© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
C2: Supplies of goods
MEANING OF SUPPLY OF GOODS
Autonomous meaning to ensure uniform application
"[8] This view is in accordance with the purpose of the directive, which is designed inter alia to base the common system of VAT on a uniform definition of taxable transactions . This objective might be jeopardized if the preconditions for a supply of goods - which is one of the three taxable transactions - varied from one Member State to another, as do the conditions governing the transfer of ownership under civil law." (SAFE C-320/88)
Transfer of right to dispose of tangible property as owner
"(1) ‘Supply of goods’ shall mean the transfer of the right to dispose of tangible property as owner." (PVD Article 14)
- Consider all the facts of the case
"[12] This is illustrated, moreover, by the specific conditions mentioned in the second question, since they refer, on the one hand, to an agreement to transfer ownership under civil law, which does not necessarily seem to entail the transfer of actual power as indicated by Article 5(1 ) of the Sixth Directive, and, on the other, the actual placing of the property at the disposal of the other party, which would normally point towards a finding that actual power has been transferred .
[13] The answer to the second question must therefore be that it is for the national court to determine in each individual case, on the basis of the facts of the case, whether there is a transfer of the right to dispose of the property as owner within the meaning of Article 5(1 ) of the Sixth Directive." (SAFE C-320/88)
- Any transfer which empowers the recipient actually to dispose as if owner, irrespective of national law
"[20] In this connection, according to settled case-law of the Court, the concept of ‘supply of goods’ in Article 5(1) of the Sixth Directive and Article 14(1) of Directive 2006/112 does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were its owner (see Case C-435/03 British American Tobacco and Newman Shipping [2005] ECR I-7077, paragraph 35; Optigen and Others, paragraph 39; Halifax and Others, paragraph 51; Case C-237/09 De Fruytier [2010] ECR I-4985, paragraph 24; and Case C‑78/12 Evita-K [2013] ECR, paragraph 33)." (Dixon Retail Plc C-494/12)
"[76] We should add that the above analysis is not changed simply because the goods supplied pursuant to the Disputed Supplies - namely, the fuel and the parts provided during the provision of repairs and maintenance - were installed in vehicles owned by ROBO. As the CJEU noted in Vega at paragraph [27], "the concept of a 'supply of goods' ... does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law, but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were its owner". In this case, the economic and commercial reality was that the suppliers in question empowered the Appellant to dispose of the relevant goods as if the Appellant were the owner and the supplies of goods were accordingly made to the Appellant. In this respect too, the Appellant was in the same position as the card holders in Auto Lease Holland and Vega - see Auto Lease Holland at paragraphs [31] to [37] and Vega at paragraphs [27] to [39]." (D Nuttall UK Limited v. HMRC [2025] UKFTT 1600 (TC), Judge Beare)
- Transfer procured by credit card fraud is still a transfer
"[26] The fraudulent use of a bank card as a means of payment when those transactions were carried out does not affect the ability to classify them as supplies of goods within the meaning of the Sixth Directive and Directive 2006/112. Such use is a matter not of the objective criteria on which that concept is based but of the intention of the person who has taken part, as the person acquiring the goods, in the transactions at issue and of the processes carried out in order to give effect to that intention.
[27] Accordingly, it must be found that a ‘transfer’, within the meaning of Article 5(1) of the Sixth Directive and Article 14(1) of Directive 2006/112, exists between Dixons and its customers, even though the latter, when the transactions at issue in the main proceedings were carried out, fraudulently used a bank card as a means of payment for the goods supplied by Dixons." (Dixon Retail Plc C-494/12)
- Theft does not empower the thief to dispose of the goods under same conditions as their owner
"[28] It should be added that, contrary to Dixons’ contentions, a situation such as that at issue in the main proceedings must be distinguished from that of theft of goods, which is not covered by the concept of ‘supply of goods’ under the Sixth Directive and Directive 2006/112 (see British American Tobacco and Newman Shipping, paragraph 33).
[29] The theft of goods does not have the effect of empowering the thief to dispose of the goods under the same conditions as their owner. A theft cannot therefore be regarded as effecting a transfer, within the meaning of Article 5(1) of the Sixth Directive and Article 14(1) of Directive 2006/112, from the victim to the thief (see British American Tobacco and Newman Shipping, paragraph 32).
