On March 7, 2018 on the website of the Court of Justice of the European Union (CJEU) the opinion of Advocate General Tanchev in the Case C-544/16, Marcandi Limited, trading as ‘Madbid’ versus Commissioners for Her Majesty’s Revenue and Customs (ECLI:EU:C:2018:164) was published.
From introductory remarks made by the Advocate General
In the present case, the Court is called upon to decide whether the grant of the right to participate in a penny auction must be regarded as a supply of services subject to value added tax (‘VAT’) within the meaning of Article 2(1)(c) of Council Directive 2006/112/EC or as a preliminary transaction not subject to VAT.
In penny auctions, participants are required to pay a non-refundable fee in order to place bids (‘the bidding fee’). When the auction begins, the timer begins to count down to zero. Each bid increases the price of the auctioned goods by 0.01 pounds sterling (GBP) (hence the name ‘penny auction’) and restarts the timer. The auction ends when the timer reaches zero. The winner is the person who was the last to bid.
According to Article 2(1)(a) and (c) of Directive 2006/112, the supply of goods for consideration and the supply of services for consideration constitute transactions subject to VAT.
There are two ways of looking at the payment of the bidding fee for the purposes of Article 2(1) of Directive 2006/112.
On the one hand, the bidding fee may be regarded as consideration for the supply of a service, namely, the grant of the right to participate in the auction. The grant of that right in return for the payment of the bidding fee would thus be a transaction subject to VAT within the meaning of Article 2(1)(c) of Directive 2006/112. The subsequent purchase, by the winner, of the auctioned goods would be considered a supply of goods within the meaning of Article 2(1)(a) of that directive and, as such, a further and distinct transaction subject to VAT.
On the other hand, participants in the auction aim at winning the auction and purchasing the auctioned goods. Therefore, the grant of the right to participate in the auction could be regarded as a mere preliminary step towards the purchase of the auctioned goods. It would not be a transaction subject to VAT within the meaning of Article 2(1) of Directive 2006/112. Only the subsequent purchase of the goods won would be considered a transaction subject to VAT within the meaning of that provision.
In the present case, the Court is called upon to decide between the two approaches described above. It is also asked what constitutes consideration for the supply of services and/or the subsequent supply of goods.
The facts, the main proceedings and the questions referred for a preliminary ruling
· Marcandi Limited (‘Madbid’), a company established in the United Kingdom, operates an online shopping business under the name ‘Madbid’. Madbid sells mainly technology-related products, such as mobile telephones, tablets, computers and televisions. It occasionally sells higher-value goods, such as cars. Madbid provides an online platform where registered users can participate in online penny auctions to bid for, and win, goods. It also allows users to buy goods directly from its online shop.
· Madbid initially launched a website in the United Kingdom. Following the success of that website, Madbid launched websites in nine other Member States, including Germany, and in Canada and Turkey as well.
· Madbid is registered for VAT in, among other places, the United Kingdom and Germany.
· Madbid’s business operates as follows. In order to be able to bid in an online auction or purchase goods online, persons have to register online with Madbid as users (‘the users’) and agree to Madbid’s contractual terms.
· Once registered, users may buy so-called ‘credits’ (‘the Credits’). Credits allow users to place bids in Madbid’s online auctions. Credits cannot, however, be used to purchase goods directly from the Madbid shop. Nor can they be converted back into cash. Credits are purchased by using one of the accepted payment methods such as credit or debit cards. Each Credit has a unique identifying code, which allows Madbid to track the Credits in a user’s account at any given time. Credits are sold in packages of different numbers of Credits for different prices (for instance, a package of 500 Credits costs GBP 49.99, and a package of 80 Credits costs GBP 9.99). A specific monetary value is attributed to each Credit. That value is, as near as makes no difference, the same as the amount that the user paid for the Credits. Credits expire after 180 days.
· As mentioned above, Credits are used to make a bid in an auction on Madbid’s website. Every auction begins with an opening price of GBP 0.00, and with the auction timer set to the allocated time limit set for the auction, which is usually one minute. Each auction also specifies a set number of Credits (between 1 and 8) that a user must spend in order to place a bid. When the auction begins, the timer begins to count down to zero. When the timer reaches zero, the auction comes to an end.
· When a user places a bid by clicking the ‘Bid’ button, the set number of Credits required for placing a bid in that auction is deducted from the total number of Credits in that user’s account. The bid placed is GBP 0.01 higher than the previous bid, which means that the listed auction price of the goods is increased by GBP 0.01. The auction timer is reset to the allocated time limit and starts to count down to zero. The winner of the auction is the current highest bidder when the auction timer reaches zero.
