SAC: advertising services and the right to deduct VAT
In judgment 8 Afs 111/2022–36, the Supreme Administrative Court (SAC) assessed how far a taxpayer had discharged their burden of proof in a case involving received advertising services that were to be rendered within motorcycle races, among other things by placement on the jersey of a racer who due to injury had only been racing for three months out of the year.
The tax administrator examined the extent of received advertising services on which the taxpayer claimed input VAT. The taxpayer was also asked to prove the identity of the supplier declared in the VAT returns.
Referring to judgment C-154/20, Kemwater ProChemie, the taxpayer argued that the tax administrator's request to prove the identity of the supplier of advertising services was based on outdated case-law: in the referred judgment, the Court of Justice of the EU confirmed that to exercise the right to deduct, it is not necessary to prove the identity of the supplier but to prove that had they acted in the capacity of a taxable person at the time of the supply. The SAC agreed with this argument.
The tax administrator also questioned the taxpayer’s right to deduct VAT on the received services, arguing that the racer on whose jersey the advertisement was placed had been injured and unable to race. Therefore, advertising services could not have been provided to the taxpayer in the agreed-upon extent. However, the SAC considered all evidence produced by the taxpayer, which proved that the racer had indeed participated in motorcycle races despite his injury and had displayed the taxpayer's logo. Similarly, the racer had also worn the jersey during his physiotherapy and gym sessions, posed for photographers, and given interviews to journalists. All evidence was thus proven to be consistent.
The SAC therefore concluded that although the racer had been injured during the season, the evidence submitted clearly showed that the taxpayer's promotion continued in the manner envisaged by the contract although not directly on the track during races.