San Domenico Vetraria SpA v. Agenzia delle Entrate, Case C-94/19 (ECLI:EU:C:2020:193) (7th Chamber)

In 2004, the parent company (“Avir”) of San Domenico Vetraria SpA (“SDV”) seconded one of its directors to SDV and, in return, SDV paid Avir the wages costs of the director plus VAT. The Italian tax authorities rejected SDV’s claim to recover VAT on the grounds that, the Italian VAT legislation provided that:

The lending or secondment of staff in respect of whom only the related cost is reimbursed shall not be regarded as relevant for the purposes of [VAT].

Article 2 of the Sixth Directive provided:

The following shall be subject to [VAT]:

1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such …

“Supply of services” was defined as “any transaction which does not constitute a supply of goods… .”

The Italian Supreme Court of Cassation referred the question of: whether the Sixth Directive preluded the above-quoted Italian VAT provision.

In finding that such provision was indeed precluded, the 7^th Chamber stated (at paras. 21-25):

21 …[A] supply of services is effected ‘for consideration’ within the meaning of Article 2, point 1, of the Sixth Directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. That is the case if there is a direct link between the service supplied and the consideration received … .

22 In the present case, it appears from the documents before the Court that the secondment was carried out on the basis of a legal relationship of a contractual nature between Avir and San Domenico Vetraria.

23 Furthermore, it appears that, in the context of that legal relationship, there was reciprocal performance, namely the secondment of a director from Avir to San Domenico Vetraria, on the one hand, and the payment by San Domenico Vetraria to Avir of the amounts invoiced to it, on the other.

24 The Commission disputes, however, the existence of a direct link between those two services, arguing that, in the absence of a requirement for remuneration higher than the costs borne by Avir, the secondment at issue in the main proceedings did not take place with the aim of receiving consideration.

25 That argument cannot be accepted.

Although the European VAT Directive provided that supplies of services (or goods) for consideration were taxable for VAT purposes, Italian VAT legislation provided that the secondment of staff where only the payroll costs were reimbursed was to be ignored for VAT purposes. In finding that this Italian legislation was contrary to the VAT Directive, so that VAT was applicable to the payments made by an Italian subsidiary (San Domenico Vetraria) to its Italian parent (Avir) to reimburse the latter for the payroll costs of a staff member who had been seconded to San Domenico Vetraria, the 7^th Chamber stated (at paras. 21-23:

[A] supply of services is effected ‘for consideration’ … if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. … .

[T]he secondment was carried out on the basis of a legal relationship of a contractual nature between Avir and San Domenico Vetraria … [and] there was reciprocal performance, namely the secondment of a director from Avir to San Domenico Vetraria, on the one hand, and the payment by San Domenico Vetraria to Avir of the amounts invoiced to it, on the other.