Opinion of the Advocate General — ECLI:EU:C:2021:248
Date: 2021-03-25
Language of the case: Bulgarian
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Bulgaria

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: 
17 January 2020 
Referring court: 
Administrativen sad Sofia-grad (Bulgaria) 
Date of the decision to refer: 
31 December 2019 
Applicant: 
Balgarska natsionalna televizia 
Defendant: 
Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna 
praktika’ — Sofia pri Zentralno upravlenie na Natsionalnata 
Agentsia za Prihodite (NAP) 
  
Subject matter of the main proceedings 
The public television broadcaster’s right to deduct VAT in respect of the services 
it offers. 
Subject matter and legal basis of the reference 
Interpretation of Article 2(1)(c), Article 25(c), Article 132(1)(q) and Article 168 
of Council Directive 2006/112/EC of 28 November 2006 on the common system 
of value added tax pursuant to Article 267(1)(b) TFEU. 
Questions referred 
The referring court raises the following questions: 
EN 
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(1) Can the supply of audiovisual media services to viewers by the public 
television broadcaster be regarded as a service supplied for consideration within 
the meaning of Article 2(1)(c) of Directive 2006/112/Е[C] if it is financed by the 
State in the form of subsidies, with the viewers paying no fees for the 
broadcasting, or does it not constitute a service supplied for consideration within 
the meaning of that provision and not fall within the scope of that Directive? 
(2) If the answer is that the audiovisual media services provided to viewers by 
the public television broadcaster fall within the scope of Article 2(1)(c) of 
Directive 2006/112/Е[C], can it then be considered that exempt supplies for the 
purposes of Article 132(1)(q) of the Directive are involved, and is a national 
regulation which exempts this activity solely on the basis of the payment from the 
State budget received by the public television broadcaster, regardless of whether 
that activity is also of a commercial nature, permissible? 
(3) Is a practice which makes a full right of input tax deduction for purchases 
dependent not solely on the use of the purchases (for taxable or non-taxable 
activity), but also on the way in which those purchases are financed, namely on 
the one hand from self-generated income (advertising services inter alia), and on 
the other hand from State subsidisation, and which grants the right to full input tax 
deduction only for purchases financed from self-generated income and not for 
those financed through State subsidies, with the delimitation thereof being 
required, permissible pursuant to Article 168 of Directive 2006/112/E[C]? 
(4) If it is considered that the activity of the public television broadcaster 
consists of taxable and exempt supplies, having regard to its mixed financing, 
what is the scope of the right to input tax deduction in respect of those purchases 
and which criteria must be applied for the determination thereof[?] 
EU legislation and case-law 
Article 2(1)(a), Article 25(c), Article 132(1)(q), Article 168 and Article 173(1) of 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (OJ L 347, 2006, p. 1; ‘the Directive’). 
Judgment of the Court of Justice of 27 March 2014, Le Rayon d'Or, C-151/13, 
EU:C:2014:185, paragraphs 30 and 34. 
Judgment of the Court of Justice of 22 June 2016, Odvolací finanční ředitelství, 
C-11/15, EU:C:2016:470, paragraph 32. 
National legislation 
Zakon za danak varhu dobavenata stoynost (The Law on Value Added Tax, ‘the 
ZDDS’): 
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‘Article 2 The following shall be subject to value added tax: 
1. any taxable supply of goods or provision of services made for consideration; 
… 
Article 3(1) Taxable person shall mean any person who carries out an 
independent economic activity, whatever the purposes and results of that activity. 
… 
(5) Non-taxable persons are the State, the State and municipal authorities for all 
activities and supplies which they carry out or provide in the exercise of State or 
municipal public authority, including cases in which they collect fees, 
contributions or duties for those activities or supplies. Excluded therefrom are: 
1. the following activities or supplies: 
(n) radio and television activity of a commercial nature; 
(6) A taxable person who also effects or provides exempt supplies and/or 
supplies or services outside of the independent economic activity and a non-
taxable legal person who is registered for value added tax purposes shall be 
taxable in relation to all services received. 
… 
Article 8. For the purposes of this law, a service is anything which has a value and 
which is distinct from goods and from money in circulation and foreign currencies 
which are used as a means of payment. 
… 
Article 42. Exempt supplies are: 
2. the activity of Balgarsko natsionalno radio (Bulgarian national radio), 
Balgarska natsionalna televizia (Bulgarian national television) and the Balgarska 
telegrafna agentsia (Bulgarian news agency), for which they receive payments 
from the State budget. 