· The auction winner is entitled to purchase the goods won for the amount of the winning bid, plus the shipping and handling charge. He is not, however, obliged to purchase those goods. Should the auction winner decide to purchase the goods won, he must pay the amount of the winning bid, plus the shipping and handling charge, within a specified period; otherwise he forfeits entitlement to buy the goods won for the amount of the winning bid. The value of the Credits used by the auction winner to bid in the auction is not credited towards the price paid for the goods won. The value of those Credits is extinguished.
· However, Madbid’s auction platform also has a so-called ‘Buy Now’ feature (‘the Buy Now feature’). That feature allows a user to purchase, during the course of an auction, goods identical to those for which he was bidding. The price of the goods (‘the initial Buy Now price’) is reduced by the value of the Credits spent by that user in placing bids in that auction. For instance, if a user spends Credits with a value of GBP 100 in bidding for an iPod, by clicking the ‘Buy Now’ button that user may purchase the iPod directly by paying GBP 100 less than the initial Buy Now price. In almost all cases, the initial Buy Now price is equal to the recommended retail price. Therefore, the Buy Now feature allows users to purchase the goods at a price below the recommended retail price. The user who purchases goods through the Buy Now feature during an auction may not place any more bids in that auction.
· A user who placed bids in an auction but did not win that auction, and who did not make a Buy Now purchase, is awarded a discount equal to the value of the Credits spent bidding in the auction (that is, the amount that the user paid for those Credits) (‘the Earned Discount’). The Earned Discount is awarded after the auction in which the user spent the Credits is completed. If that user decides to purchase goods directly from the Madbid shop, the price of the goods (‘the price in the Madbid shop’) is reduced by the amount of the Earned Discount. That purchase will be referred to below as a purchase through ‘the Earned Discount feature’. The Earned Discount accumulates in respect of all auctions in which a user used Credits to bid. The Earned Discount generated by each particular Credit expires 365 days after that Credit was spent in an auction. The value of Credits used by the auction winner to bid in the auction he won does not generate any Earned Discount.
· The Buy Now and Earned Discount features ensure that the user who spends Credits in bidding cannot lose money by doing so. Indeed, as mentioned at point 20 above, when that user clicks the Buy Now button during the course of the auction, the initial Buy Now price is reduced by the value of those Credits. Similarly, should he, as mentioned in point 21 above, go on to buy directly from the Madbid shop, he is awarded an Earned Discount equal to the value of those Credits.
· By decision of 9 December 2013, Her Majesty’s Revenue and Customs (‘HMRC’), which is the public authority responsible for the collection and management of VAT in the United Kingdom, found that the amount paid by users, to Madbid, for the issue of Credits was consideration for a supply of services, namely, the grant of a right to take part in Madbid auctions, and that the place of supply of that service was where Madbid is established, namely the United Kingdom (‘HMRC’s decision’).
· In a ruling of 9 July 2014, the Finanzamt Hanover-Nord (Hanover-Nord Tax Office, Germany) (‘the German tax authorities’) found, in particular, that (i) the issue of Credits by Madbid is not a transaction subject to VAT; (ii) where Madbid supplies goods to customers situated in Germany, this constitutes a supply of goods for VAT purposes; (iii) consideration for that supply of goods includes both the price paid by the user for the goods (namely, the auction winning price, the Buy Now price or the price in the Madbid shop net of Earned Discount) andthe value of the Credits spent by that user in acquiring those goods (namely, the Credits used either to place bids and win the auction, or to generate the reduction in the Buy Now price or the Earned Discount); and (iv) Madbid is liable for VAT in Germany on that supply of goods.
· Madbid brought an appeal against HMRC’s decision before the First-tier Tribunal (Tax Chamber) (United Kingdom).
· On 10 May 2016, the First-tier Tribunal (Tax Chamber) released an interim decision making findings of fact and deciding to request a preliminary ruling from the Court. According to the First-tier Tribunal (Tax Chamber), Credits are bought for a distinct purpose, namely, taking part in Madbid auctions, and the subsequent purchase of goods, if and when it takes place, is a further and distinct transaction. The complexity of the matter, reflected in the diverging interpretations of Directive 2006/112 by HMRC and the German tax authorities, led the First-tier Tribunal (Tax Chamber) to refer the following questions to the Court for a preliminary ruling:
‘(1) On the correct interpretation of [A]rticles 2(1), 24, 62, 63, 65, and 73 of [Directive 2006/112], and in circumstances such as those in the main proceedings:
(a) is the issue of Credits to users, by Madbid, in return for a money payment:
(i) a “preliminary transaction” outside the scope of [A]rticle 2(1), of the sort identified by the Court in [the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780)], at paragraphs 23 [to] 42; or
(ii) a supply of services by Madbid within the meaning of [A]rticle 2(1)(c), namely the grant of a right to participate in online auctions;
(b) if the grant of a right to participate in online auctions is a supply of services by Madbid, then is it a supply made “for consideration” within the meaning of [A]rticle 2(1)(c), namely the payment for it (i.e. the money received by Madbid from a user in return for Credits);
(c) is the answer to (b) different if the payment for the Credits also serves as an entitlement for the user to acquire goods to the same value in the event of the user not succeeding in the auction;
(d) if Madbid does not make a supply of services for consideration when it issues Credits to its users in return for a money payment, does it make such a supply at any other time;
and what principles should be applied in determining the answer to those questions?
