2.6.2 Composite supplies

I will elaborate on the VAT consequences of composite supplies in Chapter 4 of this research. For this section, it is relevant to determine which criteria the CJEU applies for determining whether a supply consisting of multiple elements should, for VAT purposes, be treated as a supply of all the separate elements or rather as a single, composite, supply. For this purpose, the CJEU has not used the ‘economic reality’ as such, but it has used ‘commercial reality’ as a test.1 In most cases about the VAT treatment of composite supplies, the CJEU uses the term ‘from an economic point of view’.2 Every supply must normally be regarded as distinct and independent but a transaction 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.3 The characteristic elements of the transaction concerned must be examined in order to determine whether the supplies constitute several distinct principal supplies or one single supply. This means that in my view, in cases where the CJEU tests whether the transactions of the case qualify as multiple, separate supplies or as a single, composite, supply, economic and/or commercial reality, or rather the ‘economic point of view, is – amongst other things – a reflection of the way independent businesses would normally do business and design or set up their transactions.

In this cluster of CJEU case law, economic reality is assessed from the viewpoint of a ‘typical consumer’. Where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split, that supply should be treated as a single (composite) supply.4 Who is this ‘typical consumer’ that determines economic reality?