Bookit, Ltd v Commissioners for Her Majesty's Revenue and Customs.
Date: 2016-05-26
22


The referring court bases its request for a preliminary ruling on the premise that the card handling service supplied by Bookit, when a person who wishes to visit an Odeon cinema purchases, via Bookit, a ticket which that person pays for using a debit card or a credit card, constitutes the supply of a service that is distinct from and independent of the sale of that ticket.
23


The Court has however previously held that the additional charges invoiced by a provider of services to its customers, where the latter pay for those services by credit card, debit card, cheque or cash, over the counter at a bank or authorised payment agent acting on behalf of that service provider, do not constitute consideration for a supply of services that is distinct from and independent of the principal supply of services for which that payment is made (see, to that effect, the judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 32).
24


In that regard, the Court held, first, that the fact that the principal service provider makes available to customers an infrastructure that enables them to pay the price for that service, inter alia by bank card, does not constitute, for those customers, an end in itself, and that that supposed supply of services, which those customers are unable to access separately from the use of the principal service, can have no interest for such customers that is independent of that principal service (see, to that effect, judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 27).
25


The Court then added that the receipt of a payment and the handling of that payment are intrinsically linked to any supply of services provided for consideration, and that it is inherent in such a supply that the service provider should seek payment and make appropriate efforts to ensure that the customer can make effective payment in consideration for the service supplied, the Court holding that, in principle, any method of payment for a supply of services involves the provider taking certain steps for the handling of the payment, even if the extent of those steps may vary from one method of payment to another (see, to that effect, judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 28).
26


The Court stated, last, that the fact that a separate price for the alleged financial service is identified as such in the contract document and itemised separately in the invoices issued to customers is not of itself decisive, the Court holding that the fact that a single price is invoiced, or that separate prices were contractually stipulated, has no decisive significance for the purposes of determining whether it is necessary to find that there are two or more distinct transactions or only a single economic transaction (see, to that effect, judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 29 and the case-law cited).
27


In accordance with the Court’s settled case-law, it is for the national court to assess whether the material put before it discloses, having regard to the economic and commercial reality of the transactions concerned, the characteristics of a single transaction, the contractual structure of that transaction notwithstanding (see, to that effect, judgments of 21 February 2008, Part Service, C‑425/06, EU:C:2008:108, paragraph 54, and of 20 June 2013, Newey, C‑653/11, EU:C:2013:409, paragraphs 42 to 45) and taking into consideration all the circumstances in which that transaction takes place (see, to that effect, judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 26 and the case-law cited).
28


In the light of the foregoing, it is for the referring court to determine whether, in the main proceedings, the card handling service provided by Bookit should be considered, for the purposes of the application of VAT, as a service that is ancillary to the sale of the cinema tickets concerned or as a service that is ancillary to another principal service that is supplied by Bookit to the purchasers of those tickets, which might be the remote reservation or purchase in advance of cinema tickets, and, consequently, as forming with that principal supply a single supply, with the result that that service should receive the same tax treatment as the principal supply (see, to that effect, judgments of 25 February 1999, CPP, C‑349/96, EU:C:1999:93, paragraph 32, and of 16 April 2015, Wojskowa Agencja Mieszkaniowa w Warszawie, C‑42/14, EU:C:2015:229, paragraph 31).
33


In accordance with the Court’s settled case-law, the exemptions laid down in Article 135(1) of the VAT Directive constitute autonomous concepts of EU law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another (see, inter alia, judgments of 10 March 2011, Skandinaviska Enskilda Banken, C‑540/09, EU:C:2011:137, paragraph 19 and the case-law cited, and of 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 33 and the case-law cited).
34


It is also settled case-law that the terms used to specify those exemptions are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, inter alia, the judgment of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 23, and 22 October 2015, Hedqvist, C‑264/14, EU:C:2015:718, paragraph 34 and the case-law cited).
36


The transactions exempted under that provision are defined in terms of the nature of the services provided and not in terms of the person supplying or receiving the service. Accordingly, the exemption is not subject to the condition that the transactions be effected by a certain type of institution or legal person, where the transactions in question relate to the sphere of financial transactions (see judgment of 28 October 2010, Axa UK, C‑175/09, EU:C:2010:646, paragraph 26 and the case-law cited).
38


