C-70/83

FINANZAMT [Tax Officel] L E E R ,

o n the interpretation of Article 13 Β (d) 1 of t h e Sixth Council Directive of 17 M a y 1977 on the h a r m o n i z a t i o n of t h e laws of the M e m b e r States relating t o t u r n o v e r taxes — C o m m o n system of value-added t a x : uniform basis of assessment (Official J o u r n a l 1977, L 145, p. 1) and of Article 1 of the N i n t h C o u n c i l Directive, 7 8 / 5 8 3 / E E C , of 26 J u n e 1978 o n t h e h a r m o n ­ ization of t h e laws of t h e M e m b e r States relating t o t u r n o v e r taxes (Official J o u r n a l 1978, L 194, p. 16),

THE COURT

c o m p o s e d of: J. M e r t e n s de Wilmars, President, T . K o o p m a n s , K. B a h l m a n n and Y. G a l m o t (Presidents of C h a m b e r s ) , P. P e s c a t o r e , L o r d M a c k e n z i e Stuart, A. O'Keeffe, G. Bosco, O . D u e , U . Everling and C. K a k o u r i s , Judges,

Advocate General : P. V e r L o r e n van T h e m a a t Registrar: H . A. Rühl, Principal Administrator

gives the following

3. Article 1 of that directive (herein­ Paragraph 4 (8) of the Law on turnover after referred to as "the Sixth Directive") tax [Umsatzsteuergesetz] of 16 No­ provides as follows: vember 1973 (Bundesgesetzblatt 1973, I, p. 1682) exempted from turnover tax inter alia the granting of credit, the "Member States shall modify their negotiation of transactions involving present value-added tax systems in securities and legal tender, and the accordance with the following Articles. management of credit; it did not grant exemption in respect of credit nego­ They shall adopt the necessary laws, tiation. The latter transaction was regulations and administrative provisions exempted from the charge to turnover so that the systems as modified enter into tax from 1 January 1980 by the insertion force at the earliest opportunity and by 1 of a new Paragraph 4 (8) (a) by the Law January 1978 at the latest." on the new version of the Law on turnover tax and on the amendment of other laws (Gesetz zur Neufassung des Furthermore Articles 13 B (d) 1, which Umsatzsteuergesetzes und zur Änderung falls under Title X of the directive, anderer Gesetze) (Bundesgesetzblatt dealing with exemptions, provides as 1979, I, p. 1953). follows:

"Without prejudice to other Community 2. The plaintiff in the main action, provisions, Member States shall exempt Gerda Kloppenburg, who resides in the following under conditions which Uplengen, carries on a credit and they shall lay clown for the purpose of

JUDGMENT OF 22. 2. 1984 — CASE 70/83

4. The plaintiff lodged a claim for of 26 June 1978 on the harmonization of exemption from tax with the Finanzamt the laws of the Member States relating to [Tax Office] Leer, which was, however, turnover taxes (Official Journal 1978, rejected. Consequently, by notice of L 194, p. 16, hereinafter referred to as assessment to turnover tax of 3 July "the Ninth Directive") cannot have retro- 1980, the Finanzamt assessed the active effect, since otherwise there would plaintiff's transactions at the normal rate, be a breach of fundamental principles of in accordance with the provisions of the law (laws may not have retroactive effect Law on turnover tax of 1973. if individuals are adversely affected

In Directive by 1 January 1979 at the those two references for a preliminary latest." ruling, the Court gave the following The Ninth Directive was notified to the ruling: States to which it was addressed on "As from 1 January 1979 it was possible 30 June 1978. for the provision concerning the exemption from turnover tax of 7. The Finanzamt claimed that the transactions consisting of the negotiation action should be dismissed. of credit contained in Article 13 B (d) 1 8. The Finanzgericht stayed the pro- of the Sixth Council Directive ceedings and referred to the Court for 77/388/EEC of 17 May 1977 on the a preliminary ruling the following harmonization of the laws of the question: Member States relating, to turnover taxes — Common system of value-added tax:

