ECJ Decision on Case C-598/19 on Roaming Services, Efficient Use and Enjoyment and Refund of VAT – Tax


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Decision of the European Court of Justice (ECJ) on the interpretation of Article 59a, first paragraph, point b) of Council Directive 2006/112 / EC of 28 November 2006: “Roaming services, effective use and enjoyment, reimbursement of VAT ”

On April 15, 2021, the Court of Justice of the European Union (“ECJ”) delivered its judgment on case C-598/19 (SK Telecom Co. v Tax Office of the City of Graz, Austria) concerning the reimbursement of input value added tax (VAT) paid by SK Telecom Co., relating to the provision of telecommunications services for the fiscal year 2011.

1. Brief facts of the case

  • SK Telecom Co. is a South Korean-based company providing mobile phone services to customers who were also established, had their permanent address, or generally resided in South Korea. Customers staying temporarily in Austria could use mobile phone services via roaming services.
  • An Austrian mobile communications network operator made its network available to SK Telecom Co., in exchange for payment of a user fee plus Austrian VAT (20%), so that these customers could use their phones. laptop during their stay in Austria.
  • SK Telecom Co. then billed its customers for roaming charges for using the Austrian mobile network.
  • SK Telecom Co. applied to the tax office in the city of Graz, Austria, for a refund of VAT, charged by the Austrian mobile communications network operator.
  • The Austrian tax authorities rejected the request for a VAT refund, arguing that SK Telecom Co. should have charged Austrian VAT on its roaming charges, failing which the telecommunications services provided would not be subject to tax in the country. third party (i.e., these telecommunication services were not subject to tax in South Korea), resulting in double non-taxation.

2. The main questions

The Court was essentially called upon to examine whether the use of roaming services in a Member State, provided by a mobile telephone operator established in a third country, should be regarded as being “actually used and appreciated” in that Member State. , so that the Member State may consider that the place of provision of these roaming services is within its territory, whenthese services are not subject to tax treatment in this third country, comparable to the collection of VAT.

3. Summary of the ECJ decision

The ECJ has been called upon to interpret the aforementioned transactions, in the context of Article 59 (a) of the VAT Directive:
“In order to avoid double taxation, non-taxation or distortions of competition, Member States (MS) may, with regard to services the place of supply of which is governed by Articles 44, 45, 56, 58 and 59:

b) consider the place of supply of all or part of these services, if it is located outside the Community, as being located in their territory if the actual use and enjoyment of the services take place in their territory. “

a. The underlying principle of the VAT Directive concerning the place where the service is deemed to be supplied is that services should be taxed as much as possible at the place of consumption.

Roaming services, as telecommunications services within the meaning of Article 24 (2) of that directive, being provided to non-taxable persons who are established, have their permanent address or habitually reside outside the Union European Union, are considered to be provided when such persons are established, have their permanent address or habitually reside (i.e. in South Korea).

b. Derogation under Article 59a, first paragraph, point (b) of the VAT Directive

However, under Article 59a, first paragraph, point (b), the VAT Directive allows Member States to consider that the place of delivery, which is in principle located outside the European Union, is located on their territory, if the effective use and enjoyment of these services takes place in their territory.

vs. Article 59a does not lay down any conditions relating to the length of stay in the territory of the Member State

The court declared that Article 59 bis did not include any conditions relating to the length of stay in the territory of the Member State. Therefore, if the Member State exercises the option offered by Article 59a, it is important to assess whether the roaming services are actually used and enjoyed in the territory of the Member State which wishes to benefit from the roaming rights. corresponding taxation.

re. The second paragraph of Article 1 of the VAT Directive provides that any transaction must normally be regarded as distinct and independent.

The Court emphasized that roaming services, such as those at issue in the main proceedings, provided to persons staying temporarily in the territory of a Member State, are distinct and independent other mobile communications services received by these persons, supported by the fact that these services were also subject to separate charges.
In view of the fact that the purpose of roaming services was to enable customers of SK Telecom Co. to use mobile telephony services via the mobile communications network of an Austrian operator, as well as the fact that these services are distinct and independent, the tribunal concluded that the actual use and enjoyment of these services necessarily take place in the territory of the Member State concerned during the temporary stays of SK Telecom customers in that territory (i.e. say in Austria).

e. Member States may not make use of the option provided for in Article 59a, first paragraph, point (b) of the VAT Directive, only to the extent that such use has the effect of avoiding double taxation, imposition or distortions of competition.

The Court underlined that the taxation of all telecommunications services consumed within the European Union reflects the intention of European legislation to prevent distortions of competition and also to avoid conflicts of jurisdiction which may result in either a double taxation, or double non-taxation.
Consequently, the Member States may make use of the option provided for in Article 59a, first paragraph, point (b) of that directive, when this use has the sole objective of remedying a situation of non-taxation within the European Union.
According to the information available to the Court, that was the case with the roaming services at issue in the main proceedings.

4. Other shutdown considerations:

  • This judgment has shown that in order to be able to establish whether telecommunications services are actually used and appreciated in the territory of a Member State, it is important to take into account the very nature of the services and whether these services are distinct and independent.
  • This judgment has also underlined that the length of stay in the territory of a Member State could be considered irrelevant for the purposes of determining whether telecommunications services are actually used and appreciated in that territory.
  • The judgment also underlined that Member States can make use of the option provided for in Article 59a, first paragraph, point (b) of the VAT Directive, without having to consider the taxation of these services under the legislation. national tax system of the third country.
  • The fact that a service can be taxed in a third country under the national law of that country should not prevent a Member State from taxing that service in its territory, if it is actually used and enjoyed there.

How KINANIS LLC can help you

  • VAT advice on the identification of the place of delivery of the services received / provided
  • VAT advice on VAT refunds
  • VAT decisions
  • VAT advice on identifying the VAT implications of any kind of contract
  • Assistance with VAT recovery in cooperation with VAT authorities

Originally published May 6, 2021.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought on your particular situation.

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