Shophold (Mauritius) Ltd v The Assessment Review Committee and another

Under the Mauritian Value Added Tax Act 1998, a service is supplied for VAT purposes only when the supplier issues an invoice or receives payment, whichever occurs first. The performance of services, even under a contract giving the supplier an enforceable right to remuneration, does not itself trigger VAT. Consideration means reciprocal performance: remuneration received or to be received in return for the service, not consideration in the contractual sense. United Kingdom VAT authorities concerning the time of supply must be treated cautiously where the Mauritian statutory wording differs.

Shophold provided management services to Shoprite under an agreement providing for a monthly fee calculated by reference to turnover. Shophold’s board waived the fee for the relevant period, and Shophold issued no invoices and received no payments. The Mauritius Revenue Authority assessed VAT on the basis that the continuing contractual entitlement constituted consideration. The Assessment Review Committee upheld the assessment, and the Supreme Court of Mauritius affirmed it. The appeal concerned whether services had been supplied and whether VAT had become due under the Value Added Tax Act 1998.

1. Appeal allowed. Shophold was not liable to pay VAT for the management services provided during the relevant period.
2. Lord Hodge, delivering the judgment of the Board, held that consideration in section 4(1)(b) bears the European VAT meaning of reciprocal performance. It requires remuneration received or to be received for the service and a direct link between the service and that remuneration. It does not mean an enforceable but unperformed contractual obligation in the English contract-law sense.
3. The decisive provision was section 5(2), because the agreement provided for periodic payments. Read with section 9(2), it makes VAT due at the earlier of the supplier’s issue of an invoice or receipt of payment. The performance of services alone does not create a VAT liability.
4. The Mauritian regime differs materially from the United Kingdom legislation, under which performance combined with an unwaived contractual right to payment may trigger VAT before invoicing or payment. The dicta in Norseman Gold plc v Revenue and Customs Comrs [2014] UKFTT 573 (TC) and [2016] UKUT 0069 (TCC) could not be applied uncritically.
5. As no invoice was issued and no payment was received, no supply or taxable supply arose under the Act during the relevant period. The Board stated that this construction creates no tax-avoidance difficulty because payment itself triggers VAT, and section 20(1) requires a VAT invoice when services are supplied to another registered person.

• Privy Council: Appeal allowed. The Board determined that Shophold was not liable to pay VAT for the relevant services during the relevant period.
• Supreme Court of Mauritius: The Assessment Review Committee’s decision was upheld. The Supreme Court treated the continuing contractual obligation to pay as consideration and held that VAT was due under sections 2, 4 and 9(1) of the Value Added Tax Act 1998.
• Assessment Review Committee: The VAT assessment was upheld on the basis that the services were taxable supplies whether or not invoices had been issued or payment made.