CJEU - Recent Developments in Value Added Tax 2023

S. 1681. Introduction

“Something old, something new, something borrowed, something blue” is a traditional good luck charm that brides in Western cultures incorporate into their wedding attire. A wedding, or marriage, has little to do with VAT. Although, in some cases, the marital status plays a role. The something old in this contribution refers to recent cases on an evergreen topic in VAT since the CJEU ruled in the DFDS case that a subsidiary could be regarded as a fixed establishment under certain circumstances. This led to judgments in the cases Dong Yang,Berlin Chemie and, in 2023, Cabot Plastics; the latter is addressed in this contribution in section 2. Something new refers to the Momtrade Ruse case which deals with a topic that has not been addressed in the CJEU case law thus far: the cross-border application of the exemption for welfare and social security work (section 3). Something borrowed refers to the cases dealing with charging electric vehicles and the place of supply rule for admission to events that will be addressed in this contribution in section 4. Although the topic is new, the CJEU could draw on its earlier case law dealing with VAT on fossil fuels and the place of supply rule for entertainment services, respectively.

2. Something old

The issue of whether and under which circumstances a subsidiary can be a fixed establishment of its parent company has been evident for over 25 years. A recent addition to the body of case law is the Cabot Plastics case that will be addressed in this section.

2.1. Facts

Cabot Plastics that is established in Belgium and Cabot Switzerland that is established in Switzerland are group companies (see figure 1 for the group structure). Cabot Plastics manufactures products for Cabot Switzerland using raw materials provided by the latter. These products are subsequently stored in warehouses S. 169owned by Cabot Plastics and are sold by Cabot Switzerland on the Belgian and EU markets while some of the products are exported. Cabot Plastics carries out various sales support services (managing the stock of raw materials, their inventory at the end of the year, quality control, stock management of finished products, and preparing orders before sending) in this respect. For the services it provides, Cabot Plastics charges Cabot Switzerland a consideration. In dispute is whether Cabot Switzerland has a fixed establishment in Belgium at the place where Cabot Plastics is established. If so, according to the Belgian tax administration, the service provided by Cabot Plastics to Cabot Switzerland is subject to VAT in Belgium.

Figure 1

2.2. CJEU judgement

Referring to its previous case law, the CJEU ruled that, in order to conclude that there is a fixed establishment, a taxpayer does not need to dispose of its own staff and resources. However, a taxpayer must - in order to have a fixed establishment - have staff and resources at its disposal as if it were its own. This may be evidenced by employment and leasing contracts that make those resources available to it and cannot be terminated at short notice. The mere fact that the provider and recipient of the services are linked and belong to the same group does not mean that one of the group companies has a fixed establishment in the other’s country. The CJEU refers to its previous case law where it has made it clear that the classification as a fixed establishment must be assessed in light of economic and commercial reality. A legal person, even if it has only one customer, is assumed to use the technical and human resources at its disposal for its own needs. Only if it was established by reason of the applicable contractual provisions that a company receiving services had the resources of its service provider at its disposal as if they were its own could the company receiving services be regarded as having a fixed establishment. The fact that the human and technical resources belong to Cabot S. 170Plastics therefore does not mean that Cabot Switzerland does not have a fixed establishment in Belgium if the latter company has immediate and permanent access to the resources as if they were its own. In this respect, the following circumstances can be taken into account, although they are not decisive: Cabot Plastics has undertaken to use its own equipment exclusively for producing goods covered by the agreement concluded with Cabot Switzerland; this agreement has been in force since 2012, and these services constitute almost all of Cabot Plastics' turnover.

The CJEU refers to the European Commission’s written observations that point out that the service provider retains responsibility over its own resources and provides the services at its own risk. Even if the service contract is exclusive, this does not result in the service provider's resources becoming those of the customer. The CJEU subsequently considers that a distinction must be drawn between the toll manufacturing services provided by Cabot Plastics and the goods resulting from that work that Cabot Switzerland sells. Therefore, for the purposes of establishing the place where those services are received by Cabot Switzerland, it is necessary to identify the place where the human and technical resources that the company uses for the supply of goods are situated and not the place where the resources it uses for its sales activity are located. The CJEU refers to its earlier judgment from the Berlin Chemie case from which it becomes clear that the same resources cannot be used both to provide and receive services. According to the CJEU, it is not apparent from the file before the Court that it is possible to distinguish the resources used by Cabot Plastics for its tolling services from those that are, according to the tax authority, used by Cabot Switzerland to receive those services in Belgium within its alleged fixed establishment According to that authority, this alleged fixed establishment is constituted only by the resources belonging to Cabot Plastics. The fact that Cabot Plastics also provides the recipient of its services with ancillary services, thereby facilitating the business of that recipient such as the sale of goods resulting from the tolling, has no bearing on the question of the existence of a fixed establishment of that recipient. In this regard, the Court also refers to its judgment from the Planzer Luxembourg case from which it becomes clear that an establishment that only carries out preparatory or auxiliary activities cannot be regarded as a fixed establishment. The CJEU holds that, in this case, it appears that the tolling services are received and used by Cabot Switzerland for its business of selling the goods resulting from those services in Switzerland since that company does not have a suitable structure for that purpose in Belgium. In its final judgement the CJEU therefore concludes: “that a taxable person receiving services, whose business is established outside the European Union, does not have a fixed establishment in the Member State in which the provider of the services concerned - which is legally independent from that recipient - is established, where that recipient does not have a suitable structure in terms of S. 171human and technical resources capable of constituting that fixed establishment, even where the taxable person providing the services provides to that taxable person receiving services, pursuant to an exclusive contractual undertaking, tolling services and a series of ancillary or additional services, contributing to the business of that taxable person receiving services in that Member State.”

