On December 13, 2001, the ECJ issued its decision in the case C-235/00 (CSC Financial Services).
Context: Sixth VAT Directive – Article 13B(d)(5) – Exempt transactions – Transactions in securities – Negotiation – Provision of a call centre service.
Article in the EU VAT Directive
Article 13B(d)(5) of the Sixth VAT directive (Article 135(1)(f) of the EU VAT Directive 2006/112/EC).
Article 135
1. Member States shall exempt the following transactions:
(f) transactions, including negotiation but not management or safekeeping, in shares, interests in companies or associations, debentures and other securities, but excluding documents establishing title to goods, and the rights or securities referred to in Article 15(2)
Facts
- CSC provides to financial institutions what is termed a call centre service. According to the national court, that service essentially consists in the call centre handling on behalf of the financial institution concerned all its contacts with the general public in relation to the sale of certain financial products, from initial enquiry up to but excluding execution.
- Sun Alliance, which groups together a number of companies that manage investment funds and personal equity plans, entrusted to CSC all communications and contacts with the public concerning an investment product known as the Daisy Personal Equity Plan, under which investment is made by means of units in a unit trust.
- CSC operators provide potential investors with all the information they require regarding the Daisy Personal Equity Plan, together with the relevant investment application forms. Under applicable national legislation, they are not authorised to provide advice, merely information. CSC also processes application forms submitted by prospective investors. It checks that the form has been properly filled in, that the applicant satisfies the conditions of eligibility and that the correct payment is enclosed. It also deals with cancellation requests.
- The formalities for issuing and transferring the securities, that is to say, the units in the unit trust, are, however, carried out by a separate company unconnected with CSC.
- Sun Alliance pays CSC a fee for its services which is made up of a fixed sum and an amount reflecting the number of calls and sales.
- By decision set out in a letter of 21 April 1997, the Commissioners took the view that the services provided by CSC were not exempt from VAT under Article 13B of the Sixth Directive.
- CSC appealed against that decision to the London Value Added Tax and Duties Tribunal, which held that the exemption laid down in Article 13B(d)(5) of the Sixth Directive extended to the necessary preliminary stages of the issue and transfer of securities.
- The Commissioners appealed against that decision, arguing before the High Court that Article 13B(d)(5) exempts only the issue of securities and does not extend to preliminary steps taken by a third party on behalf of an issuer. For its part, CSC submitted that the services it provides are specific to and an essential part of the issue of securities by Sun Alliance and thus constitute transactions in securities within the meaning of Article 13B(d)(5).
Questions
How is the exemption provided by Article 13B(d)(5) of the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, in respect of transactions in securities to be interpreted? In particular,
(1) does the term transactions in securities apply only to transactions in which the parties’ legal rights or obligations in respect of the security are altered?
(2) does the term transactions, including negotiation, in securities apply to a service of providing information to potential investors and receiving and processing applications from investors for the issue of a security (but not including preparing and dispatching the document of title to the security), where that service is provided to a person who has legal rights or obligations under the security by a person who does not have any legal right or obligation under the security?
AG Opinion
(1) The term transactions in securities in Article 13B(d)(5) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, are transactions capable of creating, altering or extinguishing the rights and obligations of the parties in respect of the security.
(2) The term transactions, including negotiation, in securities appearing in that provision does not extend to services which are limited to the provision of information about a financial product and, if appropriate, the receiving and processing of applications to subscribe for the securities concerned, but do not include the issuing of such securities.
Decision
On a proper construction of Article 13B(d)(5) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment
– transactions in securities means transactions liable to create, alter or extinguish parties’ rights and obligations in respect of securities;
– negotiation in securities does not cover services limited to providing information about a financial product and, as the case may be, receiving and processing applications for subscription to the relevant securities, without issuing them.
Summary
Exempt transactions – Transactions involving securities – Intermediation – Provision of a so-called “call center” service
The terms “acts in securities” refer to acts that may create, modify or cancel the rights and obligations of the parties in securities.
The terms ‘securities brokerage’ do not refer to services which merely provide information about a financial product and, where appropriate, receive and process applications for subscriptions for the securities concerned, without including their issuance.
Source
Similar ECJ cases
Reference to the case in the other EU MS (+UK)
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