Opinion of Advocate General SZPUNAR delivered on 3 May 2018 in Case C‑153/17 (Volkswagen Financial Services (UK) Ltd)
Facts (simplified):
Volkswagen Financial Services (UK) Ltd (‘VWFS’) is a company established in the United Kingdom, which is part of the German group Volkswagen AG. Its activities include, inter alia, hire purchase transactions whereby vehicles are supplied to individuals.
In that context, VWFS offers various types of contract which may result in the acquisition of ownership of the vehicle by the customer, or simply allow the customer to use the vehicle for a given period. For the purposes of those hire purchase transactions, VWFS purchases vehicles from dealerships and then supplies those vehicles, in its own name, to customers to whom it also provides certain related services. The consideration paid by the customer under a hire purchase agreement is divided into two parts: the price of the vehicle, which is equal to the price paid by VWFS to the dealership, and the ‘finance charges’, which include all the other fees and provisions as well as a profit margin.
For VAT purposes, those hire purchase agreements are treated as two distinct transactions: a taxable supply of goods and an exempt supply of credit. In the context of the supply of goods, only the price of the vehicle, as paid by VWFS and charged to the customer, is regarded as consideration. That price therefore includes VAT, the amount of which is equal to the input VAT paid by VWFS on the purchase of the vehicle. The remainder of the amount charged to the customer does not include VAT.
The input VAT paid by VWFS on the purchase of the vehicles is fully deducted from the output VAT charged to customers.
The dispute between VWFS and the tax authority concerns the right to deduct the input VAT on VWFS’ various overhead costs in so far as the goods and services in respect of which those costs were incurred have been used for the purposes of VWFS’ taxable transactions, namely, supplies of vehicles.
Conclusion:
In the light of all of the foregoing, I propose that the Court should answer the questions as follows:
Hire purchase agreements such as those at issue in the main proceedings constitute single complex transactions which are subject to tax, the suppliers in question having the right to deduct all the input value added tax (VAT) on the goods and services used for the purpose of those supplies.
Taxable persons who have benefited from the partial exemption of those transactions under national law do not have the right to deduct the input VAT levied on the goods and services used for the purposes of those transactions, the cost of which has been incorporated into the price of the exempt transactions. It is for the referring court to ascertain whether those taxable persons may request the full taxation of those transactions in order to be able to benefit from the right to deduct.
Source: Curia
