C-544/16 Marcandi

JUDGMENT OF THE COURT (Fifth Chamber)

5 July 2018 ( *1 )

(Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 2(1)(c) — Issuing of ‘credits’ that can be used to place bids in online auctions — Supply of services for consideration — Preliminary transaction — Article 73 — Taxable amount)

In Case C–544/16,

REQUEST for a preliminary ruling under Article 267 TFEU from the First-tier Tribunal (Tax Chamber), made by decision of 17 October 2016, received at the Court on 28 October 2016, in the proceedings

Marcandi Ltd, trading as ‘Madbid’

v

Commissioners for Her Majesty’s Revenue and Customs,

THE COURT (Fifth Chamber),

composed of J.L. da Cruz Vilaça, President of the Chamber, E. Levits, A. Borg Barthet (Rapporteur), M. Berger and F. Biltgen, Judges,

Advocate General: E. Tanchev,

Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 13 December 2017,

after considering the observations submitted on behalf of:

Marcandi Ltd, by J. Brinsmead-Stockham, Barrister, C. Van Zyl, Solicitor, and A. Brown, advocate,

the United Kingdom Government, D. Robertson and Z. Lavery, acting as Agents, assisted by P. Mantle, Barrister,

the European Commission, by R. Lyal and L. Lozano Palacios, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 7 March 2018,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 2(1), Articles 14, 24, 62, 63, 65 and 73, and Article 79(b) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) (‘the VAT Directive’).

2The request has been made in proceedings between Marcandi Ltd, trading as ‘Madbid’, and the Commissioners for Her Majesty’s Revenue and Customs (‘HMRC’) (United Kingdom) concerning the system of value added tax (VAT) applicable to the sale of ‘credits’ that can be used to participate in online auctions.

Legal context

3Under Article 2(1) of the VAT Directive:

‘The following transactions shall be subject to VAT:

the supply of goods and services for consideration within the territory of the country by a taxable person acting as such;

...

the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

...’

4Article 14(1) of that directive defines a supply of goods as ‘the transfer of the right to dispose of tangible property as owner’.

5Under Article 24(1) of that directive:

‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’

6Article 62 of the directive reads as follows:

‘For the purposes of this Directive:

“chargeable event” shall mean the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled;

VAT shall become “chargeable” when the tax authority becomes entitled under the law, at a given moment, to claim the tax from the person liable to pay, even though the time of payment may be deferred.’

7Article 63 of the VAT directive provides:

‘The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.’

8Article 65 of Directive 2006/112 is worded as follows:

‘Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.’

9Article 73 of that directive provides:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

10Article 79 of the directive reads as follows:

‘The taxable amount shall not include the following factors:

...

price discounts and rebates granted to the customer and obtained by him at the time of the supply;

...’

The dispute in the main proceedings and the questions referred for a preliminary ruling

11Marcandi is a company established in the United Kingdom which operates online sales, under its trading name ‘Madbid’ (‘Madbid’). The majority of the products sold by Madbid are ‘high tech’ goods, such as mobile telephones, tablets, computers and televisions. Madbid occasionally sells higher-value items such as, inter alia, cars.

12Madbid’s website allows its users to buy goods sold by Madbid either for a fixed price in the online shop, or through online auctions.

13During the period relevant to the main proceedings, Madbid was registered as a taxable person for the purposes of VAT in the United Kingdom and in several other Member States, notably in Germany.

14According to clause 1.2 of its general terms, Madbid ‘operates a Pay-to-Bid auction website’. Users wishing to participate in the auctions organised by Madbid are required to acquire ‘credits’ from Madbid in return for payment, which are necessary in order to bid and cannot be used for other purposes. In particular, those ‘credits’ cannot be used to purchase goods sold in the online shop. Nor can they be converted into cash.

15Every page of the Madbid website includes a button which allows the user to access a page on which ‘credits’ are sold. When they have been purchased, those ‘credits’ are credited to the user’s account. Each ‘credit’ is identified by a unique code and is given a monetary value corresponding to the amount paid by the user. ‘Free credits’ are sometimes awarded to users. They have a value of GBP 0.00 and simply allow users to participate in the auctions organised by Madbid. Those ‘free credits’ expire after 30 days, whereas ‘credits’ which have been paid for are valid for 180 days.

16Every auction begins with an opening price of GBP 0.00 and with the auction timer set to the allocated time limit for the auction, which is usually one minute. For each new auction, the timer starts again with the same time as initially set. For each sale, a defined number of ‘credits’ (between 1 and 8) is necessary to bid and the user, by clicking on the ‘bid’ button, uses his ‘credits’ at the level of that number. The bid thus made by the user is GBP 0.01 higher than the preceding bid, and becomes the highest bid for the sale concerned. The sale price attached to the product also increases by GBP 0.01.

17The winner of the auction has the right to purchase the product at the amount of the winning bid, plus a charge for shipping and handling. The value of ‘credits’ used to bid during that sale is exhausted and is not, therefore, credited towards the price of the product at the winning bid. So long as the product has not been sent to him, the user has the right to cancel his order. Where appropriate, he will be reimbursed the winning sale price.

18In addition, a ‘buy now’ feature allows the user to buy a product identical to the one in the auction in which he is participating for a price which, in the course of that auction, reduces to the level of the value of the ‘credits’ that he used to bid in the context of that sale. A user who purchases a product through the ‘buy now’ feature during an auction cannot place any more bids in that auction.

19Finally, the ‘earned discount’ feature allows a user who was unsuccessful in the auction, and who also did not use the ‘buy now’ feature, to obtain a discount that he might use later when purchasing a product available in Madbid’s online shop. An ‘earned discount’, whose value corresponds to the value of the ‘credits’ that allowed the user to bid in the course of the sale, expires after 365 days.

20If a user who has made a purchase using the ‘earned discount’ or the ‘buy now’ features cancels his order, he receives a reimbursement in the amount which he paid for the goods in question, with the exception of the value of the ‘credits’ that were taken into account to arrive at the final price at which the goods were sold to him.

21In a decision of 9 December 2013, HMRC considered that the amount paid by Madbid’s clients in exchange for ‘credits’ represented the consideration for a provision of services provided in the United Kingdom, namely the grant of the right to participate in online auctions organised by Madbid.

22Madbid lodged an appeal against that decision before the First-tier Tribunal (Tax Chamber) (United Kingdom), submitting that the issuing of ‘credits’ for the benefit of its clients was not a supply of services but simply a ‘preliminary transaction’, within the meaning of the judgment of 16 December 2010, MacDonald Resorts (C‑270/09, EU:C:2010:780, paragraph 24). On the basis of that judgment, Madbid concluded that it was liable for VAT not on the issuing of credits for the benefit of its clients, but only on the supplies of goods. The consideration for those supplies was made up of the price paid by the client for the product that he purchased and the value of the ‘credits’ exhausted in purchasing that product. In the alternative, Madbid submitted before the referring court that, if the latter held that the issue of ‘credits’ was a supply of services, it would be necessary to regard such a supply as not effected for consideration, for the purposes of Article 2(1)(c) and Article 73 of the VAT Directive.

23HMRC submitted before the referring court that, when Madbid provides ‘credits’ to its users, it gives them the right, which the user may use immediately, to participate in the online auctions that it organises. That supply is a supply of services. Furthermore, the ‘buy now’ and ‘earned discount’ features are promotional schemes in the context of which Madbid agrees to a discount, within the meaning of Article 79(b) of the VAT Directive, in the sale price of those goods.

24The referring court also states that, in a decision of 9 July 2014, the Finanzamt Hannover-Nord (Hanover-Nord Tax Office, Germany) considered that the sale of ‘credits’ by Madbid was neither the supply of goods nor the supply of services for the purposes of VAT. According to that tax office, Madbid is liable for VAT in Germany for supplies of goods that it makes to users established in that Member State. The consideration for those supplies of goods is not only the price paid by the client for the goods purchased, namely the price at which the auction was won, the price resulting from use of the ‘buy now’ feature or the price after deduction of the ‘earned discount’, but also the value of the ‘credits’ used for the purpose of acquiring that product, namely the value of the ‘credits’ that enabled the winning bid to be made in the auction or that generated the price discount through use of the ‘buy now’ or ‘earned discount’ feature. As regards users who bought ‘credits’ and participated in the auction without winning it, the Hanover-Nord Tax Office considers that a supply of services was effected for the benefit of those users only if they do not make any purchase using the value of the ‘credits’ that enabled them to bid. The consideration for that supply of services, subject to VAT in the United Kingdom, is the value of those ‘credits’.