… 
Article 69(1) Where the goods and services are used for the purposes of taxable 
supplies carried out by a person registered for value added tax purposes, that 
person shall be entitled to deduct the following: 
1. the tax on the goods and services which were supplied or provided or are 
supplied or provided thereto by the supplier or service provider, this being a 
person likewise registered under this law; 
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… 
Article 73(1) The registered person shall have the right to partial input tax 
deduction with regard to the goods or supplies which are used both for supplies in 
respect of which the person has a right to input tax deduction and for supplies or 
activities in respect of which the person has no such right.’ 
Brief summary of the facts and procedure 
1 The subject of the appeal is a notification of tax liability of 14 December 2016, 
which was issued by the tax authority and confirmed by decision of the Direktor 
na direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia pri Zentralno 
upravlenie na Natsionalnata agentsia za prihodite (Director of the Sofia ‘Appeals 
and Tax and Social Insurance Practice’ Directorate within the Central 
Administration of the National Revenue Agency) of 27 February 2017. An action 
was brought against the notification confirmed by that decision, on the basis of 
which the proceedings at the Administrativen sad Sofia-grad (Sofia 
Administrative Court) were initiated. 
2 The notification of tax liability was issued following a tax audit carried out 
pursuant to the ZDDS at Balgarska natsionalna televizia (Bulgarian national 
television, ‘BNT’). BNT was found to owe value added tax amounting to BGN 
1 568 037.04 for the period from 1 September 2015 to 31 March 2016 and interest 
amounting to BGN 144 138.74 for the period from 15 October 2015 to 
14 December 2016. This tax liability resulted from the adjustment, which took 
place after the tax audit, of the results declared by BNT for the tax periods 
mentioned, with the tax audit having recognised a partial input tax deduction for 
the indicated supplies in respect of which BNT had made a full input tax 
deduction. 
3 BNT is a legal person, a national public provider of audiovisual media services 
under Article 6(3) of the Zakon za radioto i televiziata (Law on Radio and 
Television, ‘the ZRT’). 
4 BNT does not receive any remuneration from the viewers for broadcasting 
television programmes. Its activity is financed partly by a subsidy from the state 
budget and by self-generated income from advertising and sponsorship inter alia 
pursuant to Article 70(3) of the ZRT. The subsidy from the State budget is 
provided for the preparation, production and broadcasting of programmes and is 
determined on the basis of a flat rate per programme hour fixed by the Council of 
Ministers. 
5 BNT is registered pursuant to the ZDDS with effect from 28 December 1998. 
Until March 2015, the television broadcaster made a partial input tax deduction in 
respect of all of its purchases. Following an analysis in March 2015, BNT decided 
that the broadcasting activity was not an exempt supply to the viewers and then 
began to apply the direct allocation method. BNT is of the opinion that it is 
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entitled to the full input tax deduction in relation to the purchases used for its 
commercial activity. In contrast, it is entitled to the partial input tax deduction in 
relation to the purchases which were used at the same time for activities of a 
commercial nature and for activities of a not exclusively commercial nature. 
6 In the contested notification of tax liability, the tax inspection authorities decided 
that BNT provided both taxable supplies, namely advertising activity, and exempt 
supplies, namely broadcasting of programmes, and that, in the exercise of the right 
to input tax deduction, it could not be clearly established whether the purchase 
was only connected with an exempt supply or only connected with a taxable 
supply. This formed the basis of the adjustment in the tax audit, with a right to 
partial input tax deduction being recognised for the supplies in respect of which 
BNT had made the full input tax deduction and the reimbursement of the tax 
claimed in the amount of BGN 1 568 037.04 for the period from September 2015 
to February 2016 being refused. 
Principal arguments of the parties in the main proceedings 
7 The applicant considers the notification of tax liability to be unlawful. 
8 BNT is of the opinion that the broadcasting of its programmes does not constitute 
a service, as there is no legal relationship between it and the viewers. There is also 
no remuneration, as the subsidy from the State budget does not constitute 
consideration for a service. BNT only performs a single activity in the area of 
application of value added tax, namely the sale of advertising time. 
9 BNT considers that the provisions regarding the application of the partial input tax 
deduction are not applicable, since that mechanism only applies when the taxable 
person cannot distinguish which purchases were used for exempt supplies and 
which purchases were used for taxable supplies, that is to say when the principle 
of direct allocation cannot be applied. However, in March 2015, BNT started to 
apply the direct allocation method by examining, in isolation, for each purchase, 
whether it is used or is capable of being used for an activity of a commercial 
nature or for an activity which is part of the performance of the public service 
task. 
10 BNT submits that the defendant is relying on a provision of the Directive that has 
not been transposed into national law, namely Article 25(c). However, the State 
and its authorities may not rely on the direct effect of provisions of that Directive 
and may not derive any rights from the provisions not incorporated into national 
law. 
