C-154/80

A provision of services is taxable within expressed in money and have a subjective the meaning of the Second Directive on value since the basis of assessment for the harmonization of legislation of the provision of services is the Member States concerning turnover consideration actually received and not a taxes, when the service, in the terms of value assessed according to objective Art. 2 of that instrument, is provided criteria. against payment and the basis of assessment for such a service consists, in Therefore there can be no question of the terms of Article 8 (a) as amplified by any consideration within the meaning of point 13 of Annex A, of everything Article 8 (a) of the directive in the case received in return for the provision of of a cooperative association running a the service. There must therefore be a warehouse for the storage of goods direct link between the service provided which does not impose any storage and the consideration received. Such charge on its members for the service consideration must be capable of being provided.

In Case 154/80

REFERENCE to the Court under Article 177 of the EEC Treaty by the Hoge Raad der Nederlanden [Supreme Court of the Netherlands] for a pre- liminary ruling in the action pending before that court between 1 — Language of lhe Case: Dutch.

JUDGMENT OF 5. 2. 1981 — CASE 154/80

STAATSSECRETARIS VAN FINANCIËN [Secretary of State for Finance]

and

JUDGMENT

Facts and Issues

The facts of the case, the course of "The following shall be subject to the the procedure and the observations value-added tax: submitted pursuant to Article 20 of the Protocol on the Statute of the Court of (a) The supply of goods and the Justice of the EEC may be summarized provision of services within the as follows: territory of the country by a taxable person against payment;" and Article 8 provides: I — Facts and written procedures "The basis of assessment shall be: Article 2 (a) of the Second Directive on (a) in the case of supply of goods and harmonization of turnover taxes provides the provision of services, everything that: which makes up the consideration

STAATSSECRETARIS VAN FINANCIËN v COÖPERATIEVE AARDAPPELENBEWAARPLAATS

JUDGMENT OF 5. 2. 1981 — CASE 154/80

store each year 1 000 kilograms of indication of the scope which those who potatoes for each share certificate issued drafted the directive intended to give to by the association in their possession in the basis of assessment and that the return for a storage charge fixed each terms of point 13 of Annex A "clearly year by the association payable at the illustrate that the scope which those who end of the season. Pursuant to a decision drafted the directive wished to give to by the association, in a given year, no the basis (for assessment) is such that it storage charge may be imposed. should not be taken as meaning only the amount received". What is more any other interpretation would mean that other kinds of consideration might In such a case is there consideration escape turnover tax, for example, the within the meaning of the opening words set-off of debts, services likewise paid for and paragraph (a) of Article 8 of the in kind, those for which consideration is Second Directive?" given in the form of stocks or shares, or services for which a right is assigned in return. The judgment making the reference to the Court was registered at the Court Registry on 2 July 1980. The Netherlands Government, relying on several decisions by the Tarief- commissie, contends that that court has On hearing the report of the Judge- by implication decided in each of the Rapporteur and the views of the instances mentioned above that "the Advocate General the Court decided to person for whose benefit the service was open the oral procedure without any effected had provided something in preparatory inquiry. return."

Government, the consideration for the return or "in other words, by the service provided by the cooperative. 'subjective' value and not an 'objective' or rather 'normal' value, that is to say, by a value estimated according to objective criteria". Consequently the Netherlands Govern- ment believes that the question submitted to the Court "must be answered in the affirmative". The Commission then sets out to furnish proof for its argument, contending first of all that it is to be found in the differing definition concerning the basis of assessment in the case of the impor- tation of goods, since, in that case, there B — Observations of the Commission is reference to the "normal price" in Regulation No 803/68 of the Council of 27 June 1968 on the valuation of goods for customs purposes (Official Journal, 1. The Commission recalls that the English Special Edition 1968 (I), p. 170). main object of the First Directive on harmonization of turnover taxes was to convert those taxes into a Community system of value-added taxation whose The same applies to the supply of goods structure and detailed rules for in two particular cases — provided for application are given by the Second by Article 5 (3) (a) of the Second Directive and it then examines at length Directive in relation to (1) the appropri- Article 8 of that directive in conjunction ation by a taxable person, from his with Article 2 of the directive and in the undertaking, of goods which he applies light of point 13 of Annex A. to his own private use or transfers free of charge, (2) the use for the needs of his undertaking, by a taxable person, of goods produced or extracted by him or by another person on his behalf — the According to the Commission the effect basis of assessment is the "normal" value of those provisions is that the provision "by way of clear exception to the of a service is taxable only if the service principle of the 'subjective' value which was given for valuable consideration and is applicable generally to the supply of the basis for assessment is the value of goods and to the provision of services". that consideration, that is to say, everything received in return for the service: therefore there must be a "direct relationship between the service provided The Commission states that the nature of and the consideration received". It VAT explains why "the Second Directive further follows from those provisions is based generally on 'subjective' value as that "the consideration must be capable a criterion for assessment in regard to of being expressed in money", that internal trade". It is in the nature of a interpretation being confirmed by Article tax on consumption which means that it 9 of the Second Directive which is the actual outlay of the consumer stipulates that the standard rate of the which must be taxed and that it is only tax shall be fixed at a percentage of the when no price has been paid by the basis of assessment. That basis of consumer that there is cause to adopt the assessment is formed by the con- criterion of normal value. In this respect sideration of what is actually received in the Second Directive refers to that