(2) On the correct interpretation of [A]rticles 2(1), 14, 62, 63, 65, 73 and 79(b) of [Directive 2006/112] what, in circumstances such as those in the main proceedings, is the consideration obtained by Madbid in return for the supplies of goods that it makes to users, for the purposes of [A]rticles 2(1)(a) and 73? In particular, and taking into account the answer to Question 1:
(a) is the money paid by a user to Madbid for Credits a “payment … on account” for a supply of goods within the scope of [A]rticle 65, so that VAT is “chargeable” on receipt of that payment, and such that the payment received by Madbid from the user is consideration for a supply of goods;
(b) if a user buys goods through the Buy Now or Earned Discount features, is the value of Credits used in placing bids in auctions and, where the bid is unsuccessful, has the effect of generating Earned Discount or reducing the Buy Now price:
(i) a “price discount” within the meaning of [A]rticle 79(b), such that the consideration for Madbid’s supply of the goods is the money actually paid to Madbid by the user at the time of purchasing the goods and no more; or
(ii) part of the consideration for the supply of goods, such that the consideration for Madbid’s supply of goods includes both the money paid to Madbid by the user at the time of purchasing the goods and the money paid by the user for Credits used in placing unsuccessful bids in auctions;
(c) if a user exercises the right to buy goods after winning an online auction, is the consideration for the supply of those goods the stated auction winning price (plus shipping and handling charg[e]) and no more, or is the value of the Credits that the winner used to bid in that auction also part of the consideration for the supply of those goods by Madbid to the user;
or what principles should be applied in determining the answer to those questions?
(3) Where two Member States treat a transaction differently for the purposes of VAT, to what extent should the courts of one of those Member States take into account, when interpreting the relevant provisions of EU law and national law, the desirability of avoiding:
(a) double taxation of the transaction; and/or
(b) non-taxation of the transaction;
and what bearing does the principle of fiscal neutrality have on this question?’
· Written observations were submitted by Madbid, the United Kingdom Government and the European Commission. These parties also presented oral argument at the hearing on 13 December 2017.
Conclusion
The Advocate General proposes the following answers to the questions posed by the First-tier Tribunal (Tax Chamber) (United Kingdom):
(1) In circumstances such as those in the main proceedings, where a company operates a penny auctions website and also sells goods directly in an online shop, the issue to registered users, by that company, of Credits such as those in the main proceedings, which allow users to place bids in that company’s auctions but cannot be exchanged directly for goods, cannot be regarded as a preliminary transaction of the kind identified in paragraph 24 of the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780), which would, as such, fall outside the scope of Article 2(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. It must be regarded as a supply of services for consideration within the meaning of point (c) of that provision, the consideration being the amount paid by users for the issue of Credits. The issue of Credits in return for that amount must also be regarded as a supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 when the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods.
(2) The amount paid for the issue of Credits such as those in the main proceedings cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112. When the user wins the auction, the consideration for the supply of the goods won comprises only the auction winning price, plus the shipping and handling charge. The value of the Credits used to place bids in that auction is not part of the consideration for the supply of the goods won. When the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods, the consideration for the supply of those goods is that price, plus the shipping and handling charge, and less the value of the Credits used to place bids. In that case, the value of the Credits used to place bids must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.
(3) If the courts of a Member State against whose decision there is a judicial remedy under national law are aware that the interpretation of the provisions of Directive 2006/112 by the courts or the tax authorities of another Member State differs from their own, they may refer the matter to the Court under Article 267 TFEU.
From the assessment as made by the Advocate General
A. The first question referred
· By the first question, the referring court essentially asks whether the issue of Credits to users, by Madbid, in return for a money payment, constitutes a ‘supply of services for consideration’ within the meaning of Article 2(1)(c) of Directive 2006/112, or whether it must be regarded as a ‘preliminary transaction’ falling outside the scope of Article 2(1) of that directive, of the kind identified in paragraph 24 of the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780).
· I shall briefly summarise the Court’s judgment in MacDonald Resorts. The Court was called upon to rule on the purchase of so-called ‘Points Rights’ from a company selling timeshare usage rights in properties in holiday resorts. Points Rights entitled customers to be credited each year with points, which could be converted into the right to use a property temporarily or to stay in a hotel. The Court found that the purchase of Points Rights was not an aim in itself for customers. Their ultimate intention, when they purchased Points Rights, was to use a property temporarily or stay in a hotel. Therefore, the purchase of Points Rights was to be regarded as ‘[a] preliminary transactio[n] in order to be able to exercise the right to use a property temporarily, or to stay in a hotel’. As such, the purchase of Points Rights was not a transaction subject to VAT within the meaning of Article 2(1) of the Sixth Directive. Only the supply of the right to use a property temporarily, or to stay in a hotel, was subject to VAT within the meaning of that provision.
