EGC VAT Case T-232/26 (Appellant_1 Srl ) – Questions – VAT deductibility of general expenses for auctioneers under margin scheme

The General Court has issued the Request for a preliminary ruling in the case T-232/26 (Appellant_1 Srl )

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Articles in the EU VAT Directive

The following Articles of the EU VAT Directive 2006/112/EC are discussed in the provided text:

• Articles 333 to 341: These articles generally govern the special margin scheme for auctions.
• Article 333: Specifically mentioned as providing that the margin scheme is an optional scheme applicable for determining VAT on supplies of second-hand goods, works of art, antiques, or collectors’ items made by an organizer of sales by public auction “acting in his own name and on behalf of the persons referred to in Article 334, pursuant to a contract under which commission is payable on the sale of those goods by public auction.”
• Article 334: Mentioned in conjunction with Article 333, referring to the persons on whose behalf the auction organizer acts.
• Article 336: States that the taxable amount for each supply of goods under this section is the total amount invoiced to the purchaser (in accordance with Article 339), less the net amount paid or to be paid by the organizer to his principal (as determined in accordance with Article 337), and the amount of VAT payable by the organizer for his supply.
• Article 337: Referenced as determining the net amount paid or to be paid by the organizer to his principal.
• Article 339: Defined as the total amount invoiced to the purchaser, consisting of the auction price, taxes, duties, levies, charges, and “incidental expenses such as commission, packing, transport and insurance costs, charged by the organiser to the purchaser of the goods.”
• Article 167 et seq.: Referenced as the “rules governing the right to deduct” VAT, which the referring court believes the national interpretation might infringe.
• Article 342: Also referenced by the referring court as potentially being infringed by the national interpretation. (It should be noted that Article 342 of Directive 2006/112/EC specifically addresses the details to be shown on invoices issued under the margin scheme, particularly that the VAT amount must not be separately stated).

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Facts & Background

• Facts: Appellant_1 Srl, an Italian auction house, underwent a tax audit for the 2017 tax year. The tax authority (Agenzia delle Entrate) disallowed the deduction of VAT on certain “incidental expenses” related to auction sales, such as transport, valuations, and advertising, arguing they were not passed on to the buyer and thus non-deductible under the margin scheme. The company operates under the special VAT margin scheme for sales of second-hand goods, works of art, antiques, and collectors’ items.
• Issue: The core issue is the interpretation of “incidental expenses relating to the sale” within the context of the VAT margin scheme for auction houses, specifically whether non-deductibility of VAT on such expenses extends to costs that are not directly attributable to individual items or not charged to the buyer, and how this aligns with EU VAT directives and principles.
• Taxpayer’s Position (Appellant_1 Srl): The taxpayer argues that expenses not directly charged to the purchaser or specifically attributable to individual lots should be VAT deductible, as they are not “incidental to the sale” in a way that prevents deduction. They contend that the tax authority’s broad interpretation infringes upon their right to deduct VAT, the principle of tax neutrality, and the freedom to conduct business.
• Tax Authorities’ Position (Agenzia delle Entrate): The tax authority interprets national law (Article 40 bis(2) of Decree-Law No 41/1995) as meaning that VAT on “incidental expenses relating to the sale” is never deductible under the margin scheme, regardless of whether these costs are passed on to the successful bidder. They view expenses like transport, expert reports, and commission for referrals as inherently incidental to the sale.
• Questions sent to the European Court of Justice (ECJ): The referring court asks the ECJ to determine:
  1. Whether Articles 342 and 167 et seq. of Directive 2006/112/EC and the principle of VAT neutrality preclude a national practice that extends VAT non-deductibility for incidental expenses to those not attributable to individual items or not charged to the buyer.
  2. Whether Articles 16, 26, 101, and 107 TFEU preclude a national practice that interprets the national provision to mean that auction houses cannot refrain from passing on general operating expenses to the purchaser, thereby restricting their freedom to conduct business and economic initiative.

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Questions

The questions raised in this appeal should be referred to the Court of Justice of the European Union for a preliminary ruling to determine:

• whether Articles 342 and 167 et seq. of Directive 2006/112/EC, as well as the principle of VAT neutrality, must be interpreted as precluding an internal practice of the tax authorities which interprets a national provision – under which, for operators of auction houses, the tax on incidental expenses relating to the sale is not deductible – as extending the non-deductibility to expenses which cannot be regarded as incidental to the sale by auction of the individual item or which are not charged by the organiser of the auction to the successful bidder;
• and whether [Articles] […] 16, 26, 101 and 107 TFEU must be interpreted as precluding that practice of the tax authorities which interprets the national provision to mean that operators of auction houses are not entitled to refrain from passing on the business’ general operating expenses to the purchaser, thereby restricting the freedom to conduct a business and free economic initiative in a manner that does not in any way prejudice tax considerations.

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Source

• Curia

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Reference to other ECJ Cases

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