ECJ C-21/20 (Balgarska natsionalna televizia) – Decision – Public service television broadcasting a supply of services for consideration can deduct VAT subject to proportionality commercial vs. public activities

On Spetember 16, 2021, the ECJ issued its decision in the case C-21/20 (Balgarska natsionalna televizia) .

This case deals with the question whether the provision of audiovisual media services by the public service television broadcasting shall be considered to be a supply of services for consideration in the following cases within the meaning of Article 2(1)(c) of the VAT Directive. If so, is it to be assumed that the services are exempt supplies within the meaning of Article 132(1)(q)? Does article 168 of the VAT Directive precludes a course of action which would affect the right to claim input VAT not only dependent on the use of a purchase, but also the how it was financed? Which portion of the input VAT can be claimed, and what criteria should be used to determine this?

Context: Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112 / EC – Scope – Article 2 (1) (c) – Supply of services for consideration – Exclusion of audiovisual media services, which are offered to spectators and are financed by a public subsidy and for which spectators do not pay remuneration – Article 168 – Right to deduct – Taxable person who carries out both taxable transactions and transactions which do not fall within the scope of VAT

Article in the EU VAT Directive

Article 2(1)(c), 132(1)(q), 168 of Directive 2006/112/ЕC

Article 2
1. The following transactions shall be subject to VAT:
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

Article 132
1. Member States shall exempt the following transactions:

(q) the activities, other than those of a commercial nature, carried out by public radio and television bodies.

Article 168 (Right to deduct VAT)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.

Facts

The dispute is an additional assessment that the tax administration has issued and the director of the board has confirmed ‘disputes and tax and social insurance matters’. The Balgarska natsionalna televizia (hereinafter: the BNT) has appealed against this decision. BNT is a legal entity and a national public-law provider of audiovisual media services. The assessment was established on the basis of a tax inspection carried out at BNT in accordance with Bulgarian VAT law. With regard to BNT, a VAT debt has been established for the period from September 1, 2015 to March 31, 2016. This debt arises from the calculated additional tax on the results indicated by the BNT for the aforementioned periods, whereby the tax authorities only allowed a partial deduction of input tax for the declared supplies on which the BNT had deducted the input tax in full. The BNT is not financed by television viewers, but is partly financed from the state budget, and partly from its own income (advertising and sponsoring). In the view of BNT, it is fully entitled to deduct input tax on purchases it uses for its commercial activities. On the other hand, it may partially deduct input tax on purchases used for both commercial activities and non-exclusively commercial purposes. but is partly financed from the state budget and partly from its own income (advertising and sponsorship). In BNT’s view, it is fully entitled to deduct input tax on purchases it uses for its commercial activities. On the other hand, it may partially deduct input tax on purchases used for both commercial activities and non-exclusively commercial purposes. but is partly financed from the state budget and partly from its own income (advertising and sponsorship). In the view of BNT, it is fully entitled to deduct input tax on purchases it uses for its commercial activities. On the other hand, it may partially deduct input tax on purchases used for both commercial activities and non-exclusively commercial purposes.

Consideration:

The referring court points out that the dispute between the parties essentially revolves around whether the activities of BNT as a public television broadcaster, which has a specific task to perform under Bulgarian law, are excluded from the scope of the Bulgarian VAT law or if a supply made for consideration but exempt within the meaning of the Bulgarian VAT law must be considered. Furthermore, the parties disagree as to whether Article 73 of the Bulgarian VAT Act, which provides for a partial right to deduct input tax, applies to all supplies purchased, as no distinction is made in the booking of the purchases according to the way in which these are financed. Or that for supplies used for commercial and income-generating activities,

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Questions

Can the supply of audiovisual media services to viewers by the public television broadcaster be regarded as a service supplied for consideration within the meaning of Article 2(1)(c) of Directive 2006/112/ЕC ¹ if it is financed by the State in the form of subsidies, with the viewers paying no fees for the broadcasting, or does it not constitute a service supplied for consideration within the meaning of that provision and not fall within the scope of that Directive?

If the answer is that the audiovisual media services provided to viewers by the public television broadcaster fall within the scope of Article 2(1)(c) of Directive 2006/112/ЕC, can it then be considered that exempt supplies for the purposes of Article 132(1)(q) of the Directive are involved, and is a national regulation which exempts this activity solely on the basis of the payment from the State budget received by the public television broadcaster, regardless of whether that activity is also of a commercial nature, permissible?

Is a practice which makes a full right of input tax deduction for purchases dependent not solely on the use of the purchases (for taxable or non-taxable activity), but also on the way in which those purchases are financed, namely on the one hand from self-generated income (advertising services inter alia), and on the other hand from State subsidisation, and which grants the right to full input tax deduction only for purchases financed from self-generated income and not for those financed through State subsidies, with the delimitation thereof being required, permissible pursuant to Article 168 of Directive 2006/112/EC?

If it is considered that the activity of the public television broadcaster consists of taxable and exempt supplies, having regard to its mixed financing, what is the scope of the right to input tax deduction in respect of those purchases and which criteria must be applied for the determination thereof?

AG Opinion

1) Article 2 (1) 1 lit. (c) Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the activity of a public television broadcaster of providing television media services in so far as it is financed from subsidies from the state budget, does not constitute paid services within the meaning of this provision.

2) Article 132 (1) 1 lit. (q) of Directive 2006/112 should be interpreted as meaning that the concept of ‘commercial activities’ of public radio and television bodies within the meaning of that provision covers transactions for consideration and which do not constitute an activity in the public interest, as well as services provided free of charge, in so far as they are financed. from revenues from these paid transactions.

(3) Article 168 of Directive 2006/112 must be interpreted as meaning that a public broadcaster whose activities are financed both by subsidies from the State budget and by revenues from transactions subject to VAT, is entitled to deduct the VAT payable or paid on the goods. and services used for the purposes of this activity to the extent that its activity is financed with revenues from taxable transactions.

Decision

1) Article 2 (1) (c) of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the activity of a national public service broadcaster in providing audio-visual media services for viewers, which is financed by the state in the form of a subsidy and for which viewers do not pay fees for television broadcasting, does not constitute a supply of services for remuneration within the meaning of this provision.

(2) Article 168 of Directive 2006/112 must be interpreted as meaning that a national public service broadcaster may deduct value added tax (VAT) paid on supplies received in respect of purchases of goods and services used for the purposes of its activities, which give the right to deduct, and that he cannot deduct VAT paid on supplies received for the purchase of goods and services used for the purposes of his activities which do not fall within the scope of VAT. Member States should determine the methods and criteria for allocating the amount of VAT paid on supplies received between taxable transactions and transactions not falling within the scope of VAT, taking into account the purpose and structure of this Directive, respecting the principle of proportionality.

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