© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
D1. For consideration
GENERAL​
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- Supplies of goods/services rather than consideration that are subject to VAT
"[17] It must be borne in mind that, under Article 2(1) of the Sixth Directive, a supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such is subject to VAT. That is why it is necessary in every case to consider which party supplied the goods or services and which party provided the consideration. It is supplies of goods or services which are subject to VAT, rather than payments made by way of consideration for such supplies." (Cantor Fitzgerald C-108/99)
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FORM OF CONSIDERATION​
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- Right to payment is consideration
"[34] Next, it should be noted, with regard to the concept of ‘remuneration’, that, according to the case-law cited in paragraph 33 above, the total absence of payment of the sums due does not constitute an obstacle to the finding of reciprocity of rights and obligations resulting from the economic transaction in question (see, to that effect, judgments of 20 January 2022, Apcoa Parking Danmark, C‑90/20, EU:C:2022:37, paragraphs 39 to 43, and of 27 April 2023, Fluvius Antwerpen, C‑677/21, EU:C:2023:348, paragraphs 30 and 32)." (Cristian General Serv T-643/24)
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- Right to 50% of future winnings by horse was consideration
"[47] Indeed, this transfer, which constitutes remuneration and occurs upon conclusion of the aforementioned contracts, has economic value in itself. The actual amount transferred to the applicant in the main proceedings for each race was certainly linked to the result obtained by a given owner's horse in a given competition. However, as the referring court specifies, the transfer as such was not linked to that result, nor, consequently, to any potential outcome of the service provided by the applicant in the main proceedings, but simply to the fact that the latter provided a set of services stipulated in the contract.
[48] This conclusion also applies in the event of the absence of a victory or useful ranking of a horse in a given competition, since the absence of obtaining a prize cannot call into question the existence of the transfer provided for by the aforementioned contracts.
[49] Indeed, the consideration for all the services provided by the applicant in the main proceedings was constituted by this assignment, irrespective of whether or not it resulted in winnings from a prize at a given competition. The owners of the horses thus remunerated all the services provided by the applicant in the main proceedings by means of that assignment, which enabled him to benefit from 50% of the claim corresponding to any winnings from prizes obtained. Therefore, the existence of the aforementioned direct link is not affected by the fact that the applicant, as a rider, did not succeed in having a horse win or in placing it in a useful position at a given competition (see, to that effect, judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia, C-295/17, EU:C:2018:942, paragraph 40 and the case law cited therein)."(HAS C-713/21)
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- Debit note can be consideration
"[64] Next, the fact that the value given in exchange for that supply of services took the form of debit notes does not prevent that value being regarded as consideration within the meaning of Article 2(1)(c) of Directive 2006/112. The Court has already had occasion to observe that it is irrelevant, for the purposes of determining whether a supply of services is effected for consideration, that the remuneration does not take the form of a payment of a commission or specific fees (judgment of 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 29 and the case-law cited)." (Suzlon Wind Energy Portugal C-605/20)
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- Margin on currency exchange is consideration
"[28] In the case in the main proceedings, it is clear from the material in the case file submitted to the Court that there would be a synallagmatic legal relationship between Mr Hedqvist’s company and the other party to the contract in which the parties to the transaction would agree, reciprocally, to transfer amounts of a certain currency and receive the corresponding value in a virtual currency with bidirectional flow, or vice versa. It is also clear that Mr Hedqvist’s company would be remunerated for supplying the service by a consideration equal to the margin that it would include in the calculation of the exchange rate at which it would be willing to sell and purchase the currencies concerned.
[29] The Court has already held that it is irrelevant, for the purposes of determining whether a supply of services is effected for consideration, that the remuneration does not take the form of a payment of a commission or specific fees (judgment in First National Bank of Chicago, C‑172/96, EU:C:1998:354, paragraph 33)." (Hedqvist C-264/14)
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- Purchase of debts at below face value does not constitute provision of consideration by purchaser where it reflects the economic value
"[26] In those circumstances, the answer to the first question is that Articles 2(1) and 4 of the Sixth Directive must be interpreted as meaning that an operator who, at his own risk, purchases defaulted debts at a price below their face value does not effect a supply of services for consideration within the meaning of Article 2(1) and does not carry out an economic activity falling within the scope of that directive when the difference between the face value of those debts and their purchase price reflects the actual economic value of the debts at the time of their assignment." (GFKL Financial Services C-93/10)
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Non-monetary consideration​
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- Purchase of debts at below face value does constitute provision of consideration by purchaser where it reflects a factoring commission
"[20] In its judgment in MKG-Kraftfahrzeuge-Factoring, the Court held that a factor’s guaranteeing to a client of payment of the debts by assuming the risk of the debtors’ default must be considered to be exploitation of the property in question for the purpose of obtaining income therefrom on a continuing basis, within the meaning of Article 4(2) of the Sixth Directive, where that operation is carried out, in return for payment, for a given period (see MKG-Kraftfahrzeuge-Factoring, paragraph 50).
[21] It is to be observed that, in the context of the assignment of debts that was at issue in the case giving rise to that judgment, the assignee of the debts undertook to provide factoring services to the assignor, in return for which it received payment, namely factoring commission and a del credere fee.
