- Conditions for Re-invoicing: The Supreme Administrative Court clarified that for re-invoicing (reselling a service without a margin) to apply, the service must be purchased in the entity’s name for the benefit of another entity, with a direct link between the service and the payment by that entity. If these conditions are not met, the transaction may not qualify as re-invoicing.
- Reimbursement vs. Re-invoicing: The court distinguished between cost reimbursement and re-invoicing. If costs are incurred for the benefit of the entity that paid them and are simply reimbursed as compensation (not tied to providing a service), they are not subject to VAT. This was illustrated in a case where a former shareholder reimbursed a company for advisory services, which were deemed to be for the company’s benefit, not the shareholder’s.
- Implications for Businesses: This ruling is significant for capital groups that share costs, emphasizing the importance of correctly documenting cost reimbursements. If the service is utilized by another entity, a re-invoice with VAT can be issued; if the service was provided to the entity that incurred the cost, reimbursement should not include VAT. Businesses need to carefully assess service beneficiaries to ensure proper VAT treatment.
Source
Reference to other ECJ Cases
