March 2019
In a recent case heard in the Court of Justice of the European Union (CJEU), (C-51/18) the court ruled in favour of the European Commission, which submitted that the Republic of Austria failed to fulfil its obligations under Art. 2(1) of Council Directive 2006/112/EC. Austria had imposed VAT on the royalty payable to a creator of an original work of art based on the resale right permitted under Austrian administrative practice.
The view of the Commission, which was confirmed by the CJEU, was that the royalty based on the resale right did not constitute consideration for the artistic service provided by the author of the work of art. The Commission was of the view that in the absence of a supply of goods or services provided by the author in the exercise of the resale right, VAT should not be imposed on the resale royalty.
The CJEU, referring to settled case-law, concluded that a supply of goods or services is made for consideration only if there is a legal relationship between the supplier and the customer or recipient in the context of which there is reciprocal performance. The legal relationship that arises in the context of a resale of an original work of art arises only between the original seller and buyer. The existence of the resale right for the benefit of the creator of that work does not have any influence on that relationship.
Michael Huber
michael.huber@bdo.at
Sebastian Lacha
sebastian.lacha@bdo.at