Judgment — ECLI:EU:C:2024:994
Date: 2024-11-28
Language of the case: German
Court formation: Seventh Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Austria

Translation C-622/23 – 1 
Case C-622/23 
Request for a preliminary ruling 
Date lodged: 
10 October 2023 
Referring court: 
Oberster Gerichtshof (Austria) 
Date of the decision to refer: 
25 September 2023 
Applicant: 
rhtb: projekt gmbh 
Defendant: 
Parkring 14-16 Immobilienverwertung GmbH 
      
The Oberster Gerichtshof (Supreme Court, Austria), as the court of appeal on 
points of law […] in the case of the applicant rhtb: projekt gmbh, […] 1220 Wien, 
[…] against the defendant Parkring 14-16 Immobilienverwertung GmbH, […] 
1010 Wien, […] concerning EUR 1,540,820.10 […], in the proceedings of the 
applicant’s appeal on a point of law against the judgment of the 
Oberlandesgerichts Wien (Higher Regional Court, Vienna), hearing the case on 
appeal, of 28 December 2022, GZ 5 R 143/22v, 5 R 144/22s-66, amending the 
judgment of the Handelsgerichts Wien (Commercial Court, Vienna) of 30 June 
2022, GZ 22 Cg 24/20b-51, […] has issued the following 
O r d e r 
1. The following question shall be referred to the Court of Justice of the 
European Union for a preliminary ruling pursuant to Article 267 TFEU: 
Must Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on 
the common system of value added tax read in conjunction with Article 73 of that 
directive be interpreted as meaning that the amount which a customer owes to a 
contractor even where the work has not been (fully) carried out, but the contractor 
was ready to provide the service and, through circumstances attributable to the 
EN 
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customer (for example, cancellation of the work), was prevented from doing so, is 
subject to VAT? 
2. […] [Stay of proceedings] 
Grounds  
A. Facts 
[1] At the end of March 2018, a works contract was concluded between the 
parties (both being limited companies) whereby the applicant, as the contractor, 
was to carry out drywall construction work for the defendant, as the customer, as 
part of a building project. The agreed remuneration for the work was 
EUR 5,377,399.69, including VAT at 20% of EUR 896,233.28. 
[2] After the applicant had begun the work, the defendant informed the 
applicant at the end of June 2018 that it no longer wished to use the applicant’s 
services. 
[3] The background to the termination of the work was that the defendant’s 
managing director lost patience with the applicant’s managing director and he had 
also received a more favourable offer from the other undertaking. 
[4] On 19.12.2018, the applicant submitted a final invoice (contractual claim for 
unjustified cancellation of the works), amounting, after addition of 20% VAT and 
deduction of s 3% security deposit, to EUR 1,607,.695.07. 
[5] As a result of the cancellation, the applicant saved on costs 
• in materials, equipment and bought-in services of EUR 1,362,979  
• in wages of EUR 1,578,591 
• in building finance interest (1%) of EUR 42,584 and 
• in project-related risk of EUR 21,292, 
amounting to a total of EUR 3,005,446. 
B. Arguments of the parties 
[6] The applicant seeks payment of EUR 1,540,820.10. It argues that it is not 
responsible for the termination of the works contract. Therefore, under 
Paragraph 1168 of the Allgemeines bürgerliches Gesetzbuch (Austrian Civil 
Code, ‘the ABGB’), it is, in principle, entitled to full payment for the works. After 
deduction of savings, it is entitled to EUR 1,252,995 net, or EUR 1,503,594 gross, 
for the unjustified termination of the contract. To this are to be added 
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EUR 37,226.10 for works services already provided minus payments already 
received. The amount which is the subject of the action is calculated from the sum 
of the gross amount owed because of the unjustified termination of the contract 
and outstanding wages. 
[7] The defendant disputes the formation of a works contract. It contends that 
the applicant has already received appropriate payment for the improperly 
provided drywall construction work. There can be no question of a right to further 
remuneration pursuant to Paragraph 1168 of the ABGB. 
