Source Curia
Decision
1. Article 2(1)(a) and (c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read together with Article 14(1) and Article 24(1) thereof, must be interpreted as meaning that, where, pursuant to a demolition contract, the service provider, namely a demolition company, is required to carry out demolition works and may, in so far as the demolition waste contains scrap metal, resell that scrap metal, that contract consists of a supply of services for consideration, that is to say the performance of demolition works, and also a supply of goods for consideration, that is the supply of the scrap metal, if the purchaser, that is to say the demolition company, attributes a value to that supply of goods, which it factors in when calculating the price quoted for the performance of the demolition works, that supply of goods being, however, subject to value added tax only if it is made by a taxable person acting as such.
2. Article 2(1)(a) and (c) of Directive 2006/112, read together with Article 14(1) and Article 24(1) thereof, must be interpreted as meaning that, where, pursuant to a purchase contract for dismantling, the purchaser, namely a demolition company, purchases goods to be dismantled and undertakes, subject to a contractual penalty, to demolish or dismantle and dispose of those goods and to dispose of the waste within a period fixed in the contract, that contract consists of a supply of goods for consideration, that is the supply of goods to be dismantled, which is subject to value added tax only if it is made by a taxable person acting as such, which is for the referring court to ascertain. In so far as the purchaser is required to demolish or dismantle and dispose of those goods and to dispose of the resulting waste, thereby specifically meeting the needs of the seller, which is for the referring court to ascertain, that contract also includes a supply of services for consideration, that is the performance of demolition works or dismantling and waste disposal, if that purchaser attributes a value to that supply of goods which it factors in to the price quoted as a factor reducing the purchase price of the goods to be dismantled, which is for the referring court to ascertain.
Background
- A Oy is a demolition company. Its responsibilities include the processing and disposal of materials and waste resulting from demolition.
- Sometimes it can sell these materials. It will try and factor any money it thinks it can get from selling the materials into the price it quotes for demolition.
- It also buys old machines and equipment that it has to dismantle and remove, and factors its estimated costs of doing so into the price it offers the equipment owners, reducing the price paid to them as a result.
- In neither case is the other party to the transaction privy to A’s income or cost calculations.
- The authorities said A must view itself in all cases as supplying demolition services [Supply of services] and buying scrap metal [Supply of goods}.
- Under Finnish VAT law, the domestic reverse charge VAT was due by A on selling of scrap material.
- The domestic court decided there was a barter arrangement so A was liable to pay VAT on the demolition and the scrap, and A appealed that decision to a higher court. The higher court referred the case to the ECJ.
- The referring court thinks that
- under a demolition contract, A supplies services
- under a dismantling contract it acquires goods for consideration.
- The dispute is whether under a demolition contract it also acquires goods for consideration and under a dismantling contract whether it also supplies services for consideration.
- A challenged the barter analysis because it said there is no direct link, so that the scrap is not additional consideration for demolition and dismantling services are not additional consideration for the old machines.
- The ECJ concluded there was a direct link.
- In a demolition contract the value of the scrap is the amount A reduces the demolition price it charges by.
- The fact that this may not be the same as the amount it gets for the scrap when it sells it is irrelevant.
- The value of the demolition services on which VAT is due is therefore the price paid for the demolition and the value attributed by A to the scrap when it works out the price to charge for demolition.
- Reverse charge VAT is however only due on the value of the scrap if the supplier is a taxable person.
- As regards dismantling contracts, the ECJ has decided that again there is a link as A, in addition to paying for the goods, agrees to dismantle and dispose of them and so there is a supply of services by A, valued at the amount it reduces the purchase price of the goods by to reflect the costs of dismantling and disposal.
- The value of the goods is therefore equal to the price paid by A and the reduction to that price applied by A.
- As before reverse charge VAT is due by A on that value if the supplier of the goods is a taxable person.
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