Stock ’94 - European Court of Justice finds that interest on a loan funding a taxable supply of goods was part of the consideration for a single supply of the goods

A Hungarian company was set up to assist Hungarian farmers by lending them money to fund the purchase by them from it of current assets needed in their business. The European Court of Justice (subject to some further findings of facts to be made by the local court) essentially applied the single supply doctrine to find that the loan interest was part of the consideration for the sale of products by the company to the farmers, so that the interest was subject to VAT (even though, of course, interest on loans viewed as being for a separate supply was VAT-exempt). The Court was influenced by the facts that the loan could only be used to fund the purchases from the company (which was their sole purpose), and that the company was not authorized to make loans to anyone other than farmers.

The Tax Court of Canada would not lightly recharacterize a loan and purchase transaction as a deferred purchase price transaction. However, it is not obvious that the Tax Court could not treat interest on the deferred purchase price for a taxable supply as itself being part of the taxable consideration for a single supply.

Neal Armstrong. Summary of Stock ‘94 Szolgáltató Zrt. v Regional Customs and Finance Directorate-General for Southern Transdanubia of the National Tax and Customs Office, Hungary, ECLI:EU:C:2016:936, [2016] EUECJ C-208/15 (European Court of Justice (5^th Chamber)) under ETA s. 123(1) - financial service - (f).