criterion in the specific case of the supply a service, or, if more is provided in of goods but not in the case of the return than is actually charged, that provision of services. The question of which is provided in return". The using "normal" value is tied up with the distinction between the supply of goods question whether that use "is necessary and services is also conveyed in the to prevent a distortion of competition or definition of services contained in the unjustified fiscal advantages". The two Law; "all services, not consisting in the particular cases cited above together with supply of goods, which are provided for point 6 of Annex A show that "an consideration" (Article 4 (1) of the said attempt is made to achieve taxation Law); the words "for consideration" do which is as neutral as possible", not reappear in the definition of the sometimes by widening the field of supply of goods because certain supplies taxation, sometimes by abolishing the of goods are also taxable where there is right tó deduct the input tax. no consideration. Consequently the definition of taxable events referred to in Article 1 of the Netherlands Law does not contain the qualifying words "for valuable consideration" and is somewhat different from that of the Second Consequently, if it is assumed that the Directive which expressly adopts that storage was undertaken free of charge requirement. That difference explains and did not therefore constitute a taxable why "the Hoge Raad did not also add transaction, it must also be said that the the words 'against payment'; used in cooperative is not entitled to deduct Article 2 of the directive, to its request VAT on the goods and services utilized for a preliminary ruling". to enable that storage to be provided. But the Gerechtshof rejected that sub- sidiary submission of the inspector and the Hoge Raad does not deal with it. 2. In order to reply to that question asked by the Hoge Raad to establish whether storage services undertaken by the cooperative association are subject to Finally, to end its argument, the VAT, the Commission believes that it is Commission submits that the important to establish whether those Netherlands Wet op de omzetbelasting services were provided for valuable of 1968 adopted pursuant to the First consideration and whether in return for Directive is also based on the those services the association received "subjective" aspect of the value to be something capable of being expressed in taken into consideration as the basis of monetary terms by applying "subjective" assessment and only departs from that criteria. principle in respect of "a few exceptions in the case of the supply of goods and none in the case of services". Article 8 thereof makes "consideration" the criterion for assessment and "con- At first sight it might be difficult to sideration" is defined as "the total consider the service provided as having amount — or, if that received in return been effected for valuable consideration does not consist of money, the total because nothing had been received in value of that received in return — which return for it: it was therefore a service is charged for the supply of goods or for provided free of charge and that is the

