ECJ: TRANSFER OF THE PLACE OF SUPPLY REGARDING TELECOMMUNICATION SERVICES

Overview

In the SK Telecom case rendered on April 15, 2021, C-593/19, the ECJ deals with the place of supply of roaming services supplied by a taxable person established in a third country to third-country nationals in mobile communication networks in the EU. Moreover, the ECJ explains the conditions for a transfer of the place of supply to the national territory.

Facts

SK Telecom is a South Korean mobile phone operator that supplies roaming services to its South Korean customers during their stay in Austria. SK Telecom charges its customers roaming fees for these roaming services. Roaming services are telecommunications services that are generally taxable where the customer resides. However, in order to prevent double taxation, non-taxation or distortions of competition, the individual Member States of the European Union have the option according to EU law to transfer the place of supply to the national territory. The prerequisites are that the customer is domiciled in a third country and the telecommunications services are used or enjoyed within the national territory. Austria has made use of this option in the form of a regulation. According to the view of the Austrian tax authorities, however, the place of supply may only be transferred to Austria if the services are not subject to a tax burden in the third country that is comparable to the respective Austrian VAT. It was questionable whether this view was in line with the EU law and whether the place of supply should also be transferred in case a non-taxable person is temporarily staying within the territory of a Member State.  

Opinion of the ECJ

The ECJ ruled that roaming services supplied to third-country nationals in mobile communication networks in the EU are already used or enjoyed in the country that provides the mobile communication networks due to the nature of these services. Consequently, roaming services would be used or enjoyed in the country in which the recipients of the service are staying when receiving the service - even if the stay is only temporarily. However, a transfer of the place of supply to the national territory would have to aim at preventing double taxation, non-taxation or distortions of competition. In this context, the ECJ clarifies that the question of whether there are cases of double taxation, non-taxation or distortion of competition has to be assessed by reference to the tax treatment of the services concerned in the Member States of the European Union. Regarding the transfer of the place of supply to Austria the tax treatment of the domestic law of the third country does not have to be taken into account. According to the ECJ, in the present case a non-taxation in the European Union was at hand, therefore, the transfer of the place of supply to Austria was possible. Finally, the ECJ points out that an international agreement concluded with that third country in that respect could provide other solutions.

Conclusion

The ECJ ruled that roaming services regarding the use of the mobile communication network of a Member State supplied by a mobile phone operator established in a third country to customers of the same third country may be subject to VAT in the Member State concerned. For this provision, the specific tax treatment in the third country is irrelevant - contrary to the previous view of the Austrian tax authorities. However, the opposite could be regulated by relevant international agreements.

As a result of this legal opinion confirmed by the ECJ, third-country mobile phone operators must therefore register for VAT purposes in Austria in order to declare the VAT incurred through the domestic use and enjoyment in the assessment procedure.