· In the present case, users may purchase Credits from Madbid in return for a money payment. Credits cannot be used to purchase goods directly from the Madbid shop. They can be used only to place bids in Madbid auctions. They are necessary in order for such bids to be placed.
· As mentioned in points 5 and 6 above, the issue of Credits may be regarded either as a supply of services (namely, the grant of the right to participate in Madbid auctions), or as a preliminary transaction not subject to VAT, of the kind identified in MacDonald Resorts(since it could be argued that the purchase of Credits is not an aim in itself for users, and that their ultimate intention, when they purchase Credits, is to acquire goods).
· In the former case, Madbid would be liable to account for VAT on the issue of Credits in the Member State where it is established, namely, the United Kingdom. This was the position of HMRC. In the latter case, Madbid would be liable to account for VAT on the subsequent supply of goods in the Member State where the transport of the goods to the customer ends (in Germany, if the goods are delivered to a customer in Germany). This was the position of the German tax authorities.
· Madbid contends that the issue of Credits is a preliminary transaction of the kind identified in MacDonald Resorts.
· The United Kingdom and the Commission submit that the issue of Credits is a supply of services, not a preliminary transaction.
· I shall start by examining whether the issue of Credits must be regarded as a supply of services which, if effected for consideration, constitutes a transaction subject to VAT within the meaning of Article 2(1)(c) of Directive 2006/112, or whether it is a preliminary transaction falling outside the scope of Article 2(1) of that directive, of the kind identified in MacDonald Resorts. Since the issue of Credits constitutes, in my opinion, a supply of services, I shall then assess whether it is effected for consideration. I shall, in examining those two aspects of the first question referred, take into account the fact that users may acquire goods from Madbid either by winning an auction and purchasing the goods won, or through the Buy Now and Earned Discount features.
1. Is the issue of Credits to be regarded as a preliminary transaction of the kind identified in MacDonald Resorts, or as a supply of services?
(a) The issue of Credits cannot be regarded as a preliminary transaction
· It is true that participation in Madbid auctions is unlikely to be an aim in itself for users, and that, consequently, the ultimate aim of users, when they purchase Credits, is to purchase goods.
· However, in my opinion, the issue of Credits cannot be regarded as a preliminary transaction carried out in order to supply goods, of the kind identified in MacDonald Resorts.
· Indeed, first, although each Credit is assigned a specific monetary value in Madbid’s computer systems, Credits cannot be used as a currency to make direct purchases of goods from the Madbid shop. At the oral hearing, Madbid’s representative specified that direct purchases are paid for by credit card or debit card.
· Second, a distinct service is supplied, namely, the grant of a right to participate in Madbid auctions. Participation in Madbid auctions gives users a chance to purchase goods at a price below their market value since the winning price is typically lower than the market value of the auctioned goods. By contrast, when purchasing directly from the Madbid shop, users are charged the market price for the goods. According to the request for a preliminary ruling, ‘the decision by a … user to acquire Credits rather than to proceed direct to the Madbid shop is a decision to buy the chance of acquiring the goods on offer for less – often much less – than their shop price. … Users who bid in an auction acquire the chance of a discount through winning the auction, which the straightforward shoppers do not have’.
· Third, the auction winner is not obliged to purchase the auctioned goods. Should the winner not pay the winning price within a specified time period, he forfeits entitlement to buy the goods at the winning price. Therefore, the issue of Credits does not necessarily lead to the supply of the auctioned goods.
· Fourth, if the auction winner purchases the auctioned goods, the value of the Credits spent in bidding is not credited towards the winning price. The value of those Credits is exhausted. In other words, Credits spent in bidding cannot be used to purchase the auctioned goods.
· Fifth, where the auction winner purchases the auctioned goods, then cancels the order, only the amount of the winning price is refunded. The value of the Credits spent in bidding is not refunded.
· Sixth, the situation in MacDonald Resorts differs from that in the present case.
· Indeed, in MacDonald Resorts, the service at issue, which consisted in providing hotel accommodation or the right to use a property temporarily, was not ‘fully supplied’ until the Points Rights were converted into ‘specific services’ (the right to stay in a specific hotel or to use a specific property for a specific period of time). This was because, when customers purchased Points Rights, they did not know what accommodation would be available in a given year or the value in points of a holiday in that accommodation. When customers purchased Points Rights, the services were not identified.
· By contrast, in the present case, when users purchase Credits, they know what service will be supplied, namely, the right to participate in Madbid auctions. As submitted by the Commission, that service is identified and it is supplied immediately (since users may place bids in Madbid auctions immediately after purchasing Credits).