2.3. Analysis

The question continues of whether a subsidiary can - under certain circumstances - qualify as a fixed establishment of its parent company. Indeed, in addition to the present case, another case is now pending before the Court of Justice addressing this issue. In this author’s view, following the CJEU’s judgment in the Berlin Chemie case, this type of cases should no longer be referred to the CJEU. Indeed, in the latter case, it already provided the legal framework for determining whether a subsidiary qualifies as a fixed establishment. However, both the present case and the pending SC Adient case were referred before the judgment in Berlin Chemie, and they were not withdrawn nor is it clear whether the CJEU has approached the referring judges for that matter.

It all began with the CJEU’s judgment in the DFDS case for which the CJEU ruled that DFDS A/S’s UK subsidiary from Denmark had to be classified as a fixed establishment of the first company. This was the case because, according to the CJEU, the subsidiary was not independent from its parent company/head office. The CJEU based its judgment on the fact that there was a 100% shareholding, and there were contractual obligations whereby the subsidiary acts as an assistant to the parent company. Those contracts involved an agency agreement under which DFDS Ltd was only allowed to act for DFDS A/S and had the following obligations:

• Providing assistance to the parent company in supervising and controlling tours;

• making available qualified sales and operational personnel;

• consulting the parent company regarding the employment of management staff;

• obtaining the approval of the parent company before concluding any major contracts and for appointing advertising and public relations agents;

• promoting its commercial image in accordance with the parent company’s strategies and within the financial constraints specified by it;

• dealing with passengers’ complaints and being subject to other obligations in accordance with the company’s policy, including refraining from taking any legal proceedings without the parent company’s prior approval; and

• not authorized to work for other passenger transport companies without the parent company’s prior consent.

S. 172Since the Dong Yang judgment, it is known that a shareholding by itself does not mean that a subsidiary should be regarded as fixed establishment. With the judgement in the present case, it is also clear that acting exclusively for another company is also not sufficient to regard one company as a fixed establishment of another. This brings us to the conclusion that the fact that a subsidiary is a fixed establishment in the DFDS case should be based on the specific contractual arrangements between the subsidiary and parent company. However, having regard to the judgment of the CJEU in the present case, this author is not convinced that DFDS A/S (the parent company) has a fixed establishment in the United Kingdom in this case. The fact that permission for certain activities must be obtained or the parent company needs to be consulted does not mean that the subsidiary no longer bears responsibility regarding its own resources and no longer performs services at its own risk. This author does not rule out that the parent company in this case indeed disposes of the subsidiary’s staff and resources, but the above facts and circumstances in themselves are not convincing that this is so. The aftertaste of the present case is that a situation where a subsidiary is, in fact, a fixed establishment does not occur easily. It must also be remembered that the DFDS judgment was dealt with as a situation of abuse of law at a time when the CJEU had not yet introduced that principle in VAT. If DFDS A/S’s subsidiary was not to be regarded as a fixed establishment in the United Kingdom, DFDS's services would be taxable in Denmark where there was an exemption for this type of service whereas there was not in the United Kingdom while services were provided to UK customers.

In the second judgment on this issue, the Dong Yang case, the CJEU ruled that a subsidiary cannot simply constitute a fixed establishment but that economic and commercial reality must be used to determine whether the substantive conditions of Article 11(1) of the VAT Implementing Regulation are met. A prelude to this judgment can be found in the joined cases of Daimler and Widex in which the CJEU pointed out that a subsidiary is an autonomous taxable legal person and that commercial reality was taken into account in the DFDS case. Later in the Berlin Chemie case, the CJEU elaborated on its earlier judgement from the Dong Yang case and held that, in the case of employment and leasing contracts that make resources available and cannot be terminated at short notice, there can be a fixed establishment in the subsidiary’s country. The present judgment builds on this previous one. According to the CJEU, what matters is whether a company has immediate and permanent access to another company's human and technical resources as if they were its own. In particular, the circumstances that Cabot Plastics undertook to use its equipment exclusively for providing services to S. 173Cabot Plastics, the agreement has been in force since 2012, and the services account for almost all of Cabot Plastics are relevant here but not decisive. In this author’s opinion, the circumstance that the agreement has been in place since 2012 should be seen as fulfilling the requirement of permanence and the two other circumstances (the equipment is used exclusively for the provision of services to Cabot Plastics and the turnover thus generated is almost the entire turnover of Cabot Plastics) as fulfilling the requirement of immediate access. It should also be noted that it can be deduced from the Dong Yang case that the service provider cannot be required to check the contractual relationships between its customer and a group company to determine whether another company might constitute its customer’s fixed establishment.

The CJEU also reiterates its view in the present case that staff and resources cannot simultaneously be staff and resources of the service provider (the subsidiary) and of the customer (as a fixed establishment). Paragraph 41 of the present judgement does afford the possibility as outlined earlier by Nellen. If the staff and resources constituting the fixed establishment are different from the staff and resources providing the services, the subsidiary can provide a service to the fixed establishment of a parent company consisting of some of its own personnel and resources that it places at the parent company’s disposal.

