SAC: difference between receivable’s nominal amount and purchase price may be subject to VAT

According to the recent Supreme Administrative Court judgement, the difference between the nominal value of a receivable and its purchase price upon its transfer may be viewed as a factoring consideration, which is subject to value added tax.

In the case in question (4 Afs 143/2018), the court dealt with the regular purchasing of short-term receivables that were not overdue or hard to recover at the time of transfer (assignment).
The purchase price of the receivables being transferred was set at 95.17% of their nominal value. No other consideration was contracted in the factoring contract. In the court’s opinion, the difference between the nominal amount of the receivables and their purchase price comprised a consideration for the factoring service. The SAC did not accept that the difference would reflect the actual economic value of the receivables at the time of their transfer. Yet, the risk level of the receivables was not subject to detailed proving.

The court did not accept the arguments referring to the Court of Justice of the EU judgment in the GFKL case (C-93/10) that held that a transfer of a receivable at a price lower than its nominal value was not a provision of a service for consideration. The GFKL case involved a one-off transfer of highly risky receivables. According to the SAC, both cases were so different that the conclusions made in the GFKL case could not be applied to the case in question. The court pointed out that in the case in question, the difference between the nominal value of the receivables and their purchase price was not due to a decrease in their market value.

The SAC thus concluded that the difference in the amount of 4.83% of the receivables’ (nominal) amount was a consideration for a factoring service, and as such was subject to VAT. It is not relevant that the consideration was not explicitly agreed-upon in the contract. The court’s decision-making might have been influenced by the fact that, originally, the consideration had been agreed-upon in the contract and the purchase price of the receivables had been 100% of their nominal value; only subsequently, by an amendment to the contract, the price of the receivables was reduced and, at the same time, the commission stopped being charged.

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