Opinion of Advocate General Kokott delivered on 10 February 2022.

• Jurisdiction: European Union
• Date: 10 February 2022
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 10 February 2022 (1)

Case C‑596/20

DuoDecad Kft.

v

Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága

(Request for a preliminary ruling from the Fővárosi Törvényszék (Budapest High Court, Hungary))

(Request for a preliminary ruling – Tax law – Value added tax (VAT) – Directive 2006/112/EC – Place of supply of services – Determination of the recipient of the supply – Influence that a possible abusive arrangement between the recipient of the supply and a third party has on the place of supply – Principle of neutrality – Avoidance of double taxation – Duty of cooperation incumbent on the tax authorities of the Member States)

I. Introduction

1. This preliminary-ruling procedure demonstrates the limits of the harmonisation of law in the EU. Even though all Member States have correctly transposed the underlying directive, its application to a cross-border supply of services nevertheless leads to different outcomes. Both the Portuguese Republic and Hungary consider the place of supply of a service to be in their territory and lay claim to the right to levy VAT on it. This gives rise to genuine double taxation of one and the same transaction despite full harmonisation of the law.

2. This is particularly problematic, since, according to the concept underlying Council Directive 2006/112/EC of 28 November on the common system of value added tax (OJ 2006 L 347, p. 1), the undertakings involved are not the actual taxpayers, but only – in the words of the Court (2) – tax collectors on behalf of the State. VAT is in fact supposed to be neutral for the undertaking that merely collects that tax. This is possible only if the tax is levied only once. That presupposes, in turn, that the place of supply of the service is only in one Member State. This is, in principle, also provided for in Directive 2006/112. However, at the same time, it is necessary to rule out the possibility of legally binding decisions in the two Member States establishing that the place of supply is both in the one Member State and in the other. In other words, there must be no conflicts of qualification.

3. In addition, this request for a preliminary ruling raises the question as to the determination of the relevant recipient of the supply in the case where it is alleged that that recipient and a third party have created an abusive arrangement. This has significance for the correct determination of the place of supply in the present case. This is because, even if that allegation is true, the question that arises is whether an allegation of an abuse of rights in the relationship between the third party and the recipient of the supply can have an impact as regards the supplier, that is to say, as regards the place of supply of the latter.

II. Legal framework

A. European Union law

1. The VAT Directive

4. The legal framework is formed by Directive 2006/112 (3) in the version applicable to the years at issue, 2009 (4) and 2011. (5)

5. Article 2(1)(c) provides:

‘The following transactions shall be subject to VAT:

…

(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such’.

6. Article 24(1) of that directive is worded as follows:

‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’

7. Article 28 of the directive provides:

‘Where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself.’

8. The provisions on the place of supply for services were amended with effect from 1 January 2010, (6) with the result that different provisions on the place of supply applied to the two years at issue.

9. With respect to 2009, the first of the two years at issue, Article 43 of the directive contains the following wording:

‘The place of supply of services shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied, or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.’

10. With respect to that year at issue, 2009, that place-of-supply rule was supplemented by Article 56(1)(k) of the VAT Directive:

‘The place of supply of the following services to customers established outside the Community, or to taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment for which the service is supplied, or, in the absence of such a place, the place where he has his permanent address or usually resides:

…

(k) electronically supplied services, such as those referred to in Annex II’.

11. The abovementioned Annex II (‘Indicative list of the electronically supplied services referred to in point (k) of Article 56(1)’) lists, inter alia, ‘website supply, web-hosting, distance maintenance of programmes and equipment’ and ‘supply of images, text and information and making available of databases’.

12. With respect to that year at issue, 2009, Article 196 of the directive regulated the transfer of the tax liability to the recipient of the supply in the case of a service provided by a taxable person established abroad as follows:

‘VAT shall be payable by any taxable person to whom the services referred to in Article 56 are supplied or by any person identified for VAT purposes in the Member State in which the tax is due to whom the services referred to in Articles 44, 47, 50, 53, 54 and 55 are supplied, if the services are supplied by a taxable person not established in that Member State.’

13. However, with respect to the second year at issue, 2011, Article 44 of the directive determines the place of supply of services to a taxable person as follows:

‘The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such a place of establishment or fixed establishment, the place of supply of services is the place where the taxable person who receives such services has his permanent address or usually resides.’

14. Accordingly, with respect to that year at issue, 2011, Article 196 of the directive (transfer of tax liability to the recipient of the supply) reads as follows:

‘VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.’

2. Regulation No 904/2010

15. Furthermore, administrative cooperation between the Member States in the field of VAT is regulated by Regulation (EU) No 904/2010. (7)

16. Recital 7 of Regulation No 904/2010 states:

‘For the purposes of collecting the tax owed, Member States should cooperate to help ensure that VAT is correctly assessed. They must therefore not only monitor the correct application of tax owed in their own territory, but should also provide assistance to other Member States for ensuring the correct application of tax relating to activity carried out on their own territory but owed in another Member State.’

17. Article 1(1) of Regulation No 904/2010 reads as follows:

‘This Regulation lays down the conditions under which the competent authorities in the Member States responsible for the application of the laws on VAT are to cooperate with each other and with the Commission to ensure compliance with those laws.

To that end, it lays down rules and procedures to enable the competent authorities of the Member States to cooperate and to exchange with each other any information that may help to effect a correct assessment of VAT, monitor the correct application of VAT, particularly on intra-Community transactions, and combat VAT fraud. In particular, it lays down rules and procedures for Member States to collect and exchange such information by electronic means.’

B. Hungarian law

18. The VAT Directive was transposed by Az általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law No CXXVII of 2007 on value added tax).

III. Main proceedings

A. Background to the present request for a preliminary ruling

19. The background to the present request for a preliminary ruling is formed by the divergent decisions of the Portuguese and Hungarian tax authorities on the place of supply of IT support services provided by a Hungarian undertaking (DuoDecad Kft.; ‘the applicant’) to a Portuguese undertaking (Lalib Gestão e Investimentos LDA; ‘Lalib’).

20. Those divergent decisions are ultimately the continuation of a dispute, which has clearly not been resolved to this day, over the recognition for tax purposes of a licence granted by another Hungarian undertaking, WebMindLicenses (‘WML’), to the same Portuguese undertaking (Lalib). The dispute concerns a licence agreement for the making available of know-how enabling the operation of a website via which interactive audiovisual services were provided. The dispute was previously the subject of a preliminary-ruling procedure before the Court a number of years ago. (8)

21. In those earlier proceedings, a Hungarian court asked the Court, in essence, whether that licence agreement between WML and Lalib is to be regarded as an abuse of rights, and, if so, what the relevant criteria are in that regard. Furthermore, the Court was asked whether Regulation No 904/2010 must be interpreted as meaning that the tax authorities of a Member State which are examining whether...