Opinion of the Advocate General — ECLI:EU:C:2024:1047
Date: 2024-12-19
Language of the case: Hungarian
Procedure: Reference for a preliminary ruling
Origin: Hungary

Summary C-427/23 – 1 
Case C-427/23 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
11 July 2023 
Referring court: 
Szegedi Törvényszék (Hungary) 
Date of the decision to refer: 
3 July 2023 
Applicant: 
Határ Diszkont Kft. 
Defendant: 
Nemzeti Adó—és Vámhivatal Fellebbviteli Igazgatósága 
  
Subject matter of the main proceedings 
Judicial review proceedings against the decision of the Nemzeti Adó—és 
Vámhivatal Fellebbviteli Igazgatósága (Appeals Directorate of the National Tax 
and Customs Authority, Hungary) upholding the decision of the first-instance tax 
authority in which an activity relating to refunds of value added tax (VAT) in 
respect of supplies of goods by the applicant was classified by that authority as a 
separate transaction and, accordingly, subject to VAT. 
Subject matter and legal basis of the request 
The referring court enquires, under Article 267 TFEU, whether the following are 
in conformity with EU law, and in particular with Directive 2006/112/EC: (a) the 
practice of a Member State whereby an activity relating to refunds of VAT to 
foreign travellers is considered to be a separate supply of services on which VAT 
must be charged in accordance with the general rules; (b) the practice of a 
Member State whereby the fee for administering VAT refunds is not considered to 
be exempt from tax; (c) the practice of a Member State according to which the 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-427/23  
 
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corresponding VAT must also be paid retroactively on the administration fee; and 
(d) the practice of a Member State whereby the amount shown as exempt on the 
invoices issued for the administration fee is used as the taxable amount for VAT. 
Questions referred for a preliminary ruling 
1. Is the practice of a Member State according to which the administration of 
VAT refunds to foreign travellers – which includes the administrative 
procedures from the time the standard forms for applying for the refund of 
VAT are submitted up to the refund of the tax – is considered to be a 
separate supply of services distinct from the tax-exempt supply of goods, on 
which VAT must be charged and paid in accordance with the general rules, 
compliant with Article 1(2), Article 2(1)(c), Article 78 and Article 146(1)(e) 
of Council Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax (‘the VAT Directive’) in a situation in which the 
administration fee, which is a percentage of the VAT to be refunded, is 
received and invoiced simultaneously with the VAT refund, at a time 
different from the supply and invoicing of the goods and after the customer 
has paid the consideration for the goods and those goods have exited for a 
third country? 
2. In the event that the answer to the first question is in the affirmative, is 
Article 135(1)(d) of the VAT Directive infringed by the practice of a 
Member State whereby the fee charged for administering refunds of the 
VAT arising on the supply of goods to foreign travellers is not considered to 
be exempt from VAT as a ‘transaction concerning payments or debts’? 
3. In the event that the answers to the first and second questions are in the 
affirmative, is the practice of a Member State compliant with the principle of 
the protection of legitimate expectations as one of the fundamental 
principles of the common VAT system where, according to that practice, the 
issuer of the invoices for the administration fee must also pay VAT 
retroactively even though the tax authority had already audited that person 
on various occasions in the years prior to the inspection and during those 
audits had examined the issuer’s practice of considering the administration 
fee to be exempt from VAT and had not raised any objection or informed the 
issuer of any change in the Member State legislation in force until 
31 December 2007, which expressly included ‘refunds of the tax to foreign 
travellers processed by the trader under specific legislation’ as services 
exempt from tax? 
4. In the event that the answers to the first to third questions are in the 
affirmative, is the practice of a Member State tax authority compliant with 
Articles 73 and 78 of the VAT Directive where it consists of using as the 
taxable amount for VAT the consideration shown as exempt on the invoices 
issued for the administration fee and where, according to the tax authority’s 
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decision, the issuer of the invoices must pay VAT on that taxable amount in 
accordance with the general rules, even though the consideration paid by the 
foreign travellers does not include that amount? 
