Reflections on the CJEU’s decision in Case C-734/19
Prepared by Davide Accorsi and Giorgio Beretta
With its decision in Case C-734/19 of 12 November 2020, the Court of Justice of the European Union (CJEU) ruled, inter alia, on the possible application of the special VAT regime provided for undisclosed agents/commissionaire pursuant to Articles 28 and 14, paragraph 2, letter c) of Directive 2006/112/EC, even in a case where no mandate without representation exists.
Article 28 of Directive 2006/112/EC stipulates that “[w]here 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”. A similar rule is contained in Article 14, paragraph 2, letter c) of the VAT Directive with reference to the services carried out by a commissionaire for the purchase or sale of goods. As regards Italian VAT law, the regime in question is contained, for the purchase and sale of goods, in Article 2, paragraph 2, number 3), and, for the provision of services, in Article 3, paragraph 3, last sentence of Presidential Decree no. 633/1972.
In order to remove some inconveniences associated with the application of VAT, the aforementioned provisions establish a legal fiction based on which, for VAT purposes, if a taxable person acts in his own name but on behalf of another person, the intermediary is considered as receiving or providing the services in question, or purchasing or selling the goods, in his own name (in this regard, see the CJEU’s decision in Case C-464/10 (Henfling and Others), paragraph 35). From this legal fiction it follows that two transactions are relevant for VAT purposes: one transaction between the third party and the middleman, the other transaction between the middleman and the principal. This implies that the two operations must be invoiced separately and that VAT needs to apply on both transactions, so that the right to deduct input VAT both for the intermediary and the principal is ensured.
The operation of the special VAT regime described above requires that a legal relationship between the intermediary and the principal is established on the basis of which the intermediary concludes one or more legal acts in his own name but on behalf of the principal. From an Italian civil law point of view, the contract in question is normally regarded as a contract for commission sales (Article 1731 of the Italian Civil Code) or, alternatively, as a mandate without representation (Article 1705 of the Italian Civil Code). On the contrary, where a mandate with representation is concluded (Article 1704 of the Italian Civil Code), based on which the legal acts made by the agent have direct effect in the legal sphere of the principal, the transactions made by the agent are directly attributable to the principal.
That being clarified, the question under review by the CJEU related as to whether, for the application of the rules governing commissioning, the existence of a mandate without representation is indeed a mandatory requirement. In particular, the question concerned the applicability of the special VAT regime provided for undisclosed agents/commissionaire where a taxable person, other than in the case of a mandate without representation, was to construct a building in accordance with the specifications and business requirements of another person who had the intention to rent the building.
The CJEU replied to this question in the negative. Notably, the Court maintained that, as for the special VAT regime for undisclosed agents/commissionaire to apply, two conditions must be met jointly, namely:
- there must be a mandate without representation based on which the undisclosed agent/commissionaire intervenes, on behalf of the principal, in the sale of goods and/or in the provision of services; and
- there must be an identity between, on the one hand, the sales of goods and/or the provision of services made by the undisclosed agent/commissionaire and, on the other hand, the sales of goods and/or the provision of services made by the principal.
With reference to the first of the two requirements, i.e. the existence of a mandate without representation, the CJEU, while noting that Directive 2006/112/EC does not provide for the form, written or oral, in which the mandate in question must be conferred, ruled that an agreement between the undisclosed agent/commissionaire and the principal must be in place. In the situation at hand, based on the elements contained in the application file, the existence of such an agreement was excluded by the CJEU.
With respect to the second requirement, relating to the identity of the two transactions in question, the Court clarified that the special VAT regime for undisclosed agents/commissionaire applies if not only the transactions in question are identical, but also if a transfer of ownership of goods, where appropriate, occurs. This second condition was excluded by the CJEU in the case at hand, given that the middleman had acquired goods and services in his name and on his own account but not on behalf of a third party, notwithstanding the ultimate scope for which these acquisitions were made was to provide services in accordance with the specific needs of a given customer.
Lastly, it is interesting to note that the findings of the CJEU in the decision at comment, with particular regard to the requirement of the existence of an agreement between the parties in the form of a mandate without representation, are similar to the conclusions reached by the Italian Supreme Court in a decision rendered in 2014. In that case, with regard to the assumptions put forward by the Italian tax authorities that a business procurement contract between two companies was in reality a contract for commission sales in disguise, in a way that VAT invoicing and payment by the intermediary on the transactions made was avoided, the Italian Supreme Court ruled that, as for the special VAT regime for undisclosed agents/commissionaire to apply, specific proof must be given of the existence of a contract for commission sales concealing a business procurement agreement, given that a clear distinction exists between the two arrangements, and considering that an undisclosed agent/commissionaire carries out one or more legal acts on behalf of the principal while a broker is a mere vehicle for transmitting the contract proposals to the principal (Italian Supreme Court, Chamber V, Decision no. 1568 of 27 January 2014).
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