In its judgment of June 13, 2025 (No. 2222022, Société Mosaïc Finance), the Paris Lower Administrative Court held that connection fees charged by foreign stock exchanges should not be subject to reverse charge VAT in France, as they constitute technical services ancillary to the main service of negotiating securities transactions, which is itself VAT-exempt when provided by these entities.
The dispute
The French company Mosaïc Finance, in the context of proprietary trading of financial instruments on certain derivatives markets, used the services of several foreign stock exchanges, which invoiced it for:
- Trading fees, the VAT exemption of which was not contested in this case; and
- Connection fees, corresponding to technical services enabling access to the stock exchanges.
As the recipient of these technical services invoiced by entities established outside France, Mosaïc Finance initially accounted for French VAT under the reverse charge mechanism, but could not deduct the VAT, as these expenses related to VAT-exempt activities that do not give rise to a right to deduction. Subsequently, the company requested a refund from the tax authorities, arguing that these connection fees should not have been subject to the reverse charge mechanism, as together with the transaction fees, they constituted a single supply benefiting from the VAT exemption applicable to securities transactions.
The judgment of the Administrative Court
The Administrative Court conducted a detailed analysis of the services in question with regard to the principles of VAT applicable to single supplies, as derived from EU case law and codified in Article 257 ter of the French Tax Code.
In particular, the Court recalled that “an economic transaction constitutes a single supply when one or more elements must be regarded as the principal service, while others must be regarded as ancillary services sharing the same VAT treatment as the principal service. In this respect, a first criterion to consider is the absence of an independent purpose for the service from the perspective of the typical consumer. Thus, a service is to be considered ancillary to a principal service when, for the customer, it does not constitute an aime in itself, but a means of better enjoying the principal service supplied. A second criterion, which is effectively an indicator of the first, concerns the respective value of each component of the economic transaction, with one being minor or even marginal compared to the other.”
In this case, and notably based on the contracts and invoices, the Court noted the following conclusive points:
- Participants, such as Mosaïc Finance, in trading activities on these stock exchanges must use the specific technical connection system of each of these entities, and then their trading system in order to carry out transactions on the financial instruments listed on these markets themselves.
- They cannot use another connection system to access these markets.
- From the perspective of the typical consumer, the connection service does not have a purpose distinct from the services consisting in providing a trading system for the purpose of ultimately carrying out the purchase and sale of financial instruments.
- The provision of the technical connection system should be regarded, for the typical consumer, not as an aim in itself, but as a means of carrying out trading operations under optimal technical and economic conditions.
- Furthermore, the value of the connection system, which accounts for about 10% of the total services provided by these exchanges, is minor compared to the value of the trading system for financial instruments, and even marginal compared to the value of the trading operations performed by participants.
- It is irrelevant that the connection service is invoiced separately from the provision of the trading system.
In conclusion, the technical connection service should be regarded as ancillary to the supply of the financial instruments trading system.
Since securities transactions, including negotiation, are exempt from VAT under Article 261 C 1° e) of the French Tax Code, the Court held that the company is entitled to a refund of VAT that was incorrectly reverse charged on the connection fees.
What’s next?
This favorable decision opens up additional opportunities for VAT recovery for operators who have reverse-charged VAT on such fees.
For stock exchanges established in France that apply VAT on the basis of an option to tax, VAT should remain applicable to similar services they invoice.