Provisions of European Union law and case-law relied on 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax: Articles 1(2), 2(1) and 24(1), Articles 73 and 78 and 
Articles 135(1) and 146(1) 
Case-law of the Court of Justice relied on 
Judgments of 6 October 2005, MyTravel (C-291/03, EU:C:2005:591); of 
14 September 2006, Elmeka (C-181/04 to C-183/04, EU:C:2006:563); of 
2 December 2010, Everything Everywhere (C-276/09, EU:C:2010:730); of 
7 November 2013, Tulică and Plavoşin (C-249/12 and C-250/12, 
EU:C:2013:722); of 15 May 2014, Almos Agrárkülkereskedelmi (C-337/13, 
EU:C:2014:328); of 10 November 2016, Baštová (C-432/15, EU:C:2016:855); 
and of 8 November 2018, Cartrans Spedition (C-495/17, EU:C:2018:887) 
Provisions of national law relied on 
Általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law No CXXVII of 
2007 on value added tax, ‘the Law on VAT’) 
According to Paragraph 70(1), in the case of supplies of goods and services, the 
basis of assessment shall include: 
‘… 
(b) incidental expenses which the supplier of goods or services charges to the 
acquirer of the goods or recipient of the services, in particular: expenses and 
costs connected with commission or any other type of intermediation …’. 
Under Paragraph 86(1) of the Law on VAT, the following are exempt from VAT: 
‘… 
(d) supplies of services, including negotiation, concerning payments, transfers, 
cheques and other pecuniary claims and financial instruments but excluding 
the collection of debts (accounts receivable) itself; 
(e) supplies of services, including negotiation, concerning Hungarian or foreign 
legal tender …’. 
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According to Paragraph 98(1) of the Law on VAT, ‘supplies of goods by post or 
transported from a country to a country outside the European Community shall be 
exempt from tax provided that the posting or transport: 
(a) is carried out by the supplier himself or by a third party acting on behalf of 
the supplier; 
(b) is carried out by the purchaser himself or by a third party acting on behalf of 
the purchaser where the additional conditions provided for in 
Paragraph 98(3) and (4) and in Paragraphs 99 and 100 of the present law are 
satisfied.’ 
According to Paragraph 99(1) of the Law on VAT: ‘Where the purchaser is a 
foreign traveller and the goods supplied … form part of that person’s personal 
luggage or traveller’s luggage, in order for the exemption provided for in 
Paragraph 98(1) to apply: 
… 
(b) the foreign traveller must demonstrate that status by means of a form of 
identification consisting of his or her valid travel documents or other valid 
official documents …; 
(c) at the point of exit from the Community, the authority must certify that the 
goods have left the territory by endorsing and stamping the form provided 
for that purpose … and the goods must be presented simultaneously with the 
original invoice which confirms that the goods have been supplied. 
(2) In order to qualify for the exemption, the seller of the goods must, in 
addition to issuing an invoice, complete a tax refund application form when asked 
to do so by the foreign traveller. 
… 
(4) Exemption from tax shall be subject to the condition that: 
… 
(b) where the tax was charged at the time the goods were supplied, the seller 
shall refund the tax to the foreign traveller in accordance with Paragraphs 5 
to 8. 
(5) The foreign traveller him or herself or the agent acting on behalf of the 
traveller may apply to the seller of the goods for a refund of the tax. 
… 
(8) The seller of the goods must also ensure that the invoice proving that the 
goods have been supplied does not give rise to a further application for a tax 
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refund. The seller must therefore, before returning the original of the invoice [to 
the traveller], mark it with the note ‘VAT paid’ and make a photocopy of the 
invoice including that note; the photocopy must be retained in the seller’s 
records.’ 
According to Paragraph 102(1) of the Law on VAT: ‘Supplies of services, 
excluding those that are exempt under Paragraphs 85(1) and 86(1), shall be 
exempt from the tax when they are directly connected with goods 
… 
(b) under the exportation scheme that exit from Community territory where that 
exit is certified by the authority within the meaning of Article 98(2)(a)’. 
Succinct presentation of the facts and procedure in the main proceedings 
1 In 2020, at its commercial premises near the border between Hungary and Serbia, 
the applicant sold a large number of various goods to foreign travellers resident in 
Serbia and refunded the VAT on the sales, which totalled HUF 298 328 000. For 
processing the VAT refund, it charged the foreign travellers who had purchased 
the goods an administration fee of 15% of the VAT refunded. In its VAT returns 
the applicant included the turnover from the administration fee as an exempt 
public interest or other special service. 
2 According to the stamped tax refund application forms, the foreign travellers took 
the goods acquired out of Hungarian territory on the date of the sale; the invoices 
were marked ‘VAT paid’. Subsequently to the exportation, the applicant refunded 
to the foreign travellers the full amount of the VAT charged and shown on the 
invoices. On the date on which the VAT was refunded, the applicant issued 
invoices for cash payment in respect of the 15% administration fee and payment 
of that amount was evidenced by till receipts. The invoices for cash payment 
included the expression ‘administration fee’ as the transaction name. 