C. Procedure to date 
[8] The court of first instance granted the application. It confirmed the 
existence of a works contract. The defendant unjustifiably cancelled the contract. 
Although the performance of the work remained partly unfinished, the applicant 
was therefore entitled to payment for the work minus the resulting savings under 
Paragraph 1168(1) of the ABGB. Without providing any further explanation, the 
court of first instance also awarded to the applicant the VAT of EUR 250,599 
contained in the amount which is the subject of the action in respect of the 
services which, though no longer being provided, are to be remunerated pursuant 
to Paragraph 1168 of the ABGB. 
[9] The appeal court varied the judgment of the court of first instance in that it 
upheld the application amounting to EUR 1,290,221.10 […] and dismissed the 
remainder of the application seeking payment of EUR 250,599 […]. It ruled that a 
works contract had been formed. Remuneration is payable under the first sentence 
of Paragraph 1168(1) of the ABGB where, in spite of the contractor’s readiness to 
provide the service, the performance of the work remains ultimately unfinished 
owing to circumstances attributable to the customer. Although the contractor must 
be ready at the time to provide the service, the contractor’s obligation to perform 
the service expires upon the cancellation of the service ex nunc. The reduced right 
to remuneration from the customer is not in consideration for a service provided 
by the contractor and (in the absence of an exchange of services) is also not 
subject to VAT. The VAT contained in the claimed amount is EUR 250,599. To 
that extent, the application must be dismissed. 
[10] The matter was brought by both parties before the Supreme Court which, 
by order of today, rejected the defendant’s plea on a point of law, in which the 
defendant continued to dispute the existence of a works contract between the 
parties, essentially on the ground that the assessment of the lower courts that the 
works contract was formed is not in need of correction. That legal assessment 
must therefore be assumed for the remainder of the proceedings. 
[11] The Supreme Court still now has to rule on the applicant’s plea on a 
point of law, essentially seeking reinstatement of the judgment at first instance, 
on the ground that it is also entitled to VAT in respect of the claim under 
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paragraph 1168 of the ABGB, because that claim is subject to VAT on the basis of 
specific considerations of EU law. 
D. Applicable EU law 
[12] Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on 
the common system of value added tax (OJ 2006 L 347, p 1, ‘the Directive’) 
provides that ‘the supply of services for consideration within the territory of a 
Member State by a taxable person acting as such’, is subject to VAT. 
Article 9(1) of the Directive provides: 
‘“Taxable person” shall mean any person who, independently, carries out in any 
place any economic activity, whatever the purpose or results of that activity. 
Any activity of producers, traders or persons supplying services, including mining 
and agricultural activities and activities of the professions, shall be regarded as 
“economic activity”. The exploitation of tangible or intangible property for the 
purposes of obtaining income therefrom on a continuing basis shall in particular 
be regarded as an economic activity.’ 
[14] Article 24(1) of the Directive provides: 
‘“Supply of services” shall mean any transaction which does not constitute a 
supply of goods.’ 
[15] Article 73 of the Directive provides: 
‘In respect of the supply of goods or services, other than as referred to in 
Articles 74 to 77, 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, including subsidies directly linked to the price 
of the supply.’ 
E. National law 
E. 1. Civil law 
[16] Paragraph 1168 of the ABGB contains provisions on the works contract to 
be assessed in the present case. The first sentence of the first subparagraph of that 
paragraph reads as follows: 
‘Where the performance of the work remains unfinished, the contractor shall, 
however, be entitled to the agreed remuneration, if the contractor was ready to 
provide the service and, through circumstances attributable to the customer, was 
prevented from doing so; the contractor must, however, deduct what it has saved 
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or what it has acquired through other use or intentionally failed to acquire as a 
result of the discontinuance of the work.’ 
