A Oy v. Veronsaajien oikeudenvalvontayksikkö, [2019] EUECJ C-410/17 (10 January 2019) (European Court of Justice (9th Chamber))

Pursuant to demolition contracts, a company (“A”) undertook to demolish old factory buildings with responsibilities that included the disposal and processing of materials and waste. It took the estimated sales proceeds of the materials generated into account in quoting its price for the work but did not communicate this estimate to the client.

Article 73 of The Council Directive 2006/112/EC of 28 November 2006 provided:

In respect of the supply of goods or services … the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party … .

In finding that there was a reciprocal supply of the dismantling services and the materials for consideration, the Court first stated (at paras. 39-40, 45):

[I]t is clear from settled case-law that the consideration which is the taxable amount for a transaction has a subjective value … [being] the value which the recipient of services constituting the consideration for the supply of goods attributes to the services which he is seeking to obtain and must correspond to the amount which he is prepared to spend for that purpose … .

[T]he supply of recyclable scrap metal is made for consideration if the person acquiring it, namely a demolition company, attributes a value to that supply which it takes into account in the calculation of the price quoted for carrying out the demolition works … .

Therefore, in such a case, reciprocal transactions are exchanged under the same contract, between the service provider and its client, so that a direct link … exists between the performance of the demolition works and the supply of the recyclable scrap metal.

The company would also pay a client under a similar dismantling contract. The Court stated (at paras. 57, 59):

[T]he value of the performance of dismantling and waste disposal … must be regarded as equal to the amount that the purchaser, that is a demolition company, takes into account as a factor reducing the purchase price of the goods to be dismantled.

…[T]he taxable base of the supply of goods to be dismantled is, therefore, constituted by the price actually paid for the purchase of those goods and the amount corresponding to the factor applied by the purchaser in order to reduce the purchase price proposed.

Pursuant to demolition contracts, a company undertook to demolish old factory buildings with responsibilities that included the disposal and processing of materials and waste. It took the estimated sales proceeds of the scrap metal and other materials generated into account in quoting its price for the work but did not communicate this estimate to the customer. The company also undertook dismantling contracts under which the equipment and materials to be removed had an estimated value such that the company would pay the customer to enter into the contract (rather than being paid to perform the dismantling).

The 9^th Chamber held in both cases there was a reciprocal supply of a demolition or dismantling service and of goods (the removed materials or equipment) for VAT purposes. In the first case,

the supply of recyclable scrap metal is made for consideration if the person acquiring it, namely a demolition company, attributes a value to that supply which it takes into account in the calculation of the price quoted for carrying out the demolition works (para. 40)

with the consideration it received for its demolition work effectively being grossed up by this estimated amount.

Similarly, in the second (dismantling) case (paras. 57, 59:

[T]he value of the performance of dismantling and waste disposal … must be regarded as equal to the amount that the purchaser, that is a demolition company, takes into account as a factor reducing the purchase price of the goods to be dismantled.

…[T]he taxable base of the supply of goods to be dismantled is, therefore, constituted by the price actually paid for the purchase of those goods and the amount corresponding to the factor applied by the purchaser in order to reduce the purchase price proposed.