· Consequently, the purchase of Credits cannot be regarded as a preliminary transaction carried out in order to supply goods.
(b) No preliminary transaction where Credits spent in bidding are used to purchase goods through the Buy Now or Earned Discount features
· As explained in points 20 to 22 above, when a user withdraws from, or loses, an auction, the value of the Credits used to place bids is not exhausted.
· Indeed, a user may purchase goods from Madbid during an auction by clicking the Buy Now button. In that case, the value of the Credits which that user spent to bid in that auction is set against the initial Buy Now price.
· A user may also purchase goods from Madbid through the Earned Discount feature. In that case, the Earned Discount, whose amount is equal to the value of the Credits spent by that user to bid in Madbid auctions, is set against the price of the goods in the Madbid shop.
· According to Madbid, the fact that Credits spent in bidding may be used to purchase goods directly from its online shop demonstrates that the issue of Credits is a preliminary transaction of the kind identified in MacDonald Resorts.
· However, in my opinion, that argument does not call into question my conclusion at point 46 above.
· Indeed, first, only the value of Credits spent in bidding may be set against the price of goods purchased through the Buy Now or Earned Discount features. Credits not spent in bidding cannot be set against the price of those goods.
· Second, a service was provided to the user who is granted a reduction in the initial Buy Now price or in the price in the Madbid shop. That user took part in an auction, which gave him a chance to purchase the auctioned goods at a price below theirmarket value. It is irrelevant that that user decided to give up that chance (by clicking the Buy Now button) or that he was unlucky and lost the auction, so that he must pay the full market price of the goods. This takes nothing away from the fact that a distinct service was supplied to him. Indeed, that user could have decided to purchase goods directly in the Madbid shop, without first participating in an auction. He would have paid the same price, that is, the full retail price of the goods.
· In that regard, Madbid’s argument that the situation in the present case is similar to that in Société thermale d’Eugénie-les-Bainsmust be rejected. In Société thermale d’Eugénie-les-Bains, the Court held that the deposit paid by a customer when booking a hotel room, which is set against the full cost of the room if the customer takes up occupancy, does not constitute consideration for the supply of an independent and identifiable service. According to Madbid, it follows that Credits spent in bidding, whose value is set against the price of goods purchased through the Buy Now or Earned Discount features, do not constitute consideration for the supply of any service. However, in my view, a distinct service was provided to the user, in that he was allowed to participate in an auction. The situation in the present case differs from that in Société thermale d’Eugénie-les-Bains.
· Third, the value of Credits spent in bidding is on occasion lost because users neglect to make direct purchases from which the value of those Credits may be deducted.
· Fourth, when a user purchases goods through the Buy Now or Earned Discount features, then cancels the order, only the initial Buy Now price or the price in the Madbid shop is refunded. The value of the Credits spent in bidding is not.
· Therefore, the issue of Credits cannot be considered a preliminary transaction carried out in order to supply goods. It must be regarded as a supply of services, namely, the grant of a right to participate in Madbid auctions.
· For the sake of completeness, I should point out that, according to case-law, several formally distinct supplies must be considered to be a single transaction where they are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split, or where one or more supplies constitute a principal supply and the other supply or supplies constitute one or more ancillary supplies which share the tax treatment of the principal supply. All parties agree that that case-law does not apply. I consider, first, that the issue of Credits and the supply of goods cannot be regarded as a single, indivisible supply, for customers may purchase goods directly in the Madbid shop without participating in auctions. Second, in my opinion, the issue of Credits cannot be considered ancillary to the supply of goods, because the Buy Now or Earned Discount features seek to ensure that users cannot lose money by participating in auctions. Therefore, the purpose of those features is to induce users to participate in auctions. Nor can the supply of goods be considered ancillary to the issue of Credits, for it is only rarely that users neglect to use Credits or purchase goods through the Buy Now or Earned Discount features. Consequently, the case-law cited above is not applicable.
2. Are Credits issued for consideration within the meaning of Article 2(1)(c) of Directive 2006/112?
· Under Article 2(1)(c) of Directive 2006/112, in order for a supply of services to be covered by that directive, it must be made for consideration.
· It is settled case-law that a supply of services is effected for consideration, within the meaning of Article 2(1)(c) of Directive 2006/112, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. The Court has held that that is the case if there is a direct link between the service supplied and the consideration received, the sums constituting actual consideration for an identifiable service supplied in the context of such a legal relationship.
· Madbid submits that, should the issue of Credits be considered a supply of services, that supply would not be effected for consideration.
· The United Kingdom Government and the Commission submit that the issue of Credits is effected for consideration, that consideration being the amount paid by users for the issue of Credits.
· In my opinion, the issue of Credits is effected for consideration within the meaning of Article 2(1)(c) of Directive 2006/112. That consideration is the amount paid by users for the issue of Credits.
