Comments on ECJ C-744/23: No-Cure-No-Pay Services Are Subject to VAT

Service for Consideration: Legal representation by a lawyer, even when provided for free (pro bono) to the client, is considered a service for consideration because legislation mandates that the losing party must pay a legally established fee to the lawyer, which is subject to VAT.
Direct Link Between Service and Compensation: There is a direct link between the legal service and the compensation, as evidenced by the agreement between the lawyer and the client and the legal obligation for the opposing party to pay, regardless of whether the payment comes from the client.
Distinction from Previous Rulings: Unlike earlier rulings (Tolsma and Baštová), where payments were not seen as actual consideration, the statutory fee in this case represents the actual compensation for the legal services rendered, qualifying the legal representation as a taxable service.

Taxable Transaction for VAT: The Court of Justice of the European Union (CJEU) ruled that the no-cure-no-pay service provided by T.P.T. constitutes a taxable transaction for VAT purposes, as it is supplied for consideration despite the payment being contingent on the outcome of the legal proceedings.
Irrelevance of Free Legal Services: The court clarified that the provision of legal services free of charge to individuals in economic difficulty under Bulgarian law does not exempt T.P.T. from charging VAT on its services, as the fees awarded by the court represent actual consideration for the legal representation.
Inapplicability of Certain VAT Directives: The CJEU determined that specific articles of the VAT Directive, including Article 26(1)(b), Article 28, and Article 75, are not applicable to the no-cure-no-pay service provided by T.P.T., reinforcing that the service is subject to VAT regardless of the conditions under which it is offered.