25In those circumstances, the First-Tier Tribunal (Tax Chamber) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

On the correct interpretation of Articles 2(1), 24, 62, 63, 65, and 73 of [the VAT Directive], and in circumstances such as those in the main proceedings,

is the issue of “credits” to users, by Madbid, in return for a money payment:

a “preliminary transaction” outside the scope of Article 2(1) [of the VAT Directive], of the sort identified by the Court in paragraphs 23 to 42 of its [judgment of 16 December 2010, MacDonald Resorts (C‑270/09, EU:C:2010:780)], or

a supply of services by Madbid within the meaning of Article 2(1)(c) [of that directive], namely the grant of a right to participate in online auctions;

if the grant of a right to participate in online auctions is a supply of services by Madbid, then is it a supply made “for consideration” within the meaning of Article 2(1)(c), namely the payment for it (i.e. the money received by Madbid from a user in return for “credits”);

is the answer to [question 1 (b)] different if the payment for the “credits” also serves as an entitlement for the user to acquire goods to the same value in the event of the user not succeeding in the auction;

if Madbid does not make a supply of services for consideration when it issues “credits” to its users in return for a money payment, does it make such a supply at any other time;

or what principles should be applied in determining the answer to those questions?

On the correct interpretation of Articles 2(1), 14, 62, 63, 65, 73 and 79(b) of [the VAT Directive] what, in circumstances such as those in the main proceedings, is the consideration obtained by Madbid in return for the supplies of goods that it makes to users, for the purposes of [Article 2(1)(a) and Article 73 of that directive]?

In particular, and taking into account the answer to [the first question]:

is the money paid by a user to Madbid for “credits” a “payment ... on account” for a supply of goods within the scope of Article 65 [of the VAT Directive], so that VAT is “chargeable” on receipt of that payment, and such that the payment received by Madbid from the user is consideration for a supply of goods;

if a user buys goods through the “buy now” or “earned discount” features, is the value of the “credits” used in placing bids in auctions and, where the bid is unsuccessful, has the effect of generating “earned discount” or reducing the “buy now” price:

a “price discount” within the meaning of Article 79(b) [of the VAT Directive], such that the consideration for Madbid’s supply of the goods is the money actually paid to Madbid by the user at the time of purchasing the goods and no more, or

part of the consideration for the supply of goods, such that the consideration for Madbid’s supply of goods includes both the money paid to Madbid by the user at the time of purchasing the goods and the money paid by the user for ‘credit’ used in placing unsuccessful bids in auctions;

if a user exercises the right to buy goods after winning an online auction, is the consideration for the supply of those goods the stated auction winning price (plus shipping and handling charges) and no more, or is the value of the “credits” that the winner used to bid in that auction also part of the consideration for the supply of those goods by Madbid to the user;

or what principles should be applied in determining the answer to those questions?

Where two Member States treat a transaction differently for the purposes of VAT, to what extent should the courts of one of those Member States take into account, when interpreting the relevant provisions of EU law and national law, the desirability of avoiding:

double taxation of the transaction, and/or

non-taxation of the transaction;

and what bearing does the principle of fiscal neutrality have on this question?’

Consideration of the questions referred

The first question

26By its first question, the referring court asks, in essence, whether the issue of ‘credits’, such as those at issue in the main proceedings, in return for a money payment, constitutes a ‘supply of services for consideration’, within the meaning of Article 2(1)(c) of Directive VAT, or whether it must be regarded as a ‘preliminary transaction’, before the supply of goods, falling outside the scope of Article 2(1) of that directive, within the meaning of paragraph 24 of the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780).

27It should be recalled that in that judgment the Court held that the acquisition of contractual rights, called ‘points rights’, allowing points to be received which may be converted, in particular, into a right to occupy temporarily accommodation in the tourist complexes of the service provider was not a transaction subject to VAT, but a preliminary transaction effected in order to be able to exercise the right to temporarily use a property, or to stay in a hotel or use another service. The Court found that the purchase of ‘points rights’ was not an objective in itself for the client since the client concluded the initial contract not with the intention of collecting those points, but in order temporarily to use accommodation or obtain other services selected later (judgment of 16 December 2010, MacDonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 24 and 32).

28It concluded from that judgment that the actual service for which ‘points rights’ were acquired was the service of making available to participants in that scheme of the various possible benefits which might be obtained by virtue of the points deriving from those rights (judgment of 16 December 2010, MacDonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 27).

29In the case in the main proceedings, it is common ground that ‘credits’ can only be used to place bids in the context of sales by auction organised by Madbid. Consequently, a user who purchases ‘credits’ necessarily does so with the intention of being able to participate in those sales.

30However, that service is, for users, an autonomous interest compared with the purchase of goods in Madbid’s online shop (see, to that effect, judgment of 2 December 2010, Everything Everywhere, C‑276/09, EU:C:2010:730, paragraph 27). As the Advocate General observed in point 39 of his Opinion, participation in the auctions organised by Madbid gives users a chance to purchase goods at a price below their market value.

31Since, however, ‘credits’ issued by Madbid cannot serve as payment for the purpose of buying goods in its online shop and, as is clear from paragraph 30 above, from the time of their acquisition, those ‘credits’ are identified as representing the consideration for the chance granted to users to purchase goods at prices lower than their market value, and the ‘credits’ used to bid are not credited to the purchase price fixed at the end of the auction, their issue cannot be classified as a ‘preliminary transaction’ to the supply of goods, within the meaning of paragraph 24 of the judgment of 16 December 2010, MacDonalds Resorts (C‑270/09, EU:C:2010:780).

32Consequently, the right granted to users who have acquired those ‘credits’ to participate in the auctions organised by Madbid constitutes, in itself, a supply of services which is entirely separate from, and cannot be confused with, the supply of goods that may occur upon the conclusion of those auctions.

33That conclusion is all the more essential where the user of ‘credits’ purchases a product by activating the ‘buy now’ or ‘earned discount’ options, since, if he used the service that the ‘credits’ acquired enabled him to use, the purchase made by the use of those options represents an independent transaction from the service supplied in consideration for purchase of ‘credits’.

34Madbid submits, however, that, should the issue of ‘credits’ be considered a supply of services, that supply would not be effected for consideration.

35In that regard, it must be recalled that, according to Article 2(1) of the VAT Directive, supplies of services ‘for consideration’ within the territory of a Member State by a taxable person acting as such are liable to VAT.

36According to established case-law, a supply of services is effected ‘for consideration’, within the meaning of that provision, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient (judgments of 16 December 2010, MacDonald Resorts, C‑270/09, EU:C:2010:780, paragraph 16 and the case-law cited, and of 20 June 2013, Newey, C‑653/11, EU:C:2013:409, paragraph 40).

37The Court held that that is the case if there is a direct link between the service supplied and the consideration received, the sums paid constituting actual consideration for an identifiable service supplied in the context of such a legal relationship (judgments of 3 March 1994, Tolsma, C‑16/93, EU:C:1994:80, paragraphs 13 and 14; of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 16 and 26; and of 10 November 2016, Baštová, C‑432/15, EU:C:2016:855, paragraph 28).

38In the case in the main proceedings, it is clear from clause 1.2 of Madbid’s general terms that it ‘operates a pay-to-bid auction website’.

39Users wishing to participate in auctions organised by Madbid are required to acquire ‘credits’ from it in return for payment. Those ‘credits’ are necessary to bid and cannot serve other purposes. The number of ‘credits’ necessary to bid varies according to the sales. When a user makes a bid, his ‘credits’ are debited in that amount and the price of the product being auctioned increases by GBP 0.01. The winner of the auction has the right to purchase the product at the amount of the winning bid, plus a charge for shipping and handling. The value of the ‘credits’ spent in order to bid during that sale is however exhausted. Finally, when the user who was successful in that auction purchases the product auctioned and then cancels his purchase, only the amount of the price achieved in the auction is reimbursed to him, and not the value of the ‘credits’ that he used to bid.

40Those elements indicate that the payment received by Madbid in exchange for the ‘credits’ that it issues is the actual consideration for the service that it provides to its users, which consists of the grant of the right to participate in the auctions which it organises.

41That conclusion is not undermined by the fact that, by virtue of the ‘earned discount’ feature, users who are unsuccessful in the auction have the value of their ‘credits’ converted into a discount to be used later, when purchasing a product available in Madbid’s online shop.

42Similarly, it is irrelevant in that regard that the user who clicks on the ‘buy now’ button has the possibility of buying a product identical to the one being auctioned for a reduced price, up to the value of the ‘credits’ that he has used to bid in the context of that sale.

43First, only the value of ‘credits’, which were first used in order to bid may be credited towards the price of goods purchased through the ‘buy now’ or ‘earned discount’ features.

44Second, a user who decides to cancel a purchase made using the ‘buy now’ or ‘earned discount’ features is only reimbursed the discounted price, together with the delivery costs, and not the value of the ‘credits’ that were taken into account in the calculation of the price he paid for the goods.

45Therefore, Madbid’s argument, that the issue of ‘credits’ represents the right for the user to purchase goods up to the value of those ‘credits’, does not correspond to the economic and commercial reality, which is a fundamental criterion for the application of the common system of VAT (judgment of 20 June 2013, Newey, C‑653/11, EU:C:2013:409, paragraph 42 and the case-law cited).

46It follows from the foregoing considerations that the payment received by Madbid in exchange for the ‘credits’ that it issues represents the actual consideration for the supply consisting of the grant of the right to participate in the auctions that it organises, which is separate from the supply of a product acquired on its website.