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[24] However, unlike the factoring commission and the del credere fee which, in the dispute that gave rise to the judgment in MKG-Kraftfahrzeuge-Factoring, were retained by the factor, this difference does not constitute, in the main proceedings, a payment intended to provide direct remuneration for a service supplied by the purchaser of the assigned debts." (GFKL Financial Services C-93/10)
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- Barter transactions economically identical to transactions for money
"Furthermore, the Court has held previously that barter contracts, under which the consideration is by definition in kind, and transactions for which the consideration is in money are, economically and commercially speaking, two identical situations (see, to that effect, Case C‑330/95 Goldsmiths [1997] ECR I‑3801, paragraphs 23 and 25)." (Orfey Balgaria EOOD C-549/11)
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- Must have a subjective value that is actually received and capable of expression in money
"[27]...Such a direct link exists only if there is a legal relationship between the supplier and the purchaser entailing reciprocal performance, the price received by the supplier constituting the value actually given in return for the goods supplied. Further, that consideration must have a subjective value that is actually received and is capable of being expressed in monetary terms (judgment of 13 June 2018, Gmina Wrocław, C‑665/16, EU:C:2018:431, paragraph 43 and the case-law cited)." (WEG C-449/19)
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- Apartment fit out service in return for rent free occupation is barter transaction
"[40] It follows that if, under a contract concluded with the owner of an apartment, a supplier of services to fit out and furnish that apartment, first, undertakes to carry out that supply of services at its own expense and, secondly, obtains the right to have that apartment at its disposal in order to use it for its business activities during the term of that contract, without being required to pay rent, whereas the owner recovers the improved apartment at the end of that contract, that supply of fitting-out and furnishing services falls within the category of a supply of services for consideration within the meaning of Article 2(1)(c) of the VAT Directive. There is thus a direct link between that supply and the consideration actually received in exchange by the supplier thereof, namely the right to use the apartment in question for its business activities during the term of the contract." (Serebryannay C-283/12)
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DIRECT LINK​
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- Right to apartment improvements and right to rent free occupation are the consideration
"[41] The fact that the supply of services in question will benefit the owner of the apartment at issue only after the contract has expired does not alter anything in that regard, seeing that, as from the conclusion of that contract, the parties to such a bilateral contract undertake to perform reciprocal services for each other (see, by analogy, Case C-174/00 Kennemer Golf [2002] ECR I-3293, paragraph 40, and RCI Europe, paragraphs 31 and 33)." (Serebryannay C-283/12)
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- There must be a direct link between the supply and consideration received
"[23] As regards the question whether a supply of services such as that at issue in the main proceedings constitutes a supply of services carried out ‘for consideration’, it is settled case-law that classifying a supply of services as a transaction ‘for consideration’, within the meaning of Article 2(1)(c) of the VAT Directive, requires only that there be a direct link between that supply and the consideration actually received by the taxable person. Such a direct link is established if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the actual consideration for the service supplied to the recipient (judgment of 21 December 2023, Administration de l’enregistrement, des domaines et de la TVA (VAT – Member of a board of directors), C‑288/22, EU:C:2023:1024, paragraph 33 and the case-law cited)." (Zlakov C-744/23)
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- Consideration presupposes that a price is stipulated
"[20] In that regard, it is settled case-law that, within the framework of the VAT system, taxable transactions presuppose the existence of a transaction between the parties in which a price or consideration is stipulated. Thus, where a person’s activity consists exclusively in providing services for no direct consideration, there is no basis of assessment and the services are therefore not subject to VAT (judgment of 22 June 2016, ÄŒeský rozhlas, C‑11/15, EU:C:2016:470, paragraph 20 and the case-law cited).
[21] It follows therefrom that a supply of services is effected ‘for consideration’ within the meaning of Article 2, point 1, of the Sixth Directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. That is the case if there is a direct link between the service supplied and the consideration received (see, to that effect, judgments of 22 June 2016, ÄŒeský rozhlas, C‑11/15, EU:C:2016:470, paragraphs 21 and 22 and the case-law cited; of 22 November 2018, MEO — Serviços de Comunicações e Multimédia, C‑295/17, EU:C:2018:942, paragraph 39; and of 3 July 2019, UniCredit Leasing, C‑242/18, EU:C:2019:558, paragraph 69)." (San Domenico Vetraria C-94/19)
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- Direct link where one is conditional on the other
"[27] Accordingly, if it were to be established, which it is for the referring court to ascertain, that the payment, by San Domenico Vetraria, of the amounts invoiced to it by its parent company was a condition for the latter to second the director and that the subsidiary paid those amounts only in return for the secondment, it would have to be held that there is a direct link between the two services." (San Domenico Vetraria C-94/19)
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- Sum classified as penalty can be consideration
"[46] With regard to, in the second place, the argument relied on by Apcoa that the amount which it charges in respect of the control fees for parking in breach of the regulations is classified, under national law, as a penalty, it is sufficient to recall, as the Advocate General did, in essence, in point 42 of his Opinion, that, for the purposes of interpreting the provisions of the VAT Directive, the assessment of whether payment of a fee is made as consideration for a supply of services is a question of EU law which needs to be determined independently of the assessment made under national law (judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia, C‑295/17, EU:C:2018:942, paragraphs 69 and 70)." (Apcoa Parking Danmark C-90/20)
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"[67] The Court of Justice has consistently held that the terms of a provision of EU law which makes no express reference to the law of the Member States must normally be given an autonomous and uniform interpretation (see, to that effect, judgment of 16 November 2017, Kozuba Premium Selection, C‑308/16, EU:C:2017:869, paragraph 38 and the case-law cited).
[68] Therefore, as the Advocate General observed in point 34 of her Opinion, it is irrelevant for the purposes of interpreting the provisions of the VAT Directive that that amount is to be regarded, under national law, as a right to a remedy in tort or a contractual penalty, or that it is characterised as a remedy, damages or remuneration.
[69] The assessment of whether payment of a fee is made as consideration for a supply of services is a question of EU law which needs to be determined independently of the assessment made under national law." (MEO C-295/17)
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- Early termination charge having purpose of discouraging early termination does not prevent it being consideration
"[62] Consequently, the objective of that amount, namely to discourage customers from not observing the minimum commitment period, is not decisive for the classification of that amount, in so far as, according to the economic reality, the same amount aims to ensure that MEO, in principle, obtains the same income as it would have obtained if the contract had not been terminated before the end of the minimum commitment period for a reason attributable to the customer."
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Legal relationship between provider and recipient involving reciprocal performance
"[36] In that regard, according to settled case-law, the possibility of classifying a supply of services as a transaction for consideration requires only that there be a direct link between that supply and the consideration actually received by the taxable person. Such a direct link is established if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the actual consideration for the service supplied to the recipient (judgments of 29 October 2015, Saudaçor, C‑174/14, EU:C:2015:733, paragraph 32)." ​(EQ C-846/19)
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- Broad interpretation of legal relationship
"[33] In that regard, it should first be noted, as the Advocate General pointed out in points 38 and 48 of his Opinion, that the concept of ‘legal relationship … pursuant to which there is a reciprocal performance’ must be given a broad interpretation. Thus, it follows from the case-law that the mere use of a regulated service, such as parking in a paid car park (judgment of 20 January 2022, Apcoa Parking Danmark, C‑90/20, EU:C:2022:37) or consuming electricity at one’s place of residence (judgment of 27 April 2023, Fluvius Antwerpen, C‑677/21, EU:C:2023:348), may give rise to a legal relationship between the person holding the rights enabling the supply of that service and the person who has used it (see, to that effect, judgments of 20 January 2022, Apcoa Parking Danmark, C‑90/20, EU:C:2022:37, paragraphs 28 and 29, and of 27 April 2023, Fluvius Antwerpen, C‑677/21, EU:C:2023:348, paragraphs 30 to 32)." (Cristian General Serv T-643/24)
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- Sums payable under a statutory regime as consideration
"[25]In the present case, first, it is apparent from the order for reference that there is a contract between T.P.T. and that party’s lawyer, whose subject matter is the provision of legal assistance free of charge under Article 38(1)(2) of the ZA. Secondly, since T.P.T. was successful in the relevant legal proceedings, the opposing party was ordered, under Article 38(2) of the ZA, to pay that lawyer the lawyer’s fees, the amount of which was set according to the arrangements provided by law, by reference to the minimum amounts of lawyer’s fees.
