Report s of C ases OPINION OF ADVOCATE GENERAL TANCHEV delivered on 7 March 2018 1 Case C-544/16 Marcandi Limited, trading as ‘Madbid’ v Commissioners for Her Majesty’s Revenue and Customs (Request for a preliminary ruling from the First-tier Tribunal (Tax Chamber) (United Kingdom)) (Reference for a preliminary ruling — Value added tax — Directive 2006/112/EC — Issue of credits that can be used to place bids in online penny auctions and whose value may be credited towards the price of goods purchased directly from the company running the auctions — Article 2(1)(a) and (c) — Supply of services or goods for consideration — Preliminary transaction — Article 65 — Payment on account — Article 73 — Taxable amount — Article 79(b) — Discount covering the whole price) 1. In the present case, the Court is called upon to decide whether the grant of the right to participate in a penny auction must be regarded as a supply of services subject to value added tax (‘VAT’) within the meaning of Article 2(1)(c) of Council Directive 2006/112/EC 2 or as a preliminary transaction not subject to VAT. ‘ 2. In penny auctions, participants are required to pay a non-refundable fee in order to place bids ( the 3 bidding fee’). When the auction begins, the timer begins to count down to zero. Each bid increases the price of the auctioned goods by 0.01 pounds sterling (GBP) (hence the name ‘penny auction’) and restarts the timer. The auction ends when the timer reaches zero. The winner is the person who was the last to bid. 3. According to Article 2(1)(a) and (c) of Directive 2006/112, the supply of goods for consideration and the supply of services for consideration constitute transactions subject to VAT. 4. There are two ways of looking at the payment of the bidding fee for the purposes of Article 2(1) of Directive 2006/112. 5. On the one hand, the bidding fee may be regarded as consideration for the supply of a service, namely, the grant of the right to participate in the auction. The grant of that right in return for the payment of the bidding fee would thus be a transaction subject to VAT within the meaning of Article 2(1)(c) of Directive 2006/112. The subsequent purchase, by the winner, of the auctioned goods would be considered a supply of goods within the meaning of Article 2(1)(a) of that directive and, as such, a further and distinct transaction subject to VAT. 1 Original language: English. 2 Directive of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1). 3 By contrast, in ordinary auctions, no participation is required in order to place bids. EN ECLI:EU:C:2018:164 1 OPINION OF MR TANCHEV – CASE C-544/16 MARCANDI 6. On the other hand, participants in the auction aim at winning the auction and purchasing the auctioned goods. Therefore, the grant of the right to participate in the auction could be regarded as a 4 mere preliminary step towards the purchase of the auctioned goods. It would not be a transaction subject to VAT within the meaning of Article 2(1) of Directive 2006/112. Only the subsequent purchase of the goods won would be considered a transaction subject to VAT within the meaning of that provision. 7. In the present case, the Court is called upon to decide between the two approaches described above. It is also asked what constitutes consideration for the supply of services and/or the subsequent supply of goods. I. Legal framework 8. Article 2(1) of Directive 2006/112 provides: ‘The following transactions shall be subject to VAT: (a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such; … (c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such; …’ 9. Article 65 of Directive 2006/112 states: ‘Where a payment is to be made on account before the goods or services are supplied, VAT shall become chargeable on receipt of the payment and on the amount received.’ 10. According to Article 73 of Directive 2006/112: ‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’ 11. Article 79 of Directive 2006/112 reads: ‘The taxable amount shall not include the following factors: … (b) price discounts and rebates granted to the customer and obtained by him at the time of the supply; …’ 4 The nature of the transaction entered into by bidders who did not win the auction will also be assessed below, with regard to the specific features of the business of the applicant in the main proceedings. 2 ECLI:EU:C:2018:164 OPINION OF MR TANCHEV – CASE C-544/16 MARCANDI II. The facts, the main proceedings and the questions referred for a preliminary ruling 12. Marcandi Limited (‘Madbid’), a company established in the United Kingdom, operates an online shopping business under the name ‘Madbid’. Madbid sells mainly technology-related products, such as mobile telephones, tablets, computers and televisions. It occasionally sells higher-value goods, such as cars. Madbid provides an online platform where registered users can participate in online penny auctions to bid for, and win, goods. It also allows users to buy goods directly from its online shop. 13. Madbid initially launched a website in the United Kingdom. Following the success of that website, Madbid launched websites in nine other Member States, including Germany, and in Canada and Turkey as well. 14. Madbid is registered for VAT in, among other places, the United Kingdom and Germany. 15. Madbid’s business operates as follows. In order to be able to bid in an online auction or purchase goods online, persons have to register online with Madbid as users (‘the users’) and agree to Madbid’s contractual terms. 16. Once registered, users may buy so-called ‘credits’ (‘the Credits’). Credits allow users to place bids in Madbid’s online auctions. Credits cannot, however, be used to purchase goods directly from the Madbid shop. Nor can they be converted back into cash. Credits are purchased by using one of the accepted payment methods such as credit or debit cards. Each Credit has a unique identifying code, which allows Madbid to track the Credits in a user’s account at any given time. Credits are sold in packages of different numbers of Credits for different prices (for instance, a package of 500 Credits costs GBP 49.99, and a package of 80 Credits costs GBP 9.99). A specific monetary value is attributed to each Credit. That value is, as near as makes no difference, the same as the amount that the user paid for the Credits. 5 Credits expire after 180 days. 17. As mentioned above, Credits are used to make a bid in an auction on Madbid’s website. Every auction begins with an opening price of GBP 0.00, and with the auction timer set to the allocated time limit set for the auction, which is usually one minute. Each auction also specifies a set number of Credits (between 1 and 8) that a user must spend in order to place a bid. When the auction begins, the timer begins to count down to zero. When the timer reaches zero, the auction comes to an end. 18. When a user places a bid by clicking the ‘Bid’ button, the set number of Credits required for ’ placing a bid in that auction is deducted from the total number of Credits in that user s account. The bid placed is GBP 0.01 higher than the previous bid, which means that the listed auction price of the goods is increased by GBP 0.01. The auction timer is reset to the allocated time limit and starts to count down to zero. The winner of the auction is the current highest bidder when the auction timer reaches zero. 19. The auction winner is entitled to purchase the goods won for the amount of the winning bid, plus 6 the shipping and handling charge. He is not, however, obliged to purchase those goods. Should the auction winner decide to purchase the goods won, he must pay the amount of the winning bid, plus the shipping and handling charge, within a specified period; otherwise he forfeits entitlement to buy the goods won for the amount of the winning bid. The value of the Credits used by the auction winner to bid in the auction is not credited towards the price paid for the goods won. The value of those Credits is extinguished. 5 The price of the package is divided by the number of Credits, with a rounding mechanism, the effect of which is to produce an exact, or very nearly exact, equivalence between the amount originally paid by the user and the value attributed to the Credit. 6 For instance, if an auction for a computer started at GBP 0.00 plus GBP 8.00 shipping and handling, and closed with a winning bid of GBP 1.45 (i.e. after 145 bids), then the auction winner would be entitled to buy the computer for GBP 1.45 plus GBP 8.00 shipping and handling, giving a total price of GBP 9.45.