ECJ case: Austrian VAT treatment of termination payments
The European Court of Justice (ECJ) issued a preliminary ruling on January 27, published in the Official Journal of the European Union, concerning Austrian VAT rules on payments owed for terminating a service contract (Case No. C-622/23).
- The case involved an Austrian construction company that had entered into a contract to provide building services. The contract was later terminated without justification.
- The company sought to claim VAT on the remaining amount due under the contract, arguing that it had already begun work and was prepared to complete the services.
- The Austrian tax authorities denied the VAT claim.
Upon request for a preliminary ruling, the ECJ interpreted Article 2(1)(c) of Council Directive 2006/112/EC as follows:
- The unpaid amount constituted remuneration for the supply of services, as the company had already started work and was prepared to fulfill the contract.
- The amount owed under the contract was therefore subject to VAT.
Source: europa.eu
