6.3.3.7 Do the ‘private use’ provisions also apply to bought-in (purchased) services?

Some EU Member States, e.g. Germany,1 are of the view that the ‘full-deduction-followed-by-adjustment’ rules do not apply to purchased services. Other Member States, like the United Kingdom,2 only allow the rule for services where the private use cannot be assessed beforehand, and yet other Member States, like the Netherlands,3 are unsure.

In my view, there is no reason not to include bought-in services in this adjustment system, if only because there is nothing in the text of the provision that suggests that they should not be included. Both Merkx4 and Terra and Kajus5 share this view, based on the same CJEU case law that I will describe in this Section to support this view.

In its case law regarding this provision, i.e. the Fillibeck case,6 the Cookies World case7 and the Danfoss and AstraZeneca case,8 the CJEU has stated that the aim of this provision is to ensure equal treatment as between a taxable person who applies goods or services for his own private use or for that of his staff and a final consumer who acquires goods or services of the same type.9 To me, this is a clear indication that the CJEU supports my view that these provisions also apply to bought-in services.

Also, the same taxable amount is used for both provisions that regard services for no consideration as being made for consideration: the use of goods as well as the use of services. For the use of the goods, the provision only applies insofar VAT was deducted. The fact that the same taxable amount is used for both provisions to me is an indication that the provisions serve the same purpose: ensuring that the taxable person using services for his private purposes is treated the same as a private consumer of those services, from a VAT perspective. This goal is achieved by an adjustment system that not only ensures taxation to balance out prior deduction of VAT in case of private consumption, but also taxation of services that would have been subject to VAT if purchased from a third-party provider.

Furthermore, CJEU case law exists about the taxation of the private consumption of bought-in services: transportation of staff arranged by other parties than the employer,10 company lease cars11 and the supply of catering services.12 However, the CJEU has also ruled that where work (i.e. services, JB) which is carried out on goods after their purchase and on which the input VAT was deducted does not give rise to liability of VAT under the ‘adjustment for private consumption through taxation’-provision regarding the application of goods, the VAT deducted in respect of that work must be adjusted in accordance with the (other) ‘adjustment provisions’13 (under which overclaimed VAT must be repaid as such) if the value of the work in question has not been entirely consumed in the context of the business activity of the taxable person before the goods is allocated for private consumption purposes.14 In my view, this is not in line with the purpose of the relevant provisions and also only appears in one CJEU ruling about the application or use of goods.