Austrian Tax Court finds against Austrian Tax Administration and rules that Stock Exchange trading platform services are VAT exempt.
The highest Austrian Tax Court (VwGH; reference number: 2013/13/0096) has taken the view that trading platforms used by one of the most important European Stock Exchanges, render VAT exempt intermediary supplies to their customers rather than taxable services as argued by the Austrian Tax authority. In case of cross-border supplies, there is also no requirement for their customers to apply the reverse-charge mechanism in respect of self-accounting for VAT. On the other side the trading platform, there was no entitlement for input VAT deduction, however, their personnel (employee) do not attract a VAT charge.
Following a thorough analysis of the entities’ actual functions & operations, the VwGH dismissed the argument of the tax authorities that the supplies of trading platforms consisted only of IT-services. According to the opinion of the VwGH this was not the case, because the automated matching of the offers and demands changed the legal ownership in the shares. Therefore, the activities of the trading platform had the decisive impact required by the ECJ (“SDC”, C-2/95, “CSC Financial Services”, C- 235/00) in order to qualify as an intermediary service (although no human intervention takes place).
Bearing in mind that cost-sharing groups are targeted heavily by different European tax authorities (See our commentary in our Lux ECJ case article), consideration should be given to how arrangements could be drafted in order to ensure that similar services provided within the financial services industry may qualify for VAT exemption.