Opinion of Advocate General Ćapeta delivered on 27 January 2022.

JurisdictionEuropean Union
CourtCourt of Justice (European Union)
ECLIECLI:EU:C:2022:63
Celex Number62020CC0607
Date27 January 2022

OPINION OF ADVOCATE GENERAL

ĆAPETA

delivered on 27 January 2022(1)

Case C607/20

GE Aircraft Engine Services Ltd

v

The Commissioners for Her Majesty’s Revenue & Customs

(Request for a preliminary ruling from the First-tier Tribunal (Tax Chamber) (United Kingdom))

(Reference for a preliminary ruling – Value added tax – Transfers of vouchers as taxable transactions – Article 26(1)(b) of the VAT Directive – Concept of ‘private use or that of his staff or, more generally, for purposes other than those of his business’ – Provision of vouchers, free of charge, to staff as part of an employee reward scheme)






I. Introduction

1. The present case has layers. At the outer layer is the very interpretation sought by the First-tier Tribunal (Tax Chamber) (United Kingdom) in a dispute concerning the obligation to account for output VAT on the transfer of vouchers free of charge from a taxable person to its staff. The referring court is not certain whether that transfer must be considered a supply for ‘private use or for that of his staff or, more generally, for purposes other than those of his business’ under Article 26(1)(b) of Directive 2006/112/EC. (2)

2. However, lingering below the surface of that dispute is an issue of tax neutrality. Indeed, if the transaction at issue were considered to fall within Article 26(1)(b) of the VAT Directive, then VAT would be accounted for twice on the value of the same vouchers. That is, once at the point of transfer from the taxable person to his or her staff and once upon the use of his or her underlying right (to receive goods or services from a selected retailer).

3. Accordingly, in answering the referring court’s questions, the Court will have the opportunity to clarify when, in the case of retail vouchers such as those at issue in the present case, the legal conditions necessary for VAT to become chargeable are fulfilled.

II. Legal framework

4. The scope of application of the VAT Directive is set out in Article 2(1) thereof. Subparagraph (c) of that article provides that ‘the supply of services for consideration within the territory of a Member State by a taxable person acting as such’ shall be subject to VAT.

5. Pursuant to Article 14(1) of the VAT Directive, the ‘supply of goods’ is defined as ‘the transfer of the right to dispose of tangible property as owner’, whereas, under Article 24(1) of the VAT Directive, the ‘supply of services’ means ‘any transaction which does not constitute a supply of goods.’

6. Article 26(1) of the VAT Directive reads as follows:

‘Each of the following transactions shall be treated as a supply of services for consideration:

(b) the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.’ (3)

7. By virtue of Article 62(1) of the VAT Directive, a chargeable event is defined as ‘the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled’. As per Article 63 of the VAT Directive, ‘the chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.’

III. Facts, national proceedings and the questions referred

8. GE Aircraft Engine Services Limited (‘the applicant’) is a company that services and maintains jet engines in the United Kingdom. It is part of the General Electric (‘GE’) group of companies, an American multinational conglomerate.

9. The applicant operated a staff recognition scheme called the ‘Above & Beyond’ programme. Under that programme, any member of the applicant’s staff could nominate any other member of staff for acts which he or she considered deserved special recognition, in accordance with the eligibility requirements of the programme.

10. There were different levels of award under the ‘Above & Beyond’ programme. A person making a nomination was required to select the appropriate level and provide information as to why the nominee merited the award. At issue in the present case is solely the intermediate level of that award system. Under that level, and after an internal approval process, the nominee was awarded a retail voucher.

11. In the case of awards comprising retail vouchers, the nominee was sent a link to a website managed by Globoforce Limited (‘Globoforce’), a provider of social recognition services. On Globoforce’s website, the successful employee could select a retail voucher from a range of listed (and participating) retailers. Once selected, the voucher could only be redeemed at the selected retailer.

12. The supply of vouchers from Globoforce to the employee occurred as follows. First, Globoforce purchased the vouchers directly from the relevant retailers and sold them to GE in the United States (‘GE US’). Then, GE US sold the vouchers to the headquarters of GE, also in the United States (‘GE HQ’). Next, GE HQ would make a cross-border supply of the vouchers to a number of GE entities in the United Kingdom. Each of those entities, including the applicant, in its capacity as employer, provided the vouchers to the nominated employees under the ‘Above & Beyond’ programme.

13. Given that that supply of vouchers originated from entities outside the European Union, the applicant accounted for input VAT in respect of the supply of those vouchers from GE HQ on a reverse-charge basis and recovered the corresponding amount from the relevant tax authorities.

