Flashback on ECJ Cases – C-218/10 (ADV Allround) – Self-employed drivers also constitute staff provided

On November 26, 2011, the ECJ issued its decision in the case C-218/10 (ADV Allround).

Context: VAT — Sixth Directive — Articles 9, 17 and 18 — Determination of the place where services are supplied — Concept of ‘supply of staff’ — Self-employed persons — Need to ensure that a provision of services is assessed identically in relation to the provider and in relation to the recipient

Article in the EU VAT Directive

Artciles 9(2)(e), 17(1), 17(2)(a), 17(3)(a) and 18(1)(a) of the Sixth VAT Directive (Articles 44, 167, 168, 169, 178(a) of the EU VAT Directive 2006/112/EC).

Article 44 (Place of supply of services)
The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the taxable person who receives such services has his permanent address or usually resides.

Article 167 (Origin and scope of right of deduction)
A right of deduction shall arise at the time the deductible tax becomes chargeable.

Article 168
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.

Article 169
In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following:
(a) transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State;
(b) transactions which are exempt pursuant to Articles 136a, 138, 142 or 144, Articles 146 to 149, Articles 151, 152, 153 or 156, Article 157(1)(b), Articles 158 to 161 or Article 164;
(c) transactions which are exempt pursuant to points (a) to (f) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.

Article 178 (Rules governing exercise of the right of deduction)
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;

Facts

ADV, a company incorporated under German law, was engaged, during 2005, in the supply of self-employed lorry drivers to haulage contractors established in Germany and outside the territory of that Member State, in particular in Italy. Under the terms of the contracts concluded between ADV and the drivers, known as ‘agency agreements’, the drivers were to charge ADV for the services which they provided. ADV, in turn, charged the various client haulage contractors the price stipulated in those agency agreements, plus a margin which varied between 8% and 20%.
Initially, ADV did not add VAT when invoicing Italian customers. It took the view that the services which it provided should be classified as ‘supply of staff’ within the meaning of Paragraph 3a(4)(7) of the UStG and that, accordingly, the place where services were supplied was in Italy, the place where the recipients of those services were established.
The Finanzamt (Tax Office) ruled that the services at issue could not be classified as a ‘supply of staff’ and that, consequently, the place where the services were supplied was, pursuant to Paragraph 3a(1) of UStG, the place in which the service provider was established. VAT, it held, had therefore to be charged in Germany.
However, the Bundeszentralamt für Steuern (Federal Central Tax Office), which is the institution responsible for ruling on the applications for VAT refunds submitted, in the main proceedings, by the Italian customers, found that the services provided by ADV constituted a ‘supply of staff’ and did not give rise to VAT invoicing in Germany. Taking the view that, pursuant to the first sentence of Paragraph 3a(3) of the UStG, those services ought to have been taxed in the place where the recipients of those services have their registered office, that is to say in Italy, that institution refused to refund German VAT to the Italian undertakings.
The Finanzgericht Hamburg (Finance Court, Hamburg), before which this dispute has been brought, states, first, that, in so far as the seventh recital in the preamble to the Sixth Directive provides that the list in Article 9(2) of that directive includes ‘in particular … certain services supplied between taxable persons where the cost of the services is included in the price of the goods’, that provision might also apply to the supply of self-employed persons, but that there is uncertainty in that regard.
The Finanzgericht Hamburg also seeks to ascertain, first, whether or not the VAT debt incurred by the service provider and the right of the service recipient to a refund of input VAT are necessarily linked, in particular by reason of the principle of fiscal neutrality and, secondly, whether that link creates an obligation on the part of the competent national authorities to avoid adopting contradictory decisions between themselves.
Finally, the Finanzgericht Hamburg expresses uncertainty as to whether the period of six months accorded to the customer to submit an application for a refund, a period which, pursuant to national legislation, begins to run from the end of the calendar year during which the right to a refund arose, must be suspended or interrupted in the absence of a decision on the tax situation of the provider.

Questions

1. Is the sixth indent of Article 9(2)(e) of [the Sixth Directive] … to be interpreted as meaning that “supply of staff” also includes the supply of self-employed persons not in the employ of the trader providing the service?

2. Are Articles 17(1), 17(2)(a), 17(3)(a) and 18(1)(a) of [the Sixth Directive] … to be interpreted as meaning that provision must be made in national procedural law to ensure that the taxability and liability to tax of one and the same service are assessed in the same way in relation to the trader providing the service and the trader receiving it, even where the two traders fall within the jurisdiction of different tax authorities?

Only if the answer to Question 2 is in the affirmative:

3. Are Articles 17(1), 17(2)(a), 17(3)(a) and 18(1)(a) of [the Sixth Directive] … to be interpreted as meaning that the period within which the recipient of a service may apply for a deduction of the input tax connected with the service received must not expire before a decision on taxability and liability to tax which is binding on the trader providing the service has been adopted?

AG Opinion

– Article 9(2)(e) of 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 must be interpreted as meaning that ‘supply of staff’ also includes the supply of self-employed persons not in the employ of the provider of that service;

– the Sixth Directive, and its provisions on the right to deduct in particular, do not require that particular provision must be made in national procedural law to ensure that, in circumstances such as those of the present case, the taxability and liability to tax of one and the same service are assessed in the same way in relation to the trader providing the service and the trader receiving it, even where the two traders fall within the jurisdiction of different tax authorities.

Decision

1. The sixth indent of Article 9(2)(e) of 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 must be interpreted as meaning that the ‘supply of staff’ referred to in that provision also includes the supply of self-employed persons not employed by the trader providing the service.

2. Articles 17(1), 17(2)(a), 17(3)(a) and 18(1)(a) of Sixth Directive 77/388 must be interpreted as not requiring the Member States to amend their domestic procedural rules in such a way as to ensure that the taxability and liability to value added tax of a service are assessed in a consistent way in relation to the provider and in relation to the recipient of that service, even though they fall within the jurisdiction of different tax authorities. However, those provisions require the Member States to adopt the measures that are necessary to ensure that value added tax is collected accurately and that the principle of fiscal neutrality is observed.

Summary

‘The provision of personnel’ also covers the provision of self-employed persons who are not employed by the service provider.

Member States are not obliged to provide for measures in their internal procedural law to ensure that the taxability and tax liability of a service on the part of the service provider and the service recipient is assessed in a coherent manner, even if each of them has different tax authorities. However, those provisions oblige the Member States to take the necessary measures to ensure the correct levying of VAT and respect for the principle of fiscal neutrality.

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