Request for a preliminary ruling from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD) (Portugal) lodged on 20 September 2019 in case C-695/19 (Rádio Popular — Electrodomésticos, S.A. v Autoridade Tributária e Aduaneira)
Article in the EU VAT Directive
Article 135(1)(b) and/or (c) of Council Directive 2006/112/EC
Facts
- The applicant, Rádio Popular, is a company active in the sale of household appliances and computer and telecommunications equipment. In addition, Rádio Popular also sells extra warranty on behalf of the brand provider when the customer requests it. In this way, the customer receives an extension of the original warranty, with Rádio Popular acting as an intermediary between the insurance company and the end customer.
- It does not charge VAT on the sale of additional guarantees, but deducts in full the VAT on the goods and services it acquires to carry out all of its business.
- At Rádio Popular, a VAT audit was carried out by the AT which showed that the transactions carried out by Rádio Popular with regard to additional guarantee cannot be considered as financial transactions, as a result of which those transactions are not excluded from the calculation of the deduction pro rata as referred to in Article 23 (1) (b) of the CIVA.
- As a result of those checks, the AT set the VAT and the related interest at a total of EUR 356 433.05 (EUR 328 107.08 in VAT and EUR 28 325.97 in interest).
- Rádio Popular asks the referring court to set aside the VAT assessments and the associated interest and to order the AT to pay interest. It argues that its activities as an intermediary are negligible in relation to its overall activities. In order to exercise the right to deduct, the activity as an intermediary that the applicant party additionally carries out must, considered as an ancillary financial transaction not included in the calculation of the pro rata.
- After all, the concept of a financial transaction must be interpreted broadly, under penalty of violation of the fundamental principle of neutrality regarding VAT.
- The AT is of the opinion that the activity of the Rádio Popular at issue cannot be regarded as ancillary. According to the AT, the viability of the applicant depends on the sale of additional guarantee. In addition, the AT argues that the sale of additional guarantees does not fall under the concept of ‘financial transaction’, as required by Article 23 (5) of the CIVA. The AT is of the opinion that the activity of the Rádio Popular at issue cannot be regarded as ancillary. According to the AT, the viability of the applicant depends on the sale of additional guarantee. In addition, the AT argues that the sale of additional guarantee does not fall under the concept of ‘financial transaction’, as required by Article 23 (5) of the CIVA. The AT is of the opinion that the activity of the Rádio Popular at issue cannot be regarded as ancillary. According to the AT, the viability of the applicant depends on the sale of additional guarantee. In addition, the AT argues that the sale of additional guarantee does not fall under the concept of ‘financial transaction’, as required by Article 23 (5) of the CIVA.
Question
Do transactions involving intermediation in the sale of extended warranties on household electrical appliances, which are carried out by a taxable person under VAT law whose principal activity consists in the sale of household electrical appliances to consumers, constitute financial transactions, or are they to be treated as such pursuant to the principles of neutrality and non-distortion of competition, for the purposes of exclusion of the amount represented by them from the calculation of the deductible proportion, in accordance with Article 135(1)(b) and/or (c) of Council Directive 2006/112/EC of 28 November 2006?
Source
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