We have already reported several times on the VAT exemption for so-called white label structures and particularly on potential VAT-exempt services in connection with outsourcing the operation of ATMs in our blog.
A few days ago, the Court of Justice of the European Union (CJEU) (in the case Cardpoint GmbH as successor in title of Moneybox Deutschland GmbH; Case C-42/18) stated in a ruling that the services supplied in connection with an outsourced operation of ATMs are not exempt from VAT (Article 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJ 2006 L 347, p. 1, VAT Directive; Section 4 No. 8 letter d German VAT Act (UStG)). As we already expected in our blog post on Cash machines & VAT, CJEU judges therefore followed the Opinion of the Advocate General.
CJEU ruling: outsourcing of ATM operations is subject to VAT
In the case at hand, Cardpoint GmbH (Moneybox Deutschland GmbH) operated ATMs together with a bank. The activities undertaken by Cardpoint GmbH and the bank are described in comparative detail in paragraph 8 of the CJEU ruling. In the end, the CJEU ruled that the services provided by Cardpoint GmbH to the bank are not exempt from VAT in the context of payment and transfer transactions (Art. 135(1)(d) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJ 2006 L 347, p. 1, VAT Directive; Section 4 No. 8 letter d UStG).
Effects of the CJEU ruling on the outsourcing of ATM operations
To the extent this can be inferred from the CJEU ruling, the bank in this case exclusively carried out those activities which must be performed by a bank under applicable supervisory law. For the outsourcing of ATM operations, this means that a further outsourcing of the Bank’s activities to another company with the aim that this other company also provides services which are exempt from VAT, is not permissible under supervisory law.
Does the CJEU ruling apply to all white label structures?
A so-called white label structure in the financial services area as provided by banks and payment institutions refers to a structure whereby the service provided externally to the customer is rendered by a bank or a payment institution which is regulated by supervisory law (please also refer to my post on the VAT exemption of white label structures). The question therefore arises whether the CJEU ruling applies to all legal white label structures, particularly to a service commission within the meaning of Section 3 para. 11 UStG, where a bank operates the ATMs in its own name but for the account of a company.
There are only very few details regarding the underlying agreements in the Cardpoint GmbH case provided in the CJEU judgement, the German Federal Finance Court’s order for reference (dated 28/09/2017, V R 6/15, BStBl. II 2018, 250) and the ruling given by the court of lower instance (Finanzgericht Rheinland-Pfalz dated 23/10/2014, 6 K 1465/12, EFG 2015, 588). According to the CJEU ruling, the bank commissioned Cardpoint GmbH to provide services. These remarks indicate that there is no service commission. In light of this, it is plausible that the principles set out in the CJEU ruling do not apply in case there is a service commission (Section 3 para. 11 UStG; with regard to service commissions, please refer to my blog post on “ATMs and VAT”) and that the company provides a VAT-exempt service to the bank.
After the CJEU ruling: white label structures must be thoroughly structured with respect to applicable supervisory, civil and VAT laws
The considerations outlined above show that the legal structuring of white label structures requires the utmost diligence to the extent that it is not only the bank but also the company that is to provide VAT-exempt services. Therefore, it is advisable to bear in mind any potential effects on VAT when designing the legal structure of a white label structure.
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