[26] Consequently, the existence of a direct link between the legal assistance provided by T.P.T.’s lawyer and the lawyer’s fees paid to him is evidenced both by a contract and by law." (Zlakov C-744/23)
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- Parking in a carpark space without paying gives rise to legal relationship
"[28] In the present case, it must be noted that parking in a particular space in one of the car parks managed by Apcoa gives rise to a legal relationship between that company, as a service provider and manager of the car park concerned, and the motorist who used that space.
[29] In that regard, it is apparent from the documents available before the Court that, in the context of that legal relationship, the parties enjoy rights and assume obligations, in accordance with the general terms and conditions for use of the car parks concerned, which include, in particular, the provision of a parking space by Apcoa and the obligation on the motorist concerned to pay, in addition to the parking fees, where appropriate, in the event of failure to comply with those general terms and conditions, the amount corresponding to the control fees for parking in breach of the regulations, as indicated on the signs mentioned in paragraph 11 of the present judgment.
[30] Accordingly, in that context, with regard to, on the one hand, the condition relating to the existence of reciprocal performance, within the meaning of the case-law cited in paragraph 27 of the present judgment, it appears that that condition is fulfilled. The payment of parking fees and, where appropriate, of the amount corresponding to the control fees for parking in breach of the regulations constitutes consideration for the provision of a parking space." (Apcoa Parking Danmark C-90/20 - at least where it is a "regulated service" - see Cristian General Serv T-643/24)
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- Statutory payments for use of copyrighted works without permission consideration for supply
"[40] The terms and conditions of the single and equitable remuneration, resulting in particular from point 3.12 of the methodology, cause that remuneration to vary from single to triple depending on whether or not the communication of the protected works was authorised by Credidam, which represents the holders of related rights ex lege, pursuant to Articles 145 and 146 of the Law on copyright and related rights (see paragraphs 11 and 12 above). Consequently, even if the communication of the protected works in question took place without a licence, the fact remains that the failure of the collective management organisation for copyright and related rights to grant a licence did not prevent the legal and regulatory framework governing the communication to the public of such works without a licence from applying, which it is for the referring court to verify." (Cristian General Serv T-643/24)
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- No legal relationship/reciprocity between public broadcaster and fee payable by persons in possession of radio receiver
"[23] As regards the public broadcasting service at issue in the main proceedings, it is clear that there is no legal relationship between ÄŒeský rozhlas and the persons liable to pay the radio fee, in the course of which there is an exchange of reciprocal performance, or direct link between that public broadcasting service and that fee.
[24] In the context of the provision of that service, ÄŒeský rozhlas and those persons are not linked by any contractual relationship or transaction in which a price was stipulated, or even by a voluntary legal commitment made by one party towards the other.
[25] Moreover, the obligation to pay the radio fee does not stem from the provision of a service of which it constitutes direct consideration, since that obligation is linked not to the use of the public broadcasting service provided by ÄŒeský rozhlas by the persons subject to that obligation but solely to the possession of a radio receiver, whatever the use that is made of it.
[26] Consequently, persons possessing a radio receiver are obliged to pay that fee, even if they use that receiver solely to listen to radio programmes transmitted by broadcasters other than ÄŒeský rozhlas, such as commercial radio programmes financed by sources other than that fee, for listening to CDs or other digital media, or even for other functions generally available on that equipment enabling them to receive and reproduce transmissions." (ÄŒeský rozhlas C-11/15)
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- No reciprocal performance where creditor pursues persons whom defaulted on obligations to debtor to recover its own debt
"[14] Those legal services were in relation to the sought recovery of costs paid in the context of a loan granted by Svilosa to the foundation ‘Mir za teb, mir za men’ (‘the Foundation’) to facilitate the organisation of a concert collecting funds for the benefit of children affected by war. The loan amount had not been paid into the Foundation’s account, but had been made directly available to persons and companies who were to organise that concert. Ultimately, that concert did not take place, through no fault of the Foundation, and Svilosa therefore resorted to the law firms’ services with a view to bringing legal proceedings against the various persons who had failed to deliver on their commitments.
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[25] In the present case, it is not disputed that Svilosa granted a loan to the Foundation, in accordance with a bridge financing agreement concluded between them. By contrast, the actions taken by Svilosa with a view to recovering the amounts paid by it to third parties in the context of that loan were not subject to any agreement or other legal relationship with the Foundation pursuant to which there was reciprocal performance relating specifically to those actions. In any event, Svilosa does not appear to have received any remuneration from the Foundation in relation to those actions.
[26] In that context, it must be added that the fact that Svilosa was able, following the proceedings conducted in the United States, to recover a part of the debt owed to it by the Foundation, is irrelevant. The payment of amounts recovered in that way does not seem to have been made as consideration, by the Foundation, for the recovery actions taken by Svilosa. Therefore, those actions cannot be considered to be a supply of services for consideration." (Svilosa C-535/24)
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- Payment procured by credit card fraud is still consideration
"[37] Likewise, inasmuch as, as is apparent from the file submitted to the Court, Dixons complied with the procedures laid down by the agreements concluded with AmEx and Streamline and, in addition, the sales at issue in the main proceedings satisfy the objective criteria on which the concept of ‘supply of goods’ within the meaning of the Sixth Directive and Directive 2006/112 is based, the fact that those sales subsequently turned out to have been paid for by means of cards used in a fraudulent manner cannot have the consequence that the payment of the price of those sales does not constitute the consideration obtained by Dixons in respect of the sales." (Dixon Retail Plc C-494/12)
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Link to use of supply​
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- Sums​ payable independent of actual use not consideration for actual use
"[34] Next, it should be noted that the subsidy and the subsidised activity are organised on the basis of the law. The grant of the subsidy, which is intended to finance, generally, the activities of the national public provider, consisting in preparing, producing and broadcasting national and regional programmes, and which is determined by reference to a flat rate per programme hour, is independent of the actual use, by the viewers, of the audiovisual media services provided, of the identity or of the actual number of viewers for each programme." (Balgarska C-21/20)
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[25] Moreover, the obligation to pay the radio fee does not stem from the provision of a service of which it constitutes direct consideration, since that obligation is linked not to the use of the public broadcasting service provided by ÄŒeský rozhlas by the persons subject to that obligation but solely to the possession of a radio receiver, whatever the use that is made of it.
