ECJ C-324/20 (X-Beteiligungsgesellschaft mbH): When do installment payments become subject to VAT?

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The Preliminary Ruling of the Court of Justice of the European Union (CJEU) for Case No. C-324/20 has been published by EU Official Gazette on January 3, 2022. This ruling clarifies German VAT rules on how to determine the VAT taxable base of a transaction.  




In case C-324/20, a German firm, acting as an intermediary, provided services in 2012 in connection with a property transaction but arranged with the buyer to pay the charge in instalments over a five-year period. The provider invoiced for VAT on each payment but the German tax authorities contended that VAT was owed on the whole sum at the time the service was provided in 2012. 




The CJEU confirmed that VAT was owed on the whole charge at the time the service was provided, not at the time the instalments were due. While VAT is payable in some instances on the day the payment becomes due, the CJEU determined that this only applies to continuous or consecutive deliveries of services, not to one-time supplies, as was the case here. Additionally, the CJEU found that the supplier could not claim VAT bad debt relief on the payments earlier to their due date because the consumer had agreed to the instalment plan.  



The Advocate General’s opinion was upheld by the CJEU, stating that:  


  • It is not considered non-payment of services when a payment is deferred, or an installment plan is used. 
  • the taxable base is reduced only when the consideration for the service is no longer recoverable. 
  • In most cases, the taxable base is reduced only when the fee for the services rendered becomes irrecoverable. 


The ruling emphasizes the critical role of determining the type of the service in order to establish when VAT is required. By default, VAT is due when an item or service is given, or, in circumstances where a VAT invoice is needed, on the earlier of the invoice’s date of issue or the invoice’s latest date of issue (usually the 15th day of the month following the supply). Exceptions may apply in the case of continuing services (e.g., a lease) or if the taxpayer qualifies for the cash-receipts method of VAT accounting. 



Source: eur-lex.europa.eu 

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