In that regard, the Court has previously held that a transfer is a transaction consisting in the execution of an order for the transfer of a sum of money from one bank account to another. It is characterised in particular by the fact that it involves a change in the legal and financial situation existing, on the one hand, between the person giving the order and the recipient and, on the other, between those parties and their respective banks; and, in some cases, between those banks. Moreover, the transaction which produces the change is solely the transfer of funds between accounts, irrespective of its cause. Thus, a transfer being only a means of transmitting funds, the functional aspects are decisive for the purpose of determining whether a transaction constitutes a transfer within the meaning of Article 135(1)(d) of the VAT Directive (see, to that effect, the judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 53, and of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 25).
39


Further, the wording of Article 135(1)(d) of the VAT Directive does not in principle preclude a transfer from being broken down into separate services which then constitute ‘transactions concerning’ transfers within the meaning of that provision (see, to that effect, judgment of 5 June 1997, SDC,C‑2/95, EU:C:1997:278, paragraph 64). While it is not inconceivable that the exemption at issue may extend to services which are not transfers per se, the fact remains that that exemption can relate only to transactions which form a distinct whole, fulfilling in effect the specific, essential functions of such transfers (see, to that effect, judgment of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraphs 66 to 68).
40


It follows from the foregoing that, in order to be characterised as a transaction concerning transfers within the meaning of Article 135(1)(d) of the VAT Directive, the services at issue must, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of a transfer and, therefore, having the effect of transferring funds and entailing changes in the legal and financial situation. In that regard, a service exempted under the VAT Directive must be distinguished from the supply of a mere physical or technical service. To that end, it is relevant to examine, in particular, the extent of the liability of the supplier of services, in particular the question whether that liability is restricted to technical aspects or whether it extends to the specific, essential aspects of the transactions (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 66, and of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 24).
41


It must also be stated that, since the functional aspects are decisive to the determination of whether a transaction concerns a transfer for the purposes of Article 135(1)(d) of the VAT Directive, the test that makes it possible to distinguish a transaction that has the effect of transferring funds and bringing about changes in the legal and financial situation within the meaning of the case-law cited in paragraphs 38 to 40 of this judgment, which falls within the scope of the exemption concerned, from a transaction that does not have such effects and therefore, is outside its scope, is whether the transaction under consideration causes the actual or potential transfer of ownership of the funds concerned, or fulfils in effect the specific, essential functions of such a transfer (see, to that effect, judgment of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 33).
42


In that regard, while the fact that the service provider concerned may directly debit and/or credit itself an account, or again act by means of accounting entries in accounts belonging to the same account holder, allows, in principle, the conclusion that that condition is met and that the service under consideration is exempted (see, to that effect, judgment of 13 March 2014, ATP PensionService, C‑464/12, EU:C:2014:139, paragraphs 80, 81 and 85), the mere fact that that service does not directly involve such a task does not however mean that the possibility of its being within the scope of the exemption at issue should be immediately ruled out, given that the interpretation described in paragraph 38 of this judgment does not presuppose any particular method for effecting transfers (see, to that effect, judgment of 13 March 2014, ATP PensionService, C‑464/12, EU:C:2014:139, paragraph 80).
43


Further, according to the Court’s settled case-law, the considerations relating to transactions concerning transfers are also applicable to transactions concerning payments (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 50, and of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 26).
44


In this case, it must be observed that, as is apparent from the description in paragraph 31 of this judgment, a card handling service, such as that at issue in the main proceedings, has the effect of leading to the execution of a payment or a transfer and such a service may be regarded as being essential to that execution, given that, as is stated in the order for reference, it is the transmission of the end of day settlement file, by the service provider to its merchant acquirer, that triggers the process of payment or transfer of the sums concerned from the card issuers to that merchant acquirer and, ultimately, to the account of that service provider, and that the only payments or transfers that are in fact executed are those for which the necessary information is included in that file.
45


However, first, since Article 135(1)(d) of the VAT Directive must be interpreted strictly, the mere fact that a service is essential for completing an exempt transaction does not warrant the conclusion that that service is exempted (see, to that effect, judgments of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 65, and of 28 July 2011, Nordea Pankki Suomi, C‑350/10, EU:C:2011:532, paragraph 31).
46


Second, the obtaining by the provider of that service from the purchaser of the data pertaining to the payment card that the purchaser wishes to use; the transmission of that data by that service provider to its merchant acquirer; the receipt, by that service provider, of the authorisation code provided by the card issuer; the retransmission by that service provider to its merchant acquirer of an end of day settlement file including inter alia the authorisation codes relating to the sales effected, cannot, taken individually or together, be regarded as performing a specific and essential function of a payment or transfer transaction for the purposes of Article 135(1)(d) of the VAT Directive.
47


