Category Archives: VAT

Leasing, Insurance & VAT

The LEASING of an item and the INSURANCE  of the leased item are two separate supplies of services …  from a VAT perspective.

By a judgment of January 2013 the EUCJ has indicated that any insurance transaction has, by nature, a link with the item it covers and that this would not suffice to presume on the benefit of the case-law of the Court whereby several formally distinct services must be considered to be a single transaction when they are not independent.

Indeed if the VAT treatment of any insurance transaction were dependent upon the VAT treatment of the covered item itself, the very aim of article 135 (1) of the VAT Directive, that is the exemption of insurance transactions would be called into question.

The Court concluded that there was not here a unicity of services supply and that the supply of insurance services for a leased item and the supply of the leasing services themselves must, in principal, be regarded as distinct and independent supplies of services for VAT purposes.

The Court then observed that a supply of insurance cannot be subject to VAT simply because the insurance costs are re invoiced in accordance with the contract concluded between the parties to a leasing agreement. Indeed the fact that the lessor takes out an insurance policy at the request of its clients with a third party and then passes the exact cost billed by the third party to those clients cannot invalidate that finding.
The Court concluded that in such circumstances, there is not need to submit such a transaction to VAT, since it is exempt pursuant to Article 135(1)(a) of the VAT Directive.

The Court finally indicated that the provisions of article 28 of the VAT Directive (according to which « where a taxable person acting in his own name but on behalf of another person takes part in a supply of services, he shall be deemed to have received and supplied those services himself » ) and the related case-law of the Court on Article 28 of the VAT Directive (whereby article 28 of Title IV of the VAT Directive also concerns the application of VAT exemptions under the Sixth Directive) were such as to support the VAT exemption of the transaction at issue.

Pharmaceutical product = Medicinal product?

Any pharmaceutical product is not necessarily a medicinal product with regard  to VAT regulation and may  enjoy the benefit of the reduce rate of VAT only if it can be considered as a finished good which may be used directly by final consumers.

In a judgment of January 2013 the EUCJ, when considering the possible application of the VAT reduced rate to pharmaceutical products, has considered that the concept of « pharmaceutical product » as understood under point 3 of Appendix III to the VAT Directive does not include « medicinal substances » used habitually and suitably in the production of medicinal products.

Rejecting the position of the Commission whereby the concept of pharmaceutical products should be judged as being comparable to the concept of medicinal products given by Directive 2001/83, setting the Community code relating to medicinal products for human use, The Court notices that the majority of the language versions of this Directive use different terms in relation to the two concepts and hence considers that the concept of « pharmaceutical products » must be interpreted as having a broader meaning than « medicinal products ».
The Court stresses though that in application of the provisions of article 3 of Appendix II such defined « pharmaceutical products » must also be « normally used for health care, prevention of illness and as treatment for medical and veterinary purposes ».
The Court concludes that the reduced rate of VAT may only apply to medicinal substances only if they are likely to be used directly by final consumers for health care, prevention of illness and as treatment for medical and veterinary purposes.

Such an interpretation corroborates the purpose and the very existence of the reduced rate of VAT which is to render essential products less onerous and more accessible to final consumers.

Finally, one will note with interest that The Court , although conducting a pure fiscal VAT analysis, has however made reference to the definition of « pharmaceutical products » as provided under Customs law under chapter 30 of the European Combined Nomenclature as per Appendix I to Regulation 2658/87.


A preliminary ruling is awaiting judgment at the EUCJ as to the question whether, in the context of the Directive 2006/112, the supply of the storage of goods falls under the general provisions of article 44 of the Directive or, on the contrary, falls under the specific provisions of article 47 of the same Directive which govern the « supply of services connected with immovable property ».

The experienced « VAT player » shall indeed raise the issue of knowing whether the said supply of storage is a single supply or consists of various individual supplies, each to be assessed separately (single supply of storage, supply of storage on the one hand and supply of reconditioning services on the other  hand, single and principal supply of transportation for which the interim storage would remain a mere ancillary supply, etc.).

As to the possibility of qualifying the said storage of goods as a supply of « service connected with immovable property » our VAT professional would indeed question whether the said real estate  is a constituent , central and essential element of the said supply of service and inevitably address the issue of « direct and immediate link ».

Is the subject matter  or the object of the said supply of storage the real estate , the right to use it or a specific part of it?

Indeed if the supply of storage is not granting the use of the real estate (given part of the warehouse dedicated for the sole use of the customer, for instance) the real estate is then nothing but a simple means of performing the supply.

The VAT Committee had in fact expressed a similar view (« assigned for the exclusive use ») at its July 2001 meeting.

It is therefore likely that the Court will consider that although the said supply of storage constitutes the principal element of a single service supply, it does not though qualify as a « supply of services connected with immovable property » as understood under the provisions of article 47 of the Directive since the beneficiary does not , in the case under examination, hold any right to use the warehouse or part of it which would  be reserved to his exclusive use.

The general rule should hence prevail on the specific rule and the place of taxation to TVA of this supply of storage be judged as being the Member State where the beneficiary of the supply of storage is established… since he is a registered VAT payer in his Member State of origin.

Yearly revaluation of TGAP

The calculation system of the yearly review of the rate is modified.
The variation will now be made in a proportion equal  to the equal of the rate of variation of the officlal index on  consumption (tobacco consumption excluded) of the last but one year.