ECJ VAT C-744/23 (Zlakov) – Judgment – Pro Bono Legal Services are subject to VAT

On October 23, 2025, the ECJ issued the Judgment in the case C-744/23 (Zlakov).

Context: Reference for a preliminary ruling – Common system of value added tax – Directive 2006/112/EC – Taxable transactions – Absence of consideration for a service due to the uncertainty of a contingency fee – pro bono legal advice given by a lawyer registered as a taxable person liable for VAT – Statutory minimum fee payable by the unsuccessful party in the event of a successful outcome

Summary

Facts: A Bulgarian lawyer provided pro bono legal aid under national law to a client who later won the case. The court ordered the opposing party to pay a statutory fee to the lawyer, but without VAT.
Questions to the Court: The referring court asked whether pro bono legal aid, later compensated by a court order, constitutes a taxable supply under EU VAT Directive 2006/112/EC. It also questioned who is the taxable person when the fee is awarded directly to the lawyer.
Decision: The ECJ ruled that such services are subject to VAT when remuneration is awarded by the court. The payment creates a taxable transaction even if the client did not pay for the service.
Justification: The court held that the fee ordered by the court establishes a direct link between the service and consideration. This satisfies the conditions for VAT under Articles 2 and 24 of Directive 2006/112/EC.
Implications: Lawyers registered for VAT must charge VAT on fees awarded for pro bono work when compensation is ordered. This ensures VAT neutrality and prevents distortion between paid and unpaid legal services.

Article in the EU VAT Directive

Article 24(1) of the EU VAT Directive 2006/112/EC

Article 24
1. ‘Supply of services’ shall mean any transaction which does not constitute a supply of goods.

Facts

The applicant is TPT, a sole proprietorship firm, and the defendant is ‘Financial Bulgaria’.

They have concluded a consumer credit agreement. The legal services are provided to the client free of charge, because a Bulgarian legal profession law allows a lawyer to provide legal services free of charge to persons in economic difficulties. The lawyer argues that the judge wrongly awarded him the costs of the lawyer’s fee without value added tax.

Consideration:

The referring court has doubts as to whether VAT is due on a lawyer’s fees where the work was carried out under the conditions of free legal services. He is not sure whether the provision of a legal service free of charge is a ‘supplied service free of charge’ within the meaning of Article 24(1) of the VAT Directive. The referring court also has doubts about who the tax entity (taxable person) is in this case, the applicant or the lawyer.

Questions

1) Must ‘services’ within the meaning of Article 2(1)(c), Article 24(1), Article 26(1)(b) and Article 28 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as including the following transactions:

1. the provision of legal services free of charge (pro bono) by a lawyer of a party in legal proceedings[?]

2. the provision of legal services (pro bono) free of charge by a lawyer of a party who has been successful in the proceedings, whereby the judge awards the lawyer the fee that he would have received if it had been done in the context of a agreement for legal protection and legal assistance had been agreed[?]

2. Must ‘the provision of services free of charge’ within the meaning of Article 26(1)(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be defined as it is explained that it includes the following actions:

1. the provision of legal services free of charge (pro bono) by a lawyer of a party in legal proceedings[?]

3) Must ‘a supply of services for consideration’ within the meaning of Article 2(1)(c), Article 24(1) and Article 26(1)(b) of Directive 2006/112/EC the Council of 28 November 2006 on the common system of value added tax be interpreted as meaning that it includes the provision of a legal service free of charge (pro bono) by a lawyer for a party who has been successful in the proceedings , whereby the judge awards the lawyer the fee that he would have received if it had been agreed in the context of an agreement for legal protection and legal assistance[?]

4. Must ‘taxable person’ within the meaning of Articles 28 and 75 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning:

1. a lawyer (sole-law firm) who has provided legal services free of charge (pro bono) to a party in a legal procedure [?]

2. a lawyer (one-man law firm) who has provided legal services (pro bono) free of charge to a party who has been successful in the proceedings, whereby the judge awards the lawyer (one-man law firm) the fee that he would have received if had been agreed in the context of an agreement for legal protection and legal assistance[?]

AG Opinion

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 a service provided by a law firm to its clients free of charge, but in respect of which a statutory fee is payable by the unsuccessful party in the event of success, is provided for consideration and therefore constitutes a taxable transaction. Neither the uncertainty as to whether a fee will be paid, and the amount thereof, nor the fact that the fee is payable by operation of law, nor the fact that a third party is required to pay the fee, preclude the service provided by the law firm from being subject to VAT based on the amount of the fee actually received.

Judgment

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 representation of a party in court by a lawyer constitutes a supply of services for consideration within the meaning of that provision, in circumstances where that supply is provided free of charge, but where the legislation of the Member State concerned provides that the opposing party, in the event that the latter is ordered to pay the costs, is also ordered to pay that lawyer fees, the amount of which is regulated by that legislation.

Other ECJ Cases referred to

Baštová Case (C-432/15): This case involved the question of whether a prize awarded to a winner of a competition could be considered as remuneration for a service provided. The ECJ ruled that the prize did not constitute consideration for a service due to the uncertainty surrounding the outcome of the competition, thereby affecting the link between the service provided and the payment received.
Tolsma Case (C-16/93): Established that a supply of services is taxable only if there is a direct link between the service and consideration. This principle was applied to assess whether court-awarded fees for pro bono work constitute consideration.
Administration de l’enregistrement, des domaines et de la TVA (c-288/22) clarified that services related to loyalty programs and transaction processing are taxable electronic services, not VAT‑exempt financial transactions. The Court reasoned that these activities do not involve creating or altering legal and financial obligations, so standard VAT rules apply.

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