11 Furthermore, BNT maintains that, Article 42(2) of the ZDDS, which provides that 
the activity of BNT for which it receives payment from the State budget 
constitutes an exempt supply, incorrectly transposes the provisions of the 
Directive, since the provisions of the Directive, unlike Article 42(2), classify as 
exempt supplies the ‘activities, other than those of a commercial nature, carried 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-21/20 
 
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out by public radio and television bodies’. Therefore, in practice, the way in which 
the activity is financed, rather than its commercial nature, is recognised as the 
criterion for taxability. As a result, an activity which is subsidised but is entirely 
commercial in nature is wrongly treated as exempt by Bulgarian law. This puts 
BNT in a less favourable position than commercial media whose commercial 
activity is taxable and infringes the principle of fiscal neutrality, the main purpose 
of which is to tax supplies of the same nature in the same way. 
12 The expert report shows which activities of BNT are of a commercial nature and 
therefore the television broadcaster is entitled to the full input tax deduction for 
purchases directly relating thereto. 
13 Finally, BNT contests the defendant’s position that BNT is entitled to the full 
input tax deduction in respect of the goods and services purchased for its 
economic activity only if the purchase is financed entirely by advertising revenue 
or by other revenue derived from a commercial activity. The practice of the tax 
administration, which creates additional conditions for the assertion of rights 
enshrined in law, is contrary to the law and the case-law of the Court of Justice. 
14 The defendant does not consider the notification of tax liability to be unlawful or 
contrary to EU law. 
15 The conclusion of the tax authorities that BNT must make a partial input tax 
deduction pursuant to Article 73 of the ZDDS in respect of received supplies of 
goods and services which were used for both taxable and exempt supplies is well 
founded. The claim of the inspected person for a full input tax deduction in 
respect of the purchase of rights to broadcast programmes is unfounded, since that 
person has not proved that the purchases were financed entirely by advertising 
revenue and not by State subsidies. The State subsidies received, which, in the 
view of the defendant, constitute an exempt supply within the meaning of 
Article 42(2) of the ZDDS, exceeded the revenue obtained from taxable supplies 
many times over. 
16 Since BNT has not accounted for the purchases individually according to the way 
in which they are financed, there is, according to the defendant, no possibility of 
distinguishing purchases financed by State subsidies from those financed by 
revenue from advertising services. It is precisely for this reason that the 
notification of tax liability lawfully recognises only the right to a partial input tax 
deduction in respect of the purchases made of broadcasting rights. 
17 Since BNT has not proved that, in the course of preparing, producing and 
broadcasting a programme, it only used funds deriving from the sale of 
advertising time and not from State subsidies, BNT was only entitled to the partial 
input tax deduction for purchases of goods or services which were used for 
subsequent taxable supplies. 
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Brief summary of the basis for the reference 
18 The referring court points out that the dispute between the parties is focused on 
whether the activity of BNT as a public service provider to which specific tasks 
are assigned by the ZRT is excluded from the scope of the ZDDS (as the applicant 
claims) or constitutes a supply made for consideration but exempt within the 
meaning of the ZDDS (as the defendant submits). The parties are also in dispute 
as to whether the provision of Article 73 ZDDS, which provides for the right to a 
partial input tax deduction, is applicable to all supplies received because the 
purchases have not been distinguished according to the way in which they were 
financed (according to the defendant) or whether the full input tax deduction is to 
be recognised for supplies to be used for commercial activities which generate 
revenue, while a partial input tax deduction is to be recognised for purchases 
which do not entirely serve that commercial activity (according to the applicant). 
19 The referring court refers to the case-law of Bulgarian courts on an earlier 
notification of tax liability for BNT under the ZDDS, which endorsed the 
defendant’s position in the present case concerning the refusal of a full input tax 
deduction and the recognition of only a partial input tax deduction, and according 
to which the provisions whose interpretation is sought in the present case are clear 
and do not give rise to any doubt. 
20 By judgment of 23 April 2018, the Varhoven administrativen sad (Supreme 
Administrative Court, Bulgaria; ‘the VAS’) found that, despite its specific tasks as 
a public service provider under the ZRT, the activity of BNT fell within the scope 
of the ZDDS and was subject to value added tax. Pursuant to Article 25(c) of the 
Directive, the term ‘services’ also covered the performance of services by 
operation of law. Even though the cited provision was not transposed into 
Bulgarian law, the VAS considered that the principle of the direct effect of the 
Directive applied. In that sense, the fact that a taxable person carries out an 
activity consisting in the performance of tasks imposed and regulated by law in 
order to achieve an objective in the general interest does not mean that that 
activity does not qualify as the supply of a service under the ZDDS. 
21 According to the VAS, the legal relationship between the provider of the service 
and the recipients thereof is based on the obligations to provide services in the 
general interest delegated by law to the relevant provider. 
