The Supreme Administrative Court issued a judgment finding that the difference between the nominal value of a receivable and its purchase price upon its transfer may be viewed as consideration under a factoring contract and thus subject to value added tax (VAT).
The case identifying information is: 4 Afs 143/2018
At issue was the regular purchasing of short-term receivables that were not overdue and were not found to be hard to recover at the time of transfer (assignment).The purchase price of the transferred receivables was set at 95.17% of their nominal value. No other consideration was owed under the factoring contract.
In the court’s opinion, the difference between the nominal amount of the receivables and their purchase price was consideration for the factoring service. The court did not accept an argument that the difference would reflect the actual economic value of the receivables at the time of their transfer.
The court also did not accept an argument that a transfer of a receivable at a price lower than its nominal value was not a provision of a service for consideration. The court distinguished this situation from those in two cases from the Court of Justice of the European Union, by pointing out that in this case, the difference between the nominal value of the receivables and their purchase price was not due to a decrease in their market value.
The court concluded that the difference (4.83%) of the receivables’ nominal value was consideration for the factoring service, and as such was subject to VAT. It was not relevant that the consideration was not explicitly agreed to in the contract.
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