On 11 June 2020, the Court of Justice of the European Union (“the CJEU” or “the Court”) issued three VAT related judgements on several cases, thereby providing important clarifications on issues such as the VAT treatment applicable to amounts paid in cases when customers fail to comply with the contractual tie-in period, adjustment of the VAT taxable base in the event of non-payment, as well as the refund of VAT to taxable persons not established in the Member State of refund but established in another Member State.
C-43/19 - Vodafone Portugal
This case raises the question whether the amounts received by a mobile network operator from its customers as a result of their failure to comply with the contractual tie-in period should be considered as contractual penalties outside the scope of VAT.
Previously, the Court has also ruled in case C-295/17 MEO, in which similar issues have been addressed. However, the difference between the two cases is represented by the method of calculation related to the amounts received by operators from their clients, as a result of early termination.
As stated in the previous case mentioned above, the consideration for the price paid at the time of the signing of a contract for the supply of a service is formed by the right derived by the customer to benefit from the fulfilment of the obligations arising from that contract, irrespective of whether the customer uses that right.
In this case, unlike the previous decision in case C-295/17 MEO, the Court did not consider relevant the fact that the amounts collected from former customers did not allow Vodafone to obtain the same revenue as it would have received if the customer had not terminated the contract prematurely, as long as the consideration for the service is determined according to well-established criteria, which define both the monthly instalments and the way in which the amount for early termination must be calculated.
In conclusion, the Court ruled that the amounts received by an economic operator in the event of early termination, for reasons specific to the customer, of a services contract requiring compliance with a tie-in period in exchange for granting that customer advantageous commercial conditions, must be considered to constitute the remuneration for a supply of services for consideration and not as contractual penalties outside the scope of VAT.
C 146/19 - SCT d.d.
This request for a preliminary ruling was made in connection with the Slovenian authorities' refusal to grant SCT the right to adjust the taxable base of the VAT related to an irrecoverable debt on the grounds that the company failed to declare the debt in the bankruptcy proceedings commenced against its debtor.
The CJEU has ruled that Member States should not deny a taxable person the right to reduce the taxable base of the VAT related to a irrecoverable debt where the taxable person did not declare the claim in the insolvency proceedings against its debtor.
C 242/19 - CHEP Equipment Pooling NV
This case concerns the interpretation of the provisions of the VAT Directive and of Council Directive 2008/9/EC on the refund of VAT to taxable persons not established in the Member State of refund but established in another Member State.
More specifically, the request was made in the context in which the Romanian tax authorities refused to reimburse the tax paid in Romania by Chep Equipment Pooling, established in Belgium, on the grounds that the latter had the obligation to register for VAT purposes in Romania as a result of performing a deemed intra-Community supply of goods.
Also, the Court was asked for clarifications as to whether or not the transport of pallets from one Member State to another for the purpose of rental to a taxable person established and registered for VAT purposes in the Member State of destination should be treated as a transfer of goods (i.e. an intra-community acquisition of goods) for VAT purposes.
The CJEU emphasized the fact that, in accordance with the provisions of the VAT Directive and Council Directive 2008/9/EC, the right of a taxable person established in another Member State to obtain a VAT refund is not subject to any formal conditions with respect to the registration for VAT purposes in the Member State of refund.
Thus, Member States should not refuse the right to a VAT refund of a taxable person established on the territory of another Member State on the sole grounds that it is or it should have been registered for VAT purposes in the Member State of refund.
With regard to transfer of goods performed by Chep, the Court stated that the transfer by a taxable person of goods originating in a Member State to the Member State of refund, for the purpose of rental in the latter Member State, should not constitute an intra-Community supply of goods when the use of the mentioned goods is temporary and they were sent or transported from the Member State of the taxable person
Although the three cases presented above address different issues with respect to VAT and the practice of tax authorities in EU Member States (including Romania), we believe that all three judgments of the Court will have an important impact, given that, while on the one hand these confirm certain already established interpretations, they also raise a series of new questions / practical issues.
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