According to the settled case-law of the Supreme Court, the contractor has no 
right to perform or complete the work. The customer, on the other hand, can, if it 
wishes, prevent the commencement, continuation or completion of the work 
(RS0021809; see also RS0021831; RS0025771). In the present case, this means 
that the defendant’s express refusal in June 2018 to make further use of the 
applicant’s services results in the performance of the (still outstanding) work 
(ultimately) remaining unfinished and therefore in the applicability of the cited 
provision. The cancellation of the work results (as a further legal consequence) in 
the premature termination of the contractual relationship. Upon the cancellation of 
the work, the contractor’s obligation to (further) carry out the work ceases, 
without the contractor needing to withdraw (7 Ob 43/14w; 8 Ob 131/17y). The 
right to remuneration under the first sentence of Paragraph 1168(1) of the ABGB 
is a right to consideration and not a right to compensation (RS0021875). 
E.2. Tax law 
Under Paragraph 1(1)(1) of the Umsatzsteuergesetz (Law on turnover tax, ‘the 
UStG’), supplies and other services carried out for consideration within the 
country by an operator in the course of his business are subject to VAT. The 
charge to tax is not excluded because the transaction is effected on the basis of a 
legal or administrative act or is to be regarded under a legal provision as effected. 
[18] There is no (Supreme Court) case-law on whether the ‘consideration’ to be 
paid in this case under the first sentence of Paragraph 1168(1) of the ABGB is 
subject to VAT under Paragraph 1(1)(1) of the UStG. 
[19] The view mainly held in the legal literature is that the remuneration under 
the second sentence of Paragraph 1168(1) of the ABGB at issue is precluded (not 
by any actual service, but) by the entitled claimant’s mere readiness to provide the 
service which, in the absence of any other circumstances, is not, in principle, 
subject to VAT […]. 
[20] The guidance addressed only to the tax authorities of the Austrian 
Bundesministeriums für Finanzen (Federal Ministry of Finance) of 4.11.2015, 
BMF-010219/0414-VI/4/2015 (‘UStR 2000’), provides, in paragraph 15 thereof, 
that payments which a contracting party (generally the purchaser) must make 
owing to its premature withdrawal from the contract are not subject to VAT. 
F. Statement of reasons for the request for a preliminary ruling 
[21] F.1. As stated in E.2., according to the view prevailing in Austria, the claim 
asserted in the action is not subject to VAT and therefore the applicant’s appeal on 
a point of law (which only concerns the VAT contained in the application) is 
unjustified. 
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[22] F.2. In the light of the more recent case-law of the Court of Justice of the 
European Union on situations similar to that in the present case, there are, 
however, doubts as to whether the prevailing Austrian view is compatible with EU 
law. 
[23] F.2.1. In Air-France v KLM C-250/14 and Hop!-Brit Air SAS C-289/14 
(ECLI:EU:C:2015:841) the Court of Justice of the European Union ruled, by 
judgment of 23 December 2015, that Article 2(1) and Article 10(2) of the Sixth 
Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws 
of the Member States relating to turnover taxes – Common system of value added 
tax: uniform basis of assessment, as amended by Council Directive 1999/59/EC of 
17 June 1999, then by Council Directive 2001/115/EC of 20 December 2001, 
must be interpreted as meaning that the issue by an airline company of tickets is 
subject to value added tax where the tickets issued have not been used by 
passengers and the latter are unable to obtain a refund for those tickets. 
[24] F.2.2. In Meo – Serviços de Comunicações e Multimedia C-295/17 
(ECLI:EU:C:2018:942), the Court of Justice of the European Union ruled, by 
judgment of 22 November 2018, that 
1. Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on 
the common system of value added tax must be interpreted as meaning that the 
predetermined amount received by an economic operator where a contract for the 
supply of services with a minimum commitment period is terminated early by its 
customer or for a reason attributable to the customer, which corresponds to the 
amount that the operator would have received during that period in the absence of 
such termination – a matter which it is for the referring court to determine – must 
be regarded as the remuneration for a supply of services for consideration and 
subject, as such, to value added tax. 
