Value Added Tax

A French department store has a financial subsidiary whose main activity is to propose a specific consumer credit to the department store's clients: the amount lent by the financial institution to the clients is represented by vouchers which they can use to pay for their purchases. The financial institution's profit partly consists of the credit operation itself and partly of a commission it gets on the refund of the vouchers to the department store.

As the financial subsidiary had expressly elected for VAT, pursuant to article 260 B of the French tax code the question raised first during a tax audit by the French tax authorities and later before the French tax Court, was whether or not the commission could be assimilated to one of the financial operations provided by article 260 C of the French tax code that are not subject to VAT, even if the company expressly elects for VAT.