CJEU issues important decision on Value Added Tax (VAT) on claims settlement service

“CJEU issues important decision on Value Added Tax (VAT) on claims settlement service”

Article by X. Kretsovali, Associate & Kosmas Karanikolas, Associate

CJEU issues important decision on Value Added Tax (VAT) on claims settlement services

An insurance company incorporated and licensed in Romania which provides MTPL insurance for motor accidents occurring also outside Romania, has assigned the settlement of the claims relating to accidents incurred abroad to third companies, incorporated in foreign countries. A dispute arose between the said insurance company and the Romanian Tax Authorities regarding the place where such claims settlement services should be deemed to be provided which, in turn, defines the country where they should be subject to VAT. Pursuant to article 59 para 1c of (EU) Directive 2006/112 [VAT Directive], as amended, “the place of supply of the services of consultants, engineers, consultancy firms, lawyers, accountants, and other similar services (…) shall be the place where that person is established, has his permanent address, or usually resides”. The Supreme Court of Romania requested a preliminary ruling from the CJEU on whether the abovementioned provision embodies claims settlement services. The CJEU (C-267/21) stipulated that claims settlement services must be regarded as a single economic activity and held that they cannot fall within the scope of the services provided by lawyers, engineers, accountants, or consultants since the habitual tasks of these professions do not include settlement of claims. Moreover, claims settlement services cannot be regarded as “other similar services” since, according to CJEU’s previous case law, a service is considered as similar to the activities referred to in the aforesaid article if they both serve the same purpose. Consequently, the CJEU concluded that the purpose of claims settlement services is not consistent with the purpose of the services referred to in article 59 of the VAT Directive and, thus, the place of supply of such services cannot be determined in accordance with this article; instead, their place of supply and their taxation ought to be defined in accordance with Romanian Law which sets the headquarters of the supplier as the criterion for the determination of country in which VAT is computed.


Authors: X. Kretsovali, K. Karanikolas


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