CJEU – Recent Developments in Value Added Tax 2016

S. 209Taxable and Non-Taxable Transactions

Herman Van Kesteren

1. S. 210Introduction

1.1. Direct Link

Not all transactions carried out by a taxable person are subject to VAT. A supply is only taxable if it is effected for a consideration. Art. 2(1)(a) and Art. 2(1)(c) of the VAT Directive provide that the supply of goods and services, respectively, for consideration within the territory of a Member State by a taxable person acting as such is subject to VAT. It is settled CJEU case law that a “transaction for consideration” requires that there be a direct link between that supply and the consideration actually received by the taxable person. Such a direct link exists if there is a legal relationship between the supplier and the recipient, following which there is a reciprocal performance, which requires that the payment received by the supplier constitutes the value actually given in return for the supply to the recipient. The CJEU’s message is clear: not every link is a “direct” link!

Normally, the determination of a direct link between a consideration and a supply does not give rise to difficulties. However, there are situations in which it can be rather complicated.

For example, a direct link will...