47In that regard, it is necessary to clarify that, in the case in the main proceedings, users may purchase goods sold in Madbid’s online shop by paying for their purchases by credit or debit card, that is to say, without participating in the auctions that it organises. In addition, every participation in an auction organised by Madbid does not necessarily lead to a supply of goods, either because the user who won that auction chooses not to purchase the product that he was successful in bidding for, or because, having been unsuccessful, the user did not make use of the ‘buy now’ feature and obtains a discount that he does not use immediately.

48It follows that, as the Advocate General observes in point 58 of his Opinion, since the issue of ‘credits’ and the supply of goods do not constitute a single, indivisible economic supply, they cannot be classified as a single supply. For the same reasons, and taking into account the rule that each transaction must be regarded as distinct and independent of the other, the issue of ‘credits’ and the supply of goods also cannot be classified as ancillary in relation from one to the other.

49Having regard to all the foregoing considerations, the answer to the first question is that Article 2(1)(c) of the VAT Directive must be interpreted as meaning that the issue of ‘credits’, such as those at issue in the case in the main proceedings, which allows an operator’s clients to bid in auctions that it organises, constitutes a supply of services for consideration, for which the consideration is the amount paid in return for those ‘credits’.

The second question

50By its second question, the referring court asks, in essence, whether Article 73 of the VAT Directive must be interpreted as meaning that the value of ‘credits’ used in order to bid is included in the consideration received by the taxable person in return for the supplies of goods that it makes for the benefit of users who won an auction that it has organised or those users who purchased a product through the ‘buy now’ or ‘earned discount’ features.

51Under Article 73 of the VAT Directive, the taxable amount in respect of supplies of goods or services, effected for consideration, is made up of ‘everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply’.

52In that regard, it must be recalled first of all that, as is clear from the answer to the first question, the payment made by the user in return for ‘credits’ issued by Madbid represents the consideration for the grant of the right to participate in the actions that it organises.

53However, as the Advocate General notes in point 79 of his Opinion, the amount paid in consideration for a transaction cannot constitute the consideration for another transaction, or even a payment on account in respect of the payment of the consideration for the other transaction.

54It must therefore be stated, in reply to a question by the referring court, that the payment made by a user in exchange for ‘credits’ cannot be regarded as a payment made on account before the goods are supplied, within the meaning of Article 65 of the VAT Directive.

55In addition, the consideration for the supply of a product won in an auction cannot include the sum paid in return for the issue of ‘credits’ used in the context of that sale, but includes only the price at which the product was won, together with the shipping and handling costs.

56Lastly, that sum also cannot be included in the consideration for the later supply of goods purchased using the ‘buy now’ or ‘earned discount’ features.

57As the Advocate General observed in point 92 of his Opinion, the value of the ‘credits’ used in bidding, which is credited to the initial price using the ‘buy now’ feature or the price listed in the online shop, must be regarded as a discount on the price of those goods purchased using the ‘buy now’ or ‘earned discount’ features. Therefore, in accordance with Article 79(b) of the VAT Directive, the value of those ‘credits’ cannot be part of the taxable amount in respect of the supply of those goods.

58That is the case including where, in the context of the purchase of goods using the ‘buy now’ or ‘earned discount’ features, the value of the ‘credits’ spent to bid covers the total initial price using the ‘buy now’ feature, or the price listed in the online shop.

59As the Advocate General observes in point 102 of his Opinion, goods purchased in such a way, contrary to the case at issue in the judgment of 27 April 1999, Kuwait Petroleum (C‑48/97, EU:C:1999:203), cannot be regarded as having been the object of a disposal free of charge, since they are supplied in return for identifiable consideration, namely the initial price using the ‘buy now’ feature or the price listed in the online shop.

60Having regard to the foregoing considerations, the answer to the second question is that Article 73 of the VAT Directive must be interpreted as meaning that, in circumstances such as those in the main proceedings, the value of ‘credits’ used in order to bid is not included in the consideration received by the taxable person in return for the supplies of goods that it makes for the benefit of users who won an auction organised by it, or users who purchased a product using the ‘buy now’ or ‘earned discount’ features.

The third question

61By its third question the referring court asks, in essence, whether, where two Member States treat the same transaction differently for the purposes of VAT, the courts of one of those Member States is required, when interpreting the relevant provisions of EU and national law, to take into account the need to avoid double taxation or double non-taxation of the transaction having regard, in particular, to the principle of fiscal neutrality.

62In that regard, it must be recalled that Article 267 TFEU establishes a preliminary ruling mechanism which aims to avoid divergences in the interpretation of EU law that the national courts have to apply (see, to that effect, judgment of 21 July 2011, Kelly, C‑104/10, EU:C:2011:506, paragraph 60 and the case-law cited).

63Article 267 TFEU confers on national courts the power, and, in certain circumstances, an obligation, to make a reference to the Court once the national court considers that the substance of the dispute before it raises issues involving an interpretation of provisions of EU law and requiring a decision by them (see, to that effect, judgment of 21 July 2011, Kelly, C‑104/10, EU:C:2011:506, paragraph 61 and the case-law cited).

64Therefore, where they find that the same transaction has been the object of a different tax treatment in another Member State, the courts of a Member State before which a dispute raises issues involving an interpretation of provisions of EU law and requiring a decision by them have the power, or even the obligation, to refer a request for a preliminary ruling to the Court.

65Moreover, it must be noted that the existence in one or several other Member States of different approaches to that prevailing in the Member State concerned must not, in any event, lead the courts of that Member State to interpret the provisions of the VAT Directive incorrectly.

66Having regard to all the foregoing considerations, the answer to the third question is that, when interpreting the relevant provisions of EU and national law, the courts of a Member State that find that the same transaction has been the object of a different tax treatment for the purposes of VAT in another Member State, have the power, or even — depending on whether there is a judicial remedy under national law against its decisions — the obligation, to refer a request for a preliminary ruling to the Court.

Costs

67Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fifth Chamber) hereby rules:

Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the issue of ‘credits’, such as those at issue in the main proceedings, which allow an operator’s clients to bid in the auctions that it organises, are a supply of services for consideration, for which the consideration is the amount paid in return for those ‘credits’.

Article 73 of Directive 2006/112 must be interpreted as meaning that, in circumstances such as those in the main proceedings, the value of ‘credits’ used in order to bid is not included in the consideration received by the taxable person in return for the supplies of goods that it makes for the benefit of users who won an auction organised by it, or users who purchased a product using the ‘buy now’ or ‘earned discount’ features.

When interpreting the relevant provisions of EU and national law, courts of a Member State that find that the same transaction has been the object of a different tax treatment for the purposes of VAT in another Member State have the power, or even — depending on whether there is a judicial remedy under national law against its decisions — an obligation, to refer a request for a preliminary ruling to the Court.

Signatures

Da Cruz Vilaça

Levits

Borg Barthet

Berger

Biltgen

Delivered in open court in Luxembourg on 5 July 2018.

A. Calot Escobar

Registrar

J.L. da Cruz Vilaça

President of the Fifth Chamber

( *1 ) Language of the case: English.

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 7 March 2018 ¹

(Reference for a preliminary ruling — Value added tax — Directive 2006/112/EC — Issue of credits that can be used to place bids in online penny auctions and whose value may be credited towards the price of goods purchased directly from the company running the auctions — Article 2(1)(a) and (c) — Supply of services or goods for consideration — Preliminary transaction — Article 65 — Payment on account — Article 73 — Taxable amount — Article 79(b) — Discount covering the whole price)

1In the present case, the Court is called upon to decide whether the grant of the right to participate in a penny auction must be regarded as a supply of services subject to value added tax (‘VAT’) within the meaning of Article 2(1)(c) of Council Directive 2006/112/EC ² or as a preliminary transaction not subject to VAT.

2In penny auctions, participants are required to pay a non-refundable fee in order to place bids (‘the bidding fee’). ³ When the auction begins, the timer begins to count down to zero. Each bid increases the price of the auctioned goods by 0.01 pounds sterling (GBP) (hence the name ‘penny auction’) and restarts the timer. The auction ends when the timer reaches zero. The winner is the person who was the last to bid.

3According to Article 2(1)(a) and (c) of Directive 2006/112, the supply of goods for consideration and the supply of services for consideration constitute transactions subject to VAT.

4There are two ways of looking at the payment of the bidding fee for the purposes of Article 2(1) of Directive 2006/112.

5On the one hand, the bidding fee may be regarded as consideration for the supply of a service, namely, the grant of the right to participate in the auction. The grant of that right in return for the payment of the bidding fee would thus be a transaction subject to VAT within the meaning of Article 2(1)(c) of Directive 2006/112. The subsequent purchase, by the winner, of the auctioned goods would be considered a supply of goods within the meaning of Article 2(1)(a) of that directive and, as such, a further and distinct transaction subject to VAT.

