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EU VAT Law: Recent Developments and Key Themes (September-October 2025)
This briefing summarizes key themes and ideas emerging from recent EU Court of Justice (ECJ) and General Court (GC) rulings and opinions related to Value Added Tax (VAT). The landscape is complex and constantly evolving, but a few important themes have emerged.
I. Core Themes
- Transfer Pricing Adjustments and VAT: A major theme is the increasing scrutiny of VAT implications of transfer pricing adjustments, particularly within multinational corporations. The Arcomet Towercranes case (C-726/23) and related commentary demonstrate the CJEU’s position that transfer pricing adjustments can be subject to VAT if they represent genuine services supplied for consideration under Article 2(1)(c) of the VAT Directive.
- Vouchers vs. Discounts in Loyalty Programs: The Lyko case (C-436/24) focuses on clarifying the distinction between vouchers and discounts in loyalty programs. Advocate General (AG) Kokott’s opinion, emphasizes that loyalty points that can only be redeemed with further purchases, without a self-standing obligation to accept them as payment, are more likely to be treated as discounts than vouchers.
- VAT Deductions and Input Tax Credits: Several cases address the right to deduct input VAT, particularly when related to VAT-exempt activities or potentially fraudulent transactions. The need for a “direct and immediate link” between input and output transactions is emphasized, and tax authorities have the right to request documentation beyond invoices if it is necessary and proportionate.
- Scope of VAT Exemptions: Several cases revolve around the interpretation and scope of various VAT exemptions, such as those for certain postal services, financial transactions, and exports. The emphasis here is on interpreting EU law in a way that prevents abuse and distortion of competition.
- Proportionality and Fundamental Rights: The principle of proportionality continues to be a recurring theme, especially concerning penalties for VAT non-compliance and the right to a fair trial. National laws that unduly restrict judicial review or impose disproportionate penalties are likely to be challenged.
- Single vs. Multiple Supplies: The VAT treatment of ancillary services to a primary supply is considered, specifically in the context of the hospitality industry in Germany. An AG Opinion was rendered stating that anciliary services should not be required to be taxed at the same rate as the main service.
- In-Game Assets: Recent cases also consider the VAT treatment of in-game assets, such as virtual gold. It has been determined that such assets do not qualify for a VAT exemption.
- Reemtsma Principle: A key tenet in VAT Law which allows businesses to recover VAT directly from tax authorities when suppliers are unable or unwilling to correct an overcharge.
II. Key Cases and Opinions
- Judgments
- C-726/23 (Arcomet Towercranes): This case establishes that transfer pricing adjustments can be subject to VAT if they constitute remuneration for a service. The crucial factor is “the remuneration of intra-group services, supplied by a parent company to its subsidiary and detailed contractually… which corresponds to the part of the operating margin… constitutes the quid pro quo of a service performed for consideration falling within the field of application of Value Added Tax.” Tax authorities can request additional documentation beyond invoices to verify the “reality of the service and its use for the taxable person’s taxed operations,” but these requests must be “necessary and proportionate.” Tax advisors recommend maintaining robust documentation, integrating VAT considerations into transfer pricing policies, and ensuring services provided are clearly defined.
- C-535/24 (Svilosa): Acts by a creditor to recover debt without debtor’s mandate aren’t classified as ‘supply of services’. Actions taken by creditors to recover debts, lacking a mandate from debtors, do not fall under the VAT taxable service category.
- AG Opinion
- C-436/24 (Lyko Operations): AG Kokott’s opinion suggests that loyalty program points that require a subsequent purchase for redemption are not vouchers but rather discounts. “Discount instruments do not oblige anyone to supply upon presentation of the voucher, but only to reduce the price when a customer undertakes to purchase goods.” This distinction has implications for the timing and calculation of VAT.
- C-409/24, C-410/24, C-411/24 (Germany Ancillary Services): AG Opinion indicates support for Germany’s ability to tax ancillary services like breakfast at the standard rate, even when part of an all-inclusive package. The AG concludes that it is not contrary to EU law for hotels in Germany to tax ancillary services, such as breakfast, separately at the standard VAT rate, and this that the VAT Directive allows for this distinction, regardless of the all-inclusive nature of bookings offered to customers.
- C-472/24 (Žaidimų valiuta): In-game gold is not VAT exempt as currency because it isn’t legal tender and it lacks characteristics of a currency used in legal transactions. However, the AG suggests the margin scheme could be applied analogously to prevent double taxation.
- In ECJ C-121/24 (Vaniz), Advocate General Kokott stated that the mere non-payment of declared VAT by a supplier does not automatically constitute VAT fraud. A customer can only be held liable if they knew or should have known that their supplier was committing fraud or engaging in abusive practices. Liability cannot be imposed on a third party after the liquidation of the original debtor
III. Key Principles and Definitions Reinforced
- Direct and Immediate Link: For VAT deduction, a clear and direct link between input and output transactions must be demonstrated.
- Proportionality: Penalties and requirements must be proportionate to the offense or objective.
- Fiscal Neutrality: The VAT system should not distort competition.
