Osvobození od DPH pro platební služby – potvrzení striktního výkladu

VAT exemption on payment services - confirmation of strict interpretation

The UK Supreme Court has published an interesting judgment in Target Group Ltd, in which it addressed the question of whether services provided by Target can be considered as these concerning payments and transfers which are exempt from VAT. The judgment dealt the pre-Brexit period and is based on the judgments of the CJEU in this area, so it is also relevant to Czech companies.

Target managed clients' credit accounts for the bank and provided various services related to payments. These included generating automated payment instructions for direct debit, entering them into the UK BACS payment system, checking payments, sending reminders, etc.

The Supreme Court, after a detailed analysis of the nature of the services, found in favour of HMRC. The services provided are a technical solution which, although it leads to an automatic transfer of money, is a step prior to that transfer. By generating payment instructions, Target does not alter the legal and financial position of the counterparties, as indicated by the fact that it is not responsible for the actual transfer of money.

This is thus another judgment confirming the very strict interpretation for the VAT exemption of payment services. The judgment brings a range of interesting arguments and summarizes in detail the existing case law. It should not escape the attention of payment institutions.

We would be happy to reflect with you on the specific business model in practice. If you have any questions, please contact the authors of the article or the EY advisory team you are working with.

Authors:

Stanislav Kryl

Jevgenija Bajziková