6On the other hand, participants in the auction aim at winning the auction and purchasing the auctioned goods. Therefore, the grant of the right to participate in the auction could be regarded as a mere preliminary step towards the purchase of the auctioned goods. ⁴ It would not be a transaction subject to VAT within the meaning of Article 2(1) of Directive 2006/112. Only the subsequent purchase of the goods won would be considered a transaction subject to VAT within the meaning of that provision.

7In the present case, the Court is called upon to decide between the two approaches described above. It is also asked what constitutes consideration for the supply of services and/or the subsequent supply of goods.

I. Legal framework

8Article 2(1) of Directive 2006/112 provides:

‘The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…

the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

…’

9Article 65 of Directive 2006/112 states:

‘Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.’

10According to Article 73 of Directive 2006/112:

‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’

11Article 79 of Directive 2006/112 reads:

‘The taxable amount shall not include the following factors:

…

price discounts and rebates granted to the customer and obtained by him at the time of the supply;

…’

II. The facts, the main proceedings and the questions referred for a preliminary ruling

12Marcandi Limited (‘Madbid’), a company established in the United Kingdom, operates an online shopping business under the name ‘Madbid’. Madbid sells mainly technology-related products, such as mobile telephones, tablets, computers and televisions. It occasionally sells higher-value goods, such as cars. Madbid provides an online platform where registered users can participate in online penny auctions to bid for, and win, goods. It also allows users to buy goods directly from its online shop.

13Madbid initially launched a website in the United Kingdom. Following the success of that website, Madbid launched websites in nine other Member States, including Germany, and in Canada and Turkey as well.

14Madbid is registered for VAT in, among other places, the United Kingdom and Germany.

15Madbid’s business operates as follows. In order to be able to bid in an online auction or purchase goods online, persons have to register online with Madbid as users (‘the users’) and agree to Madbid’s contractual terms.

16Once registered, users may buy so-called ‘credits’ (‘the Credits’). Credits allow users to place bids in Madbid’s online auctions. Credits cannot, however, be used to purchase goods directly from the Madbid shop. Nor can they be converted back into cash. Credits are purchased by using one of the accepted payment methods such as credit or debit cards. Each Credit has a unique identifying code, which allows Madbid to track the Credits in a user’s account at any given time. Credits are sold in packages of different numbers of Credits for different prices (for instance, a package of 500 Credits costs GBP 49.99, and a package of 80 Credits costs GBP 9.99). A specific monetary value is attributed to each Credit. That value is, as near as makes no difference, the same as the amount that the user paid for the Credits. ⁵ Credits expire after 180 days.

17As mentioned above, Credits are used to make a bid in an auction on Madbid’s website. Every auction begins with an opening price of GBP 0.00, and with the auction timer set to the allocated time limit set for the auction, which is usually one minute. Each auction also specifies a set number of Credits (between 1 and 8) that a user must spend in order to place a bid. When the auction begins, the timer begins to count down to zero. When the timer reaches zero, the auction comes to an end.

18When a user places a bid by clicking the ‘Bid’ button, the set number of Credits required for placing a bid in that auction is deducted from the total number of Credits in that user’s account. The bid placed is GBP 0.01 higher than the previous bid, which means that the listed auction price of the goods is increased by GBP 0.01. The auction timer is reset to the allocated time limit and starts to count down to zero. The winner of the auction is the current highest bidder when the auction timer reaches zero.

19The auction winner is entitled to purchase the goods won for the amount of the winning bid, plus the shipping and handling charge. ⁶ He is not, however, obliged to purchase those goods. Should the auction winner decide to purchase the goods won, he must pay the amount of the winning bid, plus the shipping and handling charge, within a specified period; otherwise he forfeits entitlement to buy the goods won for the amount of the winning bid. The value of the Credits used by the auction winner to bid in the auction is not credited towards the price paid for the goods won. The value of those Credits is extinguished.

20However, Madbid’s auction platform also has a so-called ‘Buy Now’ feature (‘the Buy Now feature’). That feature allows a user to purchase, during the course of an auction, goods identical to those for which he was bidding. The price of the goods (‘the initial Buy Now price’) is reduced by the value of the Credits spent by that user in placing bids in that auction. For instance, if a user spends Credits with a value of GBP 100 in bidding for an iPod, by clicking the ‘Buy Now’ button that user may purchase the iPod directly by paying GBP 100 less than the initial Buy Now price. In almost all cases, the initial Buy Now price is equal to the recommended retail price. ⁷ Therefore, the Buy Now feature allows users to purchase the goods at a price below the recommended retail price. The user who purchases goods through the Buy Now feature during an auction may not place any more bids in that auction.

21A user who placed bids in an auction but did not win that auction, and who did not make a Buy Now purchase, is awarded a discount equal to the value of the Credits spent bidding in the auction (that is, the amount that the user paid for those Credits) (‘the Earned Discount’). The Earned Discount is awarded after the auction in which the user spent the Credits is completed. If that user decides to purchase goods directly from the Madbid shop, the price of the goods (‘the price in the Madbid shop’) is reduced by the amount of the Earned Discount. That purchase will be referred to below as a purchase through ‘the Earned Discount feature’. The Earned Discount accumulates in respect of all auctions in which a user used Credits to bid. The Earned Discount generated by each particular Credit expires 365 days after that Credit was spent in an auction. The value of Credits used by the auction winner to bid in the auction he won does not generate any Earned Discount.

22The Buy Now and Earned Discount features ensure that the user who spends Credits in bidding cannot lose money by doing so. Indeed, as mentioned at point 20 above, when that user clicks the Buy Now button during the course of the auction, the initial Buy Now price is reduced by the value of those Credits. Similarly, should he, as mentioned in point 21 above, go on to buy directly from the Madbid shop, he is awarded an Earned Discount equal to the value of those Credits.

23By decision of 9 December 2013, Her Majesty’s Revenue and Customs (‘HMRC’), which is the public authority responsible for the collection and management of VAT in the United Kingdom, found that the amount paid by users, to Madbid, for the issue of Credits was consideration for a supply of services, namely, the grant of a right to take part in Madbid auctions, and that the place of supply of that service was where Madbid is established, namely the United Kingdom (‘HMRC’s decision’).

24In a ruling of 9 July 2014, the Finanzamt Hanover-Nord (Hanover-Nord Tax Office, Germany) (‘the German tax authorities’) found, in particular, that (i) the issue of Credits by Madbid is not a transaction subject to VAT; (ii) where Madbid supplies goods to customers situated in Germany, this constitutes a supply of goods for VAT purposes; (iii) consideration for that supply of goods includes both the price paid by the user for the goods (namely, the auction winning price, the Buy Now price or the price in the Madbid shop net of Earned Discount) and the value of the Credits spent by that user in acquiring those goods (namely, the Credits used either to place bids and win the auction, or to generate the reduction in the Buy Now price or the Earned Discount); and (iv) Madbid is liable for VAT in Germany on that supply of goods.

25Madbid brought an appeal against HMRC’s decision before the First-tier Tribunal (Tax Chamber) (United Kingdom).

26On 10 May 2016, the First-tier Tribunal (Tax Chamber) released an interim decision making findings of fact and deciding to request a preliminary ruling from the Court. According to the First-tier Tribunal (Tax Chamber), Credits are bought for a distinct purpose, namely, taking part in Madbid auctions, and the subsequent purchase of goods, if and when it takes place, is a further and distinct transaction. The complexity of the matter, reflected in the diverging interpretations of Directive 2006/112 by HMRC and the German tax authorities, led the First-tier Tribunal (Tax Chamber) to refer the following questions to the Court for a preliminary ruling:

On the correct interpretation of [A]rticles 2(1), 24, 62, 63, 65, and 73 of [Directive 2006/112], and in circumstances such as those in the main proceedings:

is the issue of Credits to users, by Madbid, in return for a money payment:

a “preliminary transaction” outside the scope of [A]rticle 2(1), of the sort identified by the Court in [the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780)], at paragraphs 23 [to] 42; or

a supply of services by Madbid within the meaning of [A]rticle 2(1)(c), namely the grant of a right to participate in online auctions;

if the grant of a right to participate in online auctions is a supply of services by Madbid, then is it a supply made “for consideration” within the meaning of [A]rticle 2(1)(c), namely the payment for it (i.e. the money received by Madbid from a user in return for Credits);

is the answer to (b) different if the payment for the Credits also serves as an entitlement for the user to acquire goods to the same value in the event of the user not succeeding in the auction;

if Madbid does not make a supply of services for consideration when it issues Credits to its users in return for a money payment, does it make such a supply at any other time;

and what principles should be applied in determining the answer to those questions?

