Last update: October 3, 2025
Importance of articles 25 – 28 of the EU VAT Directive 2006/112/EC
- Article 25: Expands the Definition of Services It clarifies that services aren’t limited to traditional activities like consulting or labor. They include intangible transactions such as licensing intellectual property, tolerating or refraining from actions, and fulfilling legal or public authority obligations. This ensures VAT applies to a wide range of non-material economic activities.
- Article 26: Captures Private Use and Free Services It treats private use of business assets and free services as taxable supplies if VAT was previously deducted. This prevents abuse of VAT deductions and ensures fair taxation when business resources are diverted to personal or non-business use.
- ⚖️ Article 27: Anti-Avoidance Mechanism Allows Member States to treat certain internal business services as taxable when VAT would otherwise be non-deductible. This helps prevent distortions in competition and tax avoidance through internal transactions that mimic external supplies.
- Article 28: Legal Fiction for Intermediaries Establishes that intermediaries acting in their own name but on behalf of others are deemed to both receive and supply the service. This simplifies VAT accounting and ensures transparency in agency relationships, especially in complex supply chains.
Articles 25 – 28 of the EU VAT Directive 2006/112/EC
Supply of services
Article 25
A supply of services may consist, inter alia, in one of the following transactions:
(a) the assignment of intangible property, whether or not the subject of a document establishing title;
(b) the obligation to refrain from an act, or to tolerate an act or situation;
(c) the performance of services in pursuance of an order made by or in the name of a public authority or in pursuance of the law.
Article 26
1. Each of the following transactions shall be treated as a supply of services for consideration:
(a) the use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business, where the VAT on such goods was wholly or partly deductible;
(b) the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.
2. Member States may derogate from paragraph 1, provided that such derogation does not lead to distortion of competition.
Article 27
In order to prevent distortion of competition and after consulting the VAT Committee, Member States may treat as a supply of services for consideration the supply by a taxable person of a service for the purposes of his business, where the VAT on such a service, were it supplied by another taxable person, would not be wholly deductible.
Article 28
Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.
Comments: Art. 28 creates a legal fiction of two identical supplies provided consecutively. with an intermediate party who has first received a supply of services from a supplier and secondly, supplies that same service to customer on behalf of the supplier for whom he acts.
ECJ Cases Decided
Article 25
- C-501/19 (UCMR – ADA) – Collective management of copyright on musical works
- C-37/16 (SAWP) – Authors/artists do not provide a service for producers and importers of reproduction rights
- C-463/14 (Asparuhovo Lake Investment Company) – Subscription for the provision of consultancy services
- C-653/11 (Newey) – Contractual provisions are not decisive when determining provider and recipient “service”
- C-223/03 (University of Huddersfield) – Taxable transactions even if carried out for the sole purpose of obtaining a tax advantage, without any other economic purpose
- C-384/95 (Landboden-Agrardienste) – A national compensation scheme not to harvest at least 20% does not constitute a supply of services
- C-215/94 (Mohr) – An indemnity for the abandonment of milk production is not subject to VAT
Article 26
- C-607/20 (GE Aircraft Engine Services) – Issue of retail vouchers to employees is not a taxable transaction
- C-288/19 (QM) – Definition of short term hiring of vehicles, company car provided to an employee is not a service provided for consideration
- C-132/16 (Iberdrola Inmobiliaria Real Estate Investments) – Conditions for the Right to deduct VAT (!!!) – Renovation free of charge for the benefit of a third party
- C-28/16 (MVM) – Also VAT deduction limitation for ”active” company that holds participations
- C-210/11 & C-211/11 (Medicom and Maison Patrice Alard) – Provision of part of the business premises as a residence free of charge does not constitute VAT-exempt rental
- C-594/10 (van Laarhoven) – Conclusion on VAT flat rate and private use of a car
- C-464/10 (Henfling and Others) – VAT exemption for betting also applies to engaged brokers
- C-436/10 (BLM) – Private use of immovable property is not exempted
- C-334/10 (X) – Temporary private use does not preclude input tax deduction
- C-53/09 & C-55/09 (Loyalty Management UK and Baxi Group) – VAT treatment of payments in the course of operating loyalty reward programmes
- C-515/07 (Vereniging Noordelijke Land- en Tuinbouw Organisatie) – Activities by which an association promotes the general interests of its members are not activities ‘subject to VAT’
- C-460/07 (Puffer) – A full deduction VAT and a staggered imposition on the private use of a mixed use building does not infringe the principle of equal treatment
- C-371/07 (Danfoss and AstraZeneca) – VAT deduction for free meals provided in professional context
- C-269/00 (Seeling) – Use for private purposes of a taxable person of a home in a building that fully belongs to a business
- C-535/24 (Svilosa) – Acts by a creditor to recover debt without debtor’s mandate aren’t classified as ‘supply of services’
Article 27
- None
Article 28
- C-695/20 (Fenix International – OnlyFans) – Art. 9a of the Implementing Regulation is valid
- C-501/19 (UCMR – ADA) – Collective management of copyright on musical works
- C‑707/18 (Amarasti Land Investment) – Intermediary in the provision of services or investment expenditure made for the needs of a business
- C-276/18 (KrakVet Marek Batko) – Place of supply of goods sold by online retailers cross border
- C-274/15 (Commission v Luxembourg) – End of the VAT exemption regime for financial IGPs
- C-87/23 (Latvijas Informācijas un komunikācijas tehnoloģijas asociācija) – Subsidies paid by a fund to specific service providers for a particular service are included in the taxable amount
Pending ECJ Cases
None
Briefing documents & Podcasts
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- Podcasts & briefing documents: VAT concepts explained through ECJ/CJEU cases on Spotify
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