14. When the successful employee used the voucher awarded to him or her to purchase goods/services, the participating retailer would have to account for output VAT on the value of the voucher.

15. On 20 December 2017, the Commissioners for Her Majesty’s Revenue and Customs (‘the respondent’) issued, to the applicant, an assessment for 332 495 pound sterling (GBP) (approximately EUR 374 389) for the period going from December 2013 to October 2017 for undeclared output VAT on the value of the vouchers provided under the ‘Above & Beyond’ programme.

16. Harbouring doubts as to the interpretation of Article 26(1)(b) of the VAT Directive, the First-tier Tribunal (Tax Chamber) (United Kingdom) decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:

‘(1) Does the issue of vouchers for third-party retailers to employees by a taxable person as part of a recognition programme for high-performing employees constitute a supply “for his private use or for that of his staff or, more generally, for purposes other than those of his business” within the meaning of Article 26(1)(b) of the … VAT Directive?

(2) Does it have any significance in answering question 1 that the taxable person has a business purpose for the issuing of the retail vouchers to staff?

(3) Does it have any significance in answering question 1 that the retail vouchers issued to staff members are for their own use and can be used for the staff members’ private purposes?’

17. The referring court has explained that the present case acts as the lead case for other appeals arising from similar facts and concerning 19 other members of the GE group.

18. Written observations have been submitted by the applicant and the European Commission. Those parties also presented oral argument at the hearing that took place on 24 November 2021.

IV. Analysis

19. This Opinion is structured as follows. I shall start with the interpretation of Article 26(1)(b) of the VAT Directive and, in light thereof, reply to the questions posed by the referring court (A). However, as I shall explain, in the present case, the result of that may be that the value of the same vouchers is twice subject to VAT. Accordingly, I shall question whether the transfer of those vouchers is a chargeable event in the first place (B).

A. Services provided for private use or for purposes other than those of a taxable person’s business

20. In a nutshell, the referring court seeks to enquire whether the transfer of vouchers free of charge by a taxable person to its staff, under a staff recognition scheme such as that at issue in the present case, should be subject to VAT as a supply of services for consideration, as required by Article 26(1)(b) of the VAT Directive.

21. The resolution of that query requires the interpretation of the concept of ‘private use or for that of his staff or, more generally, for purposes other than those of his business’, as embodied in that provision.

22. Accordingly, I shall first turn to the interpretation of that concept (1) before answering the specific questions referred by the national court (2).

1. The law on identifying ‘non-business purposes’

23. Under Article 26(1) of the VAT Directive, two types of situations must be treated as a supply of services for consideration. The first concerns the use of goods forming part of the assets of a business for the private use of a taxable person, of his or her staff, or for purposes other than those of the taxable person’s business. The second concerns the supply of services, carried out free of charge, by a taxable person ‘for his private use or for that of his staff or, more generally, for purposes other than those of his business’.

24. It is the supply of services free of charge that is of interest in the present case. At the outset, it should be clarified that it is not disputed between the parties that there was a supply of services, or that services were supplied free of charge. The sole question that remains is whether those services were provided for private or business purposes.

25. In this regard, it should be recalled that, ordinarily, the supply of services without consideration falls outside the scope of the VAT Directive. (4) However, Article 26(1)(b) thereof provides for a derogation from that general rule. (5) As the Commission explained at the hearing, that provision creates the legal fiction that certain transactions, although provided without consideration...

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1 practice notes
  • Opinion of Advocate General Ćapeta delivered on 24 February 2022.
    • European Union
    • Court of Justice (European Union)
    • 24 February 2022
    ...trattasi. 1 Lingua originale: l’inglese. 2 Come dimostrato nelle mie conclusioni nella causa GE Aircraft Engine Services Ltd, (C‑607/20, EU:C:2022:63), presentate il 27 gennaio 3 V. direttiva 2016/1065 del 27 giugno 2016, recante modifica della direttiva 2006/112/CE per quanto riguarda il t......
1 cases
  • Opinion of Advocate General Ćapeta delivered on 24 February 2022.
    • European Union
    • Court of Justice (European Union)
    • 24 February 2022
    ...trattasi. 1 Lingua originale: l’inglese. 2 Come dimostrato nelle mie conclusioni nella causa GE Aircraft Engine Services Ltd, (C‑607/20, EU:C:2022:63), presentate il 27 gennaio 3 V. direttiva 2016/1065 del 27 giugno 2016, recante modifica della direttiva 2006/112/CE per quanto riguarda il t......

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