· First, there is a legal relationship between Madbid and the users. According to the order for reference, when persons register online as users, they have to agree to Madbid’s contractual terms. Subsequent purchases of Credits are legal relationships between Madbid and users.
· Second, there is a direct link between the grant of a right to participate in Madbid auctions and the amount paid by users for the issue of Credits. Indeed, Credits are used to place bids in Madbid auctions.
· Moreover, when a user wins an auction, there is no link between the supply of the auctioned goods and the price paid for the issue of Credits. This is because the value of the Credits used to bid in that auction is exhausted. It is not set against the winning price. Furthermore, there may be no supply of goods since the winner is not obliged to purchase the goods won.
· Furthermore, when a user withdraws from, or loses, an auction, the link between the supply of any goods purchased through the Buy Now or Earned Discount features and the price paid for the issue of the Credits is indirect, as argued by the United Kingdom Government. It is true that the value of the Credits spent in bidding is set against the initial Buy Now price or the price in the Madbid shop. However, only the value of Credits spent in bidding may be set against the price of the goods. Moreover, there may on occasion be no supply of goods if the user neglects to make purchases from which the price of Credits spent in bidding may be deducted.
· I conclude that the issue of Credits is effected for consideration within the meaning of Article 2(1)(c) of Directive 2006/112. That consideration is the amount paid by users for the issue of Credits.
3. No other supply of services for consideration
· For the sake of completeness, I should specify that Madbid makes no supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 other than the issue of Credits. No service is supplied when a user places a bid in an auction (it being the Credits issued that allow the user to place bids) or when Credits, or the Earned Discount generated by those Credits, expire (no additional service being provided by Madbid at that point).
· Therefore, the answer to the first question referred must be that, in circumstances such as those in the main proceedings, where a company operates a penny auctions website and also sells goods directly in an online shop, the issue to registered users, by that company, of Credits such as those in the main proceedings, which allow users to place bids in that company’s auctions but cannot be exchanged directly for goods, cannot be regarded as a preliminary transaction of the kind identified in MacDonald Resorts, which would, as such, fall outside the scope of Article 2(1) of Directive 2006/112. It must be regarded as a supply of services for consideration within the meaning of point (c) of that provision, the consideration being the amount paid by users for the issue of Credits. The issue of Credits in return for that amount must also be regarded as a supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 when the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods.
B. The second question referred
· By the second question, the referring court essentially asks what must be regarded as consideration for the supply of goods by Madbid within the meaning of Article 2(1)(a) of Directive 2006/112.
· First, the referring court asks whether the amount paid by users for the issue of Credits is to be considered a payment on account within the meaning of Article 65 of that directive, so that it is part of the consideration for the supply of goods. Second, the referring court asks whether, when the user does not win the auction and the value of the Credits used to place bids is credited towards the price of goods purchased through the Buy Now or Earned Discount features, the value of those Credits constitutes a price discount within the meaning of Article 79(b) of Directive 2006/112, or whether it is part of the consideration for that supply of goods. Third, the referring court asks whether, when the user wins the auction and purchases the goods won, the consideration for the supply of the goods comprises only the winning price, plus the shipping and handling charge, or whether it includes also the value of the Credits used to place bids in that auction.
· I shall examine, first, whether the amount paid for the issue of Credits is a payment on account within the meaning of Article 65 of Directive 2006/112, second, what is consideration for the supply of the goods won in an auction and, third, what is consideration for the supply of goods purchased through the Buy Now or Earned Discount features.
1. The amount paid for the issue of Credits is not a payment on account within the meaning of Article 65 of Directive 2006/112
· According to Article 63 of Directive 2006/112, VAT is chargeable when the goods or services are supplied.
· However, Article 65 of that directive provides that, where a payment is to be made on account before the goods or services are supplied, VAT becomes chargeable on receipt of the payment and on the amount received.
· According to case-law, in order for VAT to become chargeable in such a situation, all the relevant information concerning the chargeable event, namely, the future delivery or future performance, must already be known and therefore, in particular, the goods or services must be precisely identified.
· Madbid and the United Kingdom Governement agree that the amount paid by users for the issue of Credits is not a payment on account within the meaning of Article 65 of Directive 2006/112. The Commission does not address that issue.
· In my opinion, the amount paid for the issue of Credits cannot be considered a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112.
· Indeed, as explained in points 63 to 68 above, the amount paid for the issue of Credits is consideration for the supply of a service (namely, the grant of the right to participate in Madbid auctions), not for the supply of goods subsequent to an auction (if any). Those are two separate transactions. The amount paid as consideration for one transaction cannot be regarded as an account on the payment of the consideration for the other transaction.
· In any event, as argued by Madbid, users do not know, when they purchase Credits, what goods they will purchase from Madbid. Those goods are not precisely identified as required by the case-law cited in point 76 above.
