Summary
Parties
Grounds
Decision on costs
Operative part
Keywords

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Tax provisions - Harmonization of laws - Turnover tax - Common system of value added tax - Taxable amount - Supply of goods - Consideration may consist in a provision of services - Condition - Provision of services directly linked to the supply and capable of expression in monetary terms - Supply of an article without extra charge to persons introducing themselves or other persons as new customers - Purchase price for the supplier of the article supplied

(Council Directive 77/388, Art. 11A(1)(a))

Summary

The consideration for a supply of goods, and accordingly the taxable amount within the meaning of Article 11A(1)(a) of the Sixth Directive in respect of such supply, may consist in a provision of services if there is a direct link between the supply of goods and the provision of services and if the value of those services can be expressed in monetary terms. That value, which is a subjective value and not a value estimated according to objective criteria, must, where it is not a sum of money agreed between the parties, be the value which the recipient of the services provided as consideration for the supply of goods attributes to the services which he is seeking to obtain and must correspond to the amount which he is prepared to spend for that purpose.

Article 11A(1)(a) must therefore be interpreted as meaning that the taxable amount in respect of articles supplied without extra charge to persons who introduce themselves or other persons as potential new customers as consideration not for the purchase made but for the introduction of a new customer is not the taxable amount in respect of the goods bought from the supplier by the new customer but is the price paid by the supplier for that article.

Parties

In Case C-33/93,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Manchester Value Added Tax Tribunal (United Kingdom) for a preliminary ruling in the proceedings pending before that tribunal between

Empire Stores Ltd

and

Commissioners of Customs and Excise

on the interpretation of Article 11A(1)(a) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (Directive 77/388/EEC, OJ 1977 L 145, p. 1),

THE COURT (Sixth Chamber),

composed of: G.F. Mancini, President of the Chamber, C.N. Kakouris, F.A. Schockweiler (Rapporteur), P.J.G. Kapteyn and J.L. Murray, Judges,

Advocate General: W. Van Gerven,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

- Empire Stores Ltd, by Rosamond J. Marshall Smith and David Milne QC,

- the United Kingdom, by John D. Colahan, Treasury Solicitor' s Department, acting as Agent, and Stephen Richards, Barrister,

- the Portuguese Government, by Luis Fernandes, Director of the Legal Service of the Directorate-General for the European Communities in the Ministry of Foreign Affairs, Angelo Cortesão Seiça Neves, Lawyer in that Directorate-General, Arlindo Correia, Assistant Director-General of the VAT administration and Maria Teresa Lemos, Lawyer in the VAT administration, acting as Agents,

- the Commission for the European Communities, by Thomas F. Cusack, Legal Adviser, and Enrico Traversa, of the Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Empire Stores Ltd, the United Kingdom, represented by John D. Colahan and Sarah Lee, Barrister, and the Commission at the hearing on 3 February 1994,

after hearing the Opinion of the Advocate General at the sitting on 16 March 1994,

gives the following

Judgment

Grounds

1 By order of 14 January 1993, received at the Court on 4 February 1993, the Manchester Value Added Tax Tribunal referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty two questions on the interpretation of Article 11A(1)(a) of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (Directive 77/388/EEC, OJ 1977 L 145, p. 1; hereinafter "the Sixth Directive").

2 Those questions were raised in proceedings between Empire Stores Ltd (hereinafter "Empire Stores") and the Commissioners of Customs and Excise (hereinafter "the Commissioners") concerning two assessments of the VAT payable by Empire Stores on goods which it had given to people who introduced themselves or others as potential new customers.

3 Empire Stores is a mail order company selling goods by catalogue. Its customers are predominantly women. According to the order for reference, during the periods to which the assessments refer Empire Stores used two schemes to attract new customers.

4 Under the first scheme, referred to as the "self-introduction scheme", Empire Stores offered potential customers the possibility of choosing one article from a list, that article to be supplied without extra charge once they had filled in a form requesting personal details designed to establish their creditworthiness, had been approved by Empire Stores and had placed an order for goods from its sales catalogue or had made at least a first payment in respect of such an order. Under the second scheme, referred to as the "introduce-a-friend scheme", Empire Stores offered such an article to established customers who recommended one of their friends as a potential customer; the article was supplied once the new customer had filled in the form, had been approved by Empire Stores and had made a first payment relating to an order placed by him or her.

5 Under both schemes Empire Stores accounted for VAT in respect of the articles on the basis of the cost price to them. The Commissioners took the view that VAT ought to have been calculated on the basis of their tax-exclusive cost price plus 50%, being the Commissioners' estimate of the prices which Empire Stores would have charged for the articles in question if they had been offered in its sales catalogue, and raised assessments on that basis.

6 Empire Stores appealed against the assessments to the Manchester VAT Tribunal which in a decision of 17 August 1992 ruled that the appeals ought to be allowed and the assessments discharged, adding: "One or both of the parties however may wish to have one or more of the questions considered in this dec