Contract of transport – Scope of VAT

The litigation concerned the application of VAT to non-exchangeable airline tickets which had expired by virtue of the non-attendance of the customer at the point of embarkation, as well as to exchangeable tickets which remained unused at the end of their period of validity. Air France did not account for VAT in respect of sales of such tickets.

The Conseil d’Etat followed the position of the CJEU and repeated that VAT is due even when the transaction has not yet been performed, if all the elements relevant to the chargeable event (i.e. the future service) are already known and, in particular, that at the time of the advance payment, the goods and services are precisely determined. The Conseil d’Etat considered that the chargeable event relating to the service received by the passenger consists of the actual performance of the transport or of the expiration of the air carrier’s contractual obligations. As for the tax point, this occurs upon receipt of the payment of the price by the operator in charge of carrying out the transport service.

In respect of the nature of the obligation created by the contract, the Conseil d’Etat confirmed that the obligation created by a contract of transport entitles the customer to the right to be transported, exercisable at a time of his choosing for a one year period, and does not constitute a distinct obligation in respect of the reservation of the ticket or the transportation itself.

Finally, in terms of the nature of the payment made by the “no show” passenger, this is not aimed at compensating a loss. The Conseil d’Etat noted that the customer cannot be considered as having cancelled the contract where he had exercised his right to walk away from a refundable transport contract.

Michel Guichard

Michel Guichard, Partner, leads the Indirect Tax activity. With more than 30 years’ experience in International and French Tax law, he advises his clients on indirect tax matters. Michel is […]

Odile Courjon

Odile Courjon, Partner, has developed a strong expertise in indirect tax issues (VAT, wage taxes, excise taxes, export control and customs) in France and overseas. She advises her clients in […]

Bertrand Jeannin

Bertrand Jeannin, Partner, supplies strategic and technical advice to French and foreign multinational groups in all aspects of their VAT and customs policies. Major focuses of Bertrand’s input involve the […]

William Stemmer

William Stemmer, Partner, has more than 15 years’ experience in Indirect Tax matters. William particularly specializes in the real estate and financial sectors. William is a lecturer at the University […]

Anne Gerometta

Anne, Director, has been advising companies on indirect tax issues for more than 15 years. Anne has developed a specific expertise on the manufacturing sector (VAT, customs and Export Control) […]