Keywords
Summary

Keywords

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Supply of services effected for consideration – Chargeability of the tax

(Council Directive 77/388, Arts 2, point 1, 9(2)(a), and 10(2), first para.)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for in the Sixth Directive – Exemption for lettings of immovable property

(Council Directive 77/388, Art. 13B(b))

Summary

1. The supply of services by an operator under an options scheme, amongst which is the supply characteristic of this type of service consisting in the award of contractual rights called ‘Points Rights’, which enables the other party to the contract to acquire points that may be converted every year into a right to temporary occupation of accommodation in the holiday resorts of the supplier of services or to obtain hotel accommodation or other services which are not listed in the contractual documents, must be classified at the time when the customer participating in such a scheme converts the rights he initially acquired into a service offered by that operator. Where those rights are converted into hotel accommodation or into a right to temporarily use a property, those supplies are supplies of services connected with immovable property within the meaning of Article 9(2)(a) of Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, which are performed at the place where the hotel or that property is situated.

In such a scheme in which, formally, there is no exchange of timeshare usage rights, ‘Points Rights’ under the options scheme are purchased with the intention of using those rights in order to convert them into services offered under the options scheme. Therefore, the actual service for which ‘Points Rights’ are acquired is the making available to participants in that scheme of the various possible benefits that may be obtained by virtue of the points deriving from those rights, the service not being fully supplied until those points are converted. It follows that, in cases in which the service consists in providing hotel accommodation or a right to use a property temporarily, it is when the points are converted into specific services that the connection between the service supplied and the consideration paid by the customer is established, the consideration being constituted by points deriving from previously acquired rights.

Furthermore, since, when ‘Points Rights’ are acquired, the customer does not know exactly which accommodation or other services is or are available in a given year or the value in points of a holiday in that accommodation or of those services, and it is the supplier that determines the points classification of the available accommodation and services, so that the customer’s choice is limited from the outset to accommodation or services accessible to him with the number of points he has available, the factors necessary for value added tax to become chargeable are not established when rights such as ‘Points Rights’ are initially acquired. Since the real service is obtained only when the customer converts the points attaching to the ‘Points Rights’ that he has previously acquired, the chargeable event occurs and the tax becomes chargeable only at that moment, in accordance with the first subparagraph of Article 10(2) of the Sixth Directive.

It follows that, under such a scheme, it is only when the client converts the points deriving from rights previously acquired into the temporary use of a property or hotel accommodation or another service that it is possible to determine the treatment for VAT purposes applicable to the transaction, according to the type of service supplied. Therefore, in particular, the place of supply is the place where the property or hotel is situated in which the customer obtains the right to stay after conversion of those points.

(see paras 17, 23, 27-30, 32-33, 42, 53, operative part 1)

2. Under a scheme such as the options scheme, the characteristic supply of which consists in awarding contractual rights called ‘Points Rights’, which enables the other party to the contract to acquire points that may be converted every year into a right to temporary occupation of accommodation in the holiday resorts of the supplier of services or to obtain hotel accommodation or other services which are not listed in the contractual documents, when the customer converts the rights he initially acquired into a right to use a property temporarily, the supply of services concerned constitutes the letting of immovable property within the meaning of Article 13B(b) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes. However, that provision does not prevent Member States from excluding that supply from exemption.

The right to temporary use of a property obtained in exchange for rights initially acquired fulfils the conditions for a letting, as once he has converted his points into such a right, the customer is entitled to occupy the property as if he were the owner and to exclude any other person from its enjoyment for a specific period, and, therefore, that right of use displays characteristics corresponding to the concept of ‘letting’ within the meaning of Article 13B(b) of the Sixth Directive. As regards the exclusion set out in subparagraph 1 of Article 13B(b), which concerns not only accommodation in the hotel sector but also the provision of accommodation in sectors with a similar function, the words ‘sectors with a similar function’ should be given a broad construction, for their purpose is to ensure that the provision of temporary accommodation similar to, and hence in potential competition with, that provided in the hotel sector is subject to tax. In defining the classes of provision of accommodation which are to be taxed by derogation from the exemption for the leasing or letting of immovable property, in accordance with Article 13B(b)(1) of the Sixth Directive, the Member States enjoy some discretion. It is consequently a matter for the Member States, when transposing that provision, to introduce those criteria that seem to them appropriate in order to draw the distinction between taxable transactions and those that are not, that is, the leasing and letting of immovable property. Consequently Article 13B(b) of the Sixth Directive does not preclude a Member State from imposing VAT on the transfer for consideration of rights held by third parties to the temporary use of a property.

(see paras 47, 49-52, 54, operative part 2)