On May 25, 1993, the ECJ issued its decision in the case C-18/92 (Bally).
Context: Tax provisions ° Harmonization of laws ° Turnover taxes ° Common system of value added tax ° Taxable amount ° Transaction of sale with payment by credit card ° Commission retained by the issuer of the card ° Inclusion in the taxable amount
Article in the EU VAT Directive
Article 11(A)(1)(a) and 11(A)(3)(c) of the Sixth VAT Directive (Article 73 amd 79 of the EU VAT Directive 2006/112/EC).
Article 73
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.
Article 79
The taxable amount shall not include the following factors:
(a) price reductions by way of discount for early payment;
(b) price discounts and rebates granted to the customer and obtained by him at the time of the supply;
(c) amounts received by a taxable person from the customer, as repayment of expenditure incurred in the name and on behalf of the customer, and entered in his books in a suspense account.
The taxable person must furnish proof of the actual amount of the expenditure referred to in point (c) of the first paragraph and may not deduct any VAT which may have been charged.
Facts
- Bally, which markets shoes bearing the trade-mark “Bally” accepts payment from its customers for their purchases either in cash or by cheque or by credit card. For the latter case Bally concluded, with various organizations issuing credit cards, agreements providing that when the customer, the credit card holder, purchases an article using the card, the organization issuing the card pays the supplier the price of the article and retains a commission amounting usually to some 5% of the payment.
- Bally, which is a taxable person for VAT purposes under Article 4 of the Belgian VAT Code, was unsure whether it owed the tax on the net amount which it received from the card-issuing organizations after deduction of their commission or on the gross amount, that is, the price of the goods before deduction of that commission. However, Bally always paid the VAT on the net amount until 1988 when, following a tax inspection relating to previous years going back to 1984, the Special Inspector of Taxes, after regularizing the position for the years 1984 to 1987, decided that “for the calculation of the taxable amount commission is not deductible from the price” and demanded from Bally an additional payment of BFR 2 206 000 by way of VAT, plus fiscal fines and interest.
- Bally paid the sum demanded, though with reservations, and, whilst paying VAT on the gross amount as from 1989, brought an action before the Tribunal de Première Instance, Brussels, claiming repayment of the whole amount levied, in its view illegally, by way of VAT plus legal interest, and damages.
Questions
1. Article 11(A)(1)(a) of the directive:
In the context of a sale in which the payment is made by credit card, must not the view be taken that the consideration obtained from the credit organization by the affiliated trader for the delivery of a product is restricted solely to the amount received from that organization by the affiliated trader?
or
2. Article 11(A)(3)(c) of the Sixth Directive:
Must the amount of the commission or discount retained by the issuing organization from the price displayed be regarded as payment for the expense incurred on behalf of the affiliated trader so as to ensure him a guaranteed payment and accordingly not form part of the taxable amount under Article 11(3)(c) of the Sixth Directive?
AG Opinion
Article 11A of the Council’ s Sixth Directive should be interpreted as meaning that when a purchaser pays for an article with a credit card the taxable amount is the selling price ° excluding the value added tax itself ° which appears on the credit card payment slip signed by the purchaser at the time of the purchase and not the amount which the supplier receives from the organization issuing the credit card after the latter has deducted an amount as commission.
Decision
Article 11(A)(1)(a) of the Sixth Directive must be interpreted as meaning that where, in the context of a transaction of sale, the price of the goods is met by the purchaser by means of a credit card and paid to the supplier by the organization which has issued the card, after deduction of a percentage as commission in payment for the service rendered by the latter to the supplier of the goods, the sum so deducted must be included in the taxable amount on which the supplier, as the taxable person, must pay tax to the revenue authorities.
Summary
Article 11A(1)(a) of the Sixth Directive on the harmonization of the laws of the Member States relating to turnover taxes must be interpreted as meaning that where, in the context of a transaction of sale, the price of the goods is met by the purchaser by means of a credit card and paid to the supplier by the organization which has issued the card, after deduction of a percentage as commission in payment for the service rendered by the latter to the supplier of the goods, the sum so deducted must be included in the taxable amount on which the supplier, as the taxable person, must pay tax to the revenue authorities.
Source
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