On Feb 6, 2003, the ECJ issued its decision in the case C-185/01 (Auto Lease Holland).
Article in the EU VAT Directive
Article 5(1) of the Sixth VAT Directive 77/388/EC
Article 5
Supply of goods
1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
Facts
Does the landlord provide a supply to the tenant or does the utility provider provide a direct supply to the tenant? This leads to the next question, namely whether the landlord is liable for VAT. If so, then the tenant would not be entitled to any input VAT deduction arising from the utility charges. Both, the utility provider and the landlord could be liable for VAT incorrectly charged according to sec. 14c para. 2 of the German VAT Act. This results from the fact that both have issued invoices showing German VAT even though they have not performed a supply or performed a supply to a different customer.
This would have a broad and significant impact for all utility providers and landlords. Leasing companies, mineral oil companies, fuel card companies and lessees were threatened by similar serious consequences after the ECJ’s decision Auto Lease Holland (C-185/01) and the following German Federal Fiscal Court’s decision of 10 April 2003.
Additionally, this case raised the question of between which parties the supplies of goods and services are deemed to be performed. Poland is one of the few countries in which the courts have been controversially and over a lengthy period, discussing the questions and consequences of the ECJ’ Auto Lease Holland judgment It is therefore not surprising that the Supreme Administrative Court in Poland has referred such a question to the ECJ.
Questions
Where a lessee fills up a leased car in the name and at the expense of the lessor at filling stations, is there a supply of fuel by the lessor to the lessee and must tax be paid on this supply at the place of supply within the meaning of Article 8(1)(b) of [the Sixth VAT Directive] or is the onward supply included in the lessor’s supply of a service that is taxable under Article 9 of [the Sixth VAT Directive]?
AG Opinion
Article 5 of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, is to be interpreted as meaning that there is not a supply of fuel by the lessor to the lessee where the lessee fills up the leased car at filling stations in circumstances such as those of the present case.
Decision
Article 5(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment is to be interpreted as meaning that there is not a supply of fuel by the lessor of a vehicle to the lessee where the lessee fills up at filling stations the vehicle which is the subject-matter of a leasing contract, even if the vehicle is filled up in the name and at the expense of that lessor.
Summary
the ECJ does not acknowledge any analogies between the current case and the Auto Lease Holland judgment. According to the ECJ, the decisive difference is the contract concerning the purchases of goods or services between the utility provider and the landlord. In Auto Lease Holland there was no separate supply agreement between the mineral oil company and the lessor, only a fuel management agreement between the lessor and the lessee existed.
The judgment therefore serves to provide significant clarification for companies who find themselves confronted with the Auto Lease Holland judgment. Separate supply agreements between the parties throughout the entire supply chain might be a further criterion to avoid falling within the scope of Auto Lease Holland. The regulations of the Federal Ministry of Finance of 15 June 2004 should also be taken into account concerning fuel supplies with regard to which the Federal Ministry of Finance has tried to limit the drastic consequences of the jurisprudence.
Both, utility providers and landlords should check whether the contractual agreements exist and if they are sufficient to justify the supply chain, which includes the landlord.
Source
Similar ECJ cases
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