KLOPPENBURG ν FINANZAMT LEER

It should be January 1979 at the latest?" borne in mind that according to the case-law of the Court of Justice the Sixth Directive does not constitute national law, with the result that the prohibition of the adoption of laws imposing charges with retroactive effect is in any case not 9. In the grounds of its order for directly relevant. The direct effect of the reference, the Finanzgericht observes Sixth Directive lies rather in the fact that that in its opinion a credit negotiator the Member States may not plead, as could rely, as from 1 January 1979, on against private individuals who rely upon the exemption from turnover taxes the directly applicable provisions of the provided for in the Sixth Directive, if, Sixth Directive that, in breach of their like the plaintiff, he had not shown the obligations under the EEC Treaty, they turnover tax separately in his invoices have not incorporated the Sixth Directive and therefore had not passed it on to his into national law within the prescribed

latest. The Finanzgericht draws attention to the fact that the Commission of the European Communities, apparently taking into consideration the prohibition of laws having retroactive effect, agreed to the postponement of the date for the incorporation of the Sixth Directive into 10. Pursuant to Article 20 of the national law only on the express Protocol on the Statute of the Court of condition that the effects of the Justice of the European Economic provisions of the Sixth Directive which Community, written observations were did not require national implementing submitted by the plaintiff in the main measures and which had been produced action, represented by Joachim Hup- before the date of notification of the penkothen, tax adviser, by the Italian Ninth Directive, should remain fully Government, represented by its Agent,

11. Upon hearing the report of the Judge-Rapporteur and the views of the It observes that the so-called reservation Advocate General, the Court decided to of the Commission, contained in its open the oral procedure without any proposal to extend by one year the preparatory inquiry. period prescribed for the implementation of the Sixth Directive, was not adopted by the Council. There is no trace of such a reservation either in the provisions or II — "Written o b s e r v a t i o n s sub- in the statement of reasons of the Ninth Directive, even though a directive can be m i t t e d to t h e C o u r t interpreted and its effects determined only on the basis of the actual text of the directive and not of unpublished 1. Mrs Kloppenburg, the plaintiff in the declarations which are not taken up in main action, maintains that there can be the specific clauses of the measure no doubt that the Ninth Directive cannot adopted. According to the Italian deprive the individual taxpayer in the Government, that clearly means that the Community of the subjective rights derogation from Article 1 of the Sixth which were acquired during the first six Directive granted to seven Member months of 1978 by virtue of the original States must be regarded as covering all Sixth Directive. She stresses that when the possible legal effects of all the the Commission decided to propose that provisions of the Sixth Directive. The the period for implementation should be Council plainly wished to prevent a extended by one year for the benefit of hybrid and uncoordinated system from the Member States which had not being introduced, albeit temporarily, in incorporated the Sixth Directive into the Member States which had not national law within the period initially completed the procedures needed to prescribed, it did so only on the express adapt their legislation to the directive condition that that derogation should within the prescribed period, such a not prejudice the effects of the provisions system consisting partly of the old of the Sixth Directive which did not national provisions and partly of the require the adoption of national provisions of the Sixth Directive which implementing measures, if those effects complied with the conditions as to form had been produced before the date of and, as regards their content, as to the notification of the Ninth Directive. necessary degree of precision. Moreover, the Council expressly recog- nized in a "declaration" annexed to the Protocol of 26 June 1978 (on the Ninth Directive) that persons liable to the tax had acquired rights between 1 January Moreover, the effectiveness of the and 26 June 1978. extension granted would obviously have disappeared if before the end of the pre- The plaintiff concludes that the question scribed period, as extended, the persons submitted by the Finanzgericht should be concerned had been able to rely wholly answered in the affirmative. or in part before their national courts on

the provisions of the Sixth Directive. It only in relation to rules of criminal law would be wholly contrary to the spirit and, possibly, some other rules providing and wording of the Ninth Directive to for penalties of a similar nature and assume that it was intended to eliminate scope. Finally, it is inaccurate to describe the effects already produced by the Sixth a provision which suspends exemption · Directive only in respect of the six from value-added tax simply as a rule months following its adoption, whilst "adversely affecting individuals", for leaving the same effects intact in respect although the exemption may be advan of the previous six months. tageous to a particular person, yet for someone else, operating under different conditions, the same rule may prove to entail heavier charges. In addition, a reading of the well- established case-law of the Court shows that in its judgments in Cases 8/81 and 255/81, cited above, the Court repeated On the basis of the considerations set out that the secondary and indirect effects of above, the Italian Government takes the a directive in relation to individuals arise view that the reply to the question put by and end at the same time as the primary the Finanzgericht should be that the and direct effects of that directive in provision on the exemption from value- relation to the State to which it is added tax for the negotiation of credit

If contrary to the fundamental principle the competent Community institution that laws adversely affecting individuals decides to extend without restriction the should not have retroactive effect and period initially prescribed for the incor that according to that interpretation the poration of the directive into national directive is therefore illegal. First, in law, it is necessary in case of doubt to order to adjudicate upon the legality of a start from the principle that such a directive, it is necessary to have regard to postponement also involves the its primary direct effects in relation to postponement without restriction — that the States to which it is addressed. is to say even in relation to periods Secondly, the fundamental principle of which have already elapsed — of the non-retroactivity is generally recognized obligation imposed on the Member