- Single Supply: A transaction with multiple elements can be treated as a single supply if those elements are closely linked.
- Arm’s Length Principle: Used in transfer pricing, where transactions between related parties should reflect those between independent parties.
- Voucher: defined as an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services
IV. Implications for Businesses
- Transfer Pricing Documentation: Businesses need robust documentation for intra-group service agreements and transfer pricing policies, going beyond mere invoices. They must demonstrate the reality and use of the service.
- Loyalty Program Design: Companies should carefully structure loyalty programs to avoid classification as vouchers if they prefer different VAT treatment.
- VAT Compliance Strategies: Businesses need to integrate VAT considerations into transfer pricing policies, intra-group agreements, and documentation practices.
- Burden of Proof: Taxpayers bear the burden of proving their entitlement to VAT deductions.
- Hotel and Hospitality: Businesses must assess the impact of separate VAT rates on ancillary services.
- Gaming: More clarification is needed around taxing in-game assets, in preparation for the final court ruling.
V. Ongoing Questions and Areas for Further Clarification
- The exact scope and application of the Arcomet Towercranes ruling and its impact on various transfer pricing scenarios.
- The implications of the Lyko case on existing loyalty programs that treat points as vouchers.
- Whether digital QR codes can legally replace paper receipts in EU transactions.
Overviews
- 1083 ECJ VAT Cases are now available on www.VATupdate.com – ALPHABETICAL INDEX
- 1083 ECJ/General Court VAT Cases are now available on www.VATupdate.com
- ECJ VAT Cases – Link to the relevant article in the EU VAT Directive 2006/112/EC
- ECJ VAT Cases decided in 2025
- ECJ/General Court VAT Cases – Pending cases
Judgments (Order)
- ECJ C-535/24 (Svilosa) – Judgment – Acts by a creditor to recover debt without debtor’s mandate aren’t classified as ‘supply of services’
- ECJ C-726/23 (Arcomet Towercranes) – Judgment – Transfer Pricing Adjustment for intra-group services subject to VAT; documentation required
AG Opinion
- ECJ C-121/24 (Vaniz) – AG Opinion – Joint VAT liability requires existing debtor; no liability post-liquidation
- ECJ C-436/24 (Lyko Operations) – AG Opinion – VAT Treatment of Loyalty Program Points
- ECJ C-472/24 (Žaidimų valiuta) – AG Opinion – VAT Treatment of In-Game Gold Transactions
- ECJ VAT C-409/24, C-410-24, C-411/24 – AG Opinion – VAT Treatment of Ancillary Services: Separate Standard Rate Taxation Allowed
Questions
- ECJ State Aid C-360/25 (X) – Questions – Legal Validity of the Bank-to-Bank VAT Exemption
- General Court VAT case – T-569/25 (X-GmbH) – Questions – Can good faith be excluded from VAT assessment procedure?
- ECJ VAT C-465/25 (Matin Maier) – Questions – VAT deduction rights when a supplier is deregistered or declared inactive
New ECJ/General Court Cases
Agenda
Briefing document & Podcast
- Briefing document & Podcast: C-726/23 (Arcomet Towercranes) – VAT and Transfer Pricing Adjustments on on Intra-Group Services
- Briefing document & Podcast: ECJ C-409/24 to 411/24 – AG Opinion – VAT on Short-Term Accommodation and Ancillary Services
- Briefing document & Podcast: ECJ C-436/24 (Lyko) VAT on Loyalty Programs
- Briefing Document & Podcast: ECJ C-513/24 (Oblastní nemocnice Kolín) – AG Opinion – VAT Deduction Rights for Healthcare Equipment Costs Clarified
- Briefing document & Podcast: ECJ C-564/15 (Farkas) – Non-application Reverse-Charge, 50% tax penalty is disproportionate
Comments on ECJ cases
- Comments on ECJ C-121/24: Non-payment of declared VAT does not constitute VAT fraud
- Comments on ECJ C-409/24-C411/24 – Accommodation landlords must split supplies for VAT purposes (AG Opinion)
- Comments on ECJ C-436/24 (Luko): Loyalty Points Not Free for VAT Purposes in Lyko Case (AG)
- Comments on ECJ C-472/24: AG Opinion on Taxation of Virtual Gold in Online Gaming
- Comments on ECJ C-513/24 – Guidelines of the AG of the EU for VAT deduction for Czech hospitals
- Comments on ECJ C-726/23 (Arcomet Towercranes): Decision Highlights VAT and Transfer Pricing Interplay
- Comments on ECJ C-726/23 (Arcomet Towercranes): ECJ Rules Transfer Pricing Adjustments Can Trigger VAT Obligations
- Comments on ECJ C-726/23 (Arcomet Towercranes): Implications of Recent European Court of Justice Ruling
- Comments on ECJ C-726/23 (Arcomet Towercranes): Transfer Pricing Adjustments May Be Subject to VAT Across EU
