CJEU: Excessively high price no reason to refuse right to VAT deduction
In case C-334/20 Amper Metal, the Court of Justice of the European Union has ruled on whether a service recipient is entitled to deduct VAT if the price paid for advertising services is significantly higher than the price usually paid for such services.
In 2014, Amper Metal Kft., a Hungarian company, purchased advertising services consisting of placing advertising stickers with the company's logo on racing cars. The company deducted VAT on the supplies received. The Hungarian tax authorities disagreed with this practice and assessed additional tax. In their opinion, the advertising services received did not in any way increase the company's sales, and therefore were not sufficiently linked to the (output) taxable supplies carried out. At the same time, the tax administrator argued that the advertising services were excessively expensive and not beneficial to the company.
The CJEU first pointed out that a transaction’s taxable amount must include everything that a supplier obtains from a customer as consideration for the supply provided. It is therefore a price agreed between two independent companies, not an objective price determined by the market or the tax administrator. The right to deduct thus can be claimed on the agreed-upon consideration and not on an objective, usual price. The usual price may only be used as the taxable amount if the supply is provided between related or close persons, which was not the case here. The mere fact that the price for the services received is higher than the usual price is not a sufficient reason to refuse the right to deduct.
Furthermore, the CJEU emphasised that the right to deduct can be exercised by the supply recipient only if the received (input) taxable supply is directly linked to the provided (output) taxable supply – e.g., if it is reflected in the price of taxable supplies or if it is part of overhead costs. However, according to the CJEU, the received supply’s effect on sales cannot be considered a criterion to determine the link between the received supply and the taxable output. Accordingly, the mere fact that the received service does not increase sales is not a sufficient reason to refuse the right to deduct.