On July 16, 2015, the ECJ issued its decision in the case C-584/13 ( Mapfre asistencia and Mapfre warranty)
Context: Taxation — VAT — Scope — Exemptions — Concept of ‘insurance transactions’ — Concept of ‘supply of services’ — Lump sum paid for a warranty covering breakdowns of a second-hand motor vehicle
Article in the EU VAT Directive
Article 2 of the Sixth Directive provides:
‘The following shall be subject to value added tax [“VAT”]:
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
2. the importation of goods.’
Article 13(B)(a) of the Sixth Directive:
‘Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:
(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents.’
Article 33(1) of the Sixth Directive provides:
‘Without prejudice to other Community provisions, in particular those laid down in the Community provisions in force relating to the general arrangements for the holding, movement and monitoring of products subject to excise duty, this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties and, more generally, any taxes, duties or charges which cannot be characterised as turnover taxes, provided however that those taxes, duties or charges do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.’
Context: Taxation — VAT — Scope — Exemptions — Concept of ‘insurance transactions’ — Concept of ‘supply of services’ — Lump sum paid for a warranty covering breakdowns of a second-hand motor vehicle
Facts
- It appears from the order for reference that second-hand motor-vehicle dealers offered purchasers of those vehicles, through the services proposed by the company NSA Sage, which subsequently became Mapfre warranty, a warranty covering the repair of mechanical breakdowns affecting those vehicles.
- Proceeding on the view that it was supplying a service, Mapfre warranty collected VAT. Mapfre asistencia, for its part, paid the tax on insurance contracts, at the standard rate of 9%, on the premiums paid by Mapfre warranty.
- The tax authorities sent Mapfre warranty a proposed tax adjustment notice in which the services provided by it were classed as insurance transactions subject to the tax on insurance contracts provided for under Article 991 of the CGI, at the rate of 18% set for motor vehicle insurance by Article 1001-5a of the CGI.
- As they were of the view, moreover, that Mapfre warranty had taken out, with Mapfre asistencia, insurance for account of whom it may concern for the benefit of the purchasers of vehicles, the purpose of which was to cover the risk of mechanical breakdowns, those tax authorities sent Mapfre asistencia a tax adjustment notice, in which they calculated the tax on insurance contracts at the rate of 18% on the sums paid by those purchasers.
- Following the rejection of their complaint, those two companies brought actions, first before the Tribunal de grande instance de Lyon (Regional Court, Lyons) and then before the cour d’appel de Lyon (Court of Appeal, Lyons), seeking relief from those tax obligations.
- The two companies claimed that the second-hand vehicle dealers were sub-contracting part of their after-sales service to Mapfre warranty and that the latter had insured its risk of financial loss with Mapfre asistencia.
Questions
Must Article 2 and Article 13(B)(a) of the Sixth Council Directive 77/388/EEC of 17 May 1977be interpreted as meaning that the service whereby an economic operator which is independent of a second-hand motor vehicle dealer provides, in return for payment of a lump sum, a warranty covering mechanical breakdowns which may affect certain parts of the second-hand vehicle falls within the category of insurance transactions exempt from value added tax or, on the contrary, as meaning that such a supply falls within the category of ‘supply of services’?
AG Opinion
A service whereby an operator which is independent of second-hand motor-vehicle dealers provides, for a set period and in return for payment of a predetermined sum, a warranty covering the costs of repairing those motor vehicles in the event of mechanical breakdowns covered by that warranty constitutes an insurance transaction within the meaning of Article 13(B)(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, and is for that reason exempt from value added tax.
Decision
Article 13(B)(a) 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, as amended by Council Directive 91/680/EEC of 16 December 1991, must be interpreted as meaning that the supply of services whereby an economic operator which is independent of a second-hand motor-vehicle dealer provides, in return for payment of a lump sum, a warranty covering mechanical breakdowns which may affect certain parts of that vehicle constitutes an exempt insurance transaction within the meaning of that provision. It is for the referring court to determine whether, in the light of circumstances such as those of the cases in the main proceedings, the supply of services at issue in the main proceedings is such a supply. The provision of such a supply and the sale of the second-hand vehicle must, in principle, be considered to be distinct and independent supplies, to be treated separately from the point of view of VAT. It is for the referring court to determine whether, having regard to the specific circumstances of the cases in the main proceedings, the sale of a second-hand vehicle and the warranty provided by an independent economic operator to the dealer selling that second-hand vehicle covering mechanical breakdowns which may affect certain parts of that vehicle are so interconnected that they must be regarded as constituting a single transaction or whether, on the contrary, they are independent transactions.
Summary
Sale of second-hand car + warranty by a third party = distinct and independent services
The service consisting of an economic operator independent of the seller of a second-hand car providing a guarantee against payment of a fixed sum in the event of a mechanical defect in certain parts of that car constitutes an exempt insurance act.
The provision of such a supply and the sale of the second-hand car are in principle to be regarded as distinct and independent supplies to be treated separately from the point of view of VAT.
Source
Newsletters
