Advocate General Opinions of the Court of Justice of the EU

In SK Telecom Co Ltd (C-593/19), the taxpayer was a telecoms company based in South Korea which provided its consumer customers who resided in South Korea but who were staying temporarily in Austria with access to a mobile phone network in Austria (i.e. it supplied roaming services). An Austrian network operator made its network available to the taxpayer in exchange for the payment of a user fee plus Austrian VAT. When the taxpayer sought to recover the VAT it had been charged by the Austrian network provider from the Austrian tax authority as input tax under the 13th Directive, the tax authority refused arguing that the taxpayer was making taxable supplies in Austria and should have charged Austrian VAT to its customers on its roaming charges.

The Advocate General was asked whether Austria was entitled to require the payment of Austrian VAT in these circumstances based on the ‘use and enjoyment’ override rules which enable member states to regard the place of supply of certain services as being within their territory where it would otherwise be outside the EU. The override rules require that the “effective use and enjoyment” of the service take place within the relevant member state (in this case Austria) and that the change in place of supply is required to “prevent double taxation, non-taxation or distortion of competition”.

The Advocate General opined that the effective use and enjoyment of the roaming services was in Austria because: (i) the mobile telephone network used was located in Austria; (ii) the users who were granted access to this network were temporarily staying in Austria; and (iii) the roaming services could only be used in Austria.

On the question of whether the requirement of avoiding “double taxation, non-taxation or distortion of competition” was fulfilled, the Advocate General said that this was to be judged at EU level and in this case the requirement was met by virtue of avoiding non-taxation in the EU. The tax treatment of the transaction in jurisdictions outside the EU was irrelevant to the application of the test.

DLA Piper comment: The AG identifies that there are two supplies: (1) the B2B supply by the Austrian network operator to SK Telecom, and (2) the B2C supply by SK Telecom to the customers. The AG in relation to the first supply, notes that under the general B2B place of supply of services rules, Austrian VAT should not have been charged meaning that SK Telecom would not have requested a VAT refund from the Austrian tax authorities, because the place of the supply was in South Korea under the usual B2B rules. On that basis, the request for preliminary ruling may not have been necessary at all!