The European Court of Justice declared that, by levying VAT on services consisting of road assistance in the event of a breakdown, Greece had failed to fulfil its obligations under art. 13(B)(a) of Council Directive 77/388 (‘the sixth directive’).

Facts

Under Greek law, car accident or breakdown services supplied by ELPA (the Automobile & Touring Club of Greece) to its members in return for the payment of a fixed annual subscription gave rise to the levy of VAT on that subscription. The EC Commission considered that such transactions should benefit from the exemption provided for under art. 13(B)(a) of the sixth directive. The Greek Government contested the infringement complained of, claiming in particular that the road assistance services in question, which were not supplied by an insurer, broker or insurance agent, did not constitute insurance transactions within the meaning of art. 13(B)(a).

Issue

Whether Greece had failed to fulfil its obligations under Community law.

Decision

The European Court of Justice (Fourth Chamber) (ruling accordingly) said that, although the term ‘insurance transactions’ used in art. 13(B)(a) of the sixth directive was not defined therein, the essentials of an insurance transaction were, as generally understood, that the insurer undertook, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded. Further, it was not essential that the service the insurer had undertaken to provide in the event of accident/loss consisted of the payment of a sum of money, as that service might also take the form of the provision of assistance in cash or in kind of the types listed in the annex to Council Directive 73/239 (on the coordination of laws, regulations and administrative provisions relating to the taking-up and pursuit of the business of direct insurance other than life assurance, as amended).

Pursuant to art. 1(1) of Directive 73/239, the activity of direct insurance encompassed the provision of assistance referred to in art. 1(2). The latter activity, which was provided for persons who got into difficulties while travelling, while away from home or while away from their permanent residence, consisted in undertaking, against the prior payment of a premium, to make aid immediately available to the beneficiary under the assistance contract where that person was in difficulties following the occurrence of a chance event. Such aid might, among other things, consist in the provision of benefits in kind effected, if necessary, by means of the staff and equipment of the person providing them. As followed from art. 2(3) of Directive 73/239, such assistance could in particular take the form, in the event of a breakdown or an accident involving a road vehicle, of an on-the-spot breakdown service or the conveyance of the vehicle to a location at which repairs may be carried out.

Although the exemptions provided for by art. 13 of the sixth directive were to be construed strictly, the court had previously stated that the expression ‘insurance transactions’ referred to in art. 13(B)(a) was broad enough in principle to include the provision of insurance cover by a taxable person who was not himself an insurer but, in the context of a block policy, procured such cover for his customers by making use of the supplies of an insurer who assumed the risk insured.

Accordingly, the road assistance services that a body such as ELPA undertook to provide to its members, in return for the payment by those members of a fixed annual subscription, should the risk of breakdown or accident covered by that body materialise, fell within the definition of ‘insurance transactions’ referred to in art. 13(B)(a) and was exempt from VAT.

European Court of Justice (Fourth Chamber).
Judgment delivered 7 December 2006.