On November 7, 2013, the ECJ issued its decision in the joined cases C-249/12 (Tulică) & C-250/12 (Plavoşin). This case dealt with the issue where an agreement does not include any reference to VAT and the supplier is liable to account for VAT, the price established between the parties must be considered as including VAT.
Context: Taxation – VAT – Directive 2006/112/EC – Articles 73 and 78 – Immovable property transactions carried out by natural persons – Classification of those transactions as taxable – Determination of the VAT owing when the parties have made no provision for it at the time of conclusion of the contract – Question as to whether or not the vendor may recover the VAT from the purchaser – Consequences
Article in the EU VAT Directive
Articles 73 and 78 of the EU VAT Directive 2006/112/EU
Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.
Article 78
The taxable amount shall include the following factors:
(a) taxes, duties, levies and charges, excluding the VAT itself;
(b) incidental expenses, such as commission, packing, transport and insurance costs, charged by the supplier to the customer.
For the purposes of point (b) of the first paragraph, Member States may regard expenses covered by a separate agreement as incidental expenses.
Facts
- Ms Tulicǎ and Mr Plavoşin concluded numerous contracts for the sale of land, including 134 contracts for the 2007-2008 period and 15 contracts for the 2007-2009 period.
- Ms Tulicǎ and Mr Plavoşin made no provision for VAT at the time the contracts were concluded.
- After the transactions were carried out and following a tax inspection, the tax authorities found that the activities pursued by Ms Tulicǎ and Mr Plavoşin bore the hallmarks of economic activity.
- Ms Tulicǎ and Mr Plavoşin were thus automatically found to be taxable persons subject to the VAT by the tax authorities, who issued tax assessment notices to them, by which they ordered the payment of the VAT, calculated by adding that amount to the price agreed by the contracting parties, plus overdue interest.
- In the course of the proceedings giving rise to Case C‑249/12, Ms Tulicǎ argued that the tax authorities’ practice of calculating the VAT by adding that amount to the price agreed by the contracting parties infringed a number of legal principles, including the principle of contractual freedom. The VAT is a component of the price, not an addition to it. It cannot be taken as a given that the purchaser would have agreed to the purchase of the immovable property in question under the terms assumed by the tax authorities. The VAT demanded by the tax authorities can no longer be recovered from the purchaser, as that would go beyond the scope of the contract and cannot be relied on against the purchaser, either as a contractual obligation or a non-contractual legal obligation.
- Relying on Article 137 of the Tax Code, the tax authorities argued that, in order to determine the amount of VAT owing, the price agreed by the contracting parties must be used as the basis of the calculation.
Questions
AG Opinion
None
Decision
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in particular Articles 73 and 78 thereof, must be interpreted as meaning that, when the price of a good has been established by the parties without any reference to value added tax and the supplier of that good is the taxable person for the value added tax owing on the taxed transaction, in a case where the supplier is not able to recover from the purchaser the value added tax claimed by the tax authorities, the price agreed must be regarded as already including the value added tax.
Summary
Determination of VAT due if the parties have not determined anything at the time of the agreement
The agreed sales price, if it has been determined by the parties without mentioning the VAT and the supplier of the good is the person who is obliged to pay the VAT due from the taxable transaction, must be understood as already including VAT therein. in the event that the supplier cannot recover the VAT levied by the tax authorities from the buyer.
Source
Similar ECJ cases
Newsletters
