- Case Background: A Bulgarian company provided legal support to a foundation to recover a loan it had granted, which had not been repaid. The legal services aimed to recover funds from third parties, benefiting both the foundation and the company.
- Core Issue: The key question was whether the company’s actions constituted a supply of services free-of-charge to the foundation that would be subject to VAT.
- Court’s Reasoning: The Court ruled that the company did not supply services free-of-charge to the foundation. It emphasized that services provided for business purposes, such as debt recovery, are not considered “for purposes other than those of the business.” The company acted in its own interest as a creditor, and therefore, there was no VATable supply of free-of-charge services.
Source Pawel Mikula
Background of the Case: Bulgarian company Svilosa provided a loan for a benefit concert organized by a foundation. After the concert was canceled, Svilosa engaged U.S. law firms to recover payments, deducting input VAT on legal services despite not having formal instructions from the foundation.
- CJEU’s Ruling: The Court of Justice of the European Union (CJEU) determined that Svilosa’s actions did not constitute a “supply of services for consideration” under the VAT Directive, as there was no legal relationship or reciprocal exchange of services with the foundation regarding the recovery efforts.
- Implications of the Judgment: The CJEU emphasized that VAT concepts must align with EU law definitions, independent of national classifications. Since Svilosa’s recovery actions aimed to protect its own financial interests rather than serving the foundation, they were not subject to VAT as taxable services.
Source BTW Juriprudentie
See also
Roadtrip through ECJ Cases – Focus on ”Deemed supply of services” (Art. 25-28)” – VATupdate
- Join the Linkedin Group on ECJ/CJEU/General Court VAT Cases, click HERE
- VATupdate.com – Your FREE source of information on ECJ VAT Cases
- Podcasts & briefing documents: VAT concepts explained through ECJ/CJEU cases on Spotify
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