In last year’s contribution in which the Berlin Chemie case was discussed, this author argued that a taxpayer disposes of another taxpayer’s staff and resources under two conditions:

In this author’s opinion, these two conditions can still be applied after this judgment as the first condition relates to exclusivity that the CJEU considers a relevant but not decisive circumstance (and rightly so because, in this author’s view, the second condition must still be met as well). The second condition looks (together with the first) at having immediate access to the staff and resources. Since permanence is also required for a fixed establishment, this situation must also exist for a certain period of time.

This author also concluded in the same contribution that, if the subsidiary is a fixed establishment of its parent company, there can be taxable supplies between the head office and a fixed establishment. This is the case because the subsidiary, by virtue of its status as an independent legal entity, has its own economic risk. S. 174A contrario, it seems to be inferred from paragraph 39 of the present case that, for a subsidiary to qualify as a fixed establishment, it should not have its own responsibility and its own risk. In this author’s view, a distinction should be made between risks related to the service itself, in this case toll manufacturing, and risk in respect of, for example, staff as such. For example, the parent company can take responsibility and risk for manufacturing the products and instructing the staff on how to deploy resources but, at the same time, the subsidiary can incur the risk for the staff, e.g. if they fall ill or are otherwise unavailable. In the situation that is outlined, in this author’s view, the parent company has a fixed establishment but, at the same time, the subsidiary has its own economic risk making it independent within the meaning of Article 10 of the VAT Directive. This economic risk relates to the staff and resources owned by the subsidiary, and the taxable supply consists of putting those at the parent company’s disposal. As AG Kokott also points out in her opinion in Welmory, the subsidiary as such is not the fixed establishment, but the parent company can dispose of the subsidiary’s staff and resources as if they were its own which creates a fixed establishment. Later in the SC Adient case, she mentioned that, in the event of a contract to provide services, there is no fixed establishment. This could only be the case if the objective of the contract is to provide resources.

Finally, what strikes this author in the present judgment is that, in paragraph 44, the CJEU mentions the Planzer Luxembourg case and indicates that the CJEU has previously held that a fixed place used solely for the purpose of carrying out preparatory or auxiliary activities does not constitute a fixed establishment. This raises the question of whether, in order to regard an establishment as such under Art. 11 (1) VAT Implementing Regulation, an establishment should make supplies of goods or services to third parties. In this author’s view, this cannot be concluded with certainty from this paragraph of the judgement. In paragraph 44, the CJEU rules on the question raised by the referring court as to whether it is relevant that additional supporting services are provided to Cabot Switzerland by Cabot Plastics. In response, the CJEU refers to the judgment in Planzer Luxembourg. This author opines that the same applies to paragraph 40 in which the CJEU held that to determine where the services are received by Cabot Switzerland, it is necessary to identify the place where the human and technical resources that are used for the supply of the products are located (and not the staff and resources providing the tolling services). Like in the Berlin Chemie case, it is clear that this should be considered because Cabot Switzerland's activities consist of the sale of the goods. Under Art. 44 of the VAT Directive, it is necessary to establish where a taxpayer is able to receive and use services supplied to it for its own needs. It should be noted that an interpretation for which an establishment can only be S. 175regarded as a fixed establishment if it supplies goods or services to third parties would be contrary the view of the VAT committee; that has been later codified in Art. 11 (1) VAT Implementing Regulation.

No less important than the foregoing issues, it is important to note that a fixed establishment of Cabot Switzerland’s existing in Belgium may also have implications, for example, in applying the reverse charge rule on the supplies of goods made by Cabot Switzerland in Belgium to Belgian customers depending on the Belgian implementation of Art. 194 VAT Directive. In this author’s view, however, this is not possible in the case that the fixed establishment does not intervene in the supply (Art. 192a VAT Directive). Art. 53 VAT Implementing Regulation in this respect states that a fixed establishment for applying Art. 192a VAT Directive shall be taken into consideration only when it is characterized by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to make the supply of goods or services in which it intervenes. In this author’s view, only in the situation where the fixed establishment of Cabot Switzerland in Belgium is able to supply the goods in question itself can the reverse charge rule no longer be applied.

3. Something new

The Momtrade Ruse case deals with something new. For the first time, the CJEU rules on the cross-border application of the exemption for welfare and social security work.

3.1. Facts

Momtrade Ruse is established in Bulgaria. It is registered with the Social Assistance Agency as a provider of social services and holds registration certificates for personal assistance, social assistance, and domestic help. It provides personal care and domestic help to elderly persons living in Germany and Austria. Its various obligations are described in detail in a questionnaire attached to the contracts and drawn up by an agency registered in Germany or Austria that is responsible for finding customers and referring them to Momtrade Ruse.

3.2. Judgment

The CJEU rules that the exemption for welfare and social security in Article 132(1)(g) of the VAT Directive also applies in cross-border situations. In this respect, it refers to the text of the provision that does not make its application S. 176dependent on the place where the service is provided, the context of the provision that applies to services in the general interest, and the purpose of the provision which is to make the services that are in the general interest less expensive and more accessible. Pursuant to Arts. 133 and 134 VAT Directive, EU Member States cannot make the application of the exemption dependent on the place of the supply. It is irrelevant that Momtrade Ruse is put into contact with the elderly through an agency. The services of the agency and of Momtrade Ruse are independent services that must be assessed separately for VAT purposes.

