Mobile Operators Begin Bid To Claim Billions In VAT Refunds

by Ulrika Lomas, Tax-News.com, Brussels

10 February 2006

The European Court of Justice has begun to hear arguments from a group of mobile telecommunication firms, which are attempting to claim billions of euros in value added tax refunds that they believe is owed from the purchase of third generation operating licences from European governments in 2000.

The companies, which include Hutchison 3G, 02, Orange, T-Mobile and Vodafone, are arguing that governments acted in the manner of private organisations when they auctioned off licences giving firms the right to provide third generation, or '3G,' services such as video streaming.

The companies believe that the sale of the licences should be viewed by the ECJ as "economic activity", and that they therefore contain the VAT element the firms are now attempting to have refunded.

The five UK-based operators paid a total of GBP22.5 billion (EUR32.7 billion) for their operating licences, and they are now seeking a VAT refund totalling GBP3.5 billion. Altogether, mobile phone companies spent more than EUR100 billion acquiring 3G rights in Europe.

In response, lawyers representing the governments have countered that the sums paid by the mobile operators were 'fees' as opposed to commercial 'prices'.

International law experts believe a ruling in favour of the mobile firms will likely leave other member states open to claims for VAT refunds, regardless of whether they used auctions to sell 3G licences to telecom firms.

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