Brussels, 20/07/2015 (Agence Europe) - The activity of providing insurance cover for mechanical breakdowns which may affect certain parts on second-hand vehicles is an insurance operation exempt from value-added tax (VAT), the Court of Justice of the EU stated in a judgment returned on Thursday 16 July.
Mapfre warranty, an Italian insurance company operating in France under the name NSA Sage, provides fixed-term insurance cover in the event of any breakdowns in second-hand vehicles. This insurance cover, which is directly offered to clients by the reseller of the car, allows the insured party to take the vehicle to the garage of his or her choice in the event of an accident, and this garage then sends its invoice to Mapfre warranty.
Having been approached by the French Court of Cassation for a prejudicial opinion (case C-584/13), the European institution finds that the activities of Mapfre warranty should be considered a VAT-exempt insurance operation, as the scenario appears to be covered by the notion of 'insurance operation' within the meaning of the 'VAT' directive (77/388/EEC). In all cases, there is an insured party and an insurer, with the latter covering the risk in return for a premium paid by the purchaser of the vehicle. Additionally, the premium is not reimbursed to the insured party if, at the end of the cover period, no breakdown has occurred or if the cost of any repairs was below this premium. Inversely, if the repair costs exceed the level of the premium paid, the purchaser of the vehicle is not obliged to pay the difference. (Mathieu Bion)