Court of Justice of the European Communities (including Court of First Instance Decisions)

Provisional text

JUDGMENT OF THE COURT (Seventh Chamber)

5 October 2023 (*)

(Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Taxable transactions – Article 2(1)(a) – Supply of goods for consideration – Free supply of a tablet or smartphone in exchange for a new subscription to a magazine – Concept of ‘single supply’ – Criteria – Second paragraph of Article 16 – Application of goods for business use as gifts of small value)

In Case C‑505/22,

REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD), Portugal), made by decision of 22 July 2022, received at the Court on 25 July 2022, in the proceedings

Deco Proteste – Editores Lda

v

Autoridade Tributária e Aduaneira,

THE COURT (Seventh Chamber),

composed of M.L. Arastey Sahún, President of the Chamber, N. Wahl (Rapporteur) and J. Passer, Judges,

Advocate General: J. Richard de la Tour,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

–        Deco Proteste – Editores Lda, by J. Espanha, advogado,

–        the Portuguese Government, by P. Barros da Costa, C. Bento and A. Rodrigues, acting as Agents,

–        the European Commission, by A. Armenia and L. Santiago de Albuquerque, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1        This request for a preliminary ruling concerns, in essence, the interpretation of Article 2(1)(a) and Article 16 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) and the principles of neutrality, equal treatment, non-discrimination and proportionality.

2        The request has been made in proceedings between Deco Proteste – Editores Lda and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) concerning the imposition of value added tax (VAT) on the supply, by Deco Proteste – Editores, as subscription gifts, of tablets or smartphones to new subscribers to the magazines which it markets.

 Legal context

 European Union law

3        Article 2 of Directive 2006/112 provides:

‘1.      The following transactions shall be subject to VAT:

(a)      the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…’

4        Article 16 of that directive provides:

‘The application by a taxable person of goods forming part of his business assets for his private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business, shall be treated as a supply of goods for consideration, where the VAT on those goods or the component parts thereof was wholly or partly deductible.

However, the application of goods for business use as samples or as gifts of small value shall not be treated as a supply of goods for consideration.’

 Portuguese law

5        The Código do Imposto sobre o Valor Acrescentado (Code on value added tax), in the version resulting from Decreto-Lei No 102/2008 (Decree-Law No 102/2008) of 20 June 2008 (Diário da República, 1st series, No 118, of 20 June 2008) (‘the VAT Code’), provides, in Article 3, entitled ‘Concept of supply of goods’:

‘1.      The supply of tangible goods for consideration in a manner corresponding to the exercise of the right of ownership is generally considered to be a supply of goods.

…

3.      For the purposes of paragraph 1 of this Article, the following shall also be deemed to be supplies of goods:

…

(f)      … the permanent use of business assets, for the owner’s own use, for the use of staff, or in general for purposes unrelated to the business, and the supply of such assets free of charge, where all of the assets or their components have been the subject of a total or partial deduction of tax;

…

7.      Excluded from the regime set out in paragraph 3(f), as defined by the Ministerial Decree of the Ministry of Finance, are goods not intended for subsequent marketing which, because of their characteristics or the different size or format of the product constituting the sales unit, are intended, in the form of a sample, to present or promote goods produced or marketed by the taxable person himself or herself, as well as gifts with a unit value of EUR 50 or less and whose total annual value does not exceed 0.5% of the turnover achieved by the taxable person during the previous calendar year, in accordance with commercial practice.’

6        Article 18 of the VAT Code, entitled ‘VAT rates’, provides that supplies of goods set out in lists I and II annexed to that code benefit from a reduced rate of VAT, set at 6% and 13% respectively. Other supplies of goods are subject to the standard VAT rate of 23%. Supplies of tablets and smartphones fall under the latter rate.