Next, the CJEU rules that the Member State where the supplies are subject to VAT, Bulgaria in this case, may not make the application of the exemption conditional on the supplies being social in nature under the national law of another Member State (Germany and Austria in this case). The Member State where the supply is subject to VAT must determine whether the service is of a social nature and whether a body is recognized by that Member State as being devoted to social wellbeing, which is a condition for applying the exemption.

Last but no less important, according to the CJEU, the registration of Momtrade Ruse as a provider of social services can suffice for recognition as a body devoted to social wellbeing provided that the registration requires the competent authorities to verify the social nature.

3.3. Analysis

In three clearly stipulated steps, the CJEU provides an answer to the Bulgarian referring court. In brief, they involve:

3.3.1. Cross-border application of exemption

The cross-border application of an exemption under Art. 132 VAT Directive has been under dispute before. In the Aviva,DNB Banka, and Kaplan International Colleges cases, the CJEU was asked about the application of the cost sharing exemption in the situation where the cost sharing organization and its members are established in different countries. However, the CJEU did not S. 177answer this question as it ruled that the cost sharing exemption does not apply in the financial and insurance sectors and in a situation of a VAT group in which not all of its members are also members of the cost sharing organization, respectively. The CJEU's answer to the question whether the cross-border application of the exemption for welfare and social security work is possible in the present case is resoundingly affirmative. Unlike Advocate General Kokott in her opinion in the Aviva case, the CJEU does not consider the heading “within the country” that preceded Art. 13 Sixth Directive, i.e. the predecessor of Art. 132 VAT Directive, relevant. Nor is the CJEU convinced by the systematic interpretation raised by AG Kokott. Under it, the special exemptions for cross-border transactions can only be found in Chapters 4-8 and 10 of Title IX. In this author’s view, this therefore makes the present case not only relevant for the exemption for welfare and social security work but also for the other exemptions listed in Article 132 of the VAT Directive thus including the cost sharing exemption. Textually, systematically, or teleologically (the three points on which the CJEU assesses Article 132(1)(g) of the VAT Directive in the present case), this author does not see any reason why the cross-border application of other exemptions in Art. 132 VAT Directive should be assessed differently. The CJEU’s judgments in the DNB Banka and Aviva cases have reduced the importance of the cross-border application of the cost sharing exemption because it cannot be applied in the financial and insurance sector. However, it is conceivable in other sectors such as that of education as is demonstrated by the Kaplan International Colleges case. This author opines that the CJEU’s judgement in the present case due to which the exemption can be applied even if the service provider is established in a different country from the customer safeguards the free movement of services within the EU and the neutrality principle. The judgment thus accords well within the EU's objective of creating a single market.

The relevance of the question of whether it is important that the elderly are put into contact with Momtrade Ruse through an agency escapes this author. These are intermediaries. If they act in the name and on behalf of their principal, they are providing a separate intermediary service. Their office also does not constitute a place of business or fixed establishment for Momtrade Ruse. Perhaps the question has its origin in the fact that the order for reference shows that Momtrade Ruse has invoiced agencies in Germany and Austria. However, the answer as to why Momtrade has done so and how those agencies subsequently dealt with these invoices is missing in the referral.

3.3.2. Social nature of services

Having ruled that the exemption for welfare and social security work applies in cross-border situations, the follow-up question arises. The referring court wants S. 178to know whether Bulgaria can impose the condition that the services must be of a social nature under German and Austrian law. In answer to the second question, the Court unequivocally concludes that it is the Member State where the supply is subject to VAT that must determine whether the services are closely linked to welfare and social security work. The CJEU rightfully observes that this could create distortion of competition. Indeed, one Member State may impose less stringent conditions compared to the other. Suppose Member State A has strict conditions, and Member State B does not. If a taxable person from Member State A provides services of a social nature in Member State B, he might be subject to VAT while a similar taxable person established in Member State B can provide the same services exempt from VAT. Conversely, if a taxable person from Member State B provides a service in Member State A, he can do so exempt from VAT while a taxable person from Member State A will be subject to VAT. However, the CJEU, in this author’s view, correctly observes that this is caused by 1) the fact that Art. 45 VAT Directive as a main rule for services to non-taxable persons determines that those services are subject to VAT in the country where the supplier is established and that 2) the requirements of the exemption for welfare and social security work have not been completely harmonized. A different interpretation (i.e. the national legislation of the customer would be decisive) would, in this author’s opinion, also make the application of the condition of Art 133(c) VAT Directive problematic, for example, due to different price levels in Member States. Under this provision, Member States can apply the exemptions of Article 132(1)(b), (g), (h), (i), (l), (m), and (n) of the VAT Directive subject to the condition that the institutions must apply prices approved by the public authorities, prices that do not exceed the approved prices, or, in respect of services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to VAT.

