ECJ judgments

CJEU Rules on VAT Treatment of Penalty Payments and Triple Royalties

T‑643/24. – Cristian General Serv SRL

The CJEU’s recently published judgment provides another instructive example that payment obligations of a “penalty” nature may also form part of the VAT taxable amount where they are linked to a service that has been supplied and received.

In a hotel located in Romania, music protected by copyright was played without the operator having obtained prior authorisation for such use or having paid the corresponding royalties. As a result, the national collective management organisation imposed on the hotel operator a charge amounting to three times the royalty that would have been payable in the event of authorised use. Although the principal subject matter of the dispute concerned the claim of the collective management organisation, the Bucharest Court of Appeal also raised the question whether VAT should be charged on the tripled royalty claim or whether the amount should be treated as compensation falling outside the scope of VAT.

The Court of Justice of the European Union drew a parallel with Case C-90/20, Apcoa Parking Danmark, in which the Court held that a surcharge payable by a motorist for the irregular use of a car park constituted consideration subject to VAT. The Court concluded that the collective management organisation supplies a service to the user by granting authorisation for the use of the protected work in return for the royalty collected. This conclusion is not affected by the fact that the involvement of the collective management organisation is mandated by law, nor by the circumstance that the author of the work was unable to prevent the unauthorised use. Accordingly, there exists a direct link between the use of the work and the fee payable to the collective management organisation. The same reasoning applies in the case of unauthorised use: the user has likewise availed itself of the service, the only difference being the amount of the royalty payable. Consequently, the full amount of the tripled royalty due in respect of unauthorised use constitutes the taxable amount for VAT purposes.

Full English text of the judgement

Lépjen kapcsolatba szakembereinkkel!

Az alábbi űrlap segítségével feliratkozhat szakmai hírlevelünkre, így folyamatosan értesítjük az adózás, a könyvelés és a bérszámfejtés területén megjelenő újdonságokról.

További hírek

ECJ judgments

The CJEU confirms: the triangular simplification may also apply to four-party chain transactions

T 646/24 – MS KLJUČAROVCI, d.o.o. Under the EU VAT system, the conditions for applying the triangular simplification may also be met in four-party chain transactions where the goods are actually delivered to the domestic customer of the third party in the chain (Party “C”), in the Member [...]

ECJ judgments

Intra-Community supply and the classification of ancillary transactions

C‑234/24. – Brose Prievidza, spol. s r.o. As a general rule, an intra-Community supply or acquisition of goods presupposes that the goods are physically dispatched or transported from one Member State to another. This requirement applies even where the ownership of a tool used in the production process [...]

ECJ judgments

CJEU judgment: The VAT treatment of attorneys’ fees awarded in cases of free legal aid

C 744/23. – Zlakov A consideration subject to VAT also arises where a court awards a fee to a legal aid provider who has acted free of charge in the proceedings, provided that the party represented is successful. In the case at hand, a Bulgarian law firm provided [...]

ECJ judgments

The new CJEU judgment: The VAT concept of debt collection and the tax treatment of factoring fees

C 232/24. – Kosmiro The CJEU’s new judgment provides guidance on the interpretation of the concept of “debt collection” for VAT purposes and on the VAT treatment of ancillary fees related to factoring. The plaintiff in the case was a Finnish financial institution that provided two types of [...]

ECJ judgments

What VAT consequences may arise from a hotel room cancellation and from a guest’s no-show?

The Hungarian Tax Authority (NAV) recently published an official opinion, which elaborates on the VAT consequences related to hotel room cancellations and guest no-shows, thereby providing guidance to accommodation providers and stakeholders in the hotel industry. Anyone who frequently books accommodation at hotels or guesthouses may have experienced [...]

ECJ judgments

The recent judgement of the CJEU concerns the relationship between VAT and transfer pricing

C‑726/23. – S. C. Arcomet Towercranes SRL A subsequent transfer pricing adjustment invoiced by the service provider also constitutes consideration subject to VAT, provided that the contracting parties have agreed on a settlement based on the arm’s length price. The tax authority may examine the actual underlying supply in relation [...]

ECJ judgments

Procurement from a legal entity does not preclude the application of the special scheme for works of art

C-433/24 – Galerie Karsten Greve The application of the special scheme for works of art is not precluded where the dealer acquires the artwork not directly from the artist, but from a legal person established by the artist. Galerie Karsten Greve (GKG) operates an art gallery. It applies [...]

ECJ judgments

The recent decision of the CJEU concerns treatment of improperly charged higher VAT rate

The case of the Austrian company P GmbH has once again come before the CJEU: the Court has provided further guidance on the issue of the improperly charged higher VAT rate. P GmbH operates an indoor playground in Austria, where the majority—but not all—of its customers make use [...]

ECJ judgments

The CJEU examined the administrative services connected with the VAT refund of foreign travellers in a Hungarian related case

C‑427/23. – Határ Diszkont Kft. In relation to VAT refunds available to foreign passengers, the CJEU held that the administrative services performed by a retailer for consideration cannot be regarded as either an ancillary service, a service directly connected with an export, or an exempt financial service. The [...]

ECJ judgments

The recent judgement of the CJEU concerns the establishment of the fair market price from a VAT perspective

C‑808/23. – Högkullen AB Where the taxable amount regarding the management services provided by the parent company must be determined by reference to the arm’s length principle, the distinct components of such services must be examined separately to determine the fair market price. Högkullen AB provided “management” services [...]

ECJ judgments

The negligent breach of customs formalities may not preclude the application of the relevant import VAT-exemption

C‑125/24. – Palmstråle Unless the importer is acting with fraudulent intent, a mere breach of customs formalities cannot, in itself, justify the denial of import VAT exemption for the re-importation of previously exported goods. The plaintiff in this case temporarily exported racehorses from Sweden to Norway for competition [...]

ECJ judgments

The CJEU confirms that the “state of knowledge” of the invoice recipient is irrelevant when the invoiced transaction did not take place

C-501/24 – Klinka Geo Trans Földmunkavégző Ipari, Kereskedelmi és Szolgáltató Kft. The Court of Justice of the European Union (CJEU) has confirmed that if the transaction specified on the invoice did not actually occur, the deduction of VAT based on that invoice may be denied without the tax [...]