Flashback on ECJ Cases – C-124/07 (J.C.M. Beheer BV) – Activities of Insurance brokers who have only indirect relations are VAT exempt

On April 3, 2008, the ECJ issued its decision in the case C-124/07 (J.C.M. Beheer BV).

Context: Sixth VAT Directive – Supply of services relating to insurance transactions – Insurance brokers and insurance agents

Article in the EU VAT Directive

Article 13B(a) of the Sixth VAT Directive (Article 135(1)(a) of the EU VAT 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 in the main proceedings acts as a sub-agent on behalf of VDL Polisassuradeuren BV (‘VDL’) a company incorporated under Netherlands law which itself acts as an insurance broker and insurance agent.
VDL acts as an insurance agent in the conclusion of insurance contracts and as an ‘authorised agent’ for certain insurance companies. In that capacity, VDL concludes insurance contracts independently in the name of those insurers.
The activities which the appellant in the main proceedings carries out in the name and on behalf of VDL concern the conclusion of insurance contracts, the processing of transfers of insurance policies, the issue of such policies, the payment of commissions and provision of information to the insurance company and policyholders. In addition, it offers and concludes new insurance policies independently and on its own initiative.
Under the contract between VDL and the appellant in the main proceedings, the latter receives from VDL, in return for the services provided, a commission equal to 80% of the commission paid to VDL for the conclusion of an insurance contract. If the insurance lapses, the appellant in the main proceedings is required to repay the proportion of the commission it received which corresponds, pro rata, to the unexpired term of the contract.
A supplementary turnover tax assessment in the amount of NLG 55 561 (EUR 25 244) was issued to the appellant in the main proceedings in respect of the period from 1 January 1997 to 31 December 1998.
After an unsuccessful objection and the dismissal of the appeal it had lodged before the Gerechtshof te ’s-Hertogenbosch (Regional Court of Appeal, ’s‑Hertogenbosch) on the ground that it could not rely on the exemption laid down in Article 11(1)(k) of the 1968 Law, the appellant in the main proceedings appealed on a point of law to the court making the reference.
Taking the view that an interpretation of Community law was necessary in order for it to reach a decision in the main action, the Hoge Raad der Nederlanden decided to stay the proceedings and submit the following question to the Court of Justice for a preliminary

Questions

Do the provisions of Article 13 B(a) of the Sixth Directive ¹ extend to activities of a (legal) person which performs characteristic and essential activities of an insurance broker and insurance agent, whereby negotiations are carried out in the name of another insurance broker or insurance agent in connection with the bringing about of insurance transactions?

AG Opinion

None

Decision

Article 13B(a) 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 must be interpreted as meaning that the fact that an insurance broker or agent does not have a direct relationship with the parties to the insurance or reinsurance contract in the conclusion of which he has been instrumental, but merely an indirect relationship with them through the intermediary of another taxable person who is, himself, in a direct relationship with one of those parties, and to whom the insurance broker or agent is contractually bound does not prevent the service provided by the latter from being exempt from value added tax under that provision.

Summary

The fact that an insurance broker or an insurance agent does not maintain direct relations with the parties to the insurance or reinsurance contract to which he contributes, but only indirect relations, through another taxpayer, who himself maintains direct relations with one of those parties and with whom that insurance broker or insurance agent is contractually bound does not preclude the service provided by the latter from being exempt from VAT.

Source: