ECJ C-42/22 (Global Companhia de Seguros) – Judgment – The concept of ‘insurance and reinsurance transactions’ does not includes related or supplementary activities as purchase and sale of parts from written-off vehicles

On March 9, 2023, the ECJ has released the decision in the case C-42/22 (Global Companhia de Seguros).

This request for a preliminary ruling seeks an interpretation of Article 13(B)(a) and (c) of Directive 77/388/EEC and Articles 135(1)(a) and 136(a) of Directive 2006/112/EC, which replaced the former provisions, with a view to determining whether the concept of ‘insurance and reinsurance transactions’, as the principal activity of an insurance company, also includes related or supplementary activities, in particular the purchase and sale of parts from written-off vehicles, and whether, to that extent, the latter activity is also exempt from value added tax (‘VAT’). The referring court also seeks a determination as to whether that exempt may be inferred from the fact that the insurance company is an entity exempt from that tax where the aforementioned goods have not given rise to a right to deduction of VAT. Lastly, it asks whether it is contrary to the principle of fiscal neutrality for the sale of parts from written-off vehicles not to be exempt from VAT.

Context: Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Exemption from VAT — Article 135(1)(a) — Exemption of insurance and reinsurance transactions — Article 136 , under (a) – Exemption of supplies of goods assigned exclusively to an exempt activity – Concept of “insurance transactions” – Resale of wreckage of damaged motor vehicles acquired from insured parties – Principle of fiscal neutrality

Article in the EU VAT Directive

Article 135(1)(a) of Directive 2006/112/EC

Article 135
1. Member States shall exempt the following transactions:
(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;

Facts

The appellant is an insurance company which, in the course of its business, purchases vehicle parts from accidents in which its policyholders have been involved and subsequently sells them.
Further to an inspection carried out by officials from the Divisão de Inspeção a Seguradoras e Sociedades Financeiras (Division for the Inspection of Insurers and Financial Institutions), part of the Direção de Serviços de Inspeção Tributária (Tax Inspection Services Directorate) within the then Direção Geral dos Impostos (Directorate-General for Taxation), corrections were made to the value added tax
(VAT) due for the 2007 financial year in the amount of EUR 17 213.70 plus interest.
Those corrections were made on the basis of an assessment carried out by the Tax Administration in relation to the sale of parts from written-off vehicles, which is reflected in the inspection report as follows:
‘The taxable person did not account for VAT on the transfer of goods (parts from written-off vehicles). The sale of parts from written-off vehicles is a transaction subject to VAT in accordance with Article 3 of the [VAT Code], inasmuch as it is considered to be a transfer of movable property for consideration, at a rate of 21%, pursuant to Article 18(c) of that Code.’
Consequently, the Tax Administration made the assessments to VAT set out in paragraph 1, plus the corresponding interest, in the total amount of EUR 18 715.86.

Questions

A. Must Article 13(B)(a) of the Sixth VAT Directive, and, therefore, the current Article 135(1)(a) of the VAT Directive, be interpreted as meaning that the concept of ‘insurance and reinsurance transactions’ includes, for the purposes of exemption from VAT, related or supplementary activities such as the purchase and sale of parts from written-off vehicles?
B. Must Article 13(B)(c) of the Sixth VAT Directive, and, therefore, the later Article 136(a) of the VAT Directive, be interpreted as meaning that parts from written-off vehicles are regarded as being purchased and sold solely for an exempt entity, where those goods have not given rise to the right to deduction of VAT?
C. Is it contrary to the principle of VAT neutrality for the sale of parts from written-off vehicles by insurance companies not to be exempt from VAT where there was no right to deduction of VAT?

AG Opinion

None

Decision

1) Article 135(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax,

should be interpreted as:

operations consisting, for an insurance company, in selling to third parties wrecks of motor vehicles, damaged during claims covered by this company, which it has acquired from its policyholders do not fall within the scope of application of this provision.

2) Article 136(a) of Directive 2006/112

should be interpreted as:

3) The principle of fiscal neutrality inherent in the common system of value added tax

should be interpreted as:

it does not oppose the absence of exemption for operations consisting, for an insurance company, of selling to third parties the wreckage of motor vehicles, which have been involved in accidents covered by this company, that it a acquired from its policyholders when these acquisitions did not give rise to a right of deduction.

Summary

Generali Seguros is an insurance company which, as part of its business, acquires wrecks of motor vehicles damaged in accidents involving its insureds and then resells them to third parties, without paying VAT on these sales.
The Portuguese tax authorities considered that the sale of motor vehicle wrecks by Generali Seguros as a transfer for consideration of tangible property was subject to VAT and that such sale did not qualify for any VAT exemption.

According to the CJEU, acts consisting in an insurance company selling wrecks of motor vehicles acquired from its insured persons, which have been damaged in accidents covered by this company, to third parties do not fall within the scope of Article 135(1)(a) of the VAT Directive.
Transactions consisting in an insurance company selling to third parties wrecks of motor vehicles which have been acquired from its insured persons and which have been damaged in accidents covered by that company, also do not fall within the scope of Article 136(a) of the VAT Directive.
The principle of fiscal neutrality, which is inherent in the common system of VAT, does not preclude the exemption from being granted for transactions consisting in an insurance undertaking acquiring from its insured persons wrecked motor vehicles which have been involved in accidents covered by that undertaking. damaged, sells it to third parties, where those acquisitions have not given rise to a right of deduction.

Source