[26] Consequently, persons possessing a radio receiver are obliged to pay that fee, even if they use that receiver solely to listen to radio programmes transmitted by broadcasters other than ÄŒeský rozhlas, such as commercial radio programmes financed by sources other than that fee, for listening to CDs or other digital media, or even for other functions generally available on that equipment enabling them to receive and reproduce transmissions." (ÄŒeský rozhlas C-11/15)
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Such sums might be consideration for the right to use/benefit - see below (that was not the case in Balgarska)
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- Sums​ payable by government to broadcaster irrespective of number of users not third party consideration for actual use by viewers
"[37] In the present case, there is no relationship between the State, which pays a subsidy from its budget in order to finance audiovisual media services, and the viewers, who benefit from those services, which would be analogous to that between a sickness fund and its insured. As has been noted in paragraph 33 of the present judgment, those services do not benefit persons who are likely to be clearly identified, but all potential viewers. In addition, the amount of the subsidy in question is determined by reference to a flat rate per programme hour, and without taking into account the identity or the number of users of the service provided." (Balgarska C-21/20)
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- Payment that is inversely linked to use of public transport system not consideration for use by members of the public
"[39] As the Advocate General observed in points 52 and 56 of her Opinion, there was, in that case, a direct link between the healthcare services provided to the residents of the residential care home for the elderly and the financial consideration paid to that establishment, determined on the basis of the care received and the number of residents concerned. In the present case, collective public transport services benefit not clearly identifiable individuals, but all potential passengers. In addition, the compensation is calculated without taking into account the identity and number of users of the service supplied." (PSA C-615/23)
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- Yearly payment calculated by reference to expected use of healthcare services was consideration for care provided
"[18] According to the statements of the referring court, the detailed rules for calculating the ‘healthcare lump sum’ take account of the number of residents hosted by each home and their dependency level, which are assessed in accordance with the conditions set out in Articles R. 314-170 and R. 314-171 of the Code de l’action sociale et des familles, and of historical coefficients which are determined at national level and updated each year on the basis of the average expenses of all RCHEs.
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[32] It is clear that the ‘healthcare lump sum’ at issue in the main proceedings paid by the national sickness insurance fund to the RCHEs is received by the latter as consideration for the care which they provide, in different forms, to their residents.
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[36] Finally, it is clear from the Court’s case-law that where, as in the main proceedings, the supply of services in question is characterised, inter alia, by the permanent availability of the service provider to supply, at the appropriate time, the healthcare services required by the residents, it is not necessary, in order to recognise that there is a direct link between that service and the consideration received, to establish that a payment relates to a personalised supply of healthcare at a specific time carried out at the request of a resident (see, to that effect, Kennemer Golf EU:C:2002:200, paragraph 40).
[37] Accordingly, the fact, in the main proceedings, that the healthcare provided to residents is neither defined in advance nor personalised and that the payment is made in the form of a lump sum is also not such as to affect the direct link between the supply of services made and the consideration received, the amount of which is determined in advance on the basis of well-established criteria." (Le Rayon d’Or C-151/13)
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Voluntary sums​
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- Direct link broken where remuneration is awarded in a voluntary or uncertain way making it practically impossible to determine amount
"[24] By contrast, the direct link between the supply of services and the consideration is broken when the remuneration is awarded in a voluntary and uncertain way so that its amount is practically impossible to determine or where its amount is difficult to quantify or the circumstances relating to its calculation are uncertain (judgment of 21 December 2023, Administration de l’enregistrement, des domaines et de la TVA (VAT – Member of a board of directors), C‑288/22, EU:C:2023:1024, paragraph 36 and the case-law cited)." (Zlakov C-744/23)
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- Donations to busker not consideration
"[30] Thus, the judgment of 3 March 1994, Tolsma (C‑16/93, EU:C:1994:80), concerned a musician who performed in public and received donations from passers-by. In that regard, the Court found, in paragraphs 16 and 17 of that judgment, that that income did not constitute consideration for a service supplied to passers-by since, first, there was no agreement between the parties, since the passers-by voluntarily made a donation, whose amount they determined as they wished, and that, secondly, there was no necessary link between the musical service and the payments to which it gave rise." (Zlakov C-744/23)
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"[17] Firstly, there is no agreement between the parties, since the passers-by voluntarily make a donation, whose amount they determine as they wish. Secondly, there is no necessary link between the musical service and the payments to which it gives rise. The passers-by do not request music to be played for them; moreover, they pay sums which depend not on the musical service but on subjective motives which may bring feelings of sympathy into play. Indeed some persons place money, sometimes a considerable sum, in the musician' s collecting tin without lingering, whereas others listen to the music for some time without making any donation at all.
[18] In addition, contrary to the arguments of the German and Netherlands Governments, the fact that the musician plays in public with a view to collecting money and actually receives certain sums in so doing is of no relevance for the purpose of determining whether the activity in question constitutes a supply of services for consideration within the meaning of the Sixth Directive.
[19] That interpretation is not affected by the fact that a musician such as Mr Tolsma solicits money and can in fact expect to receive money by playing music on the public highway. The payments are entirely voluntary and uncertain and the amount is practically impossible to determine." (Tolsma C-16/93)
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Contingent sums​
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- Success fee is consideration because it is for the service (not the result), even if contingent
"[28] Furthermore, the finding in paragraph 26 of the present judgment is not called into question by the uncertainty concerning the payment of lawyers’ fees due to the absence of any guarantee as to the success of the legal proceedings and, consequently, as to an order that the opposing party must pay those fees.
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[33] Although, in the dispute in the main proceedings, the payment of the lawyer’s fees is subject to a risk depending on the outcome of the trial, those fees represent, however, effective consideration for the service consisting of the representation of the client in court." (Zlakov C-744/23)
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Query effect on economic activity analysis (income on a continuing basis)
"[46] ... However, for that continuing basis to subsist, it is important that, where the percentage fees are paid on the basis of the profits achieved by the company concerned, percentage fees may also be paid to members of the board of directors for business years in which the company did not achieve a profit." (TP C-288/22)
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See E2. Economic activity in general
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- Prize money is not consideration because it is for the result, not a service of participating
"[31] The judgment of 10 November 2016, Baštová (C‑432/15, EU:C:2016:855), concerned, among other things, the question of whether the provision of a horse by a taxable person to a horse race organiser to have that horse participate in that race constituted a supply of services for consideration.
