Advocate General opinions

In Apcoa Parking Danmark A/S (C-90/20), the taxpayer was a private company which operated a car park on private land with the agreement of the land owner. The taxpayer set out the conditions for using the car park – for example, the permit requirements and maximum parking time. There was a sign at the entrance to the car park stating that if the car park rules were breached, a ‘control fee’ would be levied. The ‘control fee’ could be charged for matters such as the parking ticket or permit not being displayed or parking in prohibited areas such as disabled bays without the required permit. Although the parking fees were subject to VAT the taxpayer disputed the Danish tax authority’s claim that the ‘control fees’ should also be subject to VAT.

The Danish referring court stated that the tax authorities of Germany, Sweden and the UK considered that fees for infringement of car park rules were not subject to VAT.

The Advocate General described the question as whether the ‘control fees’ should be described as an indemnity or as consideration for the customer being able to park his or her car even in breach of the car park rules. The Advocate General considered the case of Societe thermale D’Eugenie-les-Bains (C-277/05) where the Court held that where a customer forfeited his or her deposit when he or she cancelled a room, the withheld deposit was outside the scope of VAT as it constituted compensation for cancellation by the customer; the service of a hotel room was not provided in that case and in the Advocate General’s view, the scope of the judgment should be limited to cases where the customer did not receive a service.

According to the Advocate General, this case was to be distinguished on the grounds that drivers who paid the ‘control fees’ actually used the car park; the amount paid for the service simply varied according to compliance with the car park rules. In the view of the Advocate General, it was appropriate in this case to follow the judgment in Vodafone Portugal – Comunicacoes, (given after the Danish Court’s reference in this case), where the Court held that charges for early termination of telecoms contracts (before the contractual ‘lock-in’ period) were subject to VAT since the telecoms services were deemed to be provided.

The Advocate General rejected arguments by the taxpayer about the lack of proportionality between the ‘control fees’ and the car park services received and the intention of the ‘control fees’ being to penalise infringements of the rules. The Advocate General was satisfied that there was a direct link between the fees paid and the car parking services and pointed out that prior case-law has found that the amount of consideration given is irrelevant. Moreover, looking at the background evidence, it was clear that the level of ‘control fees’ took account of the cost of operating the car park.

DLA Piper comment: The distinction between payments that are outside the scope of VAT as penalty (being not the consideration for a supply of services), and those that are subject to VAT as part of the service price can be very blurred. The Court has considered this issue several times (e.g. MEO - Serviços de Comunicações e Multimédia, case C-295/17 and Vodafone Portugal – Comunicacoes, case C-43/19) but it is likely that in many cases it is still difficult for taxpayers to determine on which side of the line their payment falls. According to the Advocate General, the “control fees” would be qualified as a price for the provision of the car parking services, being one of the economic elements of such service. Indeed, in the light of the foregoing Court case law (C-94/19), the “control fees” show a direct connection between payment and services, being such fees paid in the context of a supply of services. On the contrary, however, it could be argued that each transaction depends on its own facts and has to be taxed on a stand alone basis. The Court will be called to rule on this difficult area in future cases.