Analysis: “Wellcome Trust Ltd Judgment: Place of supply of services and non-business activities” by Darya Budova
On 17 March 2021 the Court of Justice handed down its judgment in the Wellcome Trust Ltd case (C- 459/19). This judgment deals with the rules for determining the place of supply of services for Value Added Tax (VAT) purposes, in relation to classification as a taxable person.
Wellcome Trust Ltd (WTL) is the sole trustee of a charitable trust, very generously endowed. WTL uses the services of investment managers to assist in managing its large endowment portfolio. WTL distributes the income generated by those endowments by way of grants for the purposes of medical and pharmaceutical research. WTL also receives income from a number of minor activities including sales, catering and rental of properties in respect of which it is registered for VAT.
WTL is quite a unique taxpayer for VAT purposes. The Court of Justice has already had to deal with its status in its judgment of 20 June 1996, Wellcome Trust, C-155/94, by which it ruled that WTL should be considered a taxable person within the meaning of Articles 2 and 9 of the VAT Directive. However, its purchase and sale of shares and other securities in the course of the management of the assets of a charitable trust could not be considered ‘economic activities’ (and therefore it could not recover the input tax associated with such activities).
The question in this case touches on the rules for determining the place of supply of services and the classification of a taxable person acting as such. On the one hand, in the context of determining whether transactions are subject to VAT, the VAT Directive establishes that a taxable person acts as such when it acts for the purpose of its economic activity (Articles 2(1) and 9(1)). On the other hand, Article 44 of the VAT Directive establishes that services provided to a ‘taxable person acting as such’ are to be taxed where that taxable person is established. The question in this case is whether ‘taxable person acting as such’ means the same for the purposes of these two rules. Specifically, the question is whether the investment management services that WTL receives from outside the EU (services used for non-business activities, namely, where WTL is a taxable person not acting as such) should be located for VAT purposes in the UK considering that WTL is acting as such for the purposes of Article 44 of the VAT Directive.
The Court considers (in line with AG Hogan’s Opinion) that the definition of a ‘taxable person acting as such’ for the purposes of the rules for determining the place of supply of services is an extended and derogating definition and therefore, a taxable person may be acting as such, for the purposes of the rules for determining the place of supply of the services, when such person is acting for the purposes of his non-economic activities.
The Court points out in its reasoning that the only exception should be made when the supplies of services are received by a taxable person for its own personal use or that of his staff – when the taxable person cannot be deemed to be acting in its capacity as a taxable person.
Darya Budova is a Senior Associate at an international law firm, specialised in VAT and customs law.