4.2 Multiple-element transaction as a single, composite supply for VAT

The VAT treatment of a multiple-element transaction where each element should be considered a separate supply is fairly straight forward. The nature of each separate element should be established in order to apply the correct VAT treatment to that element. This becomes more challenging for multiple-element supplies where the transaction as a whole should not be split.

A supply which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system.1 This implies that the ‘legally agreed’ separate elements of a composite supply may have to be considered a single, composite, supply if the ‘economic reality’ requires so. Also, the essential features of the transaction must be ascertained in order to determine whether the taxable person is supplying the customer, being a typical consumer, with several distinct principal services or with a single service. I’ve described the ‘typical customer’ in Section 2.6.1.3. The CJEU itself has acknowledged on several occasions that it is impossible to give exhaustive guidance on how to determine whether a composite transaction should be considered one single supply or multiple supplies.2