[32] In that regard, the Court found, in paragraphs 35 and 37 of that judgment, that, in principle, such provision cannot be regarded as effective consideration for the service supplied by the race organiser and consisting in enabling that owner to have his horse participate in the horse race, where that service is remunerated by the payment, by the owner of the horse, of entrance and declaration fees reflecting the value actually given in return for the participation in the race and that any benefit, which the owner of the horse could possibly derive from that participation as a result of the increase in the value of the horse in the event that it is placed or the publicity gained by the horse from that participation, is difficult to quantify and uncertain. Furthermore, prize money, if any, awarded due to the placing of the horse at the end of the race cannot be regarded either as effective consideration for the provision of the horse since it is not that provision by the owner of the horse to the horse race organiser which, as such, leads to payment of prize money, but the achievement of a certain result at the end of the race." (Zlakov C-744/23)
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- Training horses in return for a right to 50% of any winnings is a supply for consideration
"[49] Indeed, the consideration for all the services provided by the applicant in the main proceedings was constituted by this assignment, irrespective of whether or not it resulted in winnings from a prize at a given competition. The owners of the horses thus remunerated all the services provided by the applicant in the main proceedings by means of that assignment, which enabled him to benefit from 50% of the claim corresponding to any winnings from prizes obtained. Therefore, the existence of the aforementioned direct link is not affected by the fact that the applicant, as a rider, did not succeed in having a horse win or in placing it in a useful position at a given competition (see, to that effect, judgment of 22 November 2018, MEO – Serviços de Comunicações e Multimédia, C-295/17, EU:C:2018:942, paragraph 40 and the case law cited therein).
[50] From this perspective, the assignment provided for in the aforementioned contracts constitutes remuneration determined in advance and according to well-established criteria, guaranteeing the applicant in the main proceedings predictability of the amount to which he would be entitled in the event of a victory or a useful placing of the horse in a competition, without the actual occurrence of such an event being decisive in this respect (see, to that effect, judgment of 15 April 2021, Administration de l'Enregistrement, des Domaines et de la VAT, C-846/19, EU:C:2021:277, paragraph 44 and the case law cited therein), notwithstanding the fact that the actual implementation of this assignment depends on that placing. Consequently, this method of determining the remuneration is not such as to affect the direct link between the services performed by the applicant in the main proceedings and the remuneration received by him." (HAS C-713/21)
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Method of determining amount of consideration
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- Need not be determined on the basis of individualised services: annual flat rate sufficient
"[38] In that regard, a direct link between the remuneration and the activity appears to be established where remuneration in the form of a lump sum is determined in advance. The fact that compensation is determined not on the basis of individualised services, but at a flat rate and annually would not in itself be such as to affect the direct link between the supply of services made and the consideration received (judgments of 22 February 2018, Nagyszénás Településszolgáltatási Nonprofit Kft., C‑182/17, EU:C:2018:91, paragraph 37, and of 13 June 2019, IO (VAT – Activities of a member of a supervisory board), C‑420/18, EU:C:2019:490, point 25)." (TP C-288/22)
​​
"[37] If that fact were to be confirmed, it would follow that the fact that that compensation was determined, as the case may be, not on the basis of individualised services but at a flat rate and annually, so as to cover the operating costs of that company, would not in itself be such as to affect the direct link between the supply of services made and the consideration received (judgment of 29 October 2015, Saudaçor, C‑174/14, EU:C:2015:733, paragraph 36)." (Nagyszénás Településszolgáltatási Nonprofit C-182/17)
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- Amount to be determined in advance or the procedures for fixing it are foreseeable
"[34] That being said, the fact that the price paid for an economic transaction is higher or lower than the cost price and, therefore, a price higher or lower than the open market value, is irrelevant for the purpose of establishing whether it was a transaction effected ‘for consideration’. That circumstance is not such as to affect the direct link between the services supplied or to be supplied and the consideration received or to be received, the amount of which is determined in advance and according to well-established criteria (see, to that effect, judgments of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën, C‑520/14, EU:C:2016:334, paragraph 26 and the case-law cited, and of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 43).
[35] In addition, the remuneration may be fixed as the person supplying the services in question deploys his or her activities, provided that the procedures for fixing that amount are foreseeable and capable of ensuring that the person supplying services receives, in principle, payment for the services that he or she provides (see, to that effect, judgment of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 44)." (TP C-288/22)
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- Possibility of adjustment does not break direct link
"[38] The direct nature of that link could not be called into question by the fact, assuming it were to be established, that the contract at issue contained clauses allowing, in certain circumstances, the amount of compensation to be adjusted; nor by the fact that that amount was fixed at a level lower than the open market value, provided that the amount of compensation was determined in advance on the basis of well-established criteria which ensured that it was sufficient to cover the operating costs of NTN (see, to that effect, judgments of 29 October 2015, Saudaçor, C‑174/14, EU:C:2015:733, paragraph 38, and of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraphs 45 and 46)." (Nagyszénás Településszolgáltatási Nonprofit C-182/17)
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- No direct link where sum depends on recipient's income rather than the services supplied
"[48] Although this part payment represents a portion of the fees, its amount is not calculated solely on the basis of those fees, but also depends upon the recipient’s income and assets. Thus, it is the level of the latter – and not, for example, the number of hours worked by the public offices or the complexity of the case concerned – which determines the portion of the fees for which the recipient remains responsible.
[49] It follows that the part payment made to the public offices by recipients of legal aid services depends only in part on the actual value of the services provided – the more modest the recipient’s income and assets, the less strong the link with that value will be.
...
[51] Therefore, in light of the foregoing, it does not appear that the link between the legal aid services provided by public offices and the payment to be made by the recipients is sufficiently direct for that payment to be regarded as consideration for those services and, accordingly, for those services to be regarded as economic activities for the purposes of Article 2(1) and Article 4(1) and (2) of the Sixth Directive." (Commission v. Finland C-246/08)
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- Simple reimbursement of costs incurred in looking after payer's horses not remuneration
"[43] ... Indeed, assuming, as it is for the referring court to determine, that the payment by the horse owners of the costs of maintenance, participation in competitions, transport, shoeing, and veterinary care constitutes a simple reimbursement of the expenses incurred by the applicant in the main proceedings in the operation of his stable, such reimbursement would not constitute remuneration for those services provided by him." (HAS C-713/21)
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Value of consideration
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- Need not bear any particular relation to the value of the supply
"[15] As will be seen, "consideration" in article 2 means only some value given to the supplier in return for the goods or services by the person to whom they are supplied. It is this amount on which VAT is payable. It need not be full value or indeed bear any particular relation to the value of the goods or services supplied...
...
