Administrative Court: VAT implications of outsourcing credit card services to a German company

A party was authorized to issue and manage payment instruments like credit cards but did not have the resources to handle credit card operations. Thus, they used the services of a German company called A GmbH from 2013 onwards to handle all credit card operations, including issuing processing services. A GmbH was responsible for all aspects of credit card transactions and provided a comprehensive package of services to the party. The party’s interest in obtaining a complete solution was evident from the service contract’s preambular clause. The A GmbH independently decided which services were necessary to guarantee smooth credit card transactions for the party’s customers. A GmbH performed services in the name and on behalf of the party, and the party only provided ancillary services such as general information and document storage. The auditors disagreed with A GmbH’s tax treatment of the fees charged to the party under §4 Nr.8 Buchst. d of the German VAT Act as exempt from VAT. They argued that A GmbH did not directly execute or authorize charges or credits to customer accounts since customers made that decision, and A GmbH’s authorization of transactions did not meet the criteria for the transfer of ownership of funds. Thus, the services were taxable and subject to VAT in Austria, with the recipient of the services being responsible for paying the VAT.

Source: ris.bka.gv.at

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