2. The fact that the objective of the lump sum is to discourage customers from 
not observing the minimum commitment period and to make good the damage 
that the operator suffers in the event of failure to observe that period, the fact that 
the remuneration received by a commercial agent for the conclusion of contracts 
stipulating a minimum period of commitment is higher than that provided for 
under contracts which do not stipulate such a period, and the fact that the amount 
invoiced is classified under national law as a penalty, are not decisive for 
classifying the amount predetermined in the services contract which the customer 
is liable to pay in the event of early termination. 
[25] F.2.3. In Vodafone Portugal C-43/19 (ECLI:EU:C:2020:465), the European 
Court of Justice ruled, by judgment of 11 June 2020, that Article 2(1)(c) of 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax must be interpreted as meaning that amounts received by an 
economic operator in the event of early termination, for reasons specific to the 
customer, of a services contract requiring compliance with a tie-in period in 
exchange for granting that customer advantageous commercial conditions, must 
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be considered to constitute the remuneration for a supply of services for 
consideration, within the meaning of that provision. 
[26] F.3. The cited decisions of the Court of Justice of the European Union have 
in common with the present case that they concerned an amount of money which 
constituted the remuneration for an originally agreed service provided for in a 
contract and which is (at least partly) payable even where the service is not used 
for reasons attributable to the buyer (purchaser, customer). 
[27] This suggests that the ‘remuneration’ in accordance with the first sentence of 
Paragraph 1168(1) of the ABGB at issue here is also subject to VAT. 
[28] F.4. However, the situations resulting in the cited decisions of the Court of 
Justice of the European Union differ from the situation in this case, as follows: 
[29] F.4.1. In Air-France v KLM C-250/14 and Hop!-Brit Air SAS C-289/14 
(ECLLEU:C:2015:841), the respective airline still owed its customer the air 
service at the time of its booked departure or during the period of validity of the 
flight ticket. The service (which was for a specific flight or was owed only within 
a specific period of validity) could not be provided by the airline only because the 
customer was in default of acceptance as a result of the passenger not turning up 
or not cancelling the service during the ticket’s period of validity. 
[30] In the present case, however, the applicant contractor no longer owed the 
(outstanding) service once it had been cancelled by the defendant customer (see 
E.1.). Even if liability to VAT must be assessed, in principle, irrespective of the 
existence and validity of an underlying contractual relationship […], it is doubtful 
from an objective standpoint in view of the termination of the contractual 
relationship – notwithstanding the use of the term ‘remuneration’ in the first 
sentence of Paragraph 1168(1) of the ABGB – whether the requirement that there 
be a direct link between the consideration received and the service provided is 
fulfilled (see judgment of the Court of Justice in Meo – Serviços de Comunicações 
e Multimedia C-295/17 [ECLI:EU:C:2018:942] paragraph 39 et seq.) and, 
therefore, whether the applicant contractor is still a ‘supplier’ and the defendant 
customer is still a ‘customer’ within the meaning of Article 73 of the Directive. 
[31] F.4.2. The cases Meo – Serviços de Comunicações e Multimedia C-295/17 
(ECLI:EU:C:2018:942) and Vodafone Portugal C-43/19 (ECLI:EU:C:2020:465) 
related to continuing obligations (whereas the present case concerns a works 
contract establishing a fixed-term obligation). 
[32] It is also clear from both decisions that, although the amount to be paid in 
the event of the customer’s early termination of a service contract with a tie-in 
period is still, to a certain extent, remunerative, ‘the termination of the contract 
during the tie-in period justifies an amount by way of compensation, in order to 
recover the costs associated with the terminal subsidies, the installation and 
activation of the service or other promotional conditions’ (C-43/19, paragraph 24) 
or ‘to make good the damage that the operator suffers in the event of failure to 
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observe that period, […] the remuneration received by a commercial agent for the 
conclusion of contracts stipulating a minimum period of commitment is higher 
than that provided for under contracts which do not stipulate such a period’ 
(C-295/17, second answer). 
[33] Remuneration of that kind is not applicable to the claim under the first 
sentence of Paragraph 1168(1) of the ABGB at issue in the present case. 
G. […] [Stay of proceedings] 
[…] 
Vienna, 25 September 2023 
[…]