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ECJ C-527/23 (Weatherford Atlas Gip) – Questions – Refusal of the right to deduct if services are not used for taxable transactions

11 October 2023
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6 min read

The ECJ released the questions in the case C-527/23 (Weatherford Atlas Gip).

Context:

  •  Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax: Article 2(1), Article 9(1), Articles 168, 178, 203 and 273;
  • – Treaty on European Union: Article 5(4); and
  • – Protocol (No 2) to the Treaty on European Union on the application of the principles of subsidiarity and proportionality: Article 5.

Articles in the EU VAT Directive

Article 2(1), 9(1), 168, 178, 203 and 273

Article 2
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.

Article 168 (Origin and scope of right of deduction)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
02006L0112 — EN — 01.07.2022 — 027.001 — 72
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.

 

Facts

  • The applicant, Weatherford Atlas Gip SA, is part of the Weatherford group which provides oil services worldwide.
  • After taking over Foserco SA, the tax authorities verified its obligations and decided on a new verification.
  • During this period, Foserco SA purchased administrative services from companies within the group, and the tax authorities refused to deduct VAT on these services as it had not been shown that they were used for taxable transactions.
  • The applicant has lodged an objection and questions the concept of “use of services for taxable transactions,” whether the right to deduct VAT can be refused based on subjective assessment, and whether the applicant needs to demonstrate that services were taxed for its benefit.
  • The interpretation of VAT Directive Articles 2 and 168 is important for resolving this dispute.

Questions

1. Must Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principle of fiscal neutrality, be interpreted as precluding states that, in circumstances such as those of the main proceedings, the tax authorities deny a taxable person the right to deduct the value added tax paid on the administrative services received, where it has been established that all costs recorded for the services acquired are included in the general costs of the taxpayer who only carries out taxable transactions,the provision of services has been expressly confirmed by the tax authorities and the transactions have been carried out under the reverse charge mechanism (which excludes detriment to the state budget)?

2. When interpreting Article 2 and Article 168 of Directive 2006/112, in circumstances such as those of the main proceedings, can administrative and management services (that is to say assistance and advice in various areas as well as financial and legal advice) provided by undertakings within a group are carried out for the benefit of other members of that group, are regarded by each member as being used for taxable transactions or acquired for his own use?

3. When interpreting Article 2 of Directive 2006/112, if it is established that the services provided within a group were not provided for the benefit of one of the members of the group, can a company that is part of the group but not deemed to have received these services are regarded as a taxable person acting as such?

Source 

Reference to other VAT cases

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