22 With reference to paragraphs 30 and 34 of the judgment of the Court of Justice in 
Case С-151/13, the VAS decided that there was a direct link between the supplies 
made by BNT to viewers and the State’s consideration received in the form of 
subsidies. The VAS took the view that it was not necessary for the consideration 
for the service to be provided directly by the recipients of the service; it could also 
be provided by a third person or, as in this case, by the State. 
23 The VAS did not consider the judgment in Case С-11/15 to be comparable, since 
the case before the VAS concerned State subsidies directly linked to the provision 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-21/20 
 
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of services performed by BNT as a public service provider and the amount of 
which was determined in advance according to clearly defined criteria. 
24 The VAS considered the complaint that Article 42(2) of the ZDDS did not 
correctly transpose Article 132(1)(q) of the Directive to be unfounded, since the 
provision that the activity of BNT for which payments are made from the State 
budget should be treated as an exempt supply achieves the objective of the 
Directive, which is to treat as exempt supplies only the non-commercial activities 
carried out by public radio and television bodies. 
25 The VAS decided that BNT was entitled to a full input tax deduction only if it 
could prove that certain purchases it made, which were intended for its 
commercial activity, were financed entirely by advertising or other revenues 
related to the broadcasting activity and not by the State subsidies received. In that 
sense, the VAS stressed that the funds generated by the sale of advertising time 
had to cover the expenditure for the purchase of programme products, namely 
films inter alia, which were broadcast in one of the BNT programmes, and that 
BNT did not carry out detailed analytical accounting of which part of the 
television broadcaster’s expenditure was borne by the State subsidies and which 
part was borne by the sale of advertising time. 
26 The referring court notes that the facts underlying the judgment in Case С-11/15 
are actually somewhat different, since Czech Radio collected fees from listeners, 
whereas BNT, as a public television broadcaster, receives subsidies from the State 
budget, a fact which was not the subject of the examination in the aforementioned 
case. In contrast to Case С-151/13, there is no link in the main proceedings as 
clear as that between the ‘lump sum’ at issue there and the services provided. 
27 For that reason, the referring court considers it essential for the purpose of ruling 
in the main proceedings to ascertain whether the broadcasting of programmes by 
the national public television broadcaster (BNT) constitutes, by virtue of its State 
subsidisation, a service ‘supplied for consideration’ within the meaning of 
Article 2(1)(c) of the Directive, but exempt from value added tax within the 
meaning of Article 132(1)(q) of the Directive, or whether that type of activity does 
not constitute a taxable supply falling within the scope of the Directive. 
28 In that regard, it is sufficient to note, first, that, although the provision of 
Article 132(1)(q) provides an exemption for ‘activities, other than those of a 
commercial nature, carried out by public radio and television bodies’, that 
provision is nevertheless applicable only on the condition that those activities 
should be subject to VAT within the meaning of Article 2 of the Directive and, 
second, that it is not to be interpreted as extending the scope of application of that 
Directive, as defined in Article 2 (in accordance with the reasoning in 
paragraph 32 of the judgment of the Court of Justice in Case С-11/15). 
29 It is equally important in the light of the interpretation of Article 2(1)(c) and 
Article 132(1)(q) of the Directive to clarify whether the activity of the public 
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television broadcaster in relation to the provision of audiovisual services to 
viewers is an exempt provision of a service within the meaning of the ZDDS, 
whether the subsidies paid to the national television body from the State budget 
constitute consideration and, accordingly, whether, despite its specific tasks as a 
public service provider in connection with that activity, BNT falls within the 
scope of the ZDDS and is subject to value added tax. 
30 The referring court emphasises that the determination of whether the television 
broadcasting activity of BNT, namely audiovisual media services, the recipients of 
which are all Bulgarian citizens, constitutes the provision of a service under the 
ZDDS helps to clarify whether that activity must be taken into account in the 
examination of the input tax deduction right in respect of the taxable supplies of 
which the applicant is the recipient. If it is assumed that the activity of the public 
television broadcaster is mixed in nature and includes both exempt supplies 
(broadcasting of television programmes) and taxable supplies (commercial 
advertising), the referring court wonders whether it must be assumed that only the 
part of the value added tax paid on supplies received which can be regarded as 
connected with the commercial activity of the public television broadcaster is 
subject to deduction. The referring court also wishes to know what criteria would 
have to be applied in order to determine the input tax deduction right if the mixed 
nature of the activities of the public television broadcaster were to be confirmed. 
31 Finally, the referring court points out that, despite the national case-law cited, it 
has doubts as to the scope of the provisions of Articles 2, 132 and 168 of the 
Directive in relation to the activity of BNT, and considers the interpretation of 
those provisions to be necessary in order to be able to rule on the pending action.