax?
In the event that the answers to the first to third questions are in the affirmative, is the practice of a Member State tax authority compliant with Articles 73 and 78 of the VAT Directive where it consists of using as the taxable amount for VAT the consideration shown as exempt on the invoices issued for the administration fee and where, according to the tax authority’s decision, the issuer of the invoices must pay VAT on that taxable amount in accordance with the general rules, even though the consideration paid by the foreign travellers does not include that amount?
AG Opinion
Article 1(2) and Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
must be interpreted as meaning that the seller’s administrative procedure for refunding amounts paid as a value added tax (VAT) advance by customers not resident in the European Union in the context of VAT-exempt transactions involving supplies of goods they subsequently export does not give rise to a specific and independent supply of service relating to the supply of such goods. As a consequence, that procedure is not taxable under the directive, since it is simply a means of applying the exemption, rather than a specific economic activity separate from the one relating to the supply of the goods.
Decision
1. Article 1(2), Article 2(1)(c) and Article 78 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
must be interpreted as meaning that an activity of administering refunds of value added tax (VAT) which customers who are not resident in the European Union paid when purchasing goods which they subsequently transport outside the European Union constitutes a supply of services that is distinct from, and independent of, the corresponding exempt supply of goods and must, as such, be subject to VAT. Such a supply of services does not come under the exemption provided for in Article 146(1)(e) of that directive.
2. Article 135(1)(d) of Directive 2006/112
must be interpreted as meaning that an activity of administering refunds of value added tax (VAT) which customers who are not resident in the European Union paid when purchasing goods which they subsequently transport outside the European Union does not come under the exempt transactions referred to in that provision.
3. The principle of the protection of legitimate expectations
must be interpreted as not precluding the tax authorities from subsequently making certain supplies of services subject to value added tax (VAT) where those authorities have checked and accepted the taxable person’s VAT returns for several years without challenging the classification of those supplies of services as VAT-exempt supplies and have not informed that taxable person of the change in the national legislation which, in its previous version, expressly stated that those supplies of services were among the activities exempt from VAT. In that context, it is irrelevant that, following a request for an opinion submitted under the applicable national legislation, the taxable person has received an ‘ex-post’ and non-binding response from the tax authorities, to the effect that those supplies of services were to be regarded as expenses incidental to an exempt supply of goods sharing the treatment of the main transaction as regards the VAT exemption scheme.
4. Articles 73 and 78 of Directive 2006/112
must be interpreted as precluding the practice of the tax authorities of a Member State whereby the amounts invoiced as consideration for a value added tax (VAT) refund administration service, that is, the administration fees, are deemed to be net amounts, not including VAT, where the supplier has considered their supply of services to be exempt and it is manifestly impossible for the supplier subsequently to recover from the purchasers of VAT-exempt goods the amount of VAT claimed by the tax authorities.
Source
Similar ECJ Cases
- Roadtrip through ECJ Cases – Taxable transaction, Place of Supply, VAT rate, Exemption, Invoicing – ”Composite supplies”
- Exemption – Financial transactions – deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments (Art. 135(1)(d))
ECJ Cases referred to
- CPP (C‑349/96): This case establishes the principle that each transaction under VAT must be regarded as distinct and independent.
- Levob Verzekeringen and OV Bank (C‑41/04): This case reinforces the idea of treating transactions separately for VAT purposes.
- Everything Everywhere (C‑276/09): This judgment discusses the treatment of separate payment handling charges and their classification under VAT.
- Baštová (C‑432/15): Cited for principles regarding the classification of services as either distinct or ancillary in relation to a principal supply.
- Generali Seguros (C‑42/22): This case further elaborates on the criteria for identifying a single supply versus separate supplies.
- Companhia União de Crédito Popular (C‑89/23): Discussed in relation to the treatment of separate supplies and the economic reality of transactions.
- MyTravel (C‑291/03) and Almos Agrárkülkereskedelmi (C‑337/13): These cases address the taxable amount for VAT purposes, specifically concerning the consideration actually received.
- Cartrans Spedition (C‑495/17): This case clarifies the requirements for a direct connection between services and the exportation of goods for VAT exemption.
- Tulică and Plavoşin (C‑249/12 and C‑250/12): These judgments discuss the principle of VAT neutrality and the implications for the taxable amount.
- Elmeka (C‑181/04 to C‑183/04): Relevant for discussions on the principle of legitimate expectations within the context of VAT.
- Almos Agrárkülkereskedelmi (C‑337/13): This case is cited in relation to the taxable amount for VAT purposes. It emphasizes that the taxable amount should reflect the consideration actually received by the supplier, affirming the principle that VAT must be calculated based on the actual transaction amounts. This principle supports the argument that the VAT refund administration fees charged by Határ Diszkont should be treated as distinct and subject to VAT, rather than being exempt under other provisions.
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