The XI Senate of the Federal Fiscal Court (Bundesfinanzhof, BFH) has ruled in its judgment of 13 February 2019 XI R 1/17 that cease-and-desist letters, which a rights holder undertakes in order to enforce a copyright cease-and-desist action against infringers under copyright law, are subject to VAT. The consideration for the warning service is the amount paid by the infringer. amount paid by the infringer.
The plaintiff, a producer of sound recordings, with the help of a law firm it had commissioned to who had illegally distributed sound recordings on the Internet. In return for signing a cease-and-desist declaration and a 450 (net), she offered to refrain from pursuing her claims in court, to refrain from pursuing her claims in court. She assumed that the payments received were to be regarded as compensation for the copyright copyright infringements and that no value added tax was therefore due. At the same time, she deducted the VAT charged to her by the law firm as input tax. at the same time as input tax.
This opinion on the question of taxability the BFH did not follow. It has clarified that - irrespective of the respective the parties involved and the basis for the claim under civil law - warnings to the basis for the claim - warnings to enforce a right to cease and desist are as services subject to turnover tax within the framework of a turnover taxable exchange of services between the person issuing the warning notice and the persons it has are to be qualified. According to the BFH, the warning also takes place at least in the at least in the interest of the respective infringer, because he is given the opportunity to avoid to avoid a costly legal dispute. This is to be regarded as other service subject to turnover tax. For the result, it was irrelevant that at the time of the warning it was not certain whether the warning would be successful, whether the warning would be successful: Even if it was uncertain whether the even if it was uncertain whether the person warned was an infringer and would pay. there was a direct connection between the warning as other performance and the payment payment received in return.
In doing so, the BFH is transferring its case law on cease-and-desist letters under the Unfair Competition Act to cease-and-desist letters under the Copyright Act.
Ruling of the BFH of 13.2.2019 XI R 1/17
Source: BFH press release of 08 May 2019
