Outsourced ATM services not exempt from VAT

Services provided by a company to whom the entire operation of ATMS had been outsourced did not fall within the VAT exemption for payments or transfers.

The Advocate General has opined that the services of a company operating ATMs on behalf of a bank do not fall within the scope of the VAT exemption for transfers and payments: Finanzamt Trier v Cardpoint GmbH (Case-C42/18). The functional approach to the VAT exemption endorsed by the ECJ in cases such as Bookit meant that the outsourced services provided by Cardpoint, no matter how extensive, did not fall within the exemption.


Cardpoint provided services to banks in connection with the operation of ATMs. Indeed, Cardpoint essentially had outsourced to it the full functions of operating an ATM. More specifically, Cardpoint installed in prescribed locations operational ATMs, equipped with computer software and hardware and bearing the logo of the bank operating those ATMs, and was responsible for ensuring the smooth running thereof. To do this, it was tasked with transporting bank notes, made available by that bank, and replenishing the ATMs. It was also required to install computer hardware in the ATMs in question, together with any particular software necessary to keep the hardware running smoothly. Lastly, it provided advice on the day-to-day running of the ATMs.

When ATMs were used for cash withdrawal transactions, special software would read particular data from the bank card. First of all, Cardpoint would verify that data and send an electronic request to the bank to authorise the transaction requested by the cardholder. Next, the bank would forward the request to the interbank network, which would in turn pass it on to the bank that issued the bank card concerned. That bank would verify whether the account holder had sufficient funds in his account and send back, via the same channels, an approval or refusal of the withdrawal requested. Upon receipt of the reply, Cardpoint would generate a data file on the cash withdrawal and, if authorised, implement the requested transaction.

A dispute arose between Cardpoint and the German tax authorities as to whether its services were exempt from VAT and the German courts referred the matter to the ECJ.

AG Opinion

The AG noted that the recent case law of the ECJ on the exemption for payments and transfers has emphasised the need for a functional approach. On that basis, it was clear to the AG that “the capture of an ATM user’s bank card data, the transmission and verification of those data and the execution of the transaction requested by the cardholder following receipt of the authorisation message from the bank that issued the card concerned cannot fall within the scope of the exemption”.

The service supplied by Cardpoint did not directly entail the act of debiting or crediting an account or accounting by means of accounting entries. Cardpoint transmits and receives data, but it is the banks concerned that provided and acted on the data files to effect changes to the underlying bank accounts. Cardpoint’s services were to be classified as “physical, technical or administrative services”.

Moreover, the AG emphasised that ownership of money was transferred from the bank, and not Cardpoint, to ATM users. Moreover, it was the legal, rather than physical, ownership of the money that was the important factor. So, whilst Cardpoint’s service “has the effect of physically transferring bank notes, transfer of the legal ownership of the money is nevertheless contingent upon authorisation from the bank that issued the card and the transaction’s subsequent entry in the accounts. It need hardly be pointed out in this regard that the services provided by Cardpoint are confined to forwarding the customer’s request for payment and giving technical effect to that payment.”

It made no difference that banks had outsourced a large proportion of their ATM activity to Cardpoint, such that it provided a very extensive service. It was clear from Bookit that a functional and qualitative approach to the exemption based on the nature of the services was required, not a quantative approach. Therefore, whilst some of the services of Cardpoint may have been “essential” to the payment transactions, that was not sufficient to bring it within the exemption.

Finally, the AG rejected an argument that complete outsourcing should bring the services within the exemption based on analogy with other exemptions in the VAT Directive. It was necessary to have regard to the specific features of each exemption individually.

In particular, the AG commented that: “I would reiterate the need to assess the extent of the liability of the supplier of the services and, inter alia, whether that liability is restricted to technical aspects or whether it extends to the specific and essential aspects characterising the transactions. While the information provided by Cardpoint confirms that it is liable to the bank that operates the ATM for any malfunctioning of that ATM, it shows above all that Cardpoint assumes no liability for the legal and financial changes involved in a payment transaction. In particular, since the release of funds to the user of an ATM is not an essential and specific function of a payment, the fact that Cardpoint is liable to the bank that operates that ATM for any under- or over-payments cannot have the effect of extending its liability to the specific and essential functions of the payment transaction.”


The decision is further confirmation of the need for a functional approach to the application of the exemptions for payments and transfers and the fact that it is difficult for services provided otherwise than a bank to fall within the exemption. The mere fact that almost all the necessary activities relating to the operation of an ATM were outsourced to Cardpoint was not enough to engage the exemption as it was, ultimately, the underlying banks that effected the transfers legally. In this sense, the decision follows that in Bookit where the transfer of authorisation codes by the booking agent was insufficient to engage the exemption.

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