This case concerned the interpretation of Article 9(2)(a) of the Sixth Directive and the continuing legal uncertainty as to the correct place of supply for services provided by an association whose business consists in organising exchange between its members and their holiday usage rights in timeshare accommodation, in return for which that association receives enrolment, annual subscriptions and exchange fees from its members.

The taxpayer RCI Europe (RCI) was established in the UK and has its registered office in the UK. Its business consists in facilitating and organising the exchange of timeshare usage rights held by its members in holiday accommodation outside the UK. A large proportion of the properties subject to the exchange scheme are in Spain.

RCI members pay an enrolment fee and annual subscription fees. In addition, an exchange fee is payable on the date of the request for an exchange. RCI treat this fee as a returnable deposit. If RCI is unable to identify an exchange acceptable to the member, it will hold the exchange fee as a credit to the member's account against future exchange fees or, if requested by the member, refund it.

RCI paid VAT in the UK on all enrolment fees and all annual subscriptions fees. It was also paying VAT in the UK on all exchange fees received from members who had acquired a timeshare usage right in a property located in the EU. For properties located outside the EU, no VAT was paid in the UK on the exchange fees. The UK and Spanish tax authorities both claimed payment of VAT on RCI's transactions, which essentially results in double taxation.

From 1 January 2004, RCI Europe to account for VAT in the UK on its enrolment and annual subscriptions from members who's usage rights relate to properties in Spain. The Commissioners raised an assessment to recover the VAT that they considered RCI should have accounted for in 2004, which RCI appealed against.

The Court was asked to consider what factors determine whether the services supplied in return for each of the payments made in the overall framework of the RCI scheme are connected with immovable property within the meaning of Article 9(2)(a) of the Sixth Directive.

In reaching its conclusion, the Court considered the nature of the relationship between RCI and its members, the type of service provided and the various fees; annual subscription, enrolment and exchange fees, received by RCI for the services it provided.

The Court stated that the general rule laid down by Article 9(1) of the Sixth Directive is that goods and services are taxed as far as possible in the place of consumption. However, taking this general rule, it would be possible for RCI to avoid VAT on its supply of services by establishing its registered office outside the EU.

The Court held that:

• The services supplied by RCI are not consumed in the UK where RCI is established, but in the place where the immovable property is situated.
• As for the accommodation acquired by RCI from taxable third parties in order to supplement the exchange pool, RCI does not receive any sums from third parties who may be liable to VAT. Therefore, RCI is not liable to VAT in respect of that transaction on the accommodation made available to its members by a third party.
• In accordance with the interpretation of Article 9(2)(a) of the Sixth Directive, the place where serv ices are supplied by RCI is the place where the property is situated.

The judgement is available on-line at http://www.bailii.org/cgi-bin/markup.cgi?doc=/eu/cases/EUECJ/2009/C3708.html&query=RCi+and+Europe&method=boolean