[52] Whether there is a supply of goods or services for consideration for the purposes of article 2 and whether that supply constitutes economic activity within article 9 are separate questions. A supply for consideration is a necessary but not sufficient condition for an economic activity. It is therefore logically the first question to address. It requires a legal relationship between the supplier and the recipient, pursuant to which there is reciprocal performance whereby the goods or services are supplied in return for the consideration provided by the recipient: see, for example, the judgment in Borsele at [24]. That is what is meant by "a direct link" between the supply of the goods or services and the consideration provided by the recipient: see Borsele at [26] and contrast Apple and Pear Development Council v Customs and Excise Comrs. There is no need for the consideration to be equal in value to the goods or services. It is simply the price at which the goods or services are supplied. This requirement was satisfied in both Finland and Borsele.”" (Wakefield College v. HMRC [2018] EWCA Civ 952, David Richards LJ)
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- Must be reasonable in relation to the service supplied
"[34] On that last point, it should be noted that, in order to be regarded as the value actually given in return for the service supplied, the remuneration must remain reasonable in relation to the service supplied in that it must not remunerate only part of the services supplied or to be supplied to the point of breaking the direct link between the services supplied and the consideration (see, to that effect, judgment of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraph 49)..." (TP C-288/22)
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- Fee that only "partly remunerates" may no be consideration
"[51]...Article 24 of Directive 2006/112 must be interpreted as meaning that the operation of agricultural engineering works, such as those at issue in the main proceedings, constitutes a supply of services for consideration, on the ground that the services rendered are directly linked to the fee received or to be received, provided that that modest fee constitutes remuneration for the service supplied and notwithstanding the fact that performance of those services is a legal obligation. It will be for the referring court to determine whether the amount of the fee received or to be received, qua consideration, means that there exists a direct link between the services supplied or to be supplied and that consideration, and consequently allows those services to be classified as being effected for consideration. In particular, the referring court will have to ascertain that the fee which the applicants in the main proceedings are planning to charge does not only partly remunerate the services supplied or to be supplied and that its amount has not been determined as a result of other possible factors that could, depending on the circumstances, call into question the direct link between the services supplied and the consideration." (Lajvér C-263/15
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- Irrelevant whether it is higher lower than cost or market value
"[34] That being said, the fact that the price paid for an economic transaction is higher or lower than the cost price and, therefore, a price higher or lower than the open market value, is irrelevant for the purpose of establishing whether it was a transaction effected ‘for consideration’. That circumstance is not such as to affect the direct link between the services supplied or to be supplied and the consideration received or to be received, the amount of which is determined in advance and according to well-established criteria (see, to that effect, judgments of 12 May 2016, Gemeente Borsele and Staatssecretaris van Financiën, C‑520/14, EU:C:2016:334, paragraph 26 and the case-law cited, and of 15 April 2021, Administration de l’Enregistrement, des Domaines et de la TVA, C‑846/19, EU:C:2021:277, paragraph 43)." (TP C-288/22)
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"[45] As regards, in the first place, Apcoa’s argument that that amount is predetermined and has no real economic link with the value of the parking service supplied, it must be recalled that, according to settled case-law, with regard to the characterisation of a transaction as a transaction carried out for consideration within the meaning of Article 2(1)(c) of the VAT Directive, the amount of the consideration, in particular the fact that it is equal to, greater or less than the costs which the taxable person incurred in providing the service, is irrelevant. That fact is not such as to affect the direct link between the services supplied and the consideration received (judgment of 11 March 2020, San Domenico Vetraria, C‑94/19, EU:C:2020:193, paragraph 29 and the case-law cited)." (Apcoa Parking Danmark C-90/20)
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"[27] It follows that, where consideration has been agreed and actually paid to the taxable person in direct exchange for the goods he has delivered or the service he has provided, that transaction must be classified as a transaction for consideration, regardless of whether it is effected between connected parties and the price agreed and actually paid is patently lower than the open market price. The taxable amount of such a transaction must, therefore, be determined in accordance with the general rule stated in Article 11A(1)(a) of the Sixth Directive." (Campsa Estaciones de Servicio C-285/10)
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- Supply of meals to staff at below cost is for consideration
"[22] As the Advocate General rightly stated in point 35 of his Opinion, the fact that the price paid for an economic transaction is higher or lower than the cost price is irrelevant to the question whether a transaction is to be regarded as a ‘transaction effected for consideration’. The latter concept requires only that there be a direct link between the supply of goods or the provision of services and the consideration actually received by the taxable person (see, to that effect, Case 102/86 Apple and Pear Development Council [1988] ECR 1443, paragraph 12)." (Hotel Scandic C-412/03)
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- Query whether a fee based on percentage of profits is sufficient
"[39] In the situation where TP’s remuneration took the form of percentage fees, the referring court will have to ascertain whether, in the light of the case-law cited in paragraphs 33 to 36 of the present judgment, where the public limited company concerned does not achieve a profit or achieves only a small amount of profit, the general meeting of shareholders of that company may nevertheless award TP, based on other factors, a percentage fee amount that may be regarded as being objectively in line with the service provided by TP." (TP C-288/22 - see also the question, noted above, as to whether this affects the existence of economic activity)
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Single sum paid for multiple supplies​
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- Apportion if relevant
"[27] Finally, as regards the case in which the various services are supplied in return for an overall remuneration, but some of them are exempt from VAT, as the principal supply is, while others are subject to VAT as independent supplies, it is necessary in such a case to apportion between the various services the service charges relating to them in order to determine the proportion of those charges subject to VAT and the proportion exempt from VAT." (Field Fisher Waterhouse LLP C-392/11)
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- Only one correct method
"[31] Counsel for the taxpayer was concerned to emphasise that deciding how to apportion a unitary price charged by a supplier into two elements for the purpose of calculating VAT can involve an exercise of evaluative judgment, as to which differences of view can exist within a spectrum of what is reasonable. This is undoubtedly true. But it does not follow that there must be more than one method of apportionment which the supplier may lawfully use. Although that is a possible conclusion for a court or tribunal to reach, in most cases where such a question is raised the court or tribunal can be expected to exercise its own judgment as to which method should be used. There is good reason for this. In matters of taxation consistency of approach is of critical importance. If the same exercise of apportionment may lawfully be carried out in more than one way, the result is likely to be that different taxpayers whose situations are identical will lawfully pay different amounts of tax. That offends the principle of equal treatment. It is also capable of distorting competition between businesses." (K E Entertainments v. HMRC [2020] UKSC 28)
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IDENTIFYING WHAT SUPPLY CONSIDERATION IS FOR​
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- Important to identify what service(s) are actually provided
"[33] Finally, sporting activities and, in particular, participation in sporting competitions are likely to involve the provision of several distinct but closely intertwined services (Baštová judgment, paragraph 31 and case law cited).
[34] In the present case, in order to assess whether, in the main proceedings, there is a question of a supply of services carried out for consideration, within the meaning of Article 2(1)(c) of the VAT Directive, it is necessary to identify, first of all, the supply of services provided by the applicant in the main proceedings." (HAS C-713/21)
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Multiple services, but only one is for consideration
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- Parcel delivery firm supplies service to both end customer and the business dispatching the goods
"[66] I consider that Laws J reached the right conclusion for the right reasons, and that the tribunal and the Court of Appeal fell into error. They rightly held that the service which Plantiflor supplied to the customer did not include the actual delivery of the goods to the addressee. They rightly held that this service was supplied by Parcelforce, and that it was supplied to the customer. Their error lay in overlooking the facts that Parcelforce also supplied a service to Plantiflor, viz the service of delivering its customer's goods, for which Plantiflor had previously contracted, and that it was this supply which was made for the consideration which Parcelforce received. This led them into the further error of treating the sum paid by the customer to Plantiflor as consideration for the supply of the service of delivery by Parcelforce. It was not, for Parcelforce received its consideration from Plantiflor. The sum which the customer paid to Plantiflor was paid as consideration for the supply which Plantiflor made to the customer, viz of the service of arranging for delivery to be made by Parcelforce.
