Decision of the Court of Justice of the European Union (“CJEU”) on the VAT treatment of non-repossessed leased assets relating to terminated lease agreements

Case C-438/13 BCR Leasing IFN SA

he case concerns whether leased assets which are not repossessed by the lessor from the lessees further to the early termination of finance lease agreements (due to the lessee’s default in payment), where statutory recovery procedures were instituted and followed, are deemed as supplies of goods for consideration. The Romanian VAT legislation under litigation with the CJEU has been amended before CJEU’s ruling.

The CJEU concluded that a situation where the leased goods are not recovered from the former lessees, despite the recovery procedures undertaken, and where no consideration is received by the lessor following the termination of the lease agreements, may not be treated as a supply of goods for consideration.

The CJEU’s ruling will have a direct impact on the Romanian leasing industry, but also on companies that registered missing inventories which were deemed as supplies of goods for consideration.

Hence, impacted companies would need to investigate the possibility to rely on the ruling in court litigations / open tax audits on non-repossessed leased assets / missing inventories deemed as supplies of goods for consideration.

In addition, impacted companies should also explore potential ways of recovering VAT self-charged in relation to non-repossessed leased assets / missing inventories deemed as supplies of goods for consideration under the former VAT law provision.

Such opportunities should be analysed also in the context of the obligation and conditions for performing an input VAT adjustment with respect to non-repossessed leased assets (and any missing inventory), as laid down by the VAT Directive and Romanian VAT legislation.

For additional information, please contact:
Venkatesh Srinivasan, Partner – Head of Tax and Legal

Ernst & Young SRL and Radu si Asociatii SPRL
15-17 Ion Mihalache Blvd.
Bucharest Tower Center Building, 22nd Floor
Sector 1, 011171, Bucharest, Romania
Tel: (40-21) 402 4000, Fax: (40-21) 310 7124
E-mail: office@ro.ey.com

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