7        List I annexed to the VAT Code, entitled ‘Goods and services taxed at a reduced rate’, includes Point 2.1 which reads as follows:

‘Newspapers, magazines and other periodicals as such, considered in the legislation regulating cultural, educational, recreational or sporting material …’

8        The Portaria No 497/2008 (Ministerial Decree No 497/2008) of 24 June 2008 (Diário da República, 1st series, No 120, of 24 June 2008) defines the concept of a ‘gift’ and sets out the procedures and accounting obligations to be complied with by persons liable to VAT for the purposes of the application of Article 3(7) of the VAT Code. Article 3 of that decree, entitled ‘Definition of the concept of gift’, states:

‘1.      The gift may consist of goods marketed or produced by the taxable person or goods purchased from third parties.

2.      Where the gift consists of a set of goods, the value of EUR 50 referred to in Article 3(7) of the VAT Code shall apply to that set.

3.      Quantity bonuses granted by the taxable person to his or her customers are excluded from the concept of a gift.’

 The dispute in the main proceedings and the questions referred for a preliminary ruling

9        Deco Proteste – Editores is a company established in Portugal which publishes and markets magazines and other documents providing information on consumer protection. Those goods are sold only on subscription. In the context of promotional campaigns aimed at attracting new customers, it gives new subscribers who sign up for a subscription plan a gift which can be a tablet or smartphone, the unitary value of which is always below EUR 50.

10      The subscription gift is sent by courier to those subscribers with their magazine after the first monthly subscription payment, the amount of which is identical to that of subsequent monthly payments. As there is no minimum subscription period, customers may keep the subscription gift without incurring any penalty, after the first monthly payment, even if the subscription is cancelled.

11      The subscription gifts are bought from companies established in the European Union, in the context of the reverse charge procedure in respect of VAT.

12      In 2019, following a tax inspection relating, in particular, to VAT for the years 2015 to 2018, the tax and customs authority noted that the invoices issued by the applicant in the main proceedings at the time of the new subscriptions stated the amount of the subscription to which a reduced VAT rate of 6% was applied. However, those invoices made no reference to the subscription gifts.

13      The tax and customs authority considered that the subscription gifts constituted gifts within the meaning of Article 3(7) of the VAT Code, but found that their amount exceeded the ceiling of 0.5% of the turnover of the previous calendar year laid down in that provision. It therefore subjected the supply of those gifts to VAT, using their purchase price as the taxable basis and the standard rate of 23% as the VAT rate. It assessed the amount of VAT due in that respect by the applicant in the main proceedings for the years 2015 to 2018 at EUR 3 472 125.38. The company agreed, in the context of the tax inspection, first, to put in order the VAT relating to the year 2015 and, second, on the basis of corrective tax declarations, to carry out a self-assessment in respect of VAT for the years 2016 to 2018, after deduction of tax credits in its favour. It therefore paid a total of EUR 2 851 551.41, including EUR 270 936.70 in interest.

14      However, the applicant in the main proceedings subsequently lodged an administrative appeal, seeking reimbursement of that sum, which was dismissed on 11 May 2021. Following that dismissal, on 6 August 2021, the applicant brought administrative proceedings before the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD), Portugal), the referring court.

15      The applicant in the main proceedings argued, inter alia, that the provision of subscription gifts to new subscribers did not constitute a form of giving, in the absence of an intention to act free of charge. In reality, this is a commercial offer consisting of the provision of a service, namely the subscription, linked to a supply of goods, namely the subscription gift, with a financial consideration included in the value of the magazine subscription. In any event, even if the subscription gift were considered to be something ‘given’, since its unit value is less than EUR 50, it falls within the concept of a low-value gift within the meaning of Article 3(7) of the VAT Code. It submits, in that regard, that the ceiling of 0.5% of the previous year’s turnover, laid down in that provision, is irrelevant to that concept. According to the applicant, that ceiling does not comply with Article 16 of Directive 2006/112 and also infringes the principles of proportionality, neutrality and equal treatment.