· Consequently, the amount paid for the issue of Credits cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112.
2. What is consideration for the supply of the goods won in an auction?
· Pursuant to Article 73 of Directive 2006/112, the taxable amount includes everything which constitutes consideration obtained or to be obtained by the supplier in return for the supply of goods or services.
· According to settled case-law, that consideration is the subjective value, that is to say, the value actually received, in each specific case, and not a value estimated according to objective criteria.
· Madbid contends that consideration for the supply of the goods won in an auction comprises, not only the auction winning price, plus the shipping and handling charge, but also the value of the Credits spent in bidding in that auction.
· The United Kingdom Government and the Commission submit that only the auction winning price, plus the shipping and handling charge, is consideration for the supply of the goods won in an auction.
· In my opinion, only the auction winning price, plus the shipping and handling charge, is consideration for the supply of the goods won in an auction. The amount paid for the issue of the Credits spent in bidding in that auction is not consideration for the supply of those goods since, as explained in points 63 to 68 above, it is consideration for the grant of a right to participate in that auction, which is a separate transaction.
3. What is consideration for the supply of goods purchased through the Buy Now or Earned Discount features?
· The referring court asks whether, when the user purchases goods through the Buy Now or Earned Discount features, the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid online shop, or whether it is the initial Buy Now price or the price in the Madbid online shop, less the value of the Credits spent in bidding.
· Madbid contends that, where goods are purchased through the Buy Now or Earned Discount features, the consideration for that supply of goods includes the value of the Credits spent in bidding.
· The United Kingdom Government and the Commission submit that the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid shop, plus the shipping and handling charge, and less the value of the Credits spent in bidding.
(a) The value of the Credits spent in bidding is not part of the consideration for the supply of goods purchased through the Buy Now or Earned Discount features
· I consider that, when goods are purchased through the Buy Now or Earned Discount features, the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid shop, plus the shipping and handling charge, and less the value of the Credits spent in bidding.
· This is because, as explained in points 63 to 68 above, the amount paid for the issue of Credits spent in bidding is consideration for a service, namely, the grant of a right to participate in Madbid auctions. Therefore, that amount cannot be part of the consideration for the subsequent supply of goods purchased through the Buy Now or Earned Discount features, which is a separate transaction.
· Consequently, the value of the Credits spent in bidding, which is credited towards the initial Buy Now price or the price in the Madbid shop, is to be regarded as a discount on the price of the goods purchased through the Buy Now or Earned Discount features, within the meaning of Article 79(b) of Directive 2006/112. As such, the value of those Credits is not part of the taxable amount for the supply of those goods.
· Moreover, should Credits be regarded as vouchers which, once spent in bidding, may be used to obtain a reduction in the price of goods purchased through the Buy Now or Earned Discount features, this would be in accordance with the Court’s finding in Elida Gibbs that the taxable amount is the selling price of the goods, less the value of the voucher, in the present case, the initial Buy Now price of the goods or their price in the Madbid shop (plus the shipping and handling charge), less the value of the Credits spent in bidding.
(b) Situation where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop
· However, where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the discount covers 100% of the price for the goods purchased through the Buy Now or Earned Discount features. In that situation, one may wonder whether the value of the Credits spent in bidding constitutes a price discount within the meaning of Article 79(b) of Directive 2006/112.
· Reference should be made, in that regard, to the judgment of 27 April 1999, Kuwait Petroleum (C‑48/97, EU:C:1999:203). In that case, an oil company offered vouchers to customers with every 12 litres of fuel purchased. Those vouchers could be redeemed for goods chosen from a catalogue (‘the redemption goods’). The price of the fuel was the same whether or not the customers accepted the vouchers. As mentioned above, the Court found that customers were not given a discount on the price of the redemption goods since the term ‘price discount’ in Article 11A(3)(b) of the Sixth Directive, now Article 79(b) of Directive 2006/112, cannot be applied to reductions covering 100% of the price. The redemption goods were thus disposed of free of charge. According to Article 5(6) of the Sixth Directive, now Article 16 of Directive 2006/112, the disposal of goods free of charge must be treated as a supply of goods for consideration where the VAT on those goods is wholly or partly deductible.
· In its written observations, Madbid argues that it follows from the judgment in Kuwait Petroleum that the value of the Credits spent in bidding cannot be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.
· When questioned on this point at the hearing, the United Kingdom Government indicated that, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the consideration for the supply of the goods purchased through the Buy Now or Earned Discount features is not zero. Indeed, in that situation, the shipping and handling charge must be paid and it is part of the consideration for that supply of goods. That charge cannot be reduced by the amount of the Credits spent in bidding.
