Possibility to deduct VAT on fixed sums paid for availability to provide services
In the judgment of 3 September 2015 given in Case C‑463/14 (Asparuchowo Lake Investment Company OOD v Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ Varna pri Tsentralno Upravlenie na Natsionalnata Agentsia za Prihodite), the EU Court of Justice confirmed that the term ‘supply of services’ includes subscription contracts for the supply of consulting services to an undertaking, in particular those of a legal, commercial or financial nature, under which a supplier has agreed to be available to the customer during the term of the contract.
The judgment was given in connection with a dispute between the Bulgarian company with the tax authorities concerning the deduction of input value added tax (VAT) levied on the purchase of consulting services (in the areas of corporate finance, commercial development, legal advice and information security) for a subscription fee paid on a weekly basis. According to concluded contracts, the service providers, among others, were to make themselves available to the Bulgarian company within the specified hours and, where appropriate, ensure also the presence of a competent person. The service providers also undertook to transmit documentation to the customer. The tax authorities took the view that there was no proof of performance of the services, confirming the type, quantity and nature of the services provided, and issued a decision refusing the Bulgarian company the right to deduct the VAT invoiced by the service providers.
The EU Court of Justice not only confirmed that the facts presented include the premises giving rise to the conclusion that the services are provided but also noted in the case of disputed services, which in essence entail being permanently available to the customer in order to provide it with services and which are remunerated by means of fixed sums (i.e. by way of subscription), the chargeable event and the chargeability of the tax occur upon the expiry of the period in respect of which the payment has been agreed, irrespective of whether and how often the customer has actually made use of the supplier’s services.
The judgement seems to clear any doubts whether the taxable persons have the right – provided that other premises have been also satisfied – to deduct VAT on fixed sums paid for consulting services, also where no “actual” services have been provided in a settlement period and the entire activity of the supplier involved only making itself available to provide the same.