ECJ C-593/19 (SK Telecom) – Decision- Roaming services, effective use and enjoyment, VAT refund

On April 15, 2021, the ECJ issued its decision in the Case C‑593/19 (SK Telecom Co. Ltd. versus Finanzamt Graz-Stadt). This case deals with the question if roaming services are effectively used and enjoyed within the territory of a Member State.

Context: Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Determination of the place of supply of telecommunications services – Roaming of third-country nationals on mobile communications networks within the European Union – Point (b) of the first paragraph of Article 59a – Option for Member States to transfer the place of supply of telecommunications services to their territory

Article in the EU VAT Directive

Article 59a(b) of the EU VAT Directive 2006/112/EU

Article 59a (Place of supply of services – Use and enjoyment)
In order to prevent double taxation, non-taxation or distortion of competition, Member States may, with regard to services the place of supply of which is governed by Articles 44, 45, 56 and 59:
(a) consider the place of supply of any or all of those services, if situated within their territory, as being situated outside the Community if the effective use and
enjoyment of the services takes place outside the Community;
(b) consider the place of supply of any or all of those services, if situated outside the Community, as being situated within their territory if the effective use and
enjoyment of the services takes place within their territory.
However, this provision shall not apply to the electronically supplied services where those services are rendered to non-taxable persons not established within the Community.

Article 2 of Directive 2008/8/EC

Facts (simplified)

SK Telecom is a mobile phone undertaking established in South Korea, which provided mobile phone services to some of its customers, also based in South Korea, who were temporarily staying in Austria.
In order to enable those persons to use their mobile phones during their stay in Austria, an Austrian network operator made its network available to SK Telecom in exchange for the payment of a user fee plus Austrian VAT (20%).
SK Telecom, for its part, charged its customers roaming fees for use of the Austrian network.
SK Telecom subsequently applied for reimbursement of the VAT invoiced to it by the Austrian network operator.
The Austrian Finanzamt refused the VAT refund, arguing that SK Telecom should have charged Austrian VAT on its charges to its customers, because otherwise, the roaming fees would not be subject to VAT at all, as there was no VAT charged on the roaming fees by SK Telecom to its customers (since those telecommunications services were not subject to a tax in South Korea).

The Bundesfinanzgericht (Federal Finance Court) decided to refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Does the use of roaming services in a Member State in the form of access to the national mobile telephone network for the purpose of establishing incoming and outgoing connections by a ‘non-taxable end customer’ temporarily resident in that Member State constitute ‘use and enjoyment’ in that Member State which justifies the transfer of the place of supply from the third country to that Member State, even though neither the mobile telephone operator providing the services nor the end customer are established in EU territory and the end customer does not have his permanent address and does not usually reside in the EU?

(2). May the place of supply of telecommunications services as described in Question 1, be transferred to the territory of a Member State even though neither the mobile telephone operator providing the services nor the end customer are established in EU territory and the end customer does not have his permanent address and does not usually reside in the EU, simply because the telecommunications services in the third country are not subject to a tax comparable to VAT under EU law?’

Question

Is Article 59a(b) of Directive 2006/112/EC, as amended by Article 2 of Directive 2008/8/EC, to be interpreted as meaning that the use of roaming services in a Member State in the form of access to the national mobile telephone network for the purpose of establishing incoming and outgoing connections by a ‘non-taxable end customer’ temporarily resident in that Member State constitutes ‘use and enjoyment’ in that Member State which justifies the transfer of the place of supply from the third country to that Member State, even though neither the mobile telephone operator providing the services nor the end customer are established in Community territory and the end customer does not have his permanent address and does not usually reside in the Community?

Is Article 59a(b) of Directive 2006/112, as amended by Article 2 of Directive 2008/8, to be interpreted as meaning that the place of supply of telecommunications services as described in Question 1, which are outside the Community according to Article 59 of Directive 2006/112, as amended by Article 2 of Directive 2008/8, may be transferred to the territory of a Member State even though neither the mobile telephone operator providing the services nor the end customer are established in Community territory and the end customer does not have his permanent address and does not usually reside in the Community, simply because the telecommunications services in the third country are not subject to a tax comparable to VAT under EU law?

AG Opinion

The AG considers that there are two supplies: (1) A B2B service, consisting of a network operator who operates in the country of roaming (Austria) who opens its network to a mobile phone operator established in the country of origin (SK Telecom, established in Korea) for payment of a fee. and (2) a B2C service, consisting of connecting the mobile telephone operator of the country of origin (SK Telecom) and the telephone users who have subscribed to its services. That operator ‘sublets’, as it were, to users in the country of roaming (Austria) access to the network which it has previously obtained as part of the first service.

The questions referred to the Court relate solely to the second supply of services (between SK Telecom and its subscribers), and more specifically to the place of that supply, those questions arose in connection with an application for a refund submitted by SK Telecom in respect of the first supply (between SK Telecom and the Austrian network operator). The AG seems to imply that it could also be questioned in in the first supply, the Austrian network operator could have argued that he should not charge Austrian VAT.

The Commission expressed certain reservations about making the first supply of services subject to Austrian VAT. It stated that, according to the general rule laid down in Article 44 of Directive 2006/112, the place of supply of services between taxable persons (‘B2B’ relationship) is the place where the customer has established his business, which in the case of SK Telecom is South Korea.

However, as the preliminary questions are not concerning this supply, the AG feels that its is not appropriate for the Court to examine this issue.

AG Opinion

The AG gives the following opinion:

1. Point (b) of the first paragraph of Article 59a of the EU VAT Directive must be interpreted as meaning that roaming services allowing the use of a mobile telephone network located in a Member State, which are provided by a mobile telephone operator established in a third country to users having their permanent address or usually residing in that third country but temporarily staying in the territory of that Member State, must be considered as being the subject of ‘effective use’ on the territory of that Member State.

2. Point (b) of the first paragraph of Article 59a of the EU VAT Directive must also be interpreted as meaning that the requirement of avoiding ‘double taxation, non-taxation or distortion of competition’ is satisfied where roaming services such as those described in the first question are not subject to VAT within the Union, which constitutes a case of ‘non-taxation’ within the meaning of that provision. The tax treatment in a third country is irrelevant for the purposes of the application of that provision.

Michaela Merz

Decision

Point (b) of the first paragraph of Article 59a of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended, from 1 January 2010, by Council Directive 2008/8/EC of 12 February 2008, must be interpreted as meaning that roaming services supplied by a mobile phone operator established in a third country to its customers who are also established, have their permanent address or usually reside in that third country, allowing them to use the national mobile communications network of the Member State in which they are temporarily staying, must be considered to be ‘effectively used and enjoyed’ within the territory of that Member State, for the purposes of that provision, so that that Member State may consider the place of supply of those roaming services to be situated within its territory where, regardless of the tax treatment to which those services are subject under the domestic tax law of that third country, the exercise of such an option has the effect of preventing the non-taxation of those services within the European Union.

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