The judgement in the present case, in this author’s view, demonstrates that the concept of welfare and social security is a concept of Union law. In paragraph 57, the CJEU points out that exemptions are autonomous concepts of Union law. This also applies to the specific conditions for applying the exemption and to the concepts and terminology that are used to explain them. Paragraph 59 makes it clear that services that are closely linked to welfare and social security are those that are indispensable for providing services in the field of welfare and social security. If the organization provides these services and is also recognized as a body being devoted to social wellbeing, paragraph 61 makes it clear that the Member State must allow the application of the exemption. Differences between EU Member States will therefore essentially be either those in the conditions applying for recognizing bodies being devoted to social wellbeing or because of the conditions that Member States may impose under Art. 133 VAT Directive.

It should be noted that there are exemptions that provide more margin of discretion to Member States for which -as the author argued above - the judgement S. 179in the present case is relevant as well. For example, in the British Film Institute case, the CJEU ruled that it is up to the Member States to determine which cultural services they exempt under Art. 132 (1) (n) VAT Directive. The CJEU refers to the use of the word “certain” in the exemption. It becomes clear from this word that not all cultural services need to be exempted by the Member States. The CJEU also refers to the great diversity of cultural traditions and regional heritage within the EU, which make a uniform interpretation of what constitutes a cultural service not possible. The CJEU has similarly ruled in the Golfclub Schloss Igling case about the sports exemption, Art. 132(1)(m) VAT Directive. More differences in application may therefore occur in the case of cultural or sports services. Due to the CJEU’s judgment in the Geelen case, these services can be taxed in a country other than where the customer lives if these are provided remotely (see also section 4.2). However, effective from 1 January 2025, amended VAT legislation will enter into application which has the effect that these services will be taxed in the customer’s country if attendance is virtual.

Services closely linked to welfare and social security may next be subject to legislative change regarding the place of supply. In this respect, this author also refers to the international VAT/GST guidelines that state that - with the exception of on-the-spot supplies - all internationally traded services should be subject to VAT in the customer’s jurisdiction. It is noteworthy that, if Momtrade Ruse would have had a fixed establishment in Germany or Austria, the services would be subject to VAT in those Member States. This requires a certain degree of permanence and a suitable structure (staff and resources) to provide the services in question. It can be assumed that - unless Momtrade Ruse’s staff travels daily from Bulgaria to Germany and Austria, that it disposes of staff in Germany and Austria for which the staff also has resources at its disposal to provide the services. However, pursuant to the ARO Lease case, an independent provision of services must be possible. This requires not only that there is staff and resources to provide the services in the other country, but that staff should also be able to conclude contracts for providing those services. If this is done by staff located in an office in Bulgaria, there is no fixed establishment.

3.3.3. Recognition

Bulgarian rules on recognizing Momtrade Ruse as an organization devoted to social wellbeing will apply. According to the CJEU, the following circumstances can S. 180be taken into account: special legal provisions, the public interest of the activities of the taxable person in question, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs of the services in question may be largely met by health insurance schemes or other social security bodies.

When an institution provides services to private individuals in other Member States, it is questionable whether these costs are borne by health insurance funds or other social security institutions in the country where that organization is established. These regulations are also not harmonized. The question can therefore be raised whether applying this criterion is possible in cross-border situations. However, this author posits that it could also be interpreted that it should be examined whether those costs would normally (if the customer was Bulgarian) have been reimbursed under Bulgarian law or whether those costs are in scope of health insurance schemes or other social security schemes in the recipient’s Member State.

The CJEU makes it clear that the registration of an organization as a provider of social services can be taken into account to determine whether it is recognized as a body devoted to social wellbeing. However, competent national authorities (i.e. the tax administration) should verify the social nature in light of the conditions specified by the CJEU (as mentioned above). An assessment for VAT purposes should thus be made. This test, as becomes evident from the I GmbH case, serves to establish that the organizations meet the objective of the exemption that consists of making services that are in the public interest less expensive and therefore more accessible.

4. Something borrowed

4.1. Charging electric vehicles

The issue of charging electric vehicles is one that is similar to that of fuel cards and may turn out to be the something borrowed for which the CJEU will apply its earlier case law on fuel cards to the charging of electric vehicles. In that case law, the CJEU ruled that there is a direct supply from the filling stations to the person or entity filling its tank there. The fuel card operator provides an exempt supply of credit to the person/entity that performs his operation. It should be noted that the VAT committee has recently adopted guidelines on the issue where, under certain conditions, applying the commissionaire arrangement there can be a supply by the filling station to the operator of the card scheme and subsequently a supply from that operator to the customer.

S. 181A similar issue arises for charging electric vehicles which typically includes two types of suppliers. There is a charge point operator (CPO) that either owns charging stations or has contracts with charging station owners (CSO) and an e-mobility service provider (eMSP) that offers goods and services to the driver on the basis of its subscription arrangements. The CPO has a contract with the eMSP while the eMSP has a contract with the driver.