3 In the context of an inspection carried out for the 2020 period in relation to VAT, 
among other matters, on several occasions the first-instance tax authority 
requested the applicant to indicate the actual content of the invoices issued for the 
administration fee. In its statements, the applicant maintained at all times that the 
supply of services at issue was exempt from tax, but changed its mind a number of 
times as to what constituted the ground for that exemption. 
4 It is clear from the applicant’s statements that it classified the service incorrectly 
in statistical terms. 
5 Before the inspection, the applicant had asked the Nemzeti Adó—és Vámhivatal 
Központi Irányítás Ügyfélkapcsolati és Tájékoztatási Főosztálya (Central 
Directorate of the National Tax and Customs Authority, Taxpayer Relations and 
Information Department, Hungary) whether an administration fee relating to VAT 
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refunds was exempt where it was not received at the time of the purchase. In its 
reply, the aforementioned department explained that an administration fee is an 
expense incidental to the supply of goods and must be invoiced as exempt from 
tax to the foreign traveller who acquires the goods, provided the requirements are 
satisfied for the underlying transaction to be exempt from tax. 
6 The applicant contended that the amount of VAT should not be determined on the 
basis of the net amount invoiced and claimed that the income received as 
administration fees also included the VAT amount. 
7 In its decision of 22 July 2022, the first-instance tax authority declared a tax 
difference payable by the applicant, constituting a ‘tax shortfall’ of 
HUF 12 040 000. According to the decision, the above-referred activity of the 
applicant was not an accounting service but was purely administrative, and the 
applicant had not demonstrated that the administration service was exempt from 
VAT. The first-instance tax authority underscored that the applicant itself treated 
the administration service as a separate supply of services and that it did not 
include it in the taxable amount of the supply of goods or give the date on which 
the goods were supplied as the date on which the service was performed. 
8 The applicant brought an administrative action against that decision before the 
defendant authority, which, by a decision of 27 October 2022, confirmed the 
decision of the first-instance tax authority. The defendant submits that the 
information previously requested by the applicant related to a question that the 
applicant had posed in extremely broad terms, in which it did not mention the 
essential facts that, in the specific case of the applicant, the supply of goods and 
the provision of the service were completely separate from each other and did not 
occur at the same time; that the service provided was not a requirement for 
claiming a VAT refund; and that the foreign travellers did not even request such a 
service. 
9 The applicant has brought judicial review proceedings before the referring court 
against that decision. 
The essential arguments of the parties in the main proceedings 
10 The applicant argues that the administration fee at issue is exempt from VAT 
under Article 102(1)(b) of the Law on VAT as a supply of services directly 
connected with goods whose departure from the Community has been certified by 
the tax authority. The administration fee is an expense directly incidental to the 
VAT-exempt supply of goods and is, therefore, exempt from VAT. 
11 The applicant states that, as seller, it sold the goods to foreign travellers 
(purchasers), that the purchasers paid consideration for those goods and it 
undertook to reimburse them for the VAT corresponding to the consideration paid 
for the goods if the foreign travellers proved, by presenting the tax refund 
application form, that the goods had exited from the territory of the Community, 
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provided that they paid it 15% of the refunded VAT by way of an administration 
fee. The term relating to the administration fee therefore formed an integral part of 
the sale and purchase agreement. 
12 According to the applicant, the VAT refund was in essence taken into account in 
determination of the final purchase price, and the provisions of the sale and 
purchase agreements referred to in these proceedings were fully performed when 
the VAT was refunded. The Law on VAT contains no requirement that the events 
must occur simultaneously. 
13 The applicant relies on the judgment in Case C-432/15, Baštová, which supports 
the interpretation according to which, in the present case, the supply of goods is 
the principal service and the administration service provided in relation to the 
VAT refund is regarded as an expense incidental to that service. 
14 The applicant submits that the tax authority infringed the principle of the 
protection of legitimate expectations repeatedly enshrined in the Court’s case-law, 
because on four occasions in the years preceding the inspection it had examined 
the VAT levied on the applicant and had found that the administration fee was 
treated as income exempt from VAT and that it was furthermore invoiced as such. 
In the event that none of the grounds for exemption on which the applicant relies 
was applicable, the defendant authority, by virtue of the principle of the protection 
of legitimate expectations, would not be able to claim retroactively the payment of 
VAT not previously charged by the applicant either. 
15 The applicant has proposed that a reference be made for a preliminary ruling 
seeking an answer to four questions. 
