Football agents score with EU VAT appeal

A German football agency has had its appeal upheld by the Court of Justice for the European Union (CJEU) after disputing whether the VAT liability of the services it provided to clubs hinged on the time of supply or when they were completed

Baumgarten sports & more GmbH provided agency business services in the professional football sector to Bundesliga clubs including Bayer 04 Leverkusen, FC Bayern München, and Borussia Mönchengladbach. It received commissions from clubs with whom it placed players, ‘provided that the player subsequently signs an employment contract and holds a licence issued by the German football league’.

These commissions were paid in six-monthly instalments for as long as the player remains under contract. In 2015 the German tax office, Finanzamt Goslar, decided that, with regards to the accrual taxation rule, the company should have paid tax on commission payments corresponding to fixed-term player contracts falling due in 2015.

The club disagreed with this treatment and several appeals were heard before the German finance court (Bundesfinanzhof) referred the case to the European Court of Justice (CJEU) as Finanzamt Goslar v Baumgarten sports & more GmbH [2018] BVC 50.

Finanzamt Goslar consistently argued that as Article 63 of the VAT Directive provides that ‘the chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied’, the supply of those services could be taken as the placing of a player.

The Bundesfinanzhof raised the question of whether ‘the taxable person is obliged to pre-finance the VAT owed in respect of the supply of goods or services for a period of two years if he is not able to receive (part of) the remuneration for the goods or services supplied by him until two years after the taxable event has occurred’.

In its submission to the CJEU it stated that ‘the referring court is also uncertain whether the fact that a taxable person makes an ‘[advance] payment’ to the tax authority is compatible with certain principles of VAT law and the general principles of equality and proportionality. Its uncertainty is based, in essence, on the comparison…of the respective situations of a taxable person such as that in the main proceedings and of a taxable person that is taxed according to the ‘cash accounting’ method’.

The CJEU considered the case to be exceptional given the nature of the circumstances, and that ‘the chargeable event and chargeability of a tax on the supply of a service such as that in the main proceedings must be regarded as occurring or taking effect not when the player is placed, but on expiry of the periods to which the payments made by the club relate’.

It ruled on 29 November 2018 that in these specific circumstances the service provided by an agent should be considered to have been provided, and completed, following each periodic payment, saying that:

‘Article 63 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax…must be interpreted as precluding the chargeable event and chargeability of a tax on the supply of agency services for professional football players by an agent, such as that at issue in the main proceedings, paid in conditional instalments over several years further to the placement, from being regarded as occurring or taking effect when the player is placed’.

Report by James Bunney

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