ECJ AXA case – Restrictive decision in the field of VAT and financial services

Denplan, part of the VAT group represented by AXA, operates a range of services for dentists consisting mainly in a payment plan for services rendered by dentists to their clients. The services provided by Denplan consist in receiving payment from the dentist’s clients via BACS (a UK direct debit system operated by a company grouping major UK banks) and transferring the payment received to the dentists accounts, less an agreed commission.

The Court considered that Denplan was not providing services covered by the VAT exemption applicable notably to transactions concerning payments, transfers and debts but rather debt collection and factoring services, such services being specifically excluded from the scope of this VAT exemption.

In particular, the Court specified that “factoring is not limited to debts in respect of which the debtor has already defaulted but that it can also have as its objects debts which have not yet become due and which will be paid on due date”.

By implication, flows of services involving commissions for the transfer of funds in relation to a (not yet existing) debt could require the application of VAT on the commissions. Considering the potential wide scope of application of this decision, from the financial sector to any commercial or industrial businesses, we suggest reviewing your current flows of commissions as soon as possible to determine whether this decision could have an impact on your business.

For any assistance regarding this matter, please do not hesitate to contact Christophe Plainchamp or Nicolas Devillers at your convenience: