The Advocate General has given his opinion in the UK case of Lebara Ltd (C-520/10) at European Court of Justice (ECJ) concerning the supply of phone cards to distributors in other EU-States, which end users belonging in that same EU-State can redeem in return for receiving telecoms services (previously reported here). In summary, the Advocate General has suggested that the distributor, and not the card issuer (in this case Lebara) should be liable for the VAT due on the supply of telecoms services to end users. The reasons for this are that the distributor is either acting as an undisclosed agent of the card issuer or, in the alternative, because the card issuer makes a single supply of telecoms services to the distributor and the distributor in turn makes a supply to the end user.
What does it mean for you?
If you are phone card issuer or distributor operative within the EU, we highly advise to follow this leading case at ECJ. Depending on the final decision, terms of contracts between phone card issuer and distributors have to be reviewed, as the VAT liability and VAT accountancy at the EU level would shift from one party to another.