[67] To sum up: there were three distinct supplies in the present case, and it is necessary to identify the particular supply for which the payment made by the customer was the consideration:
(i) The supply by Parcelforce to Plantiflor of the service of delivering its customer's goods. This was supplied pursuant to a contract for delivery made between Parcelforce and Plantiflor and was for a consideration payable by Plantiflor. It is (or would if Parcelforce were a private carrier be) a taxable supply.
(ii) The supply by Parcelforce to the customer of the service of delivering his goods to him or his order. This supply was also made pursuant to the contract for delivery between Parcelforce and Plantiflor. It was made in circumstances in which the customer incurred no liability to Parcelforce to pay a consideration and was not (and would not even if Parcelforce were a private carrier be) a taxable supply.
(iii) The supply by Plantiflor to the customer of an arrangement service for which Plantiflor charged £1.63 per parcel. Whatever else was included in this supply, it was not the service of actual delivery. That was supplied by Parcelforce. What the customer received for his money was the benefit of the arrangements which Plantiflor had made with Parcelforce to deliver its customer's goods to his order without charging him in the normal way. Since Plantiflor made this supply for consideration, it was a taxable supply." (CEC v. Plantiflor Limited [2002] UKHL 33, Lord Millett with whom Lords Hobhouse and Scott agreed)
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Consideration may be for making opportunity available irrespective of whether it is taken up​
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- Airline's supply for consideration is right to fly, irrespective of whether it is taken up
“[27] However, it is possible to perform those services [of transportation] only if the passenger of the airline company turns up on the agreed date and at the agreed place of boarding, the customer’s right to performance of those services being given by the company until the time of boarding, according to the conditions set out in the contract to transport passengers concluded when the ticket was purchased.
[28] Therefore, the consideration for the price paid when the ticket was purchased consists of the passenger’s right to benefit from the performance of obligations arising from the transport contract, regardless of whether the passenger exercises that right, since the airline company fulfils the service by enabling the passenger to benefit from those services.” (Air France-KLM C-250/14)
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- Provision of right of access to golf club is supply for consideration irrespective of whether the member attends
"[40] As the Commission argues, the fact that in the case before the national court the annual subscription fee is a fixed sum which cannot be related to each personal use of the golf course does not alter the fact that there is reciprocal performance between the members of a sports association such as that concerned in the main proceedings and the association itself. The services provided by the association are constituted by the making available to its members, on a permanent basis, of sports facilities and the associated advantages and not by particular services provided at the members' request. There is therefore a direct link between the annual subscription fees paid by members of a sports association such as that concerned in the main proceedings and the services which it provides." (Kennemer Golf C-174/00)
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- No supply of opportunity to use where potential users have no right to benefit
“[33] First of all, it must be observed that, in the context of the provision of those services, that provider and those viewers are not linked by any contractual relationship or transaction in which a price was stipulated, or even by a voluntary legal commitment made by one party towards the other. Additionally, the access of those viewers to the audiovisual media services provided by that provider is free and the activity concerned generally benefits all potential viewers.” (Balgarska C-21/20)
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- Permanent availability of consultancy services
"[38] At paragraph 40 of the judgment of Kennemer Golf (C‑174/00, EU:C:2002:200) and paragraph 36 of the judgment of Le Rayon d’Or (C‑151/13, EU:C:2014:185), the Court held, in essence, that where the supply of services in question is characterised, inter alia, by the permanent availability of the service provider in order to supply, at the appropriate time, the services required by the customer, it is not necessary, in order to find that there is a direct link between that service and the consideration received, to establish that a payment relates to a personalised supply of services at a specific time carried out at the request of a customer. In each of the cases which gave rise to those judgments, there was a supply of taxable services, to which the fixed sum related, irrespective of the number of services provided and received in each case, namely the number of rounds of golf played or the amount of care provided.
[39] The fact that the services provided are neither defined in advance nor personalised and that the payment is made in the form of a lump sum is also not such as to affect the direct link between the supply of services made and the consideration received, the amount of which is determined in advance on the basis of well-established criteria (judgment in Le Rayon d’Or, C‑151/13, EU:C:2014:185, paragraph 37).
[40] Those considerations are applicable to a subscription contract for consulting services, such as the contract at issue in the main proceedings — the legitimacy of which it is however for the national court to check —, in which the customer has undertaken to pay the remuneration agreed between the parties by way of fixed sums, irrespective of the quantity and nature of consulting services actually supplied during the period to which that remuneration relates." (Asparuhovo Lake Investment Company C-463/14)
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THIRD PARTY CONSIDERATION
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Not necessary that consideration is provided by the recipient of the supply
"[27] In that context, the fact that the lawyer’s fees are obtained not from the party to which legal assistance was provided, but from the opposing party and therefore from a third party is irrelevant. For a supply of services to be deemed to be ‘for consideration’ within the meaning of the VAT Directive, it is not necessary that the consideration for that supply be obtained directly from the recipient thereof (judgment of 21 December 2023, Administration de l’enregistrement, des domaines et de la TVA (VAT – Member of a board of directors), C‑288/22, EU:C:2023:1024, paragraph 40 and the case-law cited)." (Zlakov C-744/23)
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- Insurer reimbursing the final consumer means insurer has provided third party consideration
"[41] As the Advocate General observed in points 44 and 45 of his opinion, the payments made at the point of purchase of the medicinal products must be regarded as consideration provided by a third party within the meaning of Article 73 of the VAT Directive when those third parties, namely insured persons, requested reimbursement by the private health insurance companies and the latter obtained, in accordance with the national law, the discount owed to them by the pharmaceutical company. Therefore, having regard to the facts at issue in the main proceedings, the private health insurance companies must be regarded as being the final consumer of a supply made by a pharmaceutical company, which is a taxable person for the purposes of VAT, such that the amount payable to the tax authority may not exceed that paid by the final consumer (see, to that effect, the judgment of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400, paragraph 24)." (Boehringer C-462/16)
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​Reciprocity​
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- Assess from perspective of the supplier
“[57] When the Court of Justice speaks of “reciprocal performance” it is looking at the matter from perspective of the supplier of the services and it requires that under the legal arrangement the supplier receives remuneration for the service which it has performed. It is not necessary that the recipient of the service is legally responsible to the supplier for payment of the remuneration; it suffices that the arrangement is for a third party to provide the consideration. Were it otherwise, taxpayers could structure their transactions so as to escape liability to pay VAT, so long as they could meet the economic reality test.” (Airtours Holidays Transport Limited v. HMRC [2016] UKSC 21)
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PAYMENTS EXCLUDED FROM CONSIDERATION
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Mandatory requirement to apply part of price in particular way
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- Sum to be paid as winnings on gambling which is fixed in advance and mandatory does not form part of consideration
"[44] In that regard, the Court held, in paragraph 28 of the judgment of 19 July 2012, International Bingo Technology (C‑377/11, EU:C:2012:503), concerning a legal requirement for the payment of winnings in a bingo game, that since the part of the sale price of the cards which is distributed as winnings to players is fixed in advance and is mandatory, it cannot be regarded as forming part of the consideration received by the organiser of the game for the supply of the service provided to players." (Boehringer C-462/16)​
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- Sums payable by drug manufacturer to state health insurance agency
"[37] Next, it must be stated that, since the portion of the sale price of the subsidised medicinal products which is paid by Novo Nordisk, through the tax authority, to the NEAK is fixed in advance and is mandatory, it cannot be regarded as part of the financial consideration for the supply of those medicinal products actually received by Novo Nordisk (see, to that effect, judgment of 19 July 2012, International Bingo Technology, C‑377/11, EU:C:2012:503, paragraph 28)."
