An entrepreneur who, in addition to a fixed fee, receives a certain percentage of the profit generated by their activities, must also pay VAT on the variable part of the fee.
No cure no pay
This was the ruling of the Arnhem-Leeuwarden Court of Appeal in the case from a businessperson who conducted legal proceedings on behalf of third parties for victims of share leasing transactions. The remuneration for this consisted of a (low) fixed amount and an additional payment amounting to a percentage of the financial result achieved.
It is not strictly a ‘no cure, no pay’ arrangement, as a fixed fee is paid.
The Court has ruled that the variable component also forms part of the remuneration on which VAT is payable. This is because there is a direct link between that component of the remuneration and the service provided.
Last year, the Court of ‘s-Hertogenbosch had already reached the same decision in a case where no fixed remuneration was involved. See our article No cure, no pay, but VAT applies.
Racehorse
The interested party relied on the Baštová judgment of the Court of Justice. This concerns a VAT-registered trader who enters a horse in a horse race. The trader does not receive an entry fee for this, but does receive prize money in the event of a good result. The Court ruled that no VAT is payable on this prize money because it does not constitute a supply of services for consideration.