ECJ Decision On Case C-598/19 In Relation To Roaming Services, Effective Use And Enjoyment And VAT Refund – Tax
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European Court of Justice’s (ECJ) Decision on the
interpretation of point (b) of the first paragraph of Article 59a
of the Council Directive 2006/112/EC of 28 November 2006:
“Roaming services, effective use and enjoyment, VAT
On the 15th of April 2021, the Court of Justice of the European
Union (“ECJ”) issued its judgement on the C-598/19 case
(SK Telecom Co. vs Tax Office of the City of Graz, Austria)
regarding the refund of input value added tax (VAT) paid by SK
Telecom Co., in relation to a supply of telecommunications services
for the 2011 tax year.
1. Brief facts of the case
- SK Telecom Co. is a company established in South Korea, which
supplies mobile phone services to customers, who were also
established, had their permanent address or usually resided in
South Korea. Customers temporarily staying in Austria, could use
the mobile phone services by way of roaming services.
- An Austrian mobile communications network operator made its
network available to SK Telecom Co., in exchange for the payment of
a user fee plus Austrian VAT (20%), so as those customers to be
able to use their mobile phones during their stay in Austria.
- SK Telecom Co. subsequently charged its customers roaming
charges for using the Austrian mobile network.
- SK Telecom Co. applied to the Tax Office of the City of Graz,
Austria for a VAT refund, invoiced by the Austrian mobile
communications network operator.
- The Tax Office of Austria denied the application for VAT
refund, arguing that SK Telecom Co. should have charged Austrian
VAT on its roaming fees, since otherwise the telecommunications
services supplied would not be subject to tax in the third country
(i.e., those telecommunication services were not subject to a tax
in South Korea), leading to double non-taxation.
2. The main questions
The court was in essence called to examine whether the use of
roaming services in a Member State, supplied by a mobile phone
operator established in a third country, must be considered to be
“effectively used and enjoyed” within that Member State,
so that the Member State may consider the place of supply of these
roaming services being within its territory, when
such services are not subject to a tax treatment in that third
country, that is comparable to the charging of VAT.
3. Summary of the ECJ decision
The ECJ was called to interpret the aforementioned transactions,
in the context of the Article 59(a) of the VAT Directive:
“In order to prevent double taxation, non-taxation or
distortion of competition, Member States (MS) may, with regard to
services the place of supply of which is governed by Articles 44,
45, 56, 58 and 59:
b) consider the place of supply of any or all of those
services, if situated outside the Community, as being situated
within their territory if the effective use and enjoyment of the
services takes place within their territory.”
a. The underlying principle of the VAT Directive concerning the
place where the service is deemed to be supplied, is that services
should be taxed as far as possible at the place of
The roaming services, being telecommunications services within
the meaning of Article 24(2) of that directive, since are supplied
to non-taxable persons who are established, have their permanent
address or usually reside outside the European Union, are
considered to be supplied where those persons are established, have
their permanent address or usually reside (i.e., South Korea).
b. Derogation as per point (b) of the first paragraph of
Article 59a of the VAT Directive
However, under point (b) of the first paragraph of Article 59a,
the VAT Directive allows MS, to consider that the place of supply,
which is in principle situated outside the European Union, to be
situated within their territory, if the effective use and enjoyment
of those services takes place within their territory.
c. Article 59a does not lay down any conditions relating to the
length of stay in the territory of Member State
The court stated that Article 59a does not provide for any
conditions relating to the length of stay in the territory of MS.
Therefore, if the MS will exercise the option given by Article 59a,
it is important to assess whether roaming services, are indeed
effectively used and enjoyed within the territory of the Member
State, which wishes to have the relevant taxing rights.
d. The second paragraph of Article 1 of the VAT Directive
provides that every transaction must normally be regarded as
distinct and independent.
The court pointed out that the roaming services, such as those
at issue in the main proceedings, provided to persons who are
temporarily staying in the territory of a Member State, are
distinct and independent from other mobile communications
services received by those persons, supported by the fact that
these services were also subject to separate fees.
Taking into account that the purpose of the roaming services was to
allow customers of SK Telecom Co. to use mobile phone services via
the mobile communications network of an Austrian operator, and also
the fact the such services are distinct and independent, the court
concluded that the effective use and enjoyment of those services
necessarily takes place within the territory of the Member State
concerned during SK Telecom’s customers’ temporary stays in
that territory (i.e., Austria).
e. MS can make use of the option provided under point (b) of
the first paragraph of Article 59a of the VAT Directive, only in so
far as that use has the effect of preventing double taxation,
non-taxation or distortion of competition.
The court stressed out that the taxation of all
telecommunications services consumed within the European Union
reflects the intention of the European Legislation to prevent
distortion of competition and also to avoid, conflicts of
jurisdiction which may result either in double taxation or double
Therefore, MS can make use of the option provided under point (b)
of the first paragraph of Article 59a of that directive, where that
use has the only purpose of alleviating a situation of non-taxation
within the European Union.
According to the information available to the Court, this was the
case with the roaming services at issue in the main
4. Further considerations related to the judgement:
- The present judgement highlighted the fact that in order to be
able to establish whether telecommunication services are indeed
effectively used and enjoyed within the territory of a Member
State, it is important to take into account the very nature of the
services, and whether such services are distinct and
- The present judgement also pointed out that the length of stay
in a Member State territory, might deemed to be irrelevant for the
purpose of establishing whether telecommunication services are
effectively used and enjoyed within that territory.
- The judgement also underlined that the MS may make use of the
option provided under point (b) of the first paragraph of Article
59a of the VAT Directive, without having to consider the taxation
of those services under the domestic tax law of the third
- The fact that a service may be taxed in a third country under
the national legislation of that country, should not prevent a
Member State from taxing that service in its territory, if it is
effectively used and enjoyed there.
How KINANIS LLC can assist
- VAT advice on identification of the place of supply of services
received / provided
- VAT advice on VAT refunds
- VAT Rulings
- Ongoing VAT advice on identification of VAT implications of any
nature of contract
- Assistance on the VAT recovery in co-operation with the VAT
Originally published 6 May 2021.
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