(September 3, 2015)
On September 3, 2015 the European Court of Justice (CJEU) ruled in Case C‑463/14 Asparuhovo Lake Investment Company OOD versus Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite, (ECLI:EU:C:2015:542).
· Should Article 24(1) and Article 25(b) of [the VAT] Directive … be interpreted as meaning that the term “supply of services” also includes subscription contracts for the supply of consulting services such as those at issue in the main proceedings, namely where a supplier, having qualified personnel available for supplying the services, has agreed to be on call for the customer during the term of the contract and has undertaken to refrain from entering into contracts with a similar subject-matter with the customer’s competitors?
· Should Articles 63 and 64(1) of [the VAT] Directive … be interpreted as meaning that, for subscribed consulting services, the chargeable event occurs on expiry of the period in respect of which the payment was agreed, irrespective of whether and how often the customer makes use of the supplier’s on-call services?
· Should Article 62(2) of [the VAT] Directive … be interpreted as meaning that a person supplying services in connection with a subscription service contract is obliged to charge VAT for the services on expiry of the period in respect of which the subscription fee was agreed, or does this obligation arise only if the customer has made use of the consultant’s services over the corresponding taxable period?
The dispute in the main proceedings and the questions referred for a preliminary ruling
· ALIC is a Bulgarian company whose business is mainly concerned with agriculture, horticulture, livestock rearing and related activities.
· On 1 August 2011, ALIC entered into subscription contracts for consulting services with four other companies, namely ‘Krestan Bulmar — Korporativni finansi’ EOOD, ‘Krestan Bulmar — Biznes razvitie’ EOOD, ‘Krestan Bulmar — Legakonsult’ EOOD and ‘Biznes Ekspres’ EOOD, (together the ‘service providers’), in the areas of corporate finance, commercial development, legal advice and information security, respectively. Those consulting companies were all represented by the same person. The parties terminated those contracts from 5 March 2012.
· Under those contracts, the service providers undertook to:
- make themselves available to ALIC for consultation, meetings and commitments, on each working day from 9 a.m. to 6 p.m. and, when needed, outside office hours, including on Sundays and public holidays;
- where appropriate, ensure, during such time as necessary, the presence of a competent person at ALIC’s offices and/or those of a third party associated with ALIC, including outside office hours and on Sundays and public holidays;
- obtain documents and necessary information and exchange them between the parties in order to guarantee the fullest and most efficient protection possible of ALIC’s interests, and
- transmit, in good time, to the customer, for consultation, negotiation and signature, all the necessary documents relating to the protection of the customer’s interests.
· The service providers declared that they had not entered into similar contracts with third parties whose interests were contrary to those of ALIC and/or which were competing directly with ALIC. They also undertook to refrain from entering into such contracts.
· In exchange, ALIC undertook to pay them weekly remuneration, disbursed every Monday following the week for which it was due. ALIC deducted the VAT stated on the invoices issued by the service providers.
· ALIC was the subject of a tax inspection covering the period from August to October 2011. During the inspection, the tax authorities found that the invoices had been issued within the period stated in the contracts, had been duly accounted for in the accounts both of the service providers and of ALIC and had been the subject of a VAT declaration. The tax authorities also noted that the invoices established by the service providers had been honoured by way of payments made by bank transfer. It was also established that the service providers had sufficiently qualified staff to provide the agreed services.
· As regards the way in which those services were to be supplied, the service providers declared that the parties had not envisaged a formal documentary record being made of requests for those services and the provision thereof. The existing tasks and problems were examined at meetings, by telephone or by e-mail. The staff actually entrusted with performing those services stated that the customer communication manager assigned to them, via electronic communications, the various tasks to be carried out for ALIC.
· The tax authorities took the view that no proof had been provided as to the type, quantity and nature of the services actually provided — in particular there was no first-hand document relating to the number of hours performed — and that no information had been given on how service prices had been set. On 1 August 2013, the tax authorities issued an adjusted tax notice refusing ALIC the right to deduct the VAT invoiced by the service providers, concerning the sum of 33 349 Bulgarian leva (BGN), about EUR 17 000.
· ALIC challenged the adjusted tax notice before the Direktor. Since the latter upheld that notice by decision of 4 November 2013, ALIC brought an action before the referring court.
· The referring court notes that the contracts entered into by ALIC defined only the scope of the consulting services and did not indicate any specific result to be achieved as regards the subject-matter, performance deadline, manner of receipt or unit price of those services. The court adds that the decision of the parties to pay for the services supplied by the service providers by means of a fixed sum paid at regular intervals shows that those parties had not connected the right to require payment of the remuneration to the achievement of a specific result; consequently, the referring court does not consider it appropriate to examine whether such results were actually achieved.
· The referring court states that the tax authorities have never claimed that the supplies of services, in respect of which ALIC claims a right to deduct the input VAT, were fraudulent; nor have those authorities provided any evidence to that effect.
· The referring court states that it nevertheless has doubts as to whether a subscription contract, such as that at issue in the main proceedings, may constitute a ‘supply of services’ within the meaning of Article 24(1) and Article 25(b) of the VAT Directive, or whether only the supply of specific consulting services may constitute such a supply and give rise to the right to deduct VAT. In the first case, it also asks whether the chargeable event and the chargeability of the tax occur upon the expiry of the period in respect of which the payment has been agreed.
· In those circumstances, the Administrativen sad (Administrative Court, Varna, Bulgaria) has decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
(1) Should Article 24(1) and Article 25(b) of [the VAT] Directive … be interpreted as meaning that the term “supply of services” also includes subscription contracts for the supply of consulting services such as those at issue in the main proceedings, namely where a supplier, having qualified personnel available for supplying the services, has agreed to be on call for the customer during the term of the contract and has undertaken to refrain from entering into contracts with a similar subject-matter with the customer’s competitors?
(2) Should Articles 63 and 64(1) of [the VAT] Directive … be interpreted as meaning that, for subscribed consulting services, the chargeable event occurs on expiry of the period in respect of which the payment was agreed, irrespective of whether and how often the customer makes use of the supplier’s on-call services?
(3) Should Article 62(2) of [the VAT] Directive … be interpreted as meaning that a person supplying services in connection with a subscription service contract is obliged to charge VAT for the services on expiry of the period in respect of which the subscription fee was agreed, or does this obligation arise only if the customer has made use of the consultant’s services over the corresponding taxable period?
The CJEU ruled as follows:
1. Article 24(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, must be interpreted as meaning that the term ‘supply of services’ includes subscription contracts for the supply of consulting services to an undertaking, in particular those of a legal, commercial or financial nature, under which a supplier has agreed to be available to the customer during the term of the contract.
2. As regards subscription contracts for consulting services, such as those at issue in the main proceedings, Articles 62(2), 63 and 64(1) of Directive 2006/112 must be interpreted as meaning that the chargeable event and the chargeability of the tax occur upon the expiry of the period in respect of which the payment has been agreed, irrespective of whether and how often the customer has actually made use of the supplier’s services.
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