16      The referring court is uncertain whether, in circumstances such as those in the main proceedings, the subscription gift, that is to say, the tablet or smartphone, can be regarded as having been given in exchange for value, even if that value is not identified or individualised. That court is also uncertain as to the possibility of defining the concept of ‘gifts of small value’, within the meaning of the second paragraph of Article 16 of Directive 2006/112, by using both the unit value of each gift and a ratio of the overall value of the gifts given by the taxable person, calculated in relation to the turnover in the previous year. If the answer is in the affirmative, it asks whether the ceiling of 0.5% of the turnover laid down in Article 3(7) of the VAT Code is not so low as to render the second paragraph of Article 16 of that directive ineffective.

17      In those circumstances, the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa – CAAD) (Tax Arbitration Tribunal (Centre for Administrative Arbitration – CAAD)) decided to stay the proceedings and refer the following questions to the Court for a preliminary ruling:

‘(1)      Where new subscribers are given a gift (a “gadget”) when they subscribe to periodicals, must the making of that gift be considered, for the purposes of Article 16 of [Directive 2006/112], to be:

(a)      a supply of goods made free of charge, separate from the transaction consisting of subscribing to the periodicals[;]

or

(b)      part of a single transaction for consideration[;]

or

(c)      part of a commercial package, comprising a principal transaction (the subscription to the magazine) and an ancillary transaction (making the gift), in which the ancillary transaction is considered to be a supply for consideration instrumental to the subscription to the magazine?

(2)      If the answer to the first question is that the making of the gift is a supply of goods made free of charge, is the setting of an annual ceiling on the overall value of gifts of 0.5% of the turnover of the taxable person in the preceding year (in addition to the limit on the unitary value) compatible with the concept of “the application of goods … as gifts of small value” referred to in the second paragraph of Article 16 of [Directive 2006/112]?

(3)      If the preceding question is answered in the affirmative, must that proportion of 0.5% of the turnover of the taxable person in the preceding year be considered to be so low that it renders the second paragraph of Article 16 of [Directive 2006/112] ineffective?

(4)      Having regard also to the purposes for which it was established, does that ceiling of 0.5% of the turnover of the taxable person in the preceding year infringe the principles of neutrality, of equal treatment or non-discrimination and of proportionality?’

 Consideration of the questions referred

 The first question

18      By its first question, the referring courts asks, in essence, whether Article 2(1)(a) and the first paragraph of Article 16 of Directive 2006/112 must be interpreted as meaning that the giving of a subscription gift in return for a subscription to periodicals falls within the concept of a ‘supply of goods for consideration’ within the meaning of those provisions, or whether the first paragraph of Article 16 must be interpreted as meaning that the giving of such a gift, constituting a transaction separate from the subscription transaction, must be regarded as a disposal of goods free of charge within the meaning of that provision.

19      It should be recalled, as a preliminary point, that for VAT purposes every transaction must normally be regarded as distinct and independent. Where, however, a transaction comprises several elements, the question arises whether it is to be regarded as consisting of a single supply or of several distinct and independent supplies which must be assessed separately from the point of view of VAT (see, to that effect, judgment of 27 September 2012, Field Fisher Waterhouse, C‑392/11, EU:C:2012:597, paragraphs 14 and 15 and the case-law cited).

20      Thus, first, the transaction which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system. This is why there is a single supply where several elements or acts supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 38 and the case-law cited).

21      In order to determine whether the taxable person performs several distinct main supplies or a single supply, it is necessary to identify the characteristic elements of the transaction in question, from the perspective of the average consumer. The body of evidence relied on for this purpose comprises various elements, the first of which, being of an intellectual nature and of decisive importance, seek to establish whether or not the elements of the operation in question are indivisible and its economic purpose, whether or not this is unique, and the second of which, being of a substantive nature and not of decisive importance, support, where appropriate, the analysis of the first elements, such as separate access or joint access to the services in question or the existence of a single invoice or a separate invoice (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 39 and the case-law cited).

22      Second, an economic transaction constitutes a single supply where one or more elements are to be regarded as constituting the principal supply, while, by contrast, other elements are to be regarded as one or more ancillary supplies which share the tax treatment of the principal supply (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 40 and the case-law cited).

