Om March 3, 1994, the ECJ issued its decision in the case C-16/93 (R. J. Tolsma).
Article in the EU VAT Directive
Article 2 (1) of the Sixth Council Directive (77/388/EEC)
The following shall be subject to value added tax:
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
Facts
- Mr Tolsma plays a barrel organ on the public highway in the Netherlands. During his musical performance he offers passers-by a collecting tin for their donations; he also sometimes knocks on the door of houses and shops to ask for donations, but without being able to claim any remuneration by right.
- In respect of the period from 1 July to 30 September 1991 Mr Tolsma received from the Inspecteur an assessment to tax on the aforesaid activity in the sum of HFL 1 805 by way of value added tax (‘VAT’) and HFL 180 by way of a surcharge for late payment.
- Mr Tolsma’s administrative complaint against the assessment was dismissed by the Inspecteur, and he brought proceedings before the Gerechtshof, Leeuwarden.
- Mr Tolsma argued before that court that sums he received for the music he played in public were not subject to VAT because there was no obligation whatever on passers-by to give him donations, whose amount they determined themselves. The service thus was not provided for consideration and consequently did not fall within the scope of the Sixth Directive.
- The Inspecteur argued, by contrast, that there was a direct link between the service supplied and the payments obtained, with the result that Mr Tolsma’s activity constituted a supply of services for consideration within the meaning of the Sixth Directive. It did not matter that he was not entitled to a remuneration whose amount was determined by the parties in advance.
Questions
- (a) Must a service which consists of playing music on the public highway, for which no payment is stipulated but payment is nevertheless received, be regarded as a supply of services effected for consideration within the meaning of Article 2 of the Sixth Directive on the harmonization of the laws of the
Member States relating to turnover taxes? - (b) Is it relevant for the purpose of answering this question that although the payment received is not stipulated, it is nevertheless solicited and, in view of customary usage, can be expected, although its amount is neither quantified nor quantifiable?’
AG Opinion
(1) A musical performance on the public highway, for which no payment is stipulated but a payment is received, is not to be regarded as a supply of services
for consideration within the meaning of Article 2 of the Sixth Directive on the harmonization of the laws of the Member States relating to turnover taxes.
(2) It is immaterial in this respect that payment is solicited and in view of customary usage can be expected to a greater or lesser but in any event neither quantified nor quantifiable extent.
Decision
Article 2 (1) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes —
Common system of value added tax: uniform basis of assessment, must be interpreted as meaning that the ‘supply of services effected for consideration’
within the meaning of that provision does not include an activity consisting in playing music on the public highway, for which no remuneration is stipulated, even if the musician solicits money and receives sums whose amount is however neither quantified nor quantifiable
Summary
A supply of services is effected ‘for consideration’ within the meaning of Article 2 (1) of the Sixth Council Directive (77/388) on the harmonization of the laws of the Member States relating to turnover taxes, and hence is taxable, only if there is a legal relationship between the provider of the service and the
recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient.
Those conditions are not fulfilled in the case of an activity consisting in playing music on the public highway, for which no remuneration is stipulated, even if the musician solicits money and receives sums, in the form of donations, whose amount is however neither quantified nor quantifiable.
Source
Newsletters