[30] Moreover, the theft of goods, by definition, does not give rise to any payment in return to the victim of the theft. It therefore cannot as such be regarded as a supply of goods ‘for consideration’ within the meaning of Article 2(1) of the Sixth Directive and Article 2(1)(a) of Directive 2006/112 (see British American Tobacco and Newman Shipping, paragraph 32)." (Dixon Retail Plc C-494/12)
- Illegally obtained electricity was a supply of goods
"[37] In the present case, it is apparent from the order for reference that, during the period from 7 May 2017 to 7 August 2019, that is to say, for over two years, Fluvius supplied MX with electricity. It therefore necessarily assumed that it was supplying a customer and, at the same time, MX behaved as such towards Fluvius and acted ‘as if he were its owner’, that is to say, he used the electricity supplied by Fluvius. As correctly pointed out by the Belgian Government, the properties of electricity mean that the usage from the distribution network coincides with consumption of the goods and that that consumption of the goods equates not only to usage of those goods but also to disposal thereof, which is the ultimate attribute of the right to property. A supply of goods in circumstances such as those in the main proceedings must therefore be regarded as the transfer of the right to dispose of tangible property within the meaning of Article 14(1) of Directive 2006/112." (Fluvius Antwerpen C-677/21)
Finance leases
- Distinguishing operating lease and finance lease: substantially all risks and rewards pass
“[28] It is clear from the Court's case-law that an operating lease must be distinguished from a finance lease, the nature of the latter being that substantially all the risks and rewards of legal ownership are transferred to the lessee. The fact that a transfer of ownership is provided for on the expiry of the contract or the fact that the present value of the lease payments is practically identical to the market value of the property constitute, separately or together, criteria which permit a determination of whether a contract can be categorised as a finance lease (see, to that effect, judgment in Eon Aset Menidjmunt, C 118/11, EU:C:2012:97, paragraph 38).” (NLB Leasing C-209/14)
- Long lease of immoveable property: supply of goods if value of lease payments practically identical to market value
“[30] Accordingly, where a financial leasing agreement relating to immovable property provides either that ownership of that property is to be transferred to the lessee on the expiry of that agreement or that all the essential powers attaching to ownership of that property are to be enjoyed by the lessee and, in particular, substantially all the rewards and risks incidental to legal ownership of that property are transferred to the lessee and the present value of the amount of the lease payments is practically identical to the market value of the property, the transaction resulting from that agreement must be treated as an acquisition of capital goods.” (NLB Leasing C-209/14)
- Finance lease of motor vehicle: supply of goods
"[40] Accordingly, where a financial leasing contract relating to a motor vehicle provides either that ownership of that vehicle is to be transferred to the lessee on the expiry of that contract or that the lessee is to possess all the essential powers attaching to ownership of that vehicle and, in particular, that substantially all the rewards and risks incidental to legal ownership of that vehicle are transferred to the lessee and that the present value of the amount of the lease payments is practically identical to the market value of the property, the transaction must be treated as the acquisition of capital goods." (EON Asset Management C-118/11)
- HMRC view: undecided
"HM Revenue & Customs (HMRC) is considering representations made by industry representatives and has not reached a final conclusion on whether the EON decision means that FL supplies are supplies of goods rather than supplies of services or, if so, what features are decisive in determining whether a supply is of goods rather than of services. Until and unless HMRC make a contrary announcement taxpayers should continue to treat hire supplies as set out in currently published HMRC guidance. If there is any future change of policy then HMRC will only apply any changes from a future date and will not require taxpayers to make any retrospective accounting adjustments." (HMRC Brief 37/12)
LEX SPECIALIS RULES TREATING SITUATIONS AS SUPPLY OF GOODS
- Only relevant where there is not a supply of goods in the general sense
"[38] Since it is apparent from the wording and scheme of Article 14 of that directive that paragraph 2 of that article constitutes, in relation to the general definition set out in paragraph 1 thereof, a lex specialis, the conditions for the application of which are independent of those of paragraph 1 (judgment of 25 February 2021, Gmina Wrocław (Transformation of the right of usufruct), C‑604/19, EU:C:2021:132, paragraph 55 and the case-law cited), the finding in the preceding paragraph of the present judgment precludes the application of Article 14(2)(a) of that directive to the case in the main proceedings." (Fluvius Antwerpen C-677/21)
Compulsory purchase
"(2) In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:
(a)the transfer, by order made by or in the name of a public authority or in pursuance of the law, of the ownership of property against payment of compensation;" (PVD Article 14)
Hire contract providing for ownership to pass
"(2) In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:
[...]
(b) the actual handing over of goods pursuant to a contract for the hire of goods for a certain period, or for the sale of goods on deferred terms, which provides that in the normal course of events ownership is to pass at the latest upon payment of the final instalment;" (PVD Article 14)
Transfer of goods under commission contract
"(2) In addition to the transaction referred to in paragraph 1, each of the following shall be regarded as a supply of goods:
[...]
(c) the transfer of goods pursuant to a contract under which commission is payable on purchase or sale." (PVD Article 14)
Handing over works of construction (optional)
"(3) Member States may regard the handing over of certain works of construction as a supply of goods." (PVD Article 14)
GOODS
- Goods used to produce other goods treated as incorporated
"(7) For the purposes of this section, where goods are manufactured or produced from any other goods, those other goods shall be treated as incorporated in the first-mentioned goods." (VATA 1994, s.5)
- Heat treated as goods
"[26] With regard to the activity at issue in the main proceedings, that is to say the supply of heat, it should be pointed out that, under Article 15(1) of the VAT Directive, heat is to be treated as tangible property. It follows that that activity constitutes a supply of goods, for the purposes of Article 14(1) of that directive." (WEG C-449/19)
- Bitcoin/currency not goods
"[24] It must be held, first, that the ‘bitcoin’ virtual currency with bidirectional flow, which will be exchanged for traditional currencies in the context of exchange transactions, cannot be characterised as ‘tangible property’ within the meaning of Article 14 of the VAT Directive, given that, as the Advocate General has observed in point 17 of her Opinion, that virtual currency has no purpose other than to be a means of payment.
