The Advocate General issued an opinion in an Irish case referred to the Court of Justice. The case concerned whether road tolls collected by the Irish National Roads Authority (NRA) should be subject to VAT. The Advocate General concluded that VAT is due, as where tolls can be collected by both public and private bodies, public bodies must be treated as taxable persons to prevent distortions of competition, even if the roads are different. The Court also heard a case on whether the British Film Institute supplies cultural services exempt from VAT. Finally, the Advocate General deemed that greenhouse gas emission allowances should be considered similar rights to intellectual property for place of supply VAT rules.

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ITU
Summary
The Court of Justice has been
busy this week. In an Irish
referral, the Court has been
asked to rule on whether road
tolls charged by the National
Roads Authority should be
subject to VAT or whether, as a
public body, the charges are
outside the scope of VAT. The
Advocate General has released
his opinion and has
recommended that the answer to
be given by the full court is that
VAT is due.
The court also heard the British
Film Institute's case this week.
This is a referral from the UK
Court of Appeal and concerns
whether the Institute's activities
are 'cultural' in a VAT context.
Finally, the Advocate General
considers that greenhouse gas
emission allowances should be
regarded as 'similar rights' for the
purposes of determining the
place of supply of a transfer of
those rights.
21 September 2016
Court of Justice – Advocate General's opinion
The Advocate General has issued his opinion in this Irish referral to the Court of
Justice. In simple terms, the question to be resolved in this case is whether the
collection of road tolls by the Irish National Roads Authority (NRA) should be liable
to VAT or whether, in light of the public body status of the NRA, the income from
road tolls should be outside the scope of VAT.
VAT law in the EU recognises that when public authorities supply goods or services in
their 'public body' capacity, they are generally fulfilling their statutory obligations and
are not engaged in economic activities. However, in certain cases, public bodies supply
goods and services in direct competition with 'commercial' enterprises and, in such
circumstances, there is a clear risk that treating public and commercial bodies
differently could lead to a significant distortion of competition.
In this case the NRA entered into agreements with third party commercial operators.
Under the terms of the agreement, those operators managed and maintained national
roads and collected road tolls. As the roads were managed by private operators, the
road tolls were subject to Irish VAT. For unconnected reasons, the NRA took over
responsibility for operating two roads and, on the basis that it was acting as a public
body and not as a commercial entity, it submitted a claim to the Irish Revenue for a
repayment of the VAT it had paid. The Revenue Commissioners refused to repay the
VAT and the NRA appealed to the Irish tax tribunal.
The tribunal considered it necessary to refer the matter to the Court of Justice. The
question to be resolved was whether the NRA was in competition with the commercial
operators even though they actually operated different roads. The Advocate General
considers that the answer to that question is an unequivocal 'yes'. The VAT Directive
must be interpreted to mean that where, under the national law of a Member State,
road tolls may be and actually are collected both by bodies governed by public law and
by private bodies, the bodies governed by public law must be treated as taxable
persons for VAT purposes, on account of significant distortions of competition, even
if there is no real possibility of direct competition between roads on which tolls are
collected by a body governed by public law and those on which they are collected by a
private body.
Comment – if the full court follows the AG's opinion, it seems that, where tolls
are collected by both public and private bodies in a Member State, VAT will be
due on any toll roads operated by public bodies.
Issue27/2016
For whom the road tolls!
Indirect Tax Update

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GRT100456
British Film Institute – the meaning of 'certain'
Court of Justice hearing
The UK Court of Appeal referred this case to the Court of Justice in November 2015. It decided to
refer the case on the basis that it required assistance from the Court of Justice on the interpretation
of the VAT Directive in connection with the supply of 'cultural' services.
The VAT Directive exempts from VAT the supply of 'certain cultural services' by bodies governed
by public law or by other recognised bodies. As far as the UK is concerned, HMRC considers that
the use of the word 'certain' in the Directive gives it a degree of discretion as to which supplies of
cultural services it can exempt from VAT and which it can tax. In the British Film Institute's case,
HMRC considers that BFI's supplies (the showing of films) does not qualify for exemption because,
according to HMRC, to qualify as a 'cultural' service a performance must be a live performance. BFI
have challenged this and the Court of Appeal has decided to refer the matter to the Court of Justice.
The Court of Appeal has asked the Court of Justice for guidance on whether the 'certain cultural
services' provision contained in the VAT Directive is sufficiently clear and precise for it to have
direct effect. In addition, the court has asked whether the wording of the measure gives Member
States any element of discretion and, if so, what discretion?
The case was heard at the Court of Justice on 7 September 2016 and a decision is expected within a
few months.
Comment
The question of
whether a service is
'cultural' or not cannot
surely depend on
whether the
performance is live or
has been previously
recorded and then
subsequently broadcast.
BFI hopes that the
Court of Justice will
rule that Member States
have no discretion
when applying the
cultural services
exemption but the
outcome is by no
means 'certain'.Greenhouse gas emission allowances
Comment
This case arose from
criminal proceedings
against two individuals
in Germany in
connection with a VAT
fraud case involving the
cross-border supply of
emission trading
allowances. To some
extent the case is of
academic interest only
in that the place of
supply rules for most
business to business
transactions changed
with effect from 1
January 2010 in any
case.
Court of Justice
The Advocate General has issued his opinion in the case of A&B (Case C-453.15) in connection with
the place of supply rules for the transfer of greenhouse gas emission allowances. The question here
was whether the transfer (supply) of such allowances were to be regarded as the transfer of 'similar
rights' to the transfer and assignment of copyrights, patents, licences and trade marks.
The Advocate General considers that they should. Whilst the transfer of emission allowances is not
the transfer of intellectual property (which the other rights are categorised as), the transfer of
emission allowances are sufficiently 'similar'. The owner of the rights is permitted to emit a quantity
of greenhouse gas in accordance with the emissions scheme or, alternatively, he is entitled to trade
those allowances on a legitimate market. He is thus entitled to exploit his rights just as he would be if
the rights in question were copyrights, patents, licenses or trademarks.
Assuming that the full court agrees with the Advocate General, the consequences of this opinion is
that the place of supply for the supplies in question (pre 2010) is the country where the purchaser of
the rights is established. The rules on the place of supply of services changed with effect from 1
January 2010. From that date the majority of services supplied to business customers (including the
transfer of rights etc) takes place in the country where the customer is established and VAT is
payable by the customer under the reverse charge mechanism.
Contact
Stuart Brodie Scotland stuart.brodie@uk.gt.com (0)14 1223 0683
Karen Robb London & South East karen.robb@uk.gt.com (0)20 772 82556