On the correct interpretation of [A]rticles 2(1), 14, 62, 63, 65, 73 and 79(b) of [Directive 2006/112] what, in circumstances such as those in the main proceedings, is the consideration obtained by Madbid in return for the supplies of goods that it makes to users, for the purposes of [A]rticles 2(1)(a) and 73? In particular, and taking into account the answer to Question 1:

is the money paid by a user to Madbid for Credits a “payment … on account” for a supply of goods within the scope of [A]rticle 65, so that VAT is “chargeable” on receipt of that payment, and such that the payment received by Madbid from the user is consideration for a supply of goods;

if a user buys goods through the Buy Now or Earned Discount features, is the value of Credits used in placing bids in auctions and, where the bid is unsuccessful, has the effect of generating Earned Discount or reducing the Buy Now price:

a “price discount” within the meaning of [A]rticle 79(b), such that the consideration for Madbid’s supply of the goods is the money actually paid to Madbid by the user at the time of purchasing the goods and no more; or

part of the consideration for the supply of goods, such that the consideration for Madbid’s supply of goods includes both the money paid to Madbid by the user at the time of purchasing the goods and the money paid by the user for Credits used in placing unsuccessful bids in auctions;

if a user exercises the right to buy goods after winning an online auction, is the consideration for the supply of those goods the stated auction winning price (plus shipping and handling charg[e]) and no more, or is the value of the Credits that the winner used to bid in that auction also part of the consideration for the supply of those goods by Madbid to the user;

or what principles should be applied in determining the answer to those questions?

Where two Member States treat a transaction differently for the purposes of VAT, to what extent should the courts of one of those Member States take into account, when interpreting the relevant provisions of EU law and national law, the desirability of avoiding:

double taxation of the transaction; and/or

non-taxation of the transaction;

and what bearing does the principle of fiscal neutrality have on this question?’

27Written observations were submitted by Madbid, the United Kingdom Government and the European Commission. These parties also presented oral argument at the hearing on 13 December 2017.

III. Analysis

A. The first question referred

28By the first question, the referring court essentially asks whether the issue of Credits to users, by Madbid, in return for a money payment, constitutes a ‘supply of services for consideration’ within the meaning of Article 2(1)(c) of Directive 2006/112, or whether it must be regarded as a ‘preliminary transaction’ falling outside the scope of Article 2(1) of that directive, of the kind identified in paragraph 24 of the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780).

29I shall briefly summarise the Court’s judgment in MacDonald Resorts. The Court was called upon to rule on the purchase of so-called ‘Points Rights’ from a company selling timeshare usage rights in properties in holiday resorts. Points Rights entitled customers to be credited each year with points, which could be converted into the right to use a property temporarily or to stay in a hotel. The Court found that the purchase of Points Rights was not an aim in itself for customers. Their ultimate intention, when they purchased Points Rights, was to use a property temporarily or stay in a hotel. Therefore, the purchase of Points Rights was to be regarded as ‘[a] preliminary transactio[n] in order to be able to exercise the right to use a property temporarily, or to stay in a hotel’. ⁸ As such, the purchase of Points Rights was not a transaction subject to VAT within the meaning of Article 2(1) of the Sixth Directive. ⁹ Only the supply of the right to use a property temporarily, or to stay in a hotel, was subject to VAT within the meaning of that provision. ¹⁰

30In the present case, users may purchase Credits from Madbid in return for a money payment. Credits cannot be used to purchase goods directly from the Madbid shop. They can be used only to place bids in Madbid auctions. They are necessary in order for such bids to be placed.

31As mentioned in points 5 and 6 above, the issue of Credits may be regarded either as a supply of services (namely, the grant of the right to participate in Madbid auctions), ¹¹ or as a preliminary transaction not subject to VAT, of the kind identified in MacDonald Resorts (since it could be argued that the purchase of Credits is not an aim in itself for users, and that their ultimate intention, when they purchase Credits, is to acquire goods).

32In the former case, Madbid would be liable to account for VAT on the issue of Credits in the Member State where it is established, ¹² namely, the United Kingdom. This was the position of HMRC. ¹³ In the latter case, Madbid would be liable to account for VAT on the subsequent supply of goods in the Member State where the transport of the goods to the customer ends ¹⁴ (in Germany, if the goods are delivered to a customer in Germany). This was the position of the German tax authorities. ¹⁵

33Madbid contends that the issue of Credits is a preliminary transaction of the kind identified in MacDonald Resorts.

34The United Kingdom and the Commission submit that the issue of Credits is a supply of services, not a preliminary transaction.

35I shall start by examining whether the issue of Credits must be regarded as a supply of services which, if effected for consideration, constitutes a transaction subject to VAT within the meaning of Article 2(1)(c) of Directive 2006/112, or whether it is a preliminary transaction falling outside the scope of Article 2(1) of that directive, of the kind identified in MacDonald Resorts. Since the issue of Credits constitutes, in my opinion, a supply of services, I shall then assess whether it is effected for consideration. I shall, in examining those two aspects of the first question referred, take into account the fact that users may acquire goods from Madbid either by winning an auction and purchasing the goods won, or through the Buy Now and Earned Discount features.

1. Is the issue of Credits to be regarded as a preliminary transaction of the kind identified in MacDonald Resorts, or as a supply of services?

(a) The issue of Credits cannot be regarded as a preliminary transaction

36It is true that participation in Madbid auctions is unlikely to be an aim in itself for users, ¹⁶ and that, consequently, the ultimate aim of users, when they purchase Credits, is to purchase goods.

37However, in my opinion, the issue of Credits cannot be regarded as a preliminary transaction carried out in order to supply goods, of the kind identified in MacDonald Resorts.

38Indeed, first, although each Credit is assigned a specific monetary value in Madbid’s computer systems, Credits cannot be used as a currency to make direct purchases of goods from the Madbid shop. At the oral hearing, Madbid’s representative specified that direct purchases are paid for by credit card or debit card.

39Second, a distinct service is supplied, namely, the grant of a right to participate in Madbid auctions. Participation in Madbid auctions gives users a chance to purchase goods at a price below their market value since the winning price is typically lower than the market value of the auctioned goods. By contrast, when purchasing directly from the Madbid shop, users are charged the market price for the goods. According to the request for a preliminary ruling, ‘the decision by a … user to acquire Credits rather than to proceed direct to the Madbid shop is a decision to buy the chance of acquiring the goods on offer for less – often much less – than their shop price. … Users who bid in an auction acquire the chance of a discount through winning the auction, which the straightforward shoppers do not have’. ¹⁷

40Third, the auction winner is not obliged to purchase the auctioned goods. Should the winner not pay the winning price within a specified time period, he forfeits entitlement to buy the goods at the winning price. Therefore, the issue of Credits does not necessarily lead to the supply of the auctioned goods.

41Fourth, if the auction winner purchases the auctioned goods, the value of the Credits spent in bidding is not credited towards the winning price. The value of those Credits is exhausted. In other words, Credits spent in bidding cannot be used to purchase the auctioned goods.

42Fifth, where the auction winner purchases the auctioned goods, then cancels the order, only the amount of the winning price is refunded. The value of the Credits spent in bidding is not refunded.

43Sixth, the situation in MacDonald Resorts differs from that in the present case.

44Indeed, in MacDonald Resorts, the service at issue, which consisted in providing hotel accommodation or the right to use a property temporarily, was not ‘fully supplied’ until the Points Rights were converted into ‘specific services’ (the right to stay in a specific hotel or to use a specific property for a specific period of time). This was because, when customers purchased Points Rights, they did not know what accommodation would be available in a given year or the value in points of a holiday in that accommodation. When customers purchased Points Rights, the services were not identified. ¹⁸

45By contrast, in the present case, when users purchase Credits, they know what service will be supplied, namely, the right to participate in Madbid auctions. As submitted by the Commission, that service is identified and it is supplied immediately (since users may place bids in Madbid auctions immediately after purchasing Credits).

46Consequently, the purchase of Credits cannot be regarded as a preliminary transaction carried out in order to supply goods.

(b) No preliminary transaction where Credits spent in bidding are used to purchase goods through the Buy Now or Earned Discount features

47As explained in points 20 to 22 above, when a user withdraws from, or loses, an auction, the value of the Credits used to place bids is not exhausted. ¹⁹

48Indeed, a user may purchase goods from Madbid during an auction by clicking the Buy Now button. In that case, the value of the Credits which that user spent to bid in that auction is set against the initial Buy Now price.

49A user may also purchase goods from Madbid through the Earned Discount feature. In that case, the Earned Discount, whose amount is equal to the value of the Credits spent by that user to bid in Madbid auctions, is set against the price of the goods in the Madbid shop.

50According to Madbid, the fact that Credits spent in bidding may be used to purchase goods directly from its online shop demonstrates that the issue of Credits is a preliminary transaction of the kind identified in MacDonald Resorts.

51However, in my opinion, that argument does not call into question my conclusion at point 46 above.

52Indeed, first, only the value of Credits spent in bidding may be set against the price of goods purchased through the Buy Now or Earned Discount features. Credits not spent in bidding cannot be set against the price of those goods.

53Second, a service was provided to the user who is granted a reduction in the initial Buy Now price or in the price in the Madbid shop. That user took part in an auction, which gave him a chance to purchase the auctioned goods at a price below their market value. It is irrelevant that that user decided to give up that chance (by clicking the Buy Now button) or that he was unlucky and lost the auction, so that he must pay the full market price of the goods. ²⁰ This takes nothing away from the fact that a distinct service was supplied to him. Indeed, that user could have decided to purchase goods directly in the Madbid shop, without first participating in an auction. ²¹ He would have paid the same price, that is, the full retail price of the goods.

