CJEU DPAS: Limited scope of exemption for payment handling | Deloitte Nederland


CJEU DPAS: Limited scope of exemption for payment handling

On 25 July 2018 the Court of Justice of the European Union (hereinafter: CJEU) delivered its judgment in the DPAS case. With this judgment the CJEU shows that the scope of the exemption for payment handling is limited.

30 July 2018

Facts of the case

DPAS provided a dental plan to patients of dentists. Under this plan each patient paid DPAS a fixed monthly sum by direct debit to cover the costs of their dental work and for insurance cover for emergency treatment. After deduction of the payment for its services DPAS forwards the paid amounts to the dentists and insurers concerned.

The principal issue under dispute was whether the fee charged to the patients for running the payment arrangements (i.e. collecting the sums due by direct debit and remitting them to the dentists and insurers concerned) is VAT exempt, because it qualifies as a payment or money transfer service within the meaning of art. 135 (1) (d) VAT Directive.

CJEU decision

The CJEU rules that the services provided by DPAS did not constitute an exempt supply of payment or transfer services. The exemption can relate only to transactions which form a distinct whole, fulfilling in effect the specific, essential functions of such transfers. DPAS’s services do not result in the legal and financial changes which are characteristic of the transfer of a sum of money. DPAS does not itself carry out the transfers or the materialization in the relevant bank accounts of the sums of money agreed in the context of the dental plans at issue, but asks the relevant financial institutions to carry out those transfers. Furthermore, DPAS is not responsible for the failure or cancellation of a direct debit mandate on the basis of which DPAS requests that the sums which it must subsequently transfer to the dentist and to the insurer be collected from the bank account of the patient concerned.

The CJEU distinguished the case at hand from its previous judgement in AXA (which held that similar services were payment handling, but where disqualified from exemption for being debt collections), asserting that the Court had not particularly focused on the payment handling exemption in that judgement. Consequently, DPAS should have charged VAT.

Having reached this judgement, the CJEU did not go on to consider whether DPAS was providing debt collection services.


A narrow interpretation of the VAT exemption concerning payments fits in the trend seen in other recent case law from the EU. The judgement makes it even more difficult for this exemption to apply to outsourcers providing payment processing services.

In case your business is involved in processing or initiating payment services we recommend investigating – with your VAT advisor – the impact of this case. The case may also be relevant to new types of payment services under the Payment Services EU Directive (PSD 2).

Vond u dit nuttig?