Taxation of additional elements

There is a lot of controversy and doubt about the proper taxation of additional elements (goods and services) on medical devices. A key role in this regard must be attributed to the concept of a complex benefit and its correct distribution into several separate benefits or to the acceptance of a thesis on its uniform nature. Since there is no definition of a complex supply in neither polish law nor EU directives relating to VAT, it is necessary to examine each time, on the basis of the specific facts, the nature of a number of interrelated transactions.

This issue is a frequent subject of tax case-law of the Polish and EU courts. In its judgments, the Court of Justice of the European Union has consistently adopted a position which gives rise to the fundamental view that each supply must be treated separately. For example, in its judgment of 21 February 2008 in Case C-425/06, it stated: '(…) where an activity involves several benefits, the question arises whether it must be regarded as a single act or a number of separate and independent benefits, which must be assessed separately. That question is of particular importance from the point of view of VAT, in particular for the application of the rates of taxation or the exemption provisions provided for by the Sixth Directive (see judgments of 25 February 1999 in Case C-349/96 CPP and 27 October 2005 in Case C-41/04 Levob Verzekeringen and OV Bank). In this respect, Article 11(2) of the Basic Regulation provides that the commission may, in It follows that each supply must normally be regarded as separate and independent (see CPP, paragraph 29, and Levob Verzekeringen and OV Bank, paragraph 20).' That view was also reiterated in the judgment of 11 June 2009 in Case C-572/07: 'although the cleaning services of the common parts of a building accompany the use of the goods leased, they do not necessarily fall within the scope of the concept of rental within the meaning of Article 2(1)(b) of the Basic Regulation. In accordance with article 13(B).b(b) of Directive 91/414/EEC, the Commission shall, in accordance with the procedure Furthermore, since the rental of dwellings and the cleaning of common parts of a building may, in circumstances such as those in the main proceedings, be mutually separated, they cannot be regarded as forming a single supply within the meaning of the case-law of the Court.' It should be noted, however, that the Court has also pointed out that, where several services provided by a taxable person are closely linked in such a way that they create objectively, from an economic and economic point of view, a single supply, that supply should not be artificially distributed for tax purposes. Consequently, those arguments must be regarded rather as interpretative indications and the final application of one of the principles will be determined in each case by the facts and circumstances of the case.

The Supreme Administrative Court in Warsaw recently ruled on this issue (judgment of 1 June 2011, file I FSK 869/10). The facts concerned the sale of a medical device in the form of magnetic resonance imaging, where, in addition to delivery, it was also offered to provide the services necessary for the proper functioning of that device, in the form of adaptation works of the premises in which the resonance imaging was to work, i.e. electrical, air-conditioning and insulation works, protecting against radiation. The General Court stated that the supply of medical equipment and the performance of the work designated by the taxable person adapting the premises in which the equipment will work constitute two separate services and should therefore be taxed if the supplier of the equipment has not demonstrated that the supply and the services provided are so interconnected that their separation would be artificial, leading to a deterioration in the functionality of the VAT system, even if each of those services retains its usefulness in view of the needs of the hospital as the average consumer. That does not mean that those benefits remain inextricably linked economically.

On the other hand, the supply and installation of equipment, that is to say, a situation in which one of the combined services is impossible without the existence of the other, was regarded as a homogeneous supply. The General Court also emphasised that it was necessary to separate any link between the various benefits and the relationship between them, which presays them to consider that they must be regarded as a single complex benefit. Such classification cannot be determined solely by a subjective factor which emphasises the indication of an act satisfying the purchaser's essential need, in the sense that the others are in any way complementary to that need, without analysing other aspects of such benefits.

Consequently, the General Court held that, although, from the hospital's point of view, as a purchaser of the equipment, it was undoubtedly useful and desirable for the hospital to carry out the adaptation work carried out by the supplier of the medical equipment, it could not be regarded as being so closely linked to the supply of that equipment that it constituted a single supply if it was so universal from the point of view of the hospital's needs that it was that the services provided may serve a different purpose from the medical equipment provided. Moreover, by combining the various supplies or services provided into a single supply, it must not be forgotten that the statutory principle is the separateness and independence of the various supplies or services provided. The recognition of separate benefits as a single comprehensive benefit is therefore exceptional. In the facts of the case, such a broad perception of the link between the supplies qualifying them for a single complex supply could result in an infringement of the principle of competition by applying tax exemptions or preferential VAT rates to the supplies or services covered, in principle, by the basic rate.

This issue was also the subject of a request for a ruling on the tax ation of the rate of tax on goods and services in connection with the sale:

  • medical devices (including their installation, commissioning and user training) which are medical devices together with accessories which are not medical devices and medical device equipment such as medical gas cylinders, small fittings and fittings, electrical, network, installation, etc. The share of the value of the additional items in the sales value of the whole package does not exceed 10%.
  • Infinity Central Station (ICS)/Symphony/Gateway Vital Performance Monitoring Systems and Innovian Clinical Systems Information Systems, including standard electrical, network and computer components that are not medical devices and medical device equipment, such as computers, servers, computer accessories, power supplies, screens, printers, network devices, mounting elements, network software and user software, electrical and network services, etc. The share of the value of the additional items in the sales value of the whole package does not exceed 50%.

In considering the above, the Director of the Tax Chamber in Bydgoszcz argued that the supply of medical devices together with additional elements in the form of goods (m.in. cylinders for medical gases, computers, servers, computer accessories, power supply screens, printers, software) and installation, assembly and "other" services constituted a complex service in which it is necessary to distinguish: the supply of medical devices, which constituted the main supply and the supply of additional components and installation services. , assembly and 'other', which in turn was not an end in itself but rather served to ensure the normal functioning of medical devices and, as such, should be regarded as an anading service. From an economic point of view, the supply of medical devices and those devices and services was therefore objectively a single supply. Consequently, the Company was entitled to apply to such a supply the tax rate applicable to the principal supply (rate of 7% in accordance with Article 2(10) of the basic Regulation). Whereas Article 41 (1) of Regulation (EEC) No 2 Article 2 of the Act).

On the other hand, that reduced rate could not apply to the other additional elements in the form of electrical and network services, since it would be unauthorised to conclude that such services, having a very universal nature, are so closely linked to the supply of the afored medical devices that the whole constitutes a single supply. Rather, it is appropriate to consider that the nature of these works does not preclude their use in other devices or systems than the medical devices in question, even if they were sold together with devices on the basis of a single contract. Consequently, the supply of a medical device and the performance of those works constituted two separate services and, in that way, the separation of those transactions must not lead to a change in their nature or value from the point of view of the purchaser. The treatment of separate benefits as a single complex benefit is exceptional in nature, de derogation from the principle of separate taxation of each benefit at its appropriate rate of tax (ruling of 14 February 2012, No ITPP2/443-1113/10/12-S/MD).


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