54In that regard, Madbid’s argument that the situation in the present case is similar to that in Société thermale d’Eugénie-les-Bains must be rejected. In Société thermale d’Eugénie-les-Bains, the Court held that the deposit paid by a customer when booking a hotel room, which is set against the full cost of the room if the customer takes up occupancy, does not constitute consideration for the supply of an independent and identifiable service. ²² According to Madbid, it follows that Credits spent in bidding, whose value is set against the price of goods purchased through the Buy Now or Earned Discount features, do not constitute consideration for the supply of any service. However, in my view, a distinct service was provided to the user, in that he was allowed to participate in an auction. The situation in the present case differs from that in Société thermale d’Eugénie-les-Bains.

55Third, the value of Credits spent in bidding is on occasion lost because users neglect to make direct purchases from which the value of those Credits may be deducted. ²³

56Fourth, when a user purchases goods through the Buy Now or Earned Discount features, then cancels the order, only the initial Buy Now price or the price in the Madbid shop is refunded. The value of the Credits spent in bidding is not.

57Therefore, the issue of Credits cannot be considered a preliminary transaction carried out in order to supply goods. It must be regarded as a supply of services, namely, the grant of a right to participate in Madbid auctions.

58For the sake of completeness, I should point out that, according to case-law, several formally distinct supplies must be considered to be a single transaction where they are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split, or where one or more supplies constitute a principal supply and the other supply or supplies constitute one or more ancillary supplies which share the tax treatment of the principal supply. ²⁴ All parties agree that that case-law does not apply. I consider, first, that the issue of Credits and the supply of goods cannot be regarded as a single, indivisible supply, for customers may purchase goods directly in the Madbid shop without participating in auctions. Second, in my opinion, the issue of Credits cannot be considered ancillary to the supply of goods, because the Buy Now or Earned Discount features seek to ensure that users cannot lose money by participating in auctions. Therefore, the purpose of those features is to induce users to participate in auctions. Nor can the supply of goods be considered ancillary to the issue of Credits, for it is only rarely that users neglect to use Credits or purchase goods through the Buy Now or Earned Discount features. Consequently, the case-law cited above is not applicable.

2. Are Credits issued for consideration within the meaning of Article 2(1)(c) of Directive 2006/112?

59Under Article 2(1)(c) of Directive 2006/112, in order for a supply of services to be covered by that directive, it must be made for consideration.

60It is settled case-law that a supply of services is effected for consideration, within the meaning of Article 2(1)(c) of Directive 2006/112, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. The Court has held that that is the case if there is a direct link between the service supplied and the consideration received, the sums constituting actual consideration for an identifiable service supplied in the context of such a legal relationship. ²⁵

61Madbid submits that, should the issue of Credits be considered a supply of services, that supply would not be effected for consideration.

62The United Kingdom Government and the Commission submit that the issue of Credits is effected for consideration, that consideration being the amount paid by users for the issue of Credits.

63In my opinion, the issue of Credits is effected for consideration within the meaning of Article 2(1)(c) of Directive 2006/112. That consideration is the amount paid by users for the issue of Credits. ²⁶

64First, there is a legal relationship between Madbid and the users. According to the order for reference, when persons register online as users, they have to agree to Madbid’s contractual terms. Subsequent purchases of Credits are legal relationships between Madbid and users.

65Second, there is a direct link between the grant of a right to participate in Madbid auctions and the amount paid by users for the issue of Credits. Indeed, Credits are used to place bids in Madbid auctions.

66Moreover, when a user wins an auction, there is no link between the supply of the auctioned goods and the price paid for the issue of Credits. This is because the value of the Credits used to bid in that auction is exhausted. It is not set against the winning price. Furthermore, there may be no supply of goods since the winner is not obliged to purchase the goods won.

67Furthermore, when a user withdraws from, or loses, an auction, the link between the supply of any goods purchased through the Buy Now or Earned Discount features and the price paid for the issue of the Credits is indirect, as argued by the United Kingdom Government. It is true that the value of the Credits spent in bidding is set against the initial Buy Now price or the price in the Madbid shop. However, only the value of Credits spent in bidding may be set against the price of the goods. Moreover, there may on occasion be no supply of goods if the user neglects to make purchases from which the price of Credits spent in bidding may be deducted.

68I conclude that the issue of Credits is effected for consideration within the meaning of Article 2(1)(c) of Directive 2006/112. That consideration is the amount paid by users for the issue of Credits.

3. No other supply of services for consideration

69For the sake of completeness, I should specify that Madbid makes no supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 other than the issue of Credits. No service is supplied when a user places a bid in an auction (it being the Credits issued that allow the user to place bids) or when Credits, or the Earned Discount generated by those Credits, expire (no additional service being provided by Madbid at that point).

70Therefore, the answer to the first question referred must be that, in circumstances such as those in the main proceedings, where a company operates a penny auctions website and also sells goods directly in an online shop, the issue to registered users, by that company, of Credits such as those in the main proceedings, which allow users to place bids in that company’s auctions but cannot be exchanged directly for goods, cannot be regarded as a preliminary transaction of the kind identified in MacDonald Resorts, which would, as such, fall outside the scope of Article 2(1) of Directive 2006/112. It must be regarded as a supply of services for consideration within the meaning of point (c) of that provision, the consideration being the amount paid by users for the issue of Credits. The issue of Credits in return for that amount must also be regarded as a supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 when the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods.

B. The second question referred

71By the second question, the referring court essentially asks what must be regarded as consideration for the supply of goods by Madbid within the meaning of Article 2(1)(a) of Directive 2006/112.

72First, the referring court asks whether the amount paid by users for the issue of Credits is to be considered a payment on account within the meaning of Article 65 of that directive, so that it is part of the consideration for the supply of goods. Second, the referring court asks whether, when the user does not win the auction and the value of the Credits used to place bids is credited towards the price of goods purchased through the Buy Now or Earned Discount features, the value of those Credits constitutes a price discount within the meaning of Article 79(b) of Directive 2006/112, or whether it is part of the consideration for that supply of goods. Third, the referring court asks whether, when the user wins the auction and purchases the goods won, the consideration for the supply of the goods comprises only the winning price, plus the shipping and handling charge, or whether it includes also the value of the Credits used to place bids in that auction.

73I shall examine, first, whether the amount paid for the issue of Credits is a payment on account within the meaning of Article 65 of Directive 2006/112, second, what is consideration for the supply of the goods won in an auction and, third, what is consideration for the supply of goods purchased through the Buy Now or Earned Discount features.

1. The amount paid for the issue of Credits is not a payment on account within the meaning of Article 65 of Directive 2006/112

74According to Article 63 of Directive 2006/112, VAT is chargeable when the goods or services are supplied.

75However, Article 65 of that directive provides that, where a payment is to be made on account before the goods or services are supplied, VAT becomes chargeable on receipt of the payment and on the amount received.

76According to case-law, in order for VAT to become chargeable in such a situation, all the relevant information concerning the chargeable event, namely, the future delivery or future performance, must already be known and therefore, in particular, the goods or services must be precisely identified. ²⁷

77Madbid and the United Kingdom Governement agree that the amount paid by users for the issue of Credits is not a payment on account within the meaning of Article 65 of Directive 2006/112. The Commission does not address that issue.

78In my opinion, the amount paid for the issue of Credits cannot be considered a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112.

79Indeed, as explained in points 63 to 68 above, the amount paid for the issue of Credits is consideration for the supply of a service (namely, the grant of the right to participate in Madbid auctions), not for the supply of goods subsequent to an auction (if any). Those are two separate transactions. The amount paid as consideration for one transaction cannot be regarded as an account on the payment of the consideration for the other transaction.

80In any event, as argued by Madbid, users do not know, when they purchase Credits, what goods they will purchase from Madbid. ²⁸ Those goods are not precisely identified as required by the case-law cited in point 76 above.

81Consequently, the amount paid for the issue of Credits cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112.

2. What is consideration for the supply of the goods won in an auction?

82Pursuant to Article 73 of Directive 2006/112, the taxable amount includes everything which constitutes consideration obtained or to be obtained by the supplier in return for the supply of goods or services.

83According to settled case-law, that consideration is the subjective value, that is to say, the value actually received, in each specific case, and not a value estimated according to objective criteria. ²⁹

84Madbid contends that consideration for the supply of the goods won in an auction comprises, not only the auction winning price, plus the shipping and handling charge, but also the value of the Credits spent in bidding in that auction.

85The United Kingdom Government and the Commission submit that only the auction winning price, plus the shipping and handling charge, is consideration for the supply of the goods won in an auction.

86In my opinion, only the auction winning price, plus the shipping and handling charge, is consideration for the supply of the goods won in an auction. The amount paid for the issue of the Credits spent in bidding in that auction is not consideration for the supply of those goods since, as explained in points 63 to 68 above, it is consideration for the grant of a right to participate in that auction, which is a separate transaction.