16 According to the defendant authority, the legal obligation on a trader who sells 
to foreign travellers to refund the VAT on goods that exit from the territory via the 
customs border, where the legal requirements are satisfied, is considered to be a 
supply of services only by the applicant, and in the view of that authority, since 
the supplies of goods are fully performed where that service is not supplied, under 
no circumstances is this a matter of a ‘supply of services relating to’ those 
supplies of goods. In its view there is in the present case no substantive legal rule 
establishing that the supply of services in question is exempt from tax. 
17 In the pre-litigation procedure, the applicant did not plead that sale and purchase 
agreements of any kind had been concluded with the foreign travellers that were 
its customers. The supply of services was based on a unilateral decision by the 
applicant without being requested by the customers and, in essence, the applicant 
supplied the service as a requirement for the tax refund. 
18 The circumstance that the amount actually paid in consideration for the goods 
varied subsequently as a result of the VAT refund does not alter the fact that the 
purchasers paid the consideration at the time of purchase. The supply of goods 
became fully performed as a result of the fact that the customers paid the 
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consideration, took possession of the goods and moved them to a third country, 
thereby completing the transaction. 
19 The defendant authority does not believe that the referral for a preliminary ruling 
is justified. 
Succinct presentation of the reasoning in the reference for a preliminary 
ruling 
20 In these proceedings, the referring court is required to rule on the question, which 
calls for the interpretation of EU law, of whether a VAT refund that is processed 
in exchange for an administration fee is ancillary to a tax-exempt supply of goods 
to foreign travellers and must therefore be considered to be an exempt supply of 
services, or must be considered to be a separate, and in consequence taxable, 
supply of services. 
21 In respect of the first question referred, the referring court is of the view that the 
administrative procedure at issue is a supply of services ancillary to the exempt 
supply of goods and, since the supply of goods to a foreign traveller constitutes an 
exportation of goods, it is also a supply of services directly connected with that 
exportation of goods, and is therefore exempted from VAT under 
Article 146(1)(e) of the VAT Directive. 
22 As regards the considerations concerning proof of the exemption, the referring 
court considers that the Court of Justice has already ruled on the matter to the 
effect that the nature of the activity objectively determines whether there is an 
exemption on grounds of exportation, and that this is also true of a supply of 
services directly connected with the exportation of goods. 
23 In so far as concerns the second question referred, the referring court notes that, if 
the tax authority was correct to find that the supply of services at issue was a 
separate supply of services, it must decide whether that supply of services is 
exempt from tax on any ground. 
24 Article 86(1)(d) of the Law on VAT, which is the Hungarian provision 
transposing Article 135(1)(d) of the VAT Directive, lists the financial services that 
are exempt from VAT, and the question seeks clarification of whether the service 
provided by the applicant – relating to the pecuniary claim of its customers, who 
are foreign travellers, to be refunded VAT – qualifies to be exempt from tax on 
that ground. It falls to the Court of Justice to interpret the provision of the VAT 
Directive. 
25 The applicant relies on the judgment in Elmeka (Cases C-181/04 to C-183/04) in 
relation to the principle of the protection of legitimate expectations. It is apparent 
from that judgment that the referring court must determine whether, on the basis 
of the findings of the earlier tax audits, the applicant could reasonably have 
believed that the supply of services at issue was exempt from tax. 
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26 In view of the position maintained during the tax audits, which is clearly apparent 
from the audit records and has remained unchanged over the years, according to 
which the applicant had lawfully issued VAT-exempt invoices for the 
administration service, the referring court is uncertain whether the EU law 
principle of the protection of legitimate expectations is complied with in a 
situation where the applicant is required to pay VAT, including retroactively, in 
respect of the same transaction, without the tax authority having informed the 
applicant in advance that it had changed its earlier position. 
27 In respect of the method of calculating the amount of VAT, the referring court 
cites the judgments in MyTravel (C-291/03) and Almos Agrárkülkereskedelmi 
(C-337/13). According to that case-law, it is contrary to the fundamental 
principles of the VAT system to oblige the applicant to pay an amount of VAT 
that it has not received from the final consumers. 
28 Since it is manifestly impossible for the applicant, after the event, to charge its 
customers, foreign travellers, the VAT that the tax authority has determined it 
must pay on the administration fee, on the basis of the Court’s case-law cited 
above, the referring court also finds the tax authority to have acted questionably 
when it considered the administration fee to be a net quantity instead of 
considering it as a gross quantity that also included VAT. 
29 In consequence, according to the referring court, as a result of the tax authority’s 
decision, the applicant is obliged to pay VAT that it cannot charge, a situation that 
is contrary to the fundamental principle according to which VAT is to be borne by 
the final consumer.