There is no dispute, given that description, that the provider of such a service does not itself directly debit or credit the accounts concerned, and that it does not act by accounting entries, and that it does not even instruct such debit or credit, since it is the purchaser who, by using his or her payment card to make a purchase, decides that his or her account will be debited in favour of a third party.
48


Moreover, as stated by the European Commission at the hearing, the settlement files submitted by a trader who is a service provider to its merchant acquirer are nothing other than a request to receive a payment electronically. The purpose of the retransmission of such an end of day file is thus merely to inform the payment system concerned that a previously authorised sale has in fact been made. That retransmission cannot therefore be regarded as executing the payment or the transfer concerned or as fulfilling in effect the specific and essential functions. The fact that such a file is confined to producing the data and codes pertaining to sales that have actually been made, and therefore to sales where the availability of the ticket desired by the customer has been confirmed, is of no significance in that regard, since that fact is inherent in the very nature of such a file.
49


It must further be stated that, as is apparent from the order for reference, the authorisation code — which the service provider does no more than request, receive and retransmit, and over the provision of which it therefore has no control — contained in that file represents only an authorisation, to proceed with the sale, which the card issuer concerned, via the merchant acquirer, supplies to the service provider. There is again no question of a specific function that is essential to the transfer of ownership of the funds concerned. Accordingly, whether such a code is obtained by the provider of that service directly from the card issuer, or rather via its merchant acquirer, is of no relevance to the determination of whether a card handling service, such as that at issue in the main proceedings, does or does not fall within the scope of the exemption at issue.
50


Third, it is not apparent from the order for reference that the provider of such a service assumes any liability as regards the achievement of the changes in the legal and financial situation that are characteristic of the existence of an exempted transaction of transfer or payment under Article 135(1)(d) of the VAT Directive, and therefore as regards the specific and essential functions of the process of transfer of funds that takes place, between the card issuers and the merchant acquirer and then from the merchant acquirer to the account of that service provider. In particular, while the provider of a card handling service may, as stated by Bookit in its written observations, have obligations to the purchaser and, possibly, to the entity on whose behalf it makes the sale, to ensure due performance of that sale and the card handling service associated therewith, and therefore to ensure the satisfactory completion of that service, that liability does not mean that the service provider assumes any liability for the achievement of the changes in the legal and financial situation that are characteristic of an exempted transaction of payment or transfer.
51


It follows from all the foregoing that the provider of a card handling service, such as that at issue in the main proceedings, plays no specific and essential part in achieving the changes in the legal and financial situation that are the result of a transfer of ownership of the funds concerned and that, according to the Court’s case-law, can be said to be characteristic of a transaction concerning payments or transfers that is exempted under Article 135(1)(d) of the VAT Directive, but does no more than provide technical and administrative assistance for the obtaining of information and the communication of that information to its merchant acquirer, and to receive, by the same means, the communication of information that enables it to effect a sale and to receive the corresponding funds.
52


In that regard, it must be recalled that the fact that such a service is provided by electronic means, and in particular the fact that the transmission of the settlement file entails the automatic triggering of the payments or transfers under consideration, cannot alter the nature of the service provided and, therefore, does not affect the application of the exemption at issue (see, to that effect, judgment of 5 June 1997, SDC, C‑2/95, EU:C:1997:278, paragraph 37).
53


A card handling service, such as that at issue in the main proceedings, which accordingly consists, in essence, in an exchange of information between a trader and its merchant acquirer, with a view to receiving payment for a product or service offered for sale, cannot fall within the scope of the exemption provided in Article 135(1)(d) of the VAT Directive for transactions concerning payments and transfers.
54


It may be added, first, that such a service cannot be deemed to be, by its nature, a financial transaction for the purposes of Article 135(1)(b) to (g) of the VAT Directive, unless the view is taken that any trader that takes steps necessary for the receipt of payment by debit card or credit card is undertaking a financial transaction for the purpose of those provisions, which would render that concept meaningless and would be contrary to the requirement that VAT exemptions must be interpreted strictly.
55


Second, if the exemption provided for in Article 135(1)(d) of the VAT Directive were to be granted to a card handling service, such as that at issue in the main proceedings, that would be at odds with the purpose of the exemption for financial transactions, which is to alleviate the difficulties connected with determining the tax base and the amount of VAT deductible and to avoid an increase in the cost of consumer credit (judgment of 19 April 2007, Velvet & Steel Immobilien, C‑455/05, EU:C:2007:232, paragraph 24, and order of 14 May 2008, Tiercé Ladbroke and Derby, C‑231/07 and C‑232/07, not published, EU:C:2007:332, paragraph 24).