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Court of justice of the European Union rules on VAT for occasional transactions performed by VAT registered individuals

The Court of Justice of the European Union (CJEU) has recently issued its ruling in case C-62/2012 “Galin Kostov” which deals with occasional supplies of services rendered by VAT registered individuals, where such occasional supplies are not necessarily linked to the activity for which that individual has applied for a VAT registration.  The case deals with Mr. Galin Kostov who is a VAT registered bailiff in Bulgaria and who, on one occasion, performed agency services for a third party. Mr. Kostov did not pay VAT to the Bulgarian state for the agency fee it had received arguing that the agency services in question were occasional and they were in no way related to his economic activity.  The CJEU ruled against Mr. Kostov arguing that a natural person who is already a taxable person for VAT purposes in respect of his regular activities must be regarded as a taxable person in respect of any other economic activity it carries out occasionally.

Implications of the CJEU’s ruling

The VAT rulings of the CJEU provide a much needed insight on how certain principles of VAT should be interpreted. This is all the more important in situations where the domestic legislation is silent, unclear or incorrect.  On that note, the court’s decision in case C – 62 / 2012 „Galin Kostov” confirms that once a natural person is registered for VAT purposes for a certain economic activity it needs to pay attention to any other occasional activities it performs as they too may be subject to VAT.

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