States in question and therefore the which certain professions might have suspension with retroactive effect of the acquired on 1 January 1978, the Com- individual's right to rely upon the mission hesitated for a long time before directive, a right which is linked to the acceding to the wishes of the Member Member States' obligation. If on the States. When it finally decided to other hand in an individual case the right propose to the Council that the pre- to rely upon the directive is to be main- scribed period should be extended, it did tained, that should be expressly stated in so only on the express condition some way by the competent Community contained in the second sentence of

its origin. On 1 January 1978, the date Notwithstanding - the Commission's >. • laid down for the expiry of the period proposal, which was also supported by prescribed in Article 1 of the Sixth the European Parliament when it was Directive, only Belgium and the United consulted, the Council was not prepared Kingdom had incorporated the directive to include in the Ninth Directive a reser- into national law. At .the beginning of vation concerning rights already acquired 1978, the other Member States were

KLOPPENBURG ν FINANZAMT LĽER

Decision

1 By o r d e r of 3 M a r c h 1983, which was received at the C o u r t on 28 April 1983, the Niedersächsisches Finanzgericht [Finance C o u r t , Lower Saxony] referred to the C o u r t for a preliminary ruling u n d e r Article 177 of the E E C Treaty a question on the interpretation of Article 13 B (d) 1 of the Sixth Council Directive, 7 7 / 3 8 8 / E E C , of 17 M a y 1977 on the harmonization of

JUDGMENT OF 22. 2. 1984 — CASE 70/83

the laws of the Member States relating to turnover taxes — Common system of value-added tax; uniform basis of assessment (Official Journal 1977 L 145, p. 1) and of Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmonization of the laws of the Member States relating to turnover taxes (Official Journal 1978 L 194, p. 16) in order to ascertain whether the above-mentioned provision of the Sixth Directive could be relied upon by a credit negotiator in the first six months of 1978.

2 It must be remembered that, under Article 1 of the Sixth Directive of 17 May 1977, the Member States were to adopt by 1 January 1978 at the latest the necessary laws, regulations and administrative provisions in order to bring their value-added tax systems into line with the requirements of the directive. A number of Member States, including the Federal Republic of Germany, were unable to make the necessary adjustments within the prescribed period and therefore on 26 June 1978 the Council adopted the Ninth Directive which was addressed to those Member States and authorized them to implement the Sixth Directive on 1 January 1979 at the latest. The Ninth Directive was notified to its addressees on 30 June 1978.

"In the period from 1 January 1978 to 30 June 1978, was it possible for the provision concerning the exemption from turnover tax of transactions consisting of the negotiation of credit contained in Article 13 Β (d) 1 of the Sixth Council Directive, 77/388/EEC, of 17 May 1977 on the harmon­ ization of the laws of the Member States relating to turnover taxes Common system of value-added tax: uniform basis of assessment to be relied upon, in the absence of the implementation of that directive, by a credit negotiator where he had refrained from passing that tax on to persons following him in the chain of supply, even though under Article 1 of the Ninth Council Directive, 78/583/EEC, of 26 June 1978 on the harmon­ ization of the laws of the Member States relating to turnover taxes, the Member States referred to in that article were authorized to implement Directive 77/388/EEC by 1 January 1979 at the latest?"

7 In order to answer that question it is appropriate in the first place to consider the legal position of economic operators in the first six months of 1978, that is to say before the Ninth Directive took effect following its notification to the Member States to which it was addressed.

8 During that period, economic operators established in one of the Member States which had failed to comply with the obligation to bring their legislation into line with the provisions of the Sixth Directive before 1 January 1978 were confronted with a failure to implement the directive with the probable result that the tax authorities would not apply the exemptions provided for by the directive for the benefit of certain of those operators. The situation was identical to that which gave rise to the above- mentioned judgments of 19 January 1982 and 10 June 1982.

1 3 It follows that the Ninth Directive must be interpreted as not having retro­ active effect in that regard.

1 4 The answer to the question raised should therefore be that in the absence of the implementation of the Sixth Council Directive, 77/388/EEC, of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax; uniform basis of assessment, it was possible for the provision concerning the exemption of the negotiation of credit contained in Article 13 Β (d) 1 of that directive to be relied upon by a credit negotiator in relation to transactions carried out between 1 January and 30 June 1978 where he had refrained from passing the tax on to persons following him in the chain of supply.

KLOPPENBURG ν FINANZAMT LEER

Costs

15 The costs incurred by the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action pending before the national court, the decision on costs is a matter for that court.

On those grounds,

P. Heim J. Mertens de Wilmars Registrar President