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BGZ Leasing (C–224/11) - Leasing contracts and insurance - 29/01/2013


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On 17 January 2013 the Court of Justice of the European Union ("CJEU") published its decision in the case C–224/11 BGZ Leasing.

The dispute in this case was whether the provision of insurance and the leasing of goods by a lessor should be treated as a single supply (to which a single VAT rate must be applied) or separately.

In case the supplies should be considered separately, the Court was asked whether the provision of such insurance, where the lessor insures the leased goods with an insurance company and re-charges these costs to the lessee, is VAT exempt.

In its decision, the CJEU concluded that both supplies should be considered separately. CJEU argued mainly in this respect that, as under the general VAT principles every supply should be separate and independent, the leasing and the provision of insurance cannot be regarded as forming a single transaction.

In addition, CJEU confirmed that the provision of insurance (where insurance costs are recharged to the lessee), being a separate supply, should qualify for VAT exemption.

The reasons for that were that:

  1. a simple re-charge of insurance costs (recharge at cost with no margin) should not attract VAT and
  2. the VAT treatment in such case should not differ from the case where the lessee receives the insurance directly.

This decision could have a significant VAT impact on the current practice in Luxembourg. Till now, similar provision of insurance was considered as part of the leasing and thus a single VAT rate was applied on the whole supply.

If you would like to discuss the possible VAT impacts of this case, please contact the Luxembourg VAT department.

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