3. What is consideration for the supply of goods purchased through the Buy Now or Earned Discount features?

87The referring court asks whether, when the user purchases goods through the Buy Now or Earned Discount features, the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid online shop, or whether it is the initial Buy Now price or the price in the Madbid online shop, less the value of the Credits spent in bidding.

88Madbid contends that, where goods are purchased through the Buy Now or Earned Discount features, the consideration for that supply of goods includes the value of the Credits spent in bidding.

89The United Kingdom Government and the Commission submit that the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid shop, plus the shipping and handling charge, and less the value of the Credits spent in bidding.

(a) The value of the Credits spent in bidding is not part of the consideration for the supply of goods purchased through the Buy Now or Earned Discount features

90I consider that, when goods are purchased through the Buy Now or Earned Discount features, the consideration for that supply of goods is the initial Buy Now price or the price in the Madbid shop, plus the shipping and handling charge, and less the value of the Credits spent in bidding. ³⁰

91This is because, as explained in points 63 to 68 above, the amount paid for the issue of Credits spent in bidding is consideration for a service, namely, the grant of a right to participate in Madbid auctions. Therefore, that amount cannot be part of the consideration for the subsequent supply of goods purchased through the Buy Now or Earned Discount features, which is a separate transaction.

92Consequently, the value of the Credits spent in bidding, which is credited towards the initial Buy Now price or the price in the Madbid shop, is to be regarded as a discount on the price of the goods purchased through the Buy Now or Earned Discount features, within the meaning of Article 79(b) of Directive 2006/112. As such, the value of those Credits is not part of the taxable amount for the supply of those goods.

93Moreover, should Credits be regarded as vouchers which, once spent in bidding, may be used to obtain a reduction in the price of goods purchased through the Buy Now or Earned Discount features, ³¹ this would be in accordance with the Court’s finding in Elida Gibbs that the taxable amount is the selling price of the goods, less the value of the voucher, ³² in the present case, the initial Buy Now price of the goods or their price in the Madbid shop (plus the shipping and handling charge), less the value of the Credits spent in bidding.

(b) Situation where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop

94However, where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the discount covers 100% of the price for the goods purchased through the Buy Now or Earned Discount features. In that situation, one may wonder whether the value of the Credits spent in bidding constitutes a price discount within the meaning of Article 79(b) of Directive 2006/112.

95Reference should be made, in that regard, to the judgment of 27 April 1999, Kuwait Petroleum (C‑48/97, EU:C:1999:203). In that case, an oil company offered vouchers to customers with every 12 litres of fuel purchased. Those vouchers could be redeemed for goods chosen from a catalogue (‘the redemption goods’). The price of the fuel was the same whether or not the customers accepted the vouchers. As mentioned above, the Court found that customers were not given a discount on the price of the redemption goods since the term ‘price discount’ in Article 11A(3)(b) of the Sixth Directive, ³³ now Article 79(b) of Directive 2006/112, cannot be applied to reductions covering 100% of the price. ³⁴ The redemption goods were thus disposed of free of charge. According to Article 5(6) of the Sixth Directive, now Article 16 of Directive 2006/112, ³⁵ the disposal of goods free of charge must be treated as a supply of goods for consideration where the VAT on those goods is wholly or partly deductible. ³⁶

96In its written observations, Madbid argues that it follows from the judgment in Kuwait Petroleum that the value of the Credits spent in bidding cannot be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.

97When questioned on this point at the hearing, the United Kingdom Government indicated that, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the consideration for the supply of the goods purchased through the Buy Now or Earned Discount features is not zero. Indeed, in that situation, the shipping and handling charge must be paid and it is part of the consideration for that supply of goods. That charge cannot be reduced by the amount of the Credits spent in bidding.

98In the Commission’s view, it follows from the judgment in Kuwait Petroleum that, in the situation where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, goods are disposed free of charge within the meaning of Article 16 of Directive 2006/112. Therefore, in that situation, the taxable amount is, according, to Article 74 of that directive, the purchase price paid to Madbid. However, the Commission stressed that Madbid does not normally dispose of goods free of charge, so that the judgment in Kuwait Petroleum is hardly relevant to the present case.

99In my opinion, contrary to what Madbid argues, it does not follow from the judgment in Kuwait Petroleum that the value of the Credits spent in bidding does not constitute a price discount within the meaning of Article 79(b) of Directive 2006/112. Indeed, in that case, the discount covered the whole price of any of the redemption goods, whereas, in the present case, the value of the Credits spent in bidding which is credited towards the initial Buy Now price or the price in the Madbid shop is typically below that price. ³⁷ Therefore, in the present case, a portion of the goods’ price is typically paid for by one of the accepted payment methods such as credit or debit card.

100Moreover, I consider that, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid shop, the supply of the goods purchased through the Buy Now or Earned Discount features is not a disposal free of charge within the meaning of Article 16 of Directive 2006/112.

101It is true that, in Kuwait Petroleum, there were two separate transactions (namely, the supply of fuel and the supply of the redemption goods), and that the price for the fuel was the same whether or not the customers accepted the vouchers. Similarly, in the present case, there are two transactions, and the amount paid for the Credits is the same whether or not the user uses them to place bids or fails to do so within 180 days, ³⁸ and whether or not the user sets the value of the Credits spent in bidding against the initial Buy Now price or the price in the Madbid shop or fails to do so within 365 days. ³⁹

102However, I should stress that, in Kuwait Petroleum, the Court asked the referring court to verify whether part of the price paid for the fuel, whether identifiable or not, was compensation for the redemption goods. The reason why the Court nonetheless concluded that the supply of the redemption goods was a disposal free of charge was that the fact that the price for the fuel was the same whether or not the customers accepted the vouchers strongly suggested that the supply of the redemption goods was a disposal free of charge. ⁴⁰ By contrast, in the present case, the price for the goods purchased from Madbid is clearly identifiable. When a user purchases goods through the Buy Now feature, the initial Buy Now price as well as the new price (that is, the initial Buy Now price less the value of the Credits spent by that user in placing bids in the auction at issue) are displayed to that user. ⁴¹ Similarly, the price of goods in the Madbid shop is necessarily displayed in that shop, since those goods may be purchased by customers who have bought no Credits and who, consequently, have not been awarded an Earned Discount that could be credited towards that price. Therefore, in the present case, the goods purchased through the Buy Now or Earned Discount features are supplied in return for the payment of an identifiable amount. Moreover, the payment of that amount is distinct from the payment for the issue of Credits. Indeed, the former payment is necessarily made after the latter payment, since the user does not know, when he purchases Credits, what goods he will acquire from Madbid, and at what price. Consequently, when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Mabid shop, the goods purchased through the Buy Now or Earned Discount features are not disposed of free of charge within the meaning of Article 16 of Directive 2006/112.

103In any event, I note that, as argued by the representative of the United Kingdom Government, users must pay the shipping and handling charge even when the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid online shop. It is for the referring court to verify whether the sale of goods and their shipping by Madbid are to be regarded as separate transactions. I note, however, that, at the oral hearing, the United Kingdom Government stated, without being contradicted by Madbid or the Commission, that Madbid makes a single supply of goods whenever it provides goods and delivers them to users. Should this be the case, the shipping and handling charge would be regarded as part of the consideration for the supply of goods. That supply would not be a disposal free of charge within the meaning of Article 16 of Directive 2006/112.

104Therefore, in my opinion, even where the value of the Credits spent in bidding is equal to the initial Buy Now price or the price in the Madbid online shop, the value of those Credits must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112. The taxable amount attributable to Madbid is, as mentioned in points 92 and 93 above, the selling price of the goods (the initial Buy Now price or the price in the Madbid shop), plus the shipping and handling charge, and less the value of the Credits spent in bidding.

105Consequently, the answer to the second question must be that the amount paid for the issue of Credits such as those in the main proceedings cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112. When the user wins the auction, the consideration for the supply of the goods won comprises only the auction winning price, plus the shipping and handling charge. The value of the Credits used to place bids in that auction is not part of the consideration for the supply of the goods won. When the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods, the consideration for the supply of those goods is that price, plus the shipping and handling charge, and less the value of the Credits used to place bids. In that case, the value of the Credits used to place bids must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.

C. The third question referred

106By the third question, the referring court asks to what extent, if two Member States treat a transaction differently for the purposes of VAT, the courts of one of those Member States should take into account the desirability of avoiding double taxation and, conversely, non-taxation of that transaction, and the principle of fiscal neutrality as well.

107I consider that, as argued by the Commission, the answer to the third question referred must be that, if the courts of a Member State against whose decision there is a judicial remedy under national law are aware that the interpretation of the provisions of Directive 2006/112 by the courts or the tax authorities of another Member State differs from their own, they may refer the matter to the Court under Article 267 TFEU.

