Copyright levies should not be subject to VAT says Court of Justice of the European Union

On 18 January 2017, the Court of Justice of the European Union (CJEU) issued its decision in case C-37/16 (Minister Finansów v Stowarzyszenie Artystów Wykonawców Utworów Muzycznych i Słowno-Muzycznych SAWP).

The proceedings started in Poland between the Minister for Finance and the Society for performers of musical works with or without words (SAWP) concerning whether the levies paid for recording or reproducing copyright works and on media for recording or copying such works was subject to VAT. The case reached the Polish Supreme Administrative Court that decided to refer two questions to the CJEU for a preliminary ruling: (1) do rightholders supply services, within the meaning of the VAT Directive, to the producers and importers of reproduction devices and media who are liable to pay the levy and (2) if so, should the VAT be paid by Collective Management Organisations (CMOs)?

In a nutshell, the Court answered that reproduction rightholders do not make a supply of services to those liable to pay a levy, and the fees collected should therefore not be subject to VAT: “it is apparent from the order for reference that fees such as those at issue in the main proceedings are intended to finance fair compensation for holders of reproduction rights. However, the fair compensation does not constitute the direct consideration for any supply of services, because it is linked to the harm resulting for those rightholders from the reproduction of their protected works without their authorisation (Recital 30).
As the second question was asked if the first question was to be answered in the affirmative, there was no need for the Court to answer to it. 

Find the full decision here – IFRRO is now looking at possible implications of the decision for its members and will be further discussing its impact on existing levy schemes.