view which has been taken by the Commission believes however "that it is Gerechtshof. not possible to be sure either in the period prior to the decision or in the following season that all the storage services were effected for the benefit of members who, at the time of the decision, were in fact members and who as a result thereby incurred, in the The Commission nevertheless examines inspector's view, a reduction in value of the argument of the inspector that the their shares as a result of the decision". benefit provided by the members to the Finally there only remains the question cooperative association lay in their of the amounts of the consideration acceptance of a reduction in the value of which should be expressed in money. their shares in proportion to the usual The inspector finally calculated that storage charge not collected in 1975 and consideration by applying "the most 1976. But the Commission feels that it is usual price" for the storage charge. That difficult to determine with any certainty is not only an arbitrary criterion but the real effect which the annual decision more importantly it refers to "normal" on the storage charges had on the value value contrary to the scheme of the of the shares because that value could Second Directive. also be influenced one way or the other by various other factors. Whilst accepting that such a decision constitutes an exceptional measure the Commission believes that this fact cannot constitute sufficient reason for there to be question of consideration and of a taxable service. Lastly the Commission wonders What is more the inspector's view — "whether in the absence of any fixing a storage duty regarded as obligation or express authorization "normal" — is not in accordance with contained in the Second Directive it is the scheme of the directive which is permissible solely in the case of based on subjective value. cooperative associations and similar kinds of undertakings to depart from the principle of consideration actually received and therefore to subject the pricing and management policy of those cooperatives to special fiscal criteria which do not apply to other lunds of The Commission subsequently wonders whether the reduction in the value of the undertakings. Neither the wording nor shares really constitutes consideration the scheme of the Second Directive gives from the members for the service of any such indication (and moreover the storing their potatoes. It first of all same applies to the Sixth Directive too)". believes that it does not seem permissible to regard the acts of a cooperative as being those of its members since under the scheme of the Second Directive such cooperatives are considered to be taxable entities. It subsequently argues that a Consequently the Commission "accord- close relationship should exist between ingly believes that in the case raised by the acceptance of the reduction in value the Hoge Raad there can be no question of the shares and the storing of the of a service subject to value-added tax potatoes carried out in return. The because the service in question was not

3 However the fiscal authorities took the view that the cooperative had nevertheless charged its members something in return owing to the reduction in the value of their shares as a result of the non-collection of the storage charges for the two years in question and having assessed what was received in return to be the storage charge ordinarily imposed it issued a notice of assessment to additional tax.

STAATSSECRETARIS VAN FINANCIËN v COÖPERATIEVE AARDAPPELENBEWAARPLAATS

4 The cooperative referred that notice of assessment to the Gerechtshof, The Hague, arguing that, since the term consideration [vergoeding] as defined in Article 8 of the Wet op de omzetbelasting (Law on Turnover Tax) has a subjective character, the cooperative had provided its services for no consideration because it had not required anything in return.

5 The Gerechtshof upheld the application and the Staatssecretaris van Financiën appealed against that judgment.

6 In order to resolve the dispute the Hoge Raad put the following question :

"A cooperative association incorporated under Netherlands law runs in accordance with its stated objects a potato storage depot. The members of the association have the right against it and the obligation towards it to put in store each year 1 000 kilograms of potatoes for each share certificate issued by the association in their possession in return for a storage charge fixed each year by the association payable at the end of the season. Pursuant to a decision by the association, in a given year, no storage charge may be imposed.

1 1 It should then be emphasized that Article 8 (a), which defines the basis of assessment of value-added tax stating that is shall be in the case of the provision of services "everything which makes up the consideration for the provision of services", and clarified as just stated above, must be compared to Article 2 which stipulates as being solely capable of being subject to value- added tax "the provision of services within the territory of the country by a taxable person against payment".

12 So a provision of services is taxable, within the meaning of the Second Directive, when the service is provided against payment and the basis of assessment for such a service is everything which makes up the consideration for the service; there must therefore be a direct link between the service provided and the consideration received which does not occur in a case where the consideration consists of an unascertained reduction in the value of the shares possessed by the members of the cooperative and such a loss of value may not be regarded as a payment received by the cooperative providing the services.

1 3 What is more it follows from the use of the expressions "against payment" and "everything received in return" first that the consideration for the provision of a service must be capable of being expressed in money, which is further confirmed by Article 9 of the Second Directive which stipulates that "the standard rate of value-added tax shall be fixed . . . at a percentage of the basis of assessment", that is to say at a certain proportion of that which constitutes the consideration for the provision of services, which implies that such consideration is capable of being expressed in an amount assessed in money; secondly that such consideration is a subjective value since the basis of assessment for the provision of services is the consideration actually received and not a value assessed according to objective criteria.

T H E COURT (Second Chamber)

in answer to the question referred to it by the Hoge Raad der Nederlanden by judgment of 25 June 1980, hereby rules:

There can be no question of any consideration within the meaning of the opening words of subparagraph (a) of Article 8 of the Second Directive 67/228 of the Council of 11 April 1967, on the harmonization of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value-added tax,

OPINION OF MR WARNER — CASE 154/80

(Official Journal, English Special Edition 1967, p. 16) in the case of a cooperative association running a warehouse for the storage of goods which does not impose any storage charge on its members for the service provided.

Pescatore Touffait Due