IV. Conclusion

Conclusion

108In the light of the foregoing, I propose that the Court should give the following answer to the questions referred by the First-tier Tribunal (Tax Chamber) (United Kingdom):

In circumstances such as those in the main proceedings, where a company operates a penny auctions website and also sells goods directly in an online shop, the issue to registered users, by that company, of Credits such as those in the main proceedings, which allow users to place bids in that company’s auctions but cannot be exchanged directly for goods, cannot be regarded as a preliminary transaction of the kind identified in paragraph 24 of the judgment of 16 December 2010, Macdonald Resorts (C‑270/09, EU:C:2010:780), which would, as such, fall outside the scope of Article 2(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. It must be regarded as a supply of services for consideration within the meaning of point (c) of that provision, the consideration being the amount paid by users for the issue of Credits. The issue of Credits in return for that amount must also be regarded as a supply of services for consideration within the meaning of Article 2(1)(c) of Directive 2006/112 when the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods.

The amount paid for the issue of Credits such as those in the main proceedings cannot be regarded as a payment on account before the goods are supplied within the meaning of Article 65 of Directive 2006/112. When the user wins the auction, the consideration for the supply of the goods won comprises only the auction winning price, plus the shipping and handling charge. The value of the Credits used to place bids in that auction is not part of the consideration for the supply of the goods won. When the user withdraws from, or loses, an auction and goes on to purchase goods from the company, in which case the value of the Credits used to place bids is credited towards the price of those goods, the consideration for the supply of those goods is that price, plus the shipping and handling charge, and less the value of the Credits used to place bids. In that case, the value of the Credits used to place bids must be regarded as a price discount within the meaning of Article 79(b) of Directive 2006/112.

If the courts of a Member State against whose decision there is a judicial remedy under national law are aware that the interpretation of the provisions of Directive 2006/112 by the courts or the tax authorities of another Member State differs from their own, they may refer the matter to the Court under Article 267 TFEU.

¹ Original language: English.

² Directive of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

³ By contrast, in ordinary auctions, no participation is required in order to place bids.

⁴ The nature of the transaction entered into by bidders who did not win the auction will also be assessed below, with regard to the specific features of the business of the applicant in the main proceedings.

⁵ The price of the package is divided by the number of Credits, with a rounding mechanism, the effect of which is to produce an exact, or very nearly exact, equivalence between the amount originally paid by the user and the value attributed to the Credit.

⁶ For instance, if an auction for a computer started at GBP 0.00 plus GBP 8.00 shipping and handling, and closed with a winning bid of GBP 1.45 (i.e. after 145 bids), then the auction winner would be entitled to buy the computer for GBP 1.45 plus GBP 8.00 shipping and handling, giving a total price of GBP 9.45.

⁷ However, the initial Buy Now price may be below the recommended retail price where Madbid has acquired in bulk the relevant goods.

⁸ Judgment of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraph 24 (emphasis added).

⁹ Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) (‘the Sixth Directive’). The Sixth Directive was repealed and replaced by Directive 2006/112. Article 2(1) of the Sixth Directive states that ‘the supply of goods or services effected for consideration’ is subject to VAT.

¹⁰ Judgment of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 27 and 32.

¹¹ According to Article 24(1) of Directive 2006/112, any transaction which does not constitute a supply of goods must be considered a supply of services. In the present case, it is common ground that the issue of Credits does not constitute a supply of goods. Therefore, the issue of Credits may constitute only a supply of services.

¹² See Article 43 of Directive 2006/112.

¹³ See point 23 above.

¹⁴ See Article 33(1) of Directive 2006/112.

¹⁵ See point 24 above.

¹⁶ In that regard, I note that, according to the request for a preliminary ruling, the evidence is inconclusive as to whether bidders may see entertainment value in taking part in an auction.

¹⁷ Emphasis added.

¹⁸ Judgment of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 27 to 29. See point 29 above.

¹⁹ By contrast, where a user wins the auction, the value of the Credits spent in bidding is exhausted.

²⁰ The user who makes a purchase through the Buy Now or Earned Discount features pays the full market price of the goods, since he paid for the Credits spent in bidding, whose value is set against the initial Buy Now price or the price in the Madbid shop.

²¹ In that regard, the order for reference stresses that ‘the contrast between the behaviour of those who go straight to the Madbid shop and those who buy Credits and take part in an auction makes it clear that the latter group must have a reason for doing what they have chosen to do, and that the reason is the desire to participate in an auction in the hope of winning it’.

²² Judgment of 18 July 2007, Société thermale d’Eugénie-Les-Bains, C‑277/05, EU:C:2007:440, paragraphs 26 and 27.

²³ As mentioned in point 21 above, the Earned Discount expires 365 days after that Credit was spent in an auction.

²⁴ Judgment of 8 December 2016, Stock ’94, C‑208/15, EU:C:2016:936, paragraph 27.

²⁵ Judgments of 3 March 1994, Tolsma, C‑16/93, EU:C:1994:80, paragraphs 13 and 14; of 21 March 2002, Kennemer Golf, C‑174/00, EU:C:2002:200, paragraph 39; of 18 July 2007, Société thermale d’Eugénie-Les-Bains, C‑277/05, EU:C:2007:440, paragraph 19; of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraphs 16 and 26; of 21 November 2013, Dixons Retail, C‑494/12, EU:C:2013:758, paragraphs 32 and 33; of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraph 26; of 10 November 2016, Baštová, C‑432/15, EU:C:2016:855, paragraph 28; and of 18 January 2017, SAWP, C‑37/16, EU:C:2017:22, paragraphs 25 and 26.

²⁶ As described in point 16 above.

²⁷ Judgments of 21 February 2006, BUPA Hospitals and Goldsborough Developments, C‑419/02, EU:C:2006:122, paragraph 48; of 16 December 2010, Macdonald Resorts, C‑270/09, EU:C:2010:780, paragraph 31; of 19 December 2012, Orfey Balgaria, C‑549/11, EU:C:2012:832, paragraph 28; and of 7 March 2013, Efir, C‑19/12, not published, EU:C:2013:148, paragraph 32.

²⁸ Unless the Credits are purchased while the auction is still in progress. Indeed, according to the order for reference, ‘Madbid’s website also provides a “Rapid Recharge” feature, which … [prevents users from] los[ing] an auction due to running out of Credits while the auction is in progress’. However, even in that situation, the amount paid for the issue of Credits would not constitute a payment on account before the auctioned goods are supplied, for the reason set out in point 79 above.

²⁹ Judgments of 5 February 1981, Coöperatieve Aardappelenbewaarplaats, 154/80, EU:C:1981:38, paragraph 13; of 23 November 1988, Naturally Yours Cosmetics, 230/87, EU:C:1988:508, paragraph 16; of 24 October 1996, Argos Distributors, C‑288/94, EU:C:1996:398, paragraph 16; of 20 January 2005, Hotel Scandic Gåsabäck, C‑412/03, EU:C:2005:47, paragraph 21; and of 7 November 2013, Tulică and Plavoşin, C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 33.

³⁰ It being understood that the Credits whose value is deducted from the initial Buy Now price or the price in the Madbid shop are Credits used to place unsuccessful bids (since, where a user wins an auction, the value of the Credits which he spent to bid in that auction is exhausted).

³¹ I should point out that Credits cannot be regarded as straightforward vouchers for the purchase of goods since (i) they cannot be used to purchase goods directly from Madbid (see point 16 above), and (ii) they are exchanged for a service, namely, the right to participate in Madbid auctions.

³² Judgment of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400, paragraphs 29, 34 and 35.

³³ See footnote 9. Article 11A(3) of the Sixth Directive states that ‘the taxable amount shall not include: … (b) price discounts and rebates allowed to the customer and accounted for at the time of the supply; …’.

³⁴ Judgment of 27 April 1999, Kuwait Petroleum, C‑48/97, EU:C:1999:203, paragraphs 16 and 17.

³⁵ Article 5(6) of the Sixth Directive states that: ‘The application by a taxable person of goods forming part of his business assets for his private use or that of his staff, or the disposal thereof free of charge or more generally their application for purposes other than those of his business, where the value added tax on the goods in question or the component parts thereof was wholly or partly deductible, shall be treated as supplies made for consideration. …’

³⁶ Judgment of 27 April 1999, Kuwait Petroleum, C‑48/97, EU:C:1999:203, paragraphs 26 to 32

³⁷ As mentioned in point 98 above, at the oral hearing the Commission argued, without being contradicted, that Madbid does not normally dispose of goods free of charge.

³⁸ In which case the Earned Discount expires.

³⁹ In which case the value of the Credits spent in bidding is extinguished.

⁴⁰ Judgment of 27 April 1999, Kuwait Petroleum, C‑48/97, EU:C:1999:203, paragraphs 27, 31 and 32.

⁴¹ According to Clause 15.2 of Madbid’s contractual terms, ‘if Buy Now is clicked, the price of any … Credits which the … user has already spent on the auction are then deducted from the Buy Now price. … The new price (i.e. the Buy Now price less the cost of the user’s spent … Credits) is then displayed to the … user and he is asked to confirm he wishes to buy the product for that price.’