New case concerning the VAT treatment of tools will be dealt with on ECJ level. It belongs to a dispute between Mercedes‑Benz AG in Germany and the Romanian tax authorities concerning tools Mercedes‑Benz purchases and makes available free of charge to suppliers and sub‑suppliers to produce car parts. The key question is whether such free of charge use constitutes a supply of services for consideration under EU VAT law when the finished parts are sold through intermediaries rather than directly to Mercedes‑Benz.

Background of the case

Mercedes-Benz AG in Germany (hereinafter referred as Mercedes-Benz) buys tools and provides them free of charge to suppliers and sub-suppliers in Romania to produce parts, exclusively for Mercedes-Benz. Ownership of the tools remains with Mercedes-Benz. Following a VAT refund request submitted by Mercedes Benz, the tax authorities in Romania imposed additional VAT and argued that the free provision of the tools should be considered a taxable supply of services for cases where sub-suppliers were involved as there was no direct and immediate link between the free provision and its exclusive use for Mercedes Benz’s business.

Positions of the Parties

1.     Mercedes‑Benz’s position:

1.     The tools are used exclusively for Mercedes‑Benz’s business; the parts produced ultimately reach Mercedes‑Benz (directly or via intermediaries).

2.     Free provision of tools in this context should not be deemed a taxable supply for consideration, because the use is for the owner’s business purposes.

3.     A direct invoicing link between the producer and Mercedes‑Benz is not required; the presence of intermediaries does not change the exclusive benefit and business purpose. 

2.     Tax authorities’ position:

1.     To avoid treating the free provision as a taxable supply for consideration, Mercedes‑Benz must prove the tools are used for its own business and not for other taxable persons.

2.     The interposition of intermediaries (e.g., producer invoices a supplier, who then invoices Mercedes‑Benz) breaks the direct and immediate link between the free provision and its exclusive use for Mercedes‑Benz’s business.

3.     In the absence of a direct invoicing relationship between the manufacturer and Mercedes‑Benz, the free provision becomes a supply for consideration under national rules.

We recommend monitoring this important case as it will affect VAT treatment for tooling and similar arrangements across supply chains where ownership and use are separated and intermediaries are involved. The CJEU may clarify whether a direct invoicing relationship is required to avoid deeming the free provision of tools for production purposes as a taxable supply for consideration when the end‑products are ultimately for the owner’s exclusive benefit.

In case of questions, please feel free to contact:

Yvonne Langenegger: yvonne.langenegger@pwc.ch

Andreea Dereli: andreea.d.dereli@pwc.ch