On June 13, 2013, the Court of Justice of the European Union (hereinafter referred to as the “CJEU”) has rendered a judgment on case C-62/12 regarding a request for a preliminary ruling, made by the Varna Administrative Court, pursuant to a case, initiated by Mr. Galin Kostov v. the Director of “Appeal and Management of the Execution” Directorate – in Varna, related to the Central Bureau of the National Revenue Agency.
The relevant facts are as follows:
Mr. Galin Kostov is a self-employed private bailiff and in this capacity he is registered for the purposes of value added tax (“VAT”). On November 13, 2008, Mr. Kostov concluded an Agency Agreement with “Bon Marin” AD (Joint-Stock Company), according to which Mr. Galin Kostov undertook, as an agent for “Bon Marin” AD, to make bids in the context of three auctions for the acquisition of three plots, owned by the State. He also undertook to transfer the ownership in those properties to “Bon Marin” AD in the event of a successful bid. In return of that the company undertook to provide the required financial resources and to pay to Mr. Kostov a remuneration in the amount of BGN 50 000. The aforementioned remuneration was paid on the same day as that of signature of the Agency Agreement. In May 2009, Mr. Galin Kostov acquired from the State ownership of the properties and on June 30, 2009, with his consent, “Bon Marin” AD assigned to “Black Sea Capital” EOOD (ltd.) all of its rights and obligations, under the Agreement.
The VAT dispute arose from a tax audit act, according to which Mr. Kostov has received a remuneration of BGN 50 000 in return of a taxable supply of services within the meaning of Article 12 of the Bulgarian VAT Act. He has done it as a taxable person for VAT purposes and he should therefore pay VAT accrued on that amount. The tax audit act was appealed and upheld by the Director of “Appeal and Management of the Execution” Directorate – in Varna.
Mr. Kostov brought an action against the Director’s act and under these circumstances the competent Varna Administrative Court decided to suspend the procedure and to make a request for a preliminary ruling regarding the following:
Should an individual who is registered for VAT purposes because of his/her activity as a private bailiff be regarded as a taxable person within the meaning of art. 9 (1) of the VAT Directive and required, pursuant to article 193 of the VAT Directive, to pay VAT in respect of any service he/she has provided on an occasional basis and not in connection with his/her activity as a private bailiff?
The answer to that question shall be applicable not only to persons, registered for VAT purposes as private bailiffs, but also to any person in similar situation, including but not limited to – attorneys, notaries, etc.
Article 9 (1) of the VAT Directive states as follows:“1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity are.”
In this context, the request for preliminary ruling, submitted to the CJEU, is to clarify whether a person, registered for VAT purposes, should be considered a “taxable person” within the meaning of article 9 (1) of the VAT Directive in respect of any other economic activity carried out occasionally?
With regard to the circumstances aforesaid, the CJEU considers that it would not be consistent with the objective anf the general manner of leving theVAT if article 9 (1) is interpret by stating that the term “economic activity” does not encompass an activity which, whilst carried out only occasionally, falls within the general definition of that term.
In other words any person, registered for VAT purposes because of his/her activity, is to be regarded as a “taxable person” in relation to any other economic activity, as long as this activity falls within the scope of article 9 (1), 2nd subparagraph of the VAT Directive, namely – any activity of producers, traders and persons, supplying services, as well as the activity of the liberal professions and/or freelancers.
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