There car sale and ofExtended Warranty they are distinct and independent operations (in particular, the second cannot be qualified as an ancillary service to the first) and therefore they are different for VAT purposes, as they are subject to the respective regime. This was clarified by theRevenue Agency responding to a request from a company that manufactures and sells cars to intermediaries, who in turn resell them to end customers.

DIFFERENCE BETWEEN LEGAL WARRANTY AND EXTENDED WARRANTY

Before we dive into the Revenue Agency notice, let’s briefly review what they are car warranty and theExtended Warranty.

The legal guarantee of conformity is provided for by the consumer code and protects the consumer in the event of purchase of defective products, which malfunction or do not meet the use declared by the seller. Even in the automotive field, the legal warranty is a inalienable right from the private buyer buying vehicles to a professional operator. For new cars, the warranty is 24monthsfor used ones, the warranty is always 24 months but the parties can agree in writing to reduce the duration to no less than 12 months.

I’Extended Warranty (or commercial or conventional warranty) is an extension optional (and almost always payable) the duration of the warranty which covers possible breakdowns and defects for a pre-established period, after the expiry of the legal guaranteeand may also include accidental damage or damage caused by theft, fire, etc.

Thus the legal guarantee is mandatory while the extension of the guarantee is optional and the buyer is free to choose whether or not to buy it, even from a different subject from the car dealership or dealership. The other important difference is that during the period of the legal warranty, the maintenance of the car can be carried out everywhere (within the limits of Monti Directive 461/2010), during the warranty extension, maintenance must be carried out at official network from the manufacturer. However, this guarantee is only valid when the warranty extension is triggered and never concerns the duration of the legal warranty (any clause that would engage otherwise would be vexatious).

REVENUE AGENCY ON INCIDENTAL LINK BETWEEN EXTENDED WARRANTY AND CAR SALE

Having made this necessary premise, let’s move on to the answer no. 17 of January 12, 2023 from the Revenue Agency to the question on accessory link between the warranty extension and the sale of cars. here isI ask:

a company operating in the production and sale of cars is required, as we know, to guarantee the purchaser of the car a legal guarantee of conformity for a period of 24 months from the date of delivery of the goods. This warranty is therefore an implicit component of the sale price of the car. The plaintiff company intends to offer its clients aextension in time of the legal guaranteesubject to the payment of an additional fee. The possibility of stipulating an additional guarantee, in addition to the legal guarantee, will be offered both to customers who will buy a new car and to customers who have already bought a car in the past. The legal warranty and the extended warranty are valid car-related performance and, therefore, in the event of transfer of ownership of the latter, the new purchaser may request its application if necessary. In particular, the plaintiff company sells its cars to its intermediaries (dealers or dealers) who then resell them to end customers. The applicant company recalls that the signature of the extended warranty agreement can take place at two different times:

• together with the purchase of the car and the relative cost of the warranty extension will be invoiced with the purchase price of the car directly to the dealer;
• after the purchase of the means of transport, or by the customer who already owns the car and in this case the price of the warranty extension will be invoiced directly by the requesting company to the owner of the car.

So the interpellating company asks to know if theExtended Warranty beyond the 24 months of the legal guarantee can be qualified, to the effects of VATlike, how’additional performances‘ at the main sale of the car.

THE ACCESSORY LINK IN EU JUDGMENTS

In its response, the Revenue Agency did not findin the operations described by the applicant company, that accessory link which extends the VAT rate applied to the main transaction (sale of the car) also to the secondary transaction (sale of the warranty extension).

Having to establish whether the complex operation, consisting of the combination of the transfer of the car and the sale of the extended warranty, as described in the judgment, can be qualified as economically “unique”on the basis of the principles of Community and internal case law, the AdE gave as an example a few sentences of the EU Court of Justice (in particular C425/06 and C584/13) according to which “two or more performances are ancillary if they are linked in such a way as to constitute one ‘indivisible’ operationthe decomposition of which would be of an artificial nature“, also recalling that”the transfer of the used car and the performance by another person other than the resellerwhich offers a guarantee relating, for example, to a possible mechanical breakdown”.

THE SALE OF THE CAR AND THE EXTENDED WARRANTY ARE SUBJECT TO DIFFERENT VAT REGIMES

Finally, the Court of Justice of the European Communities has emphasized, for the purposes of verifying the ancillary link, the fact that the buyer of the second-hand vehicle can buy the car without signing the warranty have the possibility of contracting with a company other than the sellercircumstance which eliminates all doubt. In this case, in fact, the operation cannot be considered “unique”, since the performance is independentas separable.

And in fact, in matters of judgment, the buyer of the car (intermediary or end customer) is not obliged to sign the legal warranty extension with the seller. You can purchase the additional warranty from a third party both at the time of the car purchase agreement and afterwards. Furthermore, the sale of the extension of the legal guarantee seems to be carried out by the applicant as an intermediary of a other taxable personan insurance company deduces from this, since the company is involved in the production and sale of vehicles.

In conclusion, the Tax Agency, based on the guidance of EU judges, found that the extended warranty sale by the plaintiff company, whose corporate purpose is the production and sale of vehicles, it cannot be described as an “ancillary service” to the main car sales operation and, therefore, each of the aforesaid operations must be considered as distinct and independent and subject to the own VAT system.