4.2.1.2 Amalgamation

The other ‘form’ or ‘species’ of multiple-element transactions that are considered a single, indivisible economic supply, which it would be artificial to split, is based on two or more elements in a transaction where none of those transactions is considered ancillary to the other.1 This is the case 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.2 Those elements should not only be inseparable, but must also be placed on the same footing, or at least both be indispensable in carrying out the supply as a whole, with the result that it is not possible to take the view that one must be regarded as the principal element and the other as ancillary to it.3 In a number of cases concerning amalgamation, the CJEU makes clear that this doctrine applies to cases where considering the different elements as separate and individual would be artificial or contrived.4 It should be clear from the totality of elements that they are all closely linked and that together, they are all necessary for achieving the economic purpose of the entire (composite) transaction, where the separate elements are of no economic use individually, but together constitute an economically useful supply.5 The concept of ‘economic’ in these cases means ‘a reflection of the way a business transaction is normally conducted as perceived by a typical customer’, as I explained before.

An objective close link is required for transactions to form (part of) a single economic transaction. This means that all elements of the supply made by the supplier should be taken into account to establish whether they, together, form one single, indivisible economic supply. I take the term ‘economic’ to mean the ‘actual’ supply, which can be different from (and even opposite to) what is ‘legally agreed’ (see above).6

The way in which prices for these (individual) transactions are stipulated is not of itself decisive.7 The result of this amalgamation is a ‘new’ supply ‘sui generis’ (i.e. with its own distinct features and nature), whose VAT consequences should be based on the nature of this single, amalgamated supply.

The rules as laid down by the CJEU regarding absorption and amalgamation as described above imply that the VAT treatment of such composite transactions is determined by the nature of the single, composite supply. This VAT treatment can, for example, concern the application of a VAT rate,8 the application of an exemption9 or the application of the place of supply rules.10