On 3 September 2015 the European Court of Justice (ECJ) issued a decision in the case of Asparuhovo Lake Investment Company. The case had been referred to the ECJ by the Administrativen sad in Bulgaria and concerned the time of the chargeable event and chargeability of tax for value added tax (VAT) purposes in a supply of services under a subscription contract for consulting services.

The questions put to the ECJ by the Administrativen sad were as follows:

• Are Art. 24 (1) and point (b) of Art. 25 of the EU VAT Directive (2006/112/EC) to be interpreted to mean that a supply of services also covers cases involving subscription contracts for consulting services where a supplier with qualified personnel available for consulting services agrees to be on call for the customer throughout the period of the contract and has agreed not to enter into similar contracts with competitors of the customer.
• Should Art. 64 (1) and Art. 63 of the EU VAT Directive be interpreted to mean that in the case of subscription contracts for consulting services the chargeable event occurs when the period for which payment was agreed expires, regardless of how often the customer has made use of those on-call services.
• Is Art. 62(2) of the EU VAT Directive to be interpreted as meaning that a supplier of services under a subscription consulting contract must charge VAT for the services when the period of the subscription contract expires, or does this obligation only exist if the customer has made use of the on-call services.

EU VAT Directive

Article 24 (1) of the EU VAT Directive states that “supply of services” means any transaction which does not constitute a supply of goods. Art. 25 point (b) clarifies that a supply of services may consist of the obligation to refrain from an act, or to tolerate an act or situation.

Art. 63 of the VAT Directive states that the chargeable event shall occur and VAT shall become chargeable when the goods or services are supplied. Art. 64 (1) of the VAT Directive states that where a supply of goods or services gives rise to successive statement of account or successive payments it is regarded as being completed on the expiry of the periods to which the statements or account or payments relate.

Art. 62(2) of the Directive states that VAT shall become chargeable when the tax authority becomes entitled under the law, at a given moment, to claim the tax from the person liable to pay, even though the time of payment may be deferred.

ECJ decision

The ECJ held that Art 24 (1) of the EU VAT Directive should be interpreted to mean that a supply of services includes subscription contracts for the supply of consulting services under which the supplier has agreed to be available to the customer during the term of the contract.

Art 62 (2) and Art. 63 and 64(1) of the VAT Directive should be interpreted to mean that the chargeable event and chargeability of VAT occurs at the time of expiry of the period in relation to which the payment has been agreed, regardless of how often the customer has made use of the supplier’s services.