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- Query whether statutory 'reimbursement' to paying insurers by supplier means consideration not received or is reduction
"[43] Moreover, as regards the discount at issue in the main proceedings, it must be held that that discount is fixed by the law and that the pharmaceutical company is obliged to grant it to private health insurance companies which have reimbursed the persons they insure for the expenses incurred by those persons when purchasing medicinal products. As has been stated in paragraph 35 above, in those circumstances, the pharmaceutical company was not able freely to dispose of the full amount of the price received on the sale of its products to pharmacies or to wholesalers (see, to that effect, the judgment of 19 July 2012, International Bingo Technology, C‑377/11, EU:C:2012:503, paragraph 31)." (Boehringer C-462/16)​
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SPECIFIC SITUATIONS
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Deposits and cancellation charges
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- Forfeit deposit not consideration for obligation to keep room available where that obligation exists anyway
"[25] Thus when, following a reservation, the hotelier provides the agreed service, he does no more than honour the contract entered into with his client, in accordance with the principle that contracts must be performed. Accordingly, the fulfilment of that obligation cannot be classified as consideration for the payment of a deposit.
[26] Since the obligation to make a reservation arises from the contract for accommodation itself and not from the payment of a deposit, there is no direct connection between the service rendered and the consideration received (Apple and Pear Development Council, paragraphs 11 and 12; Tolsma, paragraph 13; and Kennemer Golf, paragraph 39). The fact that the amount of the deposit is applied towards the price of the reserved room, if the client takes up occupancy, confirms that the deposit cannot constitute the consideration for the supply of an independent and identifiable service." (Société thermale C-277/05)
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- Deposit forfeiture that compensates for cancellation not consideration
"[32] Whereas, in situations where performance of the contract follows its normal course, the deposit is applied towards the price of the services supplied by the hotelier and is therefore subject to VAT, the retention of the deposit at issue in the main proceedings is, by contrast, triggered by the client’s exercise of the cancellation option made available to him and serves to compensate the hotelier following the cancellation. Such compensation does not constitute the fee for a service and forms no part of the taxable amount for VAT purposes (see, to that effect, as regards interest applied on account of late payment, Case 222/81 BAZ Bausystem [1982] ECR 2527, paragraphs 8 to 11).
...
[35] Since, on the one hand, the deposit paid does not constitute the fee collected by a hotelier by way of genuine consideration for the supply of an independent and identifiable service to his client and, on the other hand, the retention of that deposit, following the client’s cancellation, is intended to offset the consequences of the non-performance of the contract, it must be held that neither the payment of the deposit, nor the retention of that deposit, nor the return of double its amount is covered by Article 2(1) of the Sixth Directive." (Société thermale C-277/05)
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- Payment due upon termination is consideration for the supply of the right to benefit under the contract
“[18] In that regard, it should be added that, as is apparent from the case-law of the Court, a predetermined amount received by an economic operator where a contract for the supply of services for a certain period is terminated early by its customer, or for a reason attributable to the customer, which corresponds to the sum that that operator would have received for the remainder of that period in the absence of such termination, must be regarded as the remuneration for a supply of services for consideration and subject, as such, to VAT, even though that termination entailed, inter alia, the deactivation of the services referred to in that contract before the expiry of the agreed period (see, to that effect, judgment of 11 June 2020, Vodafone Portugal, C 43/19, EU:C:2020:465, paragraph 33 and the case-law cited).
...
“[20] First, the consideration for the amount to be paid by the recipient of the supply of services is constituted by the recipient’s right to benefit from the fulfilment, by the supplier, of the obligations under the services contract, even if the recipient no longer wishes to avail itself of that right for a reason attributable to it (see, to that effect, judgment of 11 June 2020, Vodafone Portugal, C 43/19, EU:C:2020:465, paragraph 35).
[21] In a situation such as that at issue in the main proceedings, the supplier of services not only placed the customer in a position to benefit from the supply of services, within the meaning of the case-law cited in paragraph 17 above, but, since it had already begun the agreed works, actually provided part of that supply, it being noted that the supplier was prepared to perform that contract to completion.” (rhtb: projekt gmbh C-622/23)​
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See further D6. Compensation and damages.
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Partnerships, consortia and costs sharing
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- Consortium member performing its share of operations under agreement (not for consideration)
​"[88] Consequently, operations such as those at issue in the main proceedings, carried out by the members of a consortium in accordance with the provisions of a consortium contract and corresponding to the share assigned to each of them in that contract, do not constitute supplies of goods or services ‘effected for consideration’ within the meaning of Article 2(1) of the Sixth Directive, nor, consequently, a taxable transaction thereunder. The fact that such operations are carried out by the member of the consortium which manages it is irrelevant in that respect." (EDM C-77/01)
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- Consortium member performing more than its share and being entitled to payment (for consideration)
"[89] On the other hand, where the performance of more of the operations than the share thereof fixed by the said contract for a consortium member involves payment by the other members against the operations exceeding that share, those operations constitute a supply of goods or services ‘effected for consideration’ within the meaning of Article 2(1) of the Sixth Directive.
[90] In that case, under Article 11A(1)(a) of the Sixth Directive, the taxable amount is the sum received by the consortium member concerned as payment for the part of the operations which exceeds its share as laid down in the consortium contract." (EDM C-77/01)
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