In the Dyrektor Krajowej Informacji Skarbowey case, the CJEU ruled in a situation where there is only a single party involved in recharging electric vehicles. According to the CJEU, the complex supply including access to recharging devices for electric vehicles and the supply of electricity, technical support, and the provision of IT applications that enable the user to reserve a connector, view the transaction history, and purchase credits that can be used to pay for recharging session consists of a single supply of goods. This is because the supply of the electricity is the main supply while the other supplies constitute ancillary supplies. In the pending case of Digital Charging Solutions, the CJEU will need to address the VAT position of supplies made by an eMSP as referred to above. Digital Charging Solutions has concluded contracts with the CPO’s for the supply of electricity to drivers whereas it provides a network for up to date information on prices and availability as well as functions for seeking and finding charging points and route planning. The recharging sessions and using the network are invoiced separately for which the fee for the latter must always be paid. First, the question is raised whether the supply is to be regarded as a supply of goods (electricity). Second, there is the question of whether there is a single supply made by the CPO to the driver or whether the CPO supplies electricity to Digital Charing Solutions which subsequently supplies the electricity to the driver. In this case, the CJEU can therefore make it clear whether its previous case law dealing with fuel cards also applies to recharging electric vehicles. It should be noted that, according to the VAT committee, there are two subsequent supplies made by the CPO (to the eMSP) and the eMSP (to the driver).

For comments on these cases regarding the taxable event, this author refers to the contribution of Beretta This author’s opinion can be found in an article written for the International VAT Monitor. In this contribution, this author would like to reflect on the place of supply rules applicable in these cases.

S. 1824.1.1. Chain supplies via eMSP

In the case that the CPO supplies electricity to the eMSP (see Figure 2), it will be subject to VAT in the country where the eMSP is established under Art. 38 VAT Directive. This is because the eMSP will need to be regarded as a taxable dealer (as it supplies the purchased electricity to the driver). The supply from the eMSP to the driver will be subject to VAT where the customer effectively uses and consumes the good according to Art. 39 VAT Directive. This will be the country where the charge point is located. In the event that the CPO or eMSP is not established in the country where the supply is subject to VAT and the customer is VAT registered in this country, a reverse charge rule applies (Art. 195 VAT Directive). This will likely be the case for the supply from the CPO to the eMSP because is it subject to VAT in the country where the eMSP is established. However, if a customer is a consumer or is not VAT registered in the Member State of the charge point, VAT cannot be reverse charged thereby requiring the eMSP to register for VAT in the country where the charge point is located. This issue is being addressed by the single VAT registration of the VAT in the Digital Age proposal where the OSS is extended to cover the supply of electricity, gas, heating, and cooling. However, in the case of B2B supplies where the customer is not VAT registered in the Member State of taxation, it does not provide a solution. When a business customer of an eMSP charges a vehicle in a Member State other than a Member State where it is VAT registered, the eMSP would therefore still be required to VAT register. This can easily take place when business trips are made to other Member States. Member States do have the option to extent the reverse charge mechanism to situations where the recipient of the service is not VAT registered.

Figure 2

4.1.2. Direct supply from CPO to driver

If there is a direct supply made by the CPO to the driver (see Figure 3), the former will provide a supply that is subject to VAT in the country of the charging point as S. 183indicated in Art. 39 VAT Directive. A charging point could be regarded as a fixed establishment when a contract can be concluded for a recharging session on the spot while the supply is also executed at the same place. If a contract has to be concluded in advance, the charging point, in this author’s view, cannot be regarded as a fixed establishment because, in order to qualify as such, the contract for providing supplies of goods should also be concluded at that location (see section 3 above). There is also no fixed establishment if the CPO does not dispose of the charging point as if it is its own, e.g. because it is the CSO’s charging point and it has contracts with multiple CPOs. In the case that it is a fixed establishment, the reverse charge rule cannot be applied, and the CPO will need to charge VAT of the Member State where the charge point is located. If there is no fixed establishment and no place of business of the CPO in the Member State of the charging point and the customer is VAT registered in that country, the reverse charge rule can be applied (Art. 195 VAT Directive).

In the event of a direct supply from the CPO to the driver, the eMSP will provide a service. In this author’s view, this supply cannot be regarded as an exempt financial supply which is the case under the case law dealing with fuel card schemes. The eMSP’s services consist of providing the network, the billing, financing, the information about availability, and the possibility to reserve charge points. This author opines that it is this package of services that supports the charging that the average consumer seeks to purchase. This service could either be in scope of the main place of supply rule for services (Art. 44 or Art. 45 VAT Directive for B2B and B2C, respectively) or in scope of the exception for B2C services in the case that the supply qualifies as electronically supplied services. This could be the case if the service is delivered over the Internet or an electronic network, the nature of the service renders its supply essentially automated and involving minimal human intervention, and is impossible to ensure in the absence of information technology according to Art. 7 VAT Implementing Regulation. Information technology is essential for providing the services because real-time information is necessary about the availability of charging points and the reserving thereof. The insight into the status of transactions and the billing will likely also take place automatically and requires information technology. If the exception applies, the service is subject to VAT in the recipient’s country for B2C transactions, and the service can be reported in the OSS if the supplier is not established in the recipient’s country. For B2B transactions, the place of supply will be the recipient’s country where the VAT is reverse charged to the customer if the supplier is not established in that country (Art. 196 VAT Directive). In the case that the main place of supply rule for B2C services applies, the place of supply is the country where the supplier is established.

S. 184Figure 3

4.2. Entertainment

The Westside Unicat case involves a repeat of the Geelen case to a certain extent with the difference that the former involves B2B services and the application of the Art. 53 VAT Directive exception instead of the B2C services exception of Article 54(1) VAT Directive.

