(September 3, 2014)

On September 3, 2014 the European Court of Justice ruled in Case-589/12, HMRC vs GMAC UK plc. GMAC is a company registered for VAT which carries on a business of a.o. selling motor cars on deferred payment terms. The following questions were referred to the European Court of Justice for preliminary ruling:

1. To what extent is a taxable person, in relation to two transactions concerning the same goods, entitled both (i) to invoke the direct effect of one provision of [the Sixth Directive] in respect of one transaction and (ii) to rely on the provisions of national law in relation to the other transaction, when to do so would produce an overall fiscal result in relation to the two transactions which neither national law nor the [Sixth Directive] applied separately to those two transactions produces or is intended to produce?
2. If the answer to Question 1 is that there are circumstances in which the taxable person would not be entitled to do so (or would not be entitled to do so to a particular extent), what are the circumstances in which this would be so and in particular what is the relationship between the two transactions which would give rise to such circumstances?
3. Do the answers to Questions 1 and 2 differ according to whether or not the national treatment of one transaction is confirmity with the [Sixth Directive]?

The European Court of Justice ruled as follows:

The first subparagraph of Article 11C(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States  relating to turnover taxes - Common system of value added tax: uniform basis of assessment must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings, a Member State may not prevent a taxable person from invoking the direct effect of that provision in respect of one transaction by arguing that that person may rely on the provisions of national law in relation to another transaction concerning the same goods and that the cumulative application of those provisions would produce an overall fiscal result which neither national law nor Sixth Directive 77/388, applied separately to those transactions, produces or is intended to produce.

Click here for the full text of the ruling.

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