Flashback on ECJ Cases – C-154/80 (Coöperatieve Aardappelenbewaarplaats) – Clarification term “supply for consideration”: a “direct link” must exist between the supply and the amount received

On February 5, 1981, the ECJ issued its decision in the case C-154/80 (Coöperatieve Aardappelenbewaarplaats). The question raised by the Hoge Raad concerns the nature of a service provided by a cooperative association for the benefit of its members in respect of which the inspector sent a notice of assessment to additional turnover tax.

Context: Tax provisions — Harmonization of legislation — Turnover taxes — Common system of value-added tax — Provision of services — Basis of assessment — Consideration, directly linked to the service, capable of being expressed in money and having a subjective value

Article in the EU VAT Directive

Article 2 (a) of the Second Directive (Taxable Transaction)
“The following shall be subject to the value-added tax:
(a) The supply of goods and the provision of services within the territory of the country by a taxable person against payment;”

Article 8 (Taxable amount)
“The basis of assessment shall be:
(a) in the case of supply of goods and the provision of services, everything which makes up the consideration or the supply of the goods or the provision of services, including all expenses and taxes except the valueadded tax itself”.

Annex A point 13 regarding Article 8 (a) provides that:
“The expression ‘consideration’ means everything received in return for the supply of goods or the provision of services, including incidental expenses
(packing, transport, insurance, etc.) that is to say not only the cash amounts charged, but also, for example, the value of the goods received in exchange or, in
the case of goods or services supplied by order of a public authority, the amount of the compensation received”.

Facts

The cooperative association is an undertaking within the meaning of the Wet op de omzetbelasting [Law on Turnover Tax] of 1968; it runs a cold-storage
depot in which it lays in potatoes and stores them at constant temperature for the account of its members. Each grower owning shares is entitled to deposit 1 000 kilograms of potatoes a year for each share against payment of a storage charge fixed by the cooperative and payable at the end of the season.
For reasons of financial policy, namely pending the sale of the cold-store, the cooperative did not “impose or receive” in the financial years 1975 and 1976 any storage charge as remuneration for the services it provided; consequently, in the belief that its services had been provided for no consideration and were therefore exempt from tax, it completed its turnover tax declarations accordingly.
But the inspector thought that the cooperative had nevertheless charged its members something in return owing to the reduction in value of their shares
owing to the non-collection of their storage charges and he therefore assessed what was received in return to be the storage charge ordinarily charged,
namely HFL 0.02 per kilogram of potatoes, and he issued a notice of assessment to additional tax amounting to HFL 2 145.
The cooperative referred that notice of assessment to the Gerechtshof arguing that since the term consideration as defined in Article 8 of the de Wet op de omzetbelasting has a subjective character it had provided its services without consideration because it had not charged anything in return.
The Gerechtshof upheld that application and set aside the notice of assessment on the ground that it had not been proved that anything of value had been charged or paid in return so that the services in question had not therefore been provided for consideration.

Questions

A cooperative association incorporated under Netherlands law runs in accordance with its stated objects a potato storage depot. The members of the association have the right against it and the obligation towards it to put in store each year 1 000 kilograms of potatoes for each share certificate issued by the association in their possession in return for a storage charge fixed each year by the association payable at the end of the season. Pursuant to a decision by the association, in a given year, no storage charge may be imposed.
In such a case is there consideration within the meaning of the openingwords and paragraph (a) of Article 8 of the Second Directive?

AG Opinion

My own view is that this is a very simple case and I need not take time to consider my opinion.
I entirely agree with the Commission’s conclusion. The crux in my opinion is that there is nothing here that can be described as a “payment” within the
meaning of Article 2 (a) of the Directive, nothing that can be described as “consideration” within the meaning of Article 8 — consideration for the service
provided for the members of the association — and nothing that can be described as “received” by the association within the meaning of point 13 of Annex A. Certainly the reductionin the value of their shares suffered by the members cannot be so described.
One cannot in my opinion escape from the fact that there is no payment by the members and no receipt by the association. To cover such a case as this, one would need a specific provision deeming there to be consideration where there is not.