23      It follows from the Court’s case-law that the first criterion to be taken into consideration in this respect is the absence of a distinct purpose of the supply from the perspective of the average consumer. Thus, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 41 and the case-law cited).

24      The second criterion, which in fact constitutes evidence of the first, is that account should be taken of the respective value of each of the benefits making up the economic transaction, one being minimal or even marginal in relation to the other (judgment of 4 March 2021, Frenetikexito, C‑581/19, EU:C:2021:167, paragraph 42 and the case-law cited).

25      In this case, it is apparent from the information provided by the referring court, summarised in paragraphs 9 to 11 of the present judgment, that the provision of subscription gifts for all new subscriptions is an integral part of the commercial strategy of the applicant in the main proceedings. Furthermore, according to that court, subscription costs are considerably higher when accompanied by subscription gifts.

26      There is therefore a clear link between the provision of a gift and the subscription to the magazines of the applicant in the main proceedings. Nonetheless, subject to examination by the referring court, that link does not appear to be, first, systematic and, second, sufficiently close for those supplies to be considered indivisible, within the meaning of the case-law cited in paragraphs 20 and 21 of the present judgment. In that respect, the fact that the renewal of a subscription does not give rise to the provision of a new gift and that, moreover, the applicant in the main proceedings carried out promotional campaigns without offering subscription gifts demonstrates that those services are not indivisible.

27      However, the circumstances of the case in the main proceedings appear to illustrate, as it will be for the referring court to determine, a main supply accompanied by an ancillary supply, within the meaning of the case-law referred to in paragraphs 22 to 24 of the present judgment. The fact that the applicant in the main proceedings gives a subscription gift to new subscribers constitutes an incentive to subscribe. Its sole purpose is to increase the number of subscribers to the magazines published by that applicant and, consequently, to increase its profits. Moreover, it follows from the order for reference that the applicant in the main proceedings, in its commercial calculation, takes account of the fact that some subscribers will terminate their subscription after payment of the first monthly instalment, which allows them to keep the gift without being obliged to remain subscribers. The fact remains that the subscription gift enables the applicant in the main proceedings to increase significantly the number of its subscribers each year. The provision of such a gift therefore has no distinct purpose from the point of view of the average consumer, who agrees to pay at least one month’s subscription in order to obtain the gift.

28      In addition, both the applicant in the main proceedings and the European Commission rightly point out in their observations that the subscription gift offered for the years 2015 to 2018 enabled new subscribers to benefit, under the best possible conditions, from the service provider’s main service, namely the reading of the magazines for which the subscription was taken out, in so far as a tablet and a smartphone make it possible, for example, to consult a digital version of those magazines.

29      Consequently, subject to examination by the referring court, it appears that the subscription to those magazines, on the one hand, and the offer of a tablet or a smartphone with a unit value of less than EUR 50 for each new subscription, on the other, form a whole, with the subscription constituting the principal supply and the gift an ancillary supply the sole purpose of which is to encourage the purchase of a subscription.

30      The answer to the first question is therefore that Article 2(1)(a) and the first paragraph of Article 16 of Directive 2006/112 must be interpreted as meaning that the provision of a subscription gift in return for taking out a subscription to periodicals constitutes a supply that is ancillary to the principal service of supplying periodicals, which falls within the concept of a ‘supply of goods for consideration’, within the meaning of those provisions, and must not be regarded as a disposal of goods free of charge within the meaning of the first paragraph of Article 16.

 The second to fourth questions

31      In view of the answer given to the first question, there is no need to answer the other questions.

 Costs

32      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Seventh Chamber) hereby rules:

Article 2(1)(a) and the first paragraph of Article 16 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as meaning that the provision of a subscription gift in return for taking out a subscription to periodicals constitutes a supply that is ancillary to the principal service of supplying periodicals, which falls within the concept of ‘supply of goods for consideration’, within the meaning of those provisions, and must not be regarded as a disposal of goods free of charge within the meaning of the first paragraph of Article 16.

[Signatures]

*      Language of the case: Portuguese.

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