[25] The same is true for traditional currencies, since it involves money which is legal tender (see, to that effect, judgment in First National Bank of Chicago, C‑172/96, EU:C:1998:354, paragraph 25).
[26] Consequently, the transactions at issue in the main proceedings, which consist of the exchange of different means of payment, do not fall within the concept of the ‘supply of goods’, laid down in Article 14 of the directive. In those circumstances, those transactions constitute the supply of services, within the meaning of Article 24 of the VAT Directive." (Hedqvist C-264/14 - exchange is a supply of services, however)
- Vouchers not goods: right to future goods or services
"[26] Consequently, in so far as those vouchers do not immediately transfer the right to dispose of property, their provision constitutes, for VAT purposes, not a ‘supply of goods’ within the meaning of Article 5(1) of the Sixth Directive, but a ‘supply of services’ within the meaning of Article 6(1) of that directive, since, under Article 6(1), any transaction which does not constitute a supply of goods within the meaning of Article 5 is regarded as a supply of services." (Astra Zeneca UK Ltd C-40/09)
Goods v. Services
- Identify characteristic features and whether service components predominate
"[27] Next, in order to determine whether a single complex supply, such as that in the main proceedings, is to be classified as a supply of services, it is vital to identify the predominant elements of that supply (see, inter alia, Faaborg-Gelting Linien, paragraphs 12 and 14, and Levob Verzekeringen and OV Bank, paragraph 27)." (Aktiebolaget NN C-111/05)
"[62] As the German Government has emphasised the difficulty in distinguishing between supplies of goods and supplies of services, particularly where work is carried out on a motor vehicle, it should be observed that there is a consistent body of case-law to the effect that in order to determine whether a given transaction is a supply of goods or a supply of services, it is necessary to identify its characteristic features (Case C-231/94 Faaborg-Gelting Linien [1996] ECR I-2395, paragraph 12). Where a supply of goods is only one component of a transaction in which supplies of services predominate, the transaction must be regarded as a supply of services (Faaborg-Gelting Linien, paragraph 14)." (Fischer C-322/99)
- Supply of services may include ancillary and minor supplies of goods
"[62] As the German Government has emphasised the difficulty in distinguishing between supplies of goods and supplies of services, particularly where work is carried out on a motor vehicle, it should be observed that there is a consistent body of case-law to the effect that in order to determine whether a given transaction is a supply of goods or a supply of services, it is necessary to identify its characteristic features (Case C-231/94 Faaborg-Gelting Linien [1996] ECR I-2395, paragraph 12). Where a supply of goods is only one component of a transaction in which supplies of services predominate, the transaction must be regarded as a supply of services (Faaborg-Gelting Linien, paragraph 14).
[63] It follows that supplies of services, including those which necessitate ancillary and minor supplies of goods, cannot constitute component parts within the meaning of Article 5(6) of the Sixth Directive." (Fischer C-322/99)
- Supply and laying of fibre optic cable is supply of goods even though installation is complex and not ancillary because cable is not altered
"[37] In that regard, although it is true that the relationship between the price of the goods and that of the services is an objective piece of information constituting an indication which may be taken into account for the purposes of classifying the main transaction, none the less, as the Commission of the European Communities argues in its observations, the cost of materials and work must not, of itself, be a decisive factor.
[38] It is therefore necessary also to consider the importance of the supply of services in the light of the supply of the cable in order to classify the transaction envisaged.
[39] In that regard, even if it is essential that the cable be installed in order to be usable and even if, by reason in particular of the distance and difficulty of the terrain, the installation of the cable in the ground is, as is apparent from paragraph 29 of this judgment, a very complex operation requiring extensive equipment, it still does not follow that the supply of services predominates over the supply of the goods. It follows from the description of the clauses of the contract set out in the decision for reference that the work to be carried out by the supplier is limited to installation of the cable at issue in the main proceedings and neither its purpose nor its effect is to alter the nature of that cable or to adapt it to the specific requirements of the client (see, by analogy, Levob Verzekeringen and OV Bank, paragraphs 28 and 29).
[40] Having regard to all those elements, the answer to the first question must be that a transaction for the supply and installation of a fibre-optic cable linking two Member States and sited in part outside Community territory must be considered a supply of goods within the meaning of Article 5(1) of the Sixth Directive where it is apparent that, after functionality tests carried out by the supplier, the cable will be transferred to the client who will dispose of it as owner, that the price of the cable itself clearly represents the greater part of the total cost of that transaction, and that the supplier’s services are limited to the laying of the cable without altering its nature and without adapting it to the specific requirements of the client." (Aktiebolaget NN C-111/05)
Online marketplace deemed supply
See XX