Decision

It should be noted in the first place that the expression in issue is part of a provision of Community law which does not refer to the law of the Member
States for the determining of its meaning and its scope; it follows that the interpretation, in general terms, of the expression may not be left to the
discretion of each Member State.
Furthermore the Community legislature has been careful to clarify the expression “consideration” in Annex A — which by Article 20 of the Second
Directive is an integral part thereof — under point 13 regarding Article 8 (a) in so far as the term should be understood as meaning “everything received
in return for … the provision of services, including incidental expenses (packing, transport, insurance, etc.) that is to say not only the cash amounts charged, but also, for example, the value of the goods received in exchange or, in the case of goods or services supplied by order of a public authority,
the amount of the compensation received”.
It should then be emphasized that Article 8 (a), which defines the basis of assessment of value-added tax stating that is shall be in the case of the
provision of services “everything which makes up the consideration for the provision of services”, and clarified as just stated above, must be compared
to Article 2 which stipulates as being solely capable of being subject to valueadded tax “the provision of services within the territory of the country by a
taxable person against payment”.
So a provision of services is taxable, within the meaning of the Second Directive, when the service is provided against payment and the basis of
assessment for such a service is everything which makes up the consideration for the service; there must therefore be a direct link between the service
provided and the consideration received which does not occur in a case where the consideration consists of an unascertained reduction in the value
of the shares possessed by the members of the cooperative and such a loss of value may not be regarded as a payment received by the cooperative
providing the services.
What is more it follows from the use of the expressions “against payment” and “everything received in return” first that the consideration for the
provision of a service must be capable of being expressed in money, which is further confirmed by Article 9 of the Second Directive which stipulates that
“the standard rate of value-added tax shall be fixed … at a percentage of the basis of assessment”, that is to say at a certain proportion of that which
constitutes the consideration for the provision of services, which implies that such consideration is capable of being expressed in an amount assessed in
money; secondly that such consideration is a subjective value since the basis of assessment for the provision of services is the consideration actually
received and not a value assessed according to objective criteria.
Consequently a provision of services for which no definite subjective consideration is received does not constitute a provision of services “against
payment” and is therefore not taxable within the meaning of the Second Directive.
It follows therefrom that there can be no question of any consideration within the meaning of the opening words and subparagraph (a) of Article 8
of the Second Directive 67/228 of the Council of 11 April 1967 in the case of a cooperative association running a warehouse for the storage of goods
which does not impose any storage charge on its members for the service provided.

Summary

A service is taxable with VAT when it is provided for consideration. The tax base then consists of the countervalue of the service, ie everything received as countervalue of the service. There must therefore be a direct link between the service rendered and the consideration received, which must be capable of being expressed in monetary terms and represent a subjective value, since the tax base for services is the consideration actually received and not a value estimated according to objective criteria.

There can therefore be no countervalue in the case of a cooperative association that does not charge its members a custody fee for the service performed.

Source BTW Jurisprudentie

A provision of services is taxable within the meaning of the Second Directive on the harmonization of legislation of Member States concerning turnover taxes, when the service, in the terms of Art. 2 of that instrument, is provided against payment and the basis of assessment for such a service consists, in the terms of Article 8 (a) as amplified by point 13 of Annex A, of everything received in return for the provision of the service. There must therefore be a direct link between the service provided and the consideration received. Such consideration must be capable of being expressed in money and have a subjective value since the basis of assessment for the provision of services is the consideration actually received and not a value assessed according to objective criteria.
Therefore there can be no question of any consideration within the meaning of Article 8 (a) of the directive in the case of a cooperative association running a
warehouse for the storage of goods which does not impose any storage charge on its members for the service provided.

Source