Commission of the European Communities v Federal Republic of Germany.
Date: 2002-10-15
28 It should be borne in mind that Elida Gibbs concerned specifically the calculation of the taxable amount of a manufacturer who had issued money-off coupons giving rise, after purchase by the final consumer, to a reimbursement by that manufacturer to a retailer not directly connected to him in the distribution chain. The Court held that the manufacturer's taxable amount is equal to the selling price charged by the manufacturer, less the amount indicated on the voucher and refunded (Elida Gibbs, paragraph 34).
29 At paragraphs 19, 22 and 23 of Elida Gibbs, the Court recalled the principle underlying the VAT system, which is that it is intended to tax only the final consumer and is completely neutral as regards the taxable persons involved in the production and distribution process prior to the stage of final taxation, regardless of the number of transactions involved. The Court inferred, at paragraph 24 of the judgment, that the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer.
30 It went on to observe that, under the Court's settled case-law, the concept of consideration in Article 11(A)(1)(a) of the Sixth Directive had to be interpreted as the subjective' value, that is to say, the value actually received in each specific case, and not a value estimated according to objective criteria. The Court concluded that it would not be in conformity with that directive for the taxable amount used to calculate the VAT chargeable to the manufacturer, as a taxable person, to exceed the sum finally received by him. Were that the case, the principle of neutrality of VAT vis-à-vis taxable persons, of whom the manufacturer is one, would not be complied with (Elida Gibbs, paragraphs 26 to 28).
31 Accordingly, the Court held that the taxable amount attributable to the manufacturer as a taxable person must be the amount corresponding to the price at which he sold the goods to the wholesalers or retailers, less the value of those coupons. That interpretation, it added, was borne out by Article 11(C)(1) of the Sixth Directive, which seeks to ensure the neutrality of the taxable person's position (Elida Gibbs, paragraphs 29 to 31).
32 Moreover, at paragraph 32 of the judgment in Elida Gibbs the Court expressly rejected the arguments advanced in particular by the German and United Kingdom Governments to the effect that deduction from the taxable amount of reductions granted directly, or of refunds made directly, to the consumer by the initial supplier after delivery to a wholesaler or retailer would upset the functioning of the VAT machinery and render the system unworkable because it would require each wholesaler or retailer in the chain retroactively to adjust the price and, consequently, the amount of VAT they had paid to their own supplier and would require the latter to issue amended invoices.
33 In particular, the Court held that the VAT system is not disturbed as a result of such deduction since there is no need to readjust the taxable amount for the intermediate transactions. It stated that, for those transactions, observance of the principle of neutrality of VAT is ensured by application of the conditions for deduction set out in Title XI of the Sixth Directive (Elida Gibbs, paragraph 33).
42 Next, it should be emphasised that observance of the principle of neutrality is ensured since the conditions for deduction set out in Title XI of the Sixth Directive allow the intermediate links in the distribution chain to deduct from their own taxable amount the sums paid by each to his own supplier in respect of VAT on the corresponding transaction and thus to pass on to the tax authorities the part of the VAT representing the difference between the price paid by each to his supplier and the price at which he supplied the goods to his purchaser (Elida Gibbs, paragraph 33).
45 In that regard it is sufficient to state, first, that although the manufacturer may in fact be regarded as a third party as regards the transaction between the retailer who receives reimbursement of the value of the voucher and the final consumer, that reimbursement entails a corresponding reduction in the amount finally received as consideration for the supply by him and that consideration constitutes, pursuant to the principle of VAT neutrality, the basis for calculating the tax for which he is liable (see, in that connection, Elida Gibbs, paragraph 28).
46 As regards, secondly, the supply by the retailer who receives the reimbursement, it is important to note that the fact that a portion of the consideration received for that supply was not actually paid by the final consumer himself but was made available on behalf of the final consumer by a third party not connected with that transaction is immaterial for the purposes of determining that retailer's taxable amount (see, in that connection, Case C-18/92 Bally [1993] ECR I-2871, paragraph 17).
55 More specifically, it should be recalled that the case which led to the judgment in Boots Company, cited above, concerned money-off coupons which were offered free of charge by a company to its customers when they purchased certain items and formed part of a promotion the costs of which were borne by the company. Consequently, the Court ruled that since such a price reduction formed part of the price discounts and rebates allowed to the customer' within the meaning of Article 11(A)(3)(b) of the Sixth Directive, the face value of the coupons was not to be included in that company's taxable amount (Boots Company, paragraphs 13, 21 and 22).
56 In the case which led to the judgment in Argos Distributors, the vouchers were issued and sold by a company at their face value or with a rebate and were later used on the basis of their face value as means of payment in that company's stores by purchasers other than the acquirers of those vouchers. In that judgment the Court held that in order to calculate the VAT payable by Argos Distributors Ltd on the revenue from sales of goods paid for by those vouchers, the subjective consideration actually received by that company was constituted by the face value of the vouchers less any rebates actually granted (Argos Distributors, paragraphs 18 and 20).
57 It is clear from the judgments in Boots Company and Argos Distributors, first, that assessment of the money-off coupons for the purpose of calculating VAT is determined by their legal and financial characteristics and, secondly, that the taxable amount of the trader who accepts them may not be less than the sum of money which he actually receives for the supply by him (see Boots Company, paragraphs 21 and 22, and Argos Distributors, paragraphs 19 to 23).
58 It follows that, in situations such as that in the present case, the subjective consideration within the meaning of Article 11(A)(1)(a) of the Sixth Directive received by the retailer comprises the whole of the price of the goods, which is paid in part by the final consumer and in part by the manufacturer. In fact, the coupons substantiate the retailer's right to receive from the manufacturer a reimbursement in the amount of the reduction granted to the final consumer. It follows that the sum represented by the face value of those vouchers constitutes for the retailer an asset item realised on their reimbursement and that they must be treated, to the extent of that value, as a means of payment.
59 Consequently, it must be accepted that the retailer's taxable amount for the sale to the final consumer is the full retail price, namely the price paid by the final consumer plus the amount reimbursed to the retailer by the manufacturer.
75 Secondly, it should be recalled that the case which led to the judgment in Kuwait Petroleum, cited above, concerned vouchers offered by a petrol company to consumers with the purchase of a certain quantity of fuel which could be exchanged free of charge for gifts chosen from a special catalogue. The Court held that the offer of such gifts could not be regarded as constituting a rebate or discount under Article 11(A)(3)(b) of the Sixth Directive but was to be deemed to be a supply for valuable consideration and thus a taxable transaction under Article 5(6) of the Sixth Directive (Kuwait Petroleum, paragraphs 16, 17 and 31). Under that provision, the application by a taxable person of goods forming part of his business assets for his private use or that of his staff, or the disposal thereof free of charge, where the value added tax on the goods in question was wholly or partly deductible, are to be treated as supplies made for consideration.
76 However, the Court has also stated that a taxable person offering such gifts is authorised to deduct, in accordance with Article 17(2)(a) of the Sixth Directive, the amount of input VAT paid for the purchase of those goods (Kuwait Petroleum, paragraph 19).