4.2.1. Facts

Westside Unicat is a Romanian company that operates a video recording studio. Its main economic activity consists of providing digital erotic content (erotic chat sessions) to StreamRay established in the United States. StreamRay makes these sessions available to its clients via its website with the possibility to interact with the models. All models sign an association contract and declaration based on which they designate Westside Unicat to collect funds on their behalf. StreamRay sets the fees to be paid by customers participating in the session of which Westside Unicat receives a percentage. Westside Unicat subsequently pays a percentage of the money it receives from StreamRay to the models.

According to the Romanian Tax Administration, Westside Unicat is the organizer of the interactive shows, and its services are subject to VAT where the event actually takes place based on Art. 53 VAT Directive. Applying the result from the Geelen case, Westside Unicat must pay VAT in Romania according to the tax administration.

4.2.2. Judgement

The CJEU first repeats its judgement from the Srf Konsulterna case mentioning that Art. 53 VAT Directive is not to be regarded as an exception to a general rule requiring a strict interpretation. The CJEU further refers to the Geelen case from which it becomes clear that these live erotic chat sessions constitute entertainS. 185ment activities given that their objective is to provide their recipients with a source of entertainment. These types of activities are not limited to services provided in the physical presence of the recipients of this activity. According to the CJEU, however, following the usual meaning of the word, an event is a presentation to the public. The concept of “service in respect of admission to an event” as used in Art. 53 VAT Directive must (as there is no specific definition contained in the VAT Directive) be understood as designating the supply of services downstream of organizing the subject matter of that presentation and concerned with granting the public admission to the latter. According to the CJEU, this is supported by Art. 33 VAT Implementing Regulation that makes it clear that ancillary services are those that are directly related to an admission to cultural, artistic, sporting, scientific, educational, entertainment, or similar events and are provided separately to the person attending an event for a separate consideration. The ancillary services are those that are separately supplied to the person who attends an event, therefore, the primary service must be regarded as that provided to that same person for the purpose of granting him or her the right of admission to that event. The CJEU also refers to Art. 32 VAT Implementing Regulation that states that services for admission to entertainment events include the supply of services of which the essential characteristics are granting the right of admission to an event in exchange for a ticket or payment. This means that those services relate solely to marketing the right of admission to the event in question to customers. Lastly, the CJEU refers to Art. 33a VAT Implementing Regulation that states that Art. 53 VAT Directive applies when tickets to events are not sold directly by the organizer but are distributed through intermediaries acting in their own name. This also implies that services referred to in Art. 53 VAT Directive are linked to marketing the right of admission to the event in question to customers. The CJEU therefore concludes that services under Art. 53 VAT Directive are services concerned with granting the customers a right to access. The services of a video chat recording studio consisting of the recording of erotic video sessions in order to make them available to an operator of an internet streaming platform are not covered by Art. 53 VAT Directive. This is because those are not services concerned with granting customers a right to access nor are they ancillary to the latter. They are necessary for that operator to stream that content to its own customers. The fact that the studio possesses the equipment used to capture and record the erotic performance is not sufficient to support the view that the studio grants access to the interactive video sessions. Neither the possession of that equipment nor its operation implies, on its own, that those sessions are to be presented to the public. Last but no less important, the CJEU refers to the approach adopted by the VAT Committee that takes the same position.

S. 1864.2.3. Analysis

Supported by no less than four arguments, the CJEU concludes that, in the absence of a specific definition, following the usual meaning “service in respect of admission to an event” must be understood as designating the supply of services downstream of organizing the subject matter of that presentation and concerned with granting the public admission to the latter. Interestingly, one of those arguments consists of a VAT committee guideline. which is agreed upon by EU Member States and constitutes soft law that is not legally binding. While the reference to the guideline can be compared to the CJEU responding to the position taken by one of the EU Member States intervening in the case, the fact that the CJEU endorses the VAT committee guideline in its judgement has the result that it becomes legally binding to the Member States. This includes those that have not agreed to the guideline (like, in this case, because it was adopted almost unanimously). This creates more legal certainty for taxpayers and is thus a desirable development. However, in this author’s view, the facts underlying the VAT committee guideline to which the CJEU refers do not deviate from the case at hand. Therefore, in this particular case, the reference to the VAT Committee does not create more legal certainty than an answer to the preliminary questions would. Had the fact pattern underlying the VAT committee guidelines been different, the CJEU would have provided its position on both the case at hand and the case underlying the VAT committee guidelines by endorsing those guidelines. It should also be noted that the CJEU only endorses the VAT committee guidelines in the case at hand to the extent that they cover the application of Art. 53 VAT Directive to the services provided by the video chat studio. The VAT committee guidelines also address the position of the website operator. It is not the first time that the CJEU has explicitly referred to the VAT committee guidelines with the SK Telecom case being the first.