· In the Commission’s view, it follows from the judgment in Kuwait Petroleum that, in the situation where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, goods are disposed free of charge within the meaning of Article 16 of Directive 2006/112. Therefore, in that situation, the taxable amount is, according, to Article 74 of that directive, the purchase price paid to Madbid. However, the Commission stressed that Madbid does not normally dispose of goods free of charge, so that the judgment in Kuwait Petroleum is hardly relevant to the present case.
· In my opinion, contrary to what Madbid argues, it does not follow from the judgment in Kuwait Petroleum that the value of the Credits spent in bidding does not constitute a price discount within the meaning of Article 79(b) of Directive 2006/112. Indeed, in that case, the discount covered the whole price of any of the redemption goods, whereas, in the present case, the value of the Credits spent in bidding which is credited towards the initial Buy Now price or the price in the Madbid shop is typically below that price. Therefore, in the present case, a portion of the goods’ price is typically paid for by one of the accepted payment methods such as credit or debit card.
· Moreover, I consider that, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the supply of the goods purchased through the Buy Now or Earned Discount features is not a disposal free of charge within the meaning of Article 16 of Directive 2006/112.
· It is true that, in Kuwait Petroleum, there were two separate transactions (namely, the supply of fuel and the supply of the redemption goods), and that the price for the fuel was the same whether or not the customers accepted the vouchers. Similarly, in the present case, there are two transactions, and the amount paid for the Credits is the same whether or not the user uses them to place bids or fails to do so within 180 days, and whether or not the user sets the value of the Credits spent in bidding against the initial Buy Now price or the price in the Madbid shop or fails to do so within 365 days.
· However, I should stress that, in Kuwait Petroleum, the Court asked the referring court to verify whether part of the price paid for the fuel, whether identifiable or not, was compensation for the redemption goods. The reason why the Court nonetheless concluded that the supply of the redemption goods was a disposal free of charge was that the fact that the price for the fuel was the same whether or not the customers accepted the vouchers strongly suggested that the supply of the redemption goods was a disposal free of charge. By contrast, in the present case, the price for the goods purchased from Madbid is clearly identifiable. When a user purchases goods through the Buy Now feature, the initial Buy Now price as well as the new price (that is, the initial Buy Now price less the value of the Credits spent by that user in placing bids in the auction at issue) are displayed to that user. Similarly, the price of goods in the Madbid shop is necessarily displayed in that shop, since those goods may be purchased by customers who have bought no Credits and who, consequently, have not been awarded an Earned Discount that could be credited towards that price. Therefore, in the present case, the goods purchased through the Buy Now or Earned Discount features are supplied in return for the payment of an identifiable amount. Moreover, the payment of that amount is distinct from the payment for the issue of Credits. Indeed, the former payment is necessarily made after the latter payment, since the user does not know, when he purchases Credits, what goods he will acquire from Madbid, and at what price. Consequently, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Mabid shop, the goods purchased through the Buy Now or Earned Discount features are not disposed of free of charge within the meaning of Article 16 of Directive 2006/112.
· In any event, I note that, as argued by the representative of the United Kingdom Government, users must pay the shipping and handling charge even when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid online shop. It is for the referring court to verify whether the sale of goods and their shipping by Madbid are to be regarded as separate transactions. I note, however, that, at the oral hearing, the United Kingdom Government stated, without being contradicted by Madbid or the Commission, that Madbid makes a single supply of goods whenever it provides goods and delivers them to users. Should this be the case, the shipping and handling charge would be regarded as part of the consideration for the supply of goods. That supply would not be a disposal free of charge within the meaning of Article 16 of Directive 2006/112.
· Therefore, in my opinion, even where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid online shop, the value of those Credits must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112. The taxable amount attributable to Madbid is, as mentioned in points 92 and 93 above, the selling price of the goods (the initial Buy Now price or the price in the Madbid shop), plus the shipping and handling charge, and less the value of the Credits spent in bidding.
· Consequently, the answer to the second question must be that the amount paid for the issue of Credits such as those in the main proceedings cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112. When the user wins the auction, the consideration for the supply of the goods won comprises only the auction winning price, plus the shipping and handling charge. The value of the Credits used to place bids in that auction is not part of the consideration for the supply of the goods won. When the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods, the consideration for the supply of those goods is that price, plus the shipping and handling charge, and less the value of the Credits used to place bids. In that case, the value of the Credits used to place bids must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.
C. The third question referred
· By the third question, the referring court asks to what extent, if two Member States treat a transaction differently for the purposes of VAT, the courts of one of those Member States should take into account the desirability of avoiding double taxation and, conversely, non-taxation of that transaction, and the principle of fiscal neutrality as well.
· I consider that, as argued by the Commission, the answer to the third question referred must be that, if the courts of a Member State against whose decision there is a judicial remedy under national law are aware that the interpretation of the provisions of Directive 2006/112 by the courts or the tax authorities of another Member State differs from their own, they may refer the matter to the Court under Article 267 TFEU.
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