- Comments on ECJ C-726/23 (Arcomet Towercranes): VAT Treatment of Transfer Pricing Adjustments
- Comments on ECJ C-726/23 (Arcomet) – VAT Applies to Transfer Pricing Adjustments, Clarifying Deduction Requirements
- Comments on Opinion in ECJ C-409/24, C-410/24, C-411/24: Hotels must split services for VAT, including breakfast
Denmark
France
Germany
- ECJ to Decide if QR Codes Can Legally Replace Paper Receipts in EU Transactions
- VAT Exemption for Export Deliveries: Clarification of EU Court’s Anti-Abuse Rulings and Guidelines
Italy
Other
- ECJ Upholds Czech Joint VAT Liability in Fuel Fraud Case, Validates EU Law Compliance
- ECJ VAT C-513/24 (Oblastní nemocnice Kolín) – AG Opinion – Costs for non-deductible VAT activities do not guarantee proportional deductions
- CJEU to Rule on Danish VAT Group Ownership Law Compatibility with EU Directive
- AG Kokott’s Opinion: VAT Exemption, Vouchers, and Margin Scheme for In-Game Gold Trading
- AG’s Opinion in Lyko Case: New Perspectives on VAT Treatment of Loyalty Programs
- CJEU Confirms TP Adjustments as VAT-Applicable Services, Requires Supporting Documentation
- CJEU Rules on VAT for Transfer Price Adjustments in Arcomet Towercranes Case C-726/23
- CJEU Rules Transfer Pricing Adjustments May Be Subject to VAT for Intragroup Services
- CJEU Ruling C-726/23: Impact of “Balancing” Payments on VAT Between Parent and Subsidiary Companies
- CJEU Ruling on Transfer Pricing Adjustments and VAT: Individual Analysis Required
- CJEU Ruling: VAT Applies to Intra-Group Transfer Pricing Adjustments in Arcomet Case
- Court Rules Sudoku Books as Periodicals: Implications for VAT and Tariff Classification
- ECJ Case: VAT Treatment of Loyalty Points vs Vouchers Under EU Directive
- ECJ Rules Intra-Group Payments Under Transactional Net Margin Method Subject to VAT
- ECJ Rules Non-Transactional Profit Adjustments by Principal Are VAT-Applicable Services in Arcomet Case
- ECJ Rules VAT Refund Processing for Non-EU Buyers is Taxable Service, Includes VAT in Price
- ECJ Ruling: VAT Treatment of Transfer Pricing Adjustments Between EU Member State Companies
- EU Court of Justice Rules Transfer Pricing Payments Subject to VAT in Arcomet Case
- EU Court Ruling on Arcomet: Transfer Pricing Adjustments Pose VAT Risks for Companies
- EU Court Upholds VAT Exemption for Exported Goods Despite Initial Intra-EU Delivery Intentions
- European Court Rules Contractual Transfer Pricing Adjustments May Be Subject to VAT
- Transfer Pricing and VAT Post-Arcomet: Unresolved Debates in Taxation’s Complex Landscape
- Understanding the Reemtsma Principle: EU VAT Reimbursements and Recent CJEU Rulings
- Understanding VAT Implications on Transfer Pricing: Insights from Arcomet Case C-726/23
- VAT and Transfer Pricing: ECJ’s Arcomet Decision Clarifies Intra-Group Service Remuneration and VAT.
- VAT Implications on Transfer Pricing Adjustments: Insights from Acromet Towercranes Case
- VAT on Transfer Pricing Adjustments: Importance of Detailed Documentation in Court Rulings
- VAT Rules for Virtual Game Currencies: EU Court Advocate General Opinion
- VAT Treatment of Loyalty Points: Discounts vs Vouchers After ECJ Case
- ECJ Rules VAT Refund Administration Fees Taxable in Hungary for Non-EU Customers
- ECJ Advocate General: VAT Applies to Lithuanian In-Game Currency Resale Profits
- Luxembourg VAT on Directors’ Fees: Impact of CJEU C-288/22 Ruling and District Court Decision
- CJEU Ruling: Transfer Pricing Adjustments Impact VAT in Arcomet Case (C-726/23)
- Do Loyalty Program Points Qualify as Vouchers? CJEU to Decide on VAT Implications
- Court of Justice Rules on VAT for Intra-Group Services and Evidence Requirements for Deductions
- ECJ Rules Compensation Payments in Transfer Pricing as Taxable Supply for VAT Purposes
- Transfer Pricing Adjustments and VAT Implications: Impact of Recent CJEU Decisions
- VAT Treatment of Loyalty Points in Lyko’s Scheme: Not Classified as Vouchers, Says AG Kokott
- Recent ECJ/General Court VAT Jurisprudence and Implications for EU Compliance (Jul–Aug 2025)
Poland
- Transfer Pricing Adjustments and VAT: Implications of the Arcomet Towercranes Case Ruling
- VAT Implications on Virtual Game Currencies: General Advocate’s Opinion in EU Case C-472/24
Roadtrip through ECJ Cases
- Roadtrip through ECJ Cases – Focus on ”Composite supplies”
- Roadtrip through ECJ Cases – Focus on ”Vouchers” (Art. 30a, 30b, 73a)
- Roadtrip through ECJ cases: Focus on ”VAT rates” (Art. 96-99)
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