Judgement: C‑505/22. – Deco Proteste – Editores Lda | In terms of VAT, the gift of a tablet or smartphone given with a magazine subscription is considered an ancillary transaction.
The plaintiff in the case is the magazine publisher who attempted to incentivize subscriptions by giving a tablet or smartphone as a gift along with the magazine. The gift was sent to the subscriber together with the first issue after paying the one-month subscription fee, and the subscriber could keep the gift even if they canceled the subscription immediately afterward.
The publisher treated the gift as an ancillary transaction and, accordingly, only charged (reduced rate) VAT on the magazine subscription fee. The Portuguese tax authority considered the giving of the smartphone or tablet as a VAT-taxable free product transfer subject to the standard tax rate.
The European Court examined the main and ancillary transaction relationship between the magazine subscription and the gift in this case. It concluded that in this situation, the giving of the smartphone or tablet as a gift is an ancillary transaction and, as such, is included in the tax base of the subscription, even if the gift was not separately priced. The judgment supported the notion that the gift aimed to incentivize the subscription, and the gifted smartphone or tablet also facilitated the best possible provision of the main service by making the digital version of the magazine accessible through these devices. The court also considered that the publisher had factored in the potential loss from “freeloading” subscribers into the magazine subscription fee.