Art. 53 VAT Directive was introduced by Directive 2008/8/EC and has applied since 1 January 2011. Prior to that date, the provision that can currently be found in Art. 54 (1) VAT Directive and applies to B2C services also applied to B2B services. Although the set up in the original proposal was different, in this author’s view, there can be deviation from the explanatory memorandum that the objective of the change made is for simplification purposes. By limiting the scope of the exception to the general place of supply rule for B2B services, more services will be in scope of the main rule. This means that they are subject to VAT in the recipient’s country (Art. 44 VAT Directive) where VAT is reverse charged if the S. 187supplier is not established in that Member State (Art. 196 VAT Directive). This avoids the need for taxpayers to request a refund of foreign VAT under the current Directive 2008/9/EC (the Eighth Directive at the time of the proposal). The CJEU’s judgement in the current case implies that the service provided by the video chat studio to the website operator is subject to VAT in the country where that operator is established and where VAT can be reverse charged to the website operator if the video chat studio is not established in that country. In the case that Art. 53 VAT Directive would be applicable, the consequences are not yet clear because the CJEU has not answered the second question raised in the case at hand. Following its earlier ruling in the Geelen case, the service could be subject to VAT where the video chat studio is located meaning that that studio would have had to charge Romanian VAT to the website operator. The latter would have had to request the refund of foreign VAT under the Thirteenth Directive because it is not established in the EU. If the place of supply would be the place where the performers appear in front of the camera, there could be a similar result unless the performances take place in the website operator’s country. The same applies if the place of supply would be where the customers (i.e. those of the website operator) can see the images unless all of them are living or established in the website operator’s country. The CJEU’s judgement in the present case therefore supports the simplification that was intended with the change in the place of supply rule. However, it should be noted that that fact alone (contributing to the simplification of the applicable VAT rules) cannot result in an interpretation that would be contrary to the wording of the provision as the CJEU ruled in the srf Konsulterna case dealing with five-day accountancy and management courses.

It should be noted that, following the CJEU’s judgement in the Srf konsulterna case, a VAT committee guideline was adopted dealing with the question whether a course, seminar, or conference qualifies as an event. The VAT committee agreed that:

• The duration of the course, seminar, or conference is not the only decisive factor when qualifying it as an event. All of its relevant elements must be examined, i.e. content, place, and time (almost unanimously).

• The longer the duration, the less likely it qualifies as an event (almost unanimously), and it shall not last longer than a week (large majority) for it to qualify as an event.

The CJEU ruled in the present case that an event is a presentation to the public. The CJEU therefore does not state anything about the duration or content, place, S. 188and time. The CJEU was also not requested to provide an answer, however, to the question raised before the VAT committee. The author posits, therefore, that there can be no conclusion based on the judgement in the present case which elements are relevant to determine whether there is an event as indicated under Art. 53 VAT Directive. It is likely that the question will manifest at a later stage. In this author’s view, however, it can be derived from the judgement that, without a clear definition, the usual meaning of the wording “event” must be used to explain the concept. In that respect, this author agrees with the VAT committee that, in the usual meaning of the word “event”, the duration is not that long (although it can be questioned whether an event can be no longer than a week). An event would, in this author’s view, also require the presence of several attendees (at a certain place that could also be online) and a program with a fixed time schedule.

Even though the CJEU rules that the services indicated under Art. 53 VAT Directive consist of granting the public admission to that presentation, this does not mean that that rule does only apply to the organizer’s services. If an intermediary acting in its own name and for the organizer sells tickets for its own account, both the organizer and the intermediary can apply this provision. It is the organizer that provides access to the event to the intermediary and the intermediary that subsequently provides access to the person attending the event. This is also supported by Art. 33a VAT Implementing Regulation and the VAT committee guideline referred to above. The CJEU judgement just makes it clear that the supplier should provide the admission to the customer. If it only provides the content of the event, the provision will not be applicable, and Art. 44 VAT Directive applies instead.

The CJEU has not had the opportunity in the present case to clarify its judgement in the Geelen case. In that case, the CJEU ruled that the entertainment services provided by Geelen consisted of complex supplies that are rendered not by the models but by Geelen. The activities necessary for the supply of those complex services are concentrated in the place from which the provider organizes the interactive sessions relating to the erotic show performed by the models and provides customers with the opportunity to view those sessions and to interact with the models. Therefore, this complex supply must be regarded as being physically carried out in the place where that service is supplied by that provider, at the place where his business is established. The CJEU, however, also referred to the fact that, in this particular case, interpretation also leads to a rational result for tax purposes. This is because both Geelen and the customers are located in the Netherlands and the service is thus subject to VAT in the Member State where the services are used by their recipients. This raises the question of whether the CJEU would rule differently had the service provider and the customers been located in different countries. In an earlier article, this author concluded that the rationality S. 189test is not used to determine the place where the service is physically carried out because that place was already established by the CJEU before the rationality argument manifested. However, it cannot be excluded that the CJEU rules differently when presented with a different fact pattern. Under the new place of supply rules entering into application for virtual or digital admission to events these services will be excluded from the provision of Art. 53 VAT Directive as of 1 January 2025 with the consequence that Art. 44 VAT Directive applies. Therefore, the issue will likely become a rearguard dispute if the issue ever comes up at the CJEU at all.

5. Concluding: something blue

Now, where is the something blue in this story? Blue is worn for good luck and symbolizes purity, love, and fidelity. With its judgement in the Cabot Plastics case, the CJEU has remained true to its judgements in earlier cases and elaborated on their application. To that extent, this case law provides more clarity and certainty for taxpayers that is sometimes much needed if tax administrations take positions that already turned out to be incorrect in the past (and did not withdraw the case because of this). The judgements in the Momtrade Ruse and Westside Unicat cases are in this author’s view, clear and understandable. These cases can therefore be supported and will significantly facilitate Member States in dealing with many future cases.