Ireland – Appeal Commissioners’ Cases

116TACD2021 – Appellant v Revenue Commissioners – 2 July 2021

This case involved the determination on whether the provider of a taxi and hackney service (a VAT exempt activity) through a mixture of employees and self-employed drivers was acting as the principal in respect of those supplies. Revenue had contended that the Appellant in this case had been acting as an agent in respect of those supplies (as, in their view, the Appellant solely provided administrative assistance to the self-employed drivers) and that the Appellant should have been charging VAT on the provision of its services to the drivers. Accordingly, Revenue raised an assessment for circa €200k of VAT in respect the years 2010 – 2012.

After consideration of the information and supporting documents provided by both sides, the Appeal Commissioner found as material facts, that the Appellant held the contract with customers for the hackney services (as opposed to the drivers), that the Appellant was fully responsible to customers for all services provided, and, that the Appellant raised/provided receipts to customers. On this basis, the Commissioners held that the Appellant acted as principal in respect of the supply of VAT exempt hackney/taxi services and that the assessment raised by Revenue in respect of same was invalid.

110 & 101 TACD2021 – Appellant v Revenue Commissioners - June 2021

Both of these cases related to the time limit for submitting VAT reclaims. The Appeal Commissioner reaffirmed that S99 VATCA provides that there is a four-year time limit for making a reclaim of VAT incurred and that Revenue does not have any discretion to give an extension to this limit.

EU – CJEU

CJEU (Case C-21/20): BNT – 16 September 2021
BNT is the national free to air television broadcaster in Bulgaria. It is primarily subsidised by the Bulgarian state, but it also earns advertising and sponsorship income.

Until March 2015, BNT applied a general overhead rate in respect of recovering VAT on its purchases. However, it then began adopting a direct attribution approach to recovering VAT by examining, for each purchase, whether it was used or was capable of being used for an activity of a ‘commercial’ nature, such as entertainment programmes, films or sports programmes, or for an activity which is part of the ‘performance of the public service task’, such as the broadcasting of parliamentary sessions or the retransmission of religious ceremonies or election coverage. BNT also took the view that its activity of broadcasting television programmes did not constitute an ‘exempt transaction’, but an activity which did not fall within the scope of VAT, and that it was only its activity of a ‘commercial’ nature that fell within the scope of tax. As such, BNT then claimed VAT in full in respect of invoices attributable to “commercial” activities, while it continued to use its partial recovery rate in respect of invoices relating to the non-commercial or blended costs. The new approach was challenged by the Bulgarian tax authorities.

The Administrative Court in Sofia was unable to conclude on the correct position and referred the following queries to the CJEU:

1. Can the supply of audio-visual media services to viewers by the public television broadcaster be regarded as a service supplied for consideration if it is financed by the State in the form of subsidies, with the viewers paying no fees for the broadcasting?
2. If the service is in fact supplied for consideration, would it be an exempt transaction, pursuant to Article 132(1)(q) of the Directive?
3. Is a practice which makes a full right of input tax deduction for purchases dependent not solely on the use of the purchases (for taxable or non-taxable activity), but also on the way in which those purchases are financed, namely on the one hand from self-generated income (advertising services inter alia), and on the other hand from State subsidisation, and which grants the right to full input tax deduction only for purchases financed from self-generated income and not for those financed through State subsidies?
4. If it is considered that the activity of the public television broadcaster consists of taxable and exempt transactions, having regard to its mixed financing, what is the scope of the right to input tax deduction in respect of those purchases and which criteria must be applied for the determination thereof?

The Court concluded that, as there was no contractual relationship between the State (who subsidises BNT) and the viewers, the broadcasting services provided by BNT did not constitute a service supplied for consideration and therefore is outside the scope of VAT (as opposed to being exempt). In terms of the recovery position, the Court held that the national public television provider is entitled to deduct input VAT for purchases of goods and services used for the purposes of its activities which give rise to the right to deduct and that it is not entitled to deduct input VAT for purchases of goods and services used for the purposes of its activities which do not fall within the scope of VAT and also that it was at the national courts discretion to determine the methods and criteria for appointing input VAT between economic and non-economic activities (in line with previous CJEU caselaw).

CJEU (Case C-717/19): Boehringer – 6 October 2021

This Hungarian case involved a pharmaceutical company filing an amended VAT return to seek to reduce its overall taxable amount, as, by providing volume based rebates to public health insurers, it had received less than the full amount that it had initially included as part of the original return. As such, the entity sought a reclaim of circa €1m of VAT from the Hungarian tax authorities – in line with the earlier German Boehringer case (C-462/16). No formal commercial agreement had ever been put in place between Boehringer and the national health insurer (NEAK) and no invoices were ever raised between the parties.

However, as Boehringer did not have an invoice from NEAK to support this revised return (a requirement under Hungarian national law), the Hungarian tax authorities refused to allow this post sale revision to the companies’ taxable amount. However, alternative documents were made available to the authorities to support the revised taxable amount.

It is recognised that, under Articles 90(1) and 273 of the EU VAT Directive, member states have some discretion with regard to the processes and obligations they can put in place with regard to dealing with price reductions. However, these processes still need to ensure that they “affect as little as possible the objectives and principles of the VAT Directive and cannot, therefore, be used in such a way as to call into question the neutrality of VAT, which is a fundamental principle of the common system of VAT established by the relevant EU legislation”.

The Court held that since the possession of an invoice is a requirement under national law (as opposed to EU law), the neutrality of VAT is impacted in situations, such as in this case, where it is impossible for an invoice to be raised, in line with the previous CJEU Kraft Foods case (C-588/10). In such a case, they found that national legislation/regulation should not rule out the use of alternative sources of evidence to prove that the transaction actually took place. As such, they found that the Hungarian tax authorities had imposed a process that ran contrary to the intended application of Article 90(1) of the VAT Directive.

CJEU (Case C-855/19): G. Sp. z o.o. v Dyrektor Izby Administracji Skarbowej w Bydgoszczy – 9 September 2021

This Polish case related an entity failing to report the intra-Community acquisition of diesel fuel into Poland. More particularly, the entity had failed to pay the VAT on these acquisitions within five days of entry and also did not submit a monthly statement in respect of same, both requirements in line with the new national rules put in place in Poland to counter VAT fraud on cross border trade in motor fuels (which is stricter than the normal rules for accounting for VAT on a reverse charge basis). While the output VAT in respect of intra community acquisitions of fuel needs to be remitted within five days under these new rules, taxpayers are only allowed to deduct VAT in their monthly VAT returns (due on the 25th of the following month).

The question that was referred to the court was whether this time delay between remitting the VAT and taking the input deduction contravened the EU VAT Directive. The Court held that national law is precluded from imposing an obligation to pay VAT on the intra-Community supply of fuel before that VAT is properly chargeable, in line with Articles 69, 206 and 273 of the EU VAT Directive.

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