Source curia
Topic: VAT – Directive 2006/112/EC – Articles 63, 65, 73 and 80 – Establishment by natural persons of a building right in favour of a company in exchange for construction services by that company for those persons – Barter contract – VAT on construction services – Chargeable event – When chargeable – Payment on account of the entire consideration – Payment on account – Basis of assessment for a transaction in the event of consideration in the form of goods or services
Date decision
Decison
1. Articles 63 and 65 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in circumstances such as those of the main proceedings, where a building right is established in favour of a company in order to erect a building, by way of consideration for construction services of certain real property in that building and that company has undertaken to deliver on a turn-key basis to the persons who established that building right, they do not preclude the VAT on those construction services from becoming chargeable as from the moment when the building right is established, that is to say, before those services are performed, provided that, at the time that right is established, all the relevant information concerning that future supply of services is already known and, therefore, in particular, the services in question are precisely identified, and the value of that right may be expressed in monetary terms, which it is for the national court to verify.
2. In circumstances such as those of the main proceedings, where the transaction is not completed between parties having ties within the meaning of Article 80 of Directive 2006/112, which it is for the national court to verify, Articles 73 and 80 of that directive must be interpreted as precluding a national provision, such as that at issue in the main proceedings, under which, when the consideration for a transaction is made up entirely of goods or services, the taxable amount of the transaction is the open market value of the goods or services supplied.
3. Articles 63, 65 and 73 of Directive 2006/112 have direct effect.
Faxts
- A building right was granted to construct a building on a piece of land to cy A
- The owners of the land will become owner of certain of the real property built on it by cy A
- Cy A issues an invoice with VAT to the owners at the value of the building rights and not at the open market value of the property
- Tax authorities issued claim to A at the time building was not yet constructed
–Chargeable event for VAT on the construction services had occurred on the date the building right was established
–Taxable value was value of the construction services of the building provided by A
Question
- Is VAT due on construction services as from the moment when the building right is established, that is to say, before those services are performed (art 65/88).
Chargeability of VAT
- in order for VAT to be chargeable before the supply of goods or services is made, all the relevant information concerning the chargeable event, namely the future supply of goods or services, must already be known and therefore, in particular, the goods or services must be precisely identified at the time the payment on account is made
- Therefore, payments on account of supplies of goods or services that have not yet been clearly identified cannot be subject to VAT.
Decision: Chargeable event
VAT owing on construction services becomes chargeable at the time when the building right, which constitutes the entire consideration for those services, is established in favour of the company which is to supply those services, provided that, at that time, all the relevant information concerning that future supply of services is already known and, therefore, the services in question are precisely identified.
Decision: Taxable amount
When the consideration for a transaction is made up entirely of goods or services, the taxable amount of the transaction is the open market value of the goods or services supplied.
Comments Decision
If, for the purpose of constructing a building, a building right is granted to an enterprise that builds certain units in that building in exchange for that right and commits to handing over those units turnkey to those who have granted the building right, the VAT on those construction services will become chargeable from the time the building right is established, in other words before those services are provided, if at that time all the relevant elements of this future provision of services are already known and thus in particular the services in question are precisely defined and the value of that right can be expressed in money, which the referring court must verify.
If the transaction does not take place between persons who are linked to each other within the meaning of Article 80 of the VAT Directive, Articles 73 and 80 of that directive must be interpreted as precluding a national provision under which the taxable amount of a transaction The normal value of the goods supplied or services performed is when the consideration for that transaction consists entirely of goods or services.
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