Articles in the EU VAT Directive
Articles 2, 9 and 135 of the EU VAT Directive 2006/112/EC
Facts & Background
Facts:
The appellant is company ‘A Oy’, and provides financial services. The company’s business customers are active in sectors where receivables have a short turnaround time, where the business customer wants immediate access to the expected funds. To this end, the company (the factor) works with factoring via pledging, whereby credit is granted to a customer in exchange for outstanding receivables. There is also factoring via assignment of receivables, where the factor undertakes to purchase the invoiced receivables from the customer. The defendant is the Central Tax Commission and states that this method of factoring is subject to VAT insofar as it constitutes consideration for services in the field of management and collection of receivables.
Consideration:
According to the referring court, factoring via invoice financing falls within the scope of the VAT Directive. However, it is not clear to him how the exemption provisions of this directive should be interpreted in this context. The referring court seeks, inter alia, clarification as to whether it can be assumed that the factor purchasing the receivables from its client simultaneously sells to that client services which partly fall within the scope of that directive. He also wants an explanation about the financing commission that constitutes a consideration for providing the credit, and whether and where this fits into Article 135 of the VAT Directive.
Questions
1. When a factor purchases future invoiced receivables from a customer in such a way that the default risk of those receivables is transferred from the customer to him (factoring by assignment of receivables): a) The financing commission charged by the factor for each the contractual claim is charged in the form of a percentage thereof shall be regarded as an adjustment item for the purchase price of the claims or as another item falling outside the scope of the VAT Directive, or (b) Article 2, paragraph 1(c) and Article 9 of the VAT Directive are interpreted as meaning that, in return for the financing commission referred to in point 1(a) above, the factor supplies to its customers a service for consideration falling within the scope of the VAT Directive fall?
2. Should the initial fixed fee for setting up and starting up the factoring process charged to customers in the context of factoring by assignment of receivables be regarded as consideration for the sale of a service falling within the scope of the VAT Directive to the customers?
3. If the fees referred to in points 1 and 2 above, charged in the context of factoring through the assignment of receivables, are to be regarded as consideration for the provision of a service falling within the scope of the VAT Directive: a ) Should Article 135(1)(b) of the VAT Directive, which concerns the grant of credits, or Article 135(1)(d) of that Directive, which concerns transactions relating to payments and claims, be interpreted as meaning that the financing commission or initial fee charged to customers must be regarded as consideration for the exempt sale of a service, or (b) must Article 135(1)(d) of the VAT Directive be interpreted as meaning that is there a consideration for the collection of debts subject to VAT or a consideration for another service subject to VAT?
4. Where a factor provides financing by means of credit to its customers in such a way that the invoiced receivables of those customers serve as security for the financing provided by it (invoice financing factoring): (a) Should Article 135(1)(1)(a) (b) of the VAT Directive, which concerns the grant of credits, or Article 135(1)(d) of that Directive, which concerns transactions relating to payments and claims, be interpreted as meaning that the any financing commission charged under the agreement and the initial fee for setting up and starting up the factoring process must be regarded at least in part as consideration for the exempt sale of a service, or (b) Article 135(1)(b) must (d), of the VAT Directive be interpreted as meaning that there is consideration for the collection of debts subject to VAT or consideration for another service subject to VAT?
5. If the financing commission or initial fee charged in the context of factoring via assignment of claims or via invoice financing as referred to in points 3 and 4 above must be regarded as a consideration in its entirety as consideration for a service subject to VAT, the taxability of under the VAT Directive, this service is so clear and unconditional that it must be given direct effect at the request of the taxable person, even though there is an exemption under national VAT law for both the provision of loans and the provision of other forms of financing?
Source
Cited Case law
- C-305/01 (MKG-Kraftfahrzeuge-Factoring) – Factoring qualifies as a service subject to VAT
- Factoring qualifies as a taxable service subject to VAT. Factoring companies buying receivables and assuming debtor risk engage in an economic activity, entitling them to VAT deduction. Debt collection and factoring are excluded from VAT exemption
- C-175/09 AXA UK
- C-93/10 GFKL Financial Services
- C-801/19 FRANCK Taxation
- C-250/21 Szef Krajowej Administracji Skarbowej
- C-44/11 Deutsche Bank
- C-231/19 Blackrock Investment Management (UK)
- C-349/96 CPP
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