The Advocate General of the Court of Justice of the European Union (CJEU) on 21 March 2018 issued an opinion concluding that the exemption from value added tax (VAT) for payments cannot be applied to a service provider that only instructs banks to transfer sums of money.
The CJEU Advocate General concluded that giving such instructions is a “mere physical, technical or administrative service” that is not covered by the VAT exemption for payments. According to the Advocate General, such a service does not involve the execution of the transfer itself, and thus does not directly result in the legal and financial changes—characteristic for the VAT-exempt transfer of money.
If the CJEU follows the opinion of the Advocate General, it appears there would be a more limited scope of the VAT exemption for payments. A strict interpretation would mean that only the parties that actually make the payment—and that thus bring about legal and financial changes—could apply this exemption. Other links in the payment chain could not apply the VAT exemption for payments. Several parties that are not directly involved with the execution of the payment, but are currently applying the VAT exemption, could be affected by the CJEU’s ultimate judgment. Parties that offer their services directly to individual consumers or are paid by the banks may be affected by this case.
Whether the CJEU follows the Advocate General’s opinion in this case remains to be seen. There are also two other cases concerning payment and transaction services pending before the CJEU. One of these cases concerns a service provider involved in the operation of cash dispensers, and the other concerns a factoring situation.
Read a March 2018 report prepared by the KPMG member firm in the Netherlands
The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.