C-235/85
ECLI:EU:C:1987:83
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OPINION OF MR LENZ — CASE 235/85
OPINION OF MR ADVOCATE GENERAL LENZ * delivered on 12 February 1987
Mr President, (2) Order the Kingdom of the Netherlands Members of the Court, to pay the costs.
A — Facts of the case 4. The defendant claims that the Court should dismiss the application and order the 1. The present proceedings for a applicant to bear the costs. declaration that a Member State has failed to fulfil its Treaty obligations are concerned with the question whether the Kingdom of 5. The defendant argues that, in view of the the Netherlands, the defendant, is obliged statutory organization of the two under Community law to subject the official professions and their statutory functions, it services of notaries and bailiffs to is clear that their activities consist in official value-added tax [hereinafter referred to as acts, performed by a public institution in the 'VAT']. public interest. Activities of that kind are not covered by the concept of 'economic 2. The Commission of the European activity', because the normal laws of Communities, the applicant, regards the economics do not apply to them. defendant's failure to levy VAT on the services of those professions as an 6. In the alternative, the defendant infringement of the Sixth Council Directive contends that the exemption laid down in of 17 May 1977 on the harmonization of Article 4 (5) of the Sixth Directive, which the laws of the Member States relating to provides that States, regional and local turnover taxes. 1 The Commission takes the government authorities and other bodies view that the provision of services by governed by public law are not to be notaries and bailiffs is an 'economic activity' considered taxable persons, is applicable to within the meaning of the Sixth Directive, the official acts of notaries and bailiffs in which gives an autonomous definition of any event. that term.
3. The applicant therefore claims that the 7. At the hearing the parties stated that the Court should: activities of lawyers in the Netherlands are subject to VAT. (1) Declare that by not subjecting to the system of value-added tax the official services performed by notaries and 8. The activities of notaries and bailiffs are bailiffs for remuneration, the defendant subject to VAT in all the Member States in has failed to fulfil its obligations under which those activities are carried out by Community legislation, in particular self-employed persons, with the exception of under Article 2 and Article 4 (1), (2) Belgium. 2 and (4) of the Sixth Council Directive of 17 May 1977; 2 — No comment was made concerning the situation in Greece. There, the directives on turnover tax did not need to be applied until 1 January 1986 (see Fifteenth Council * Translated from the German. Directive No 83/648 of 19 December 1983, Official 1 — Official Journal 1977, L 145, p. I. Journal 1983, L 360, p. 49).
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9. The disputed turnover of Netherlands 13. According to Article 4 (1), a 'taxable notaries and bailiffs is not taken into person' means any person who indepen account when the amount of VAT to be dently carries out any economic activity, remitted to the Community as own whatever the purpose or results of that resources is calculated. As regards Belgium, activity. it makes a compensatory payment to the Community in respect of the turnover of notaries and bailiffs in Belgium which is not subject to VAT. 14. Article 4 (2) of the Sixth Directive defines economic activities as comprising 'all activities of producers, traders and persons supplying services including mining and 10. Where necessary I will examine further agricultural activities and activities of the points of the parties' arguments in the rest professions'. of my Opinion. For the rest, I refer to the Report for the Hearing.
15. Article 4 (4) provides that a person who 'independently' carries out an economic activity is understood as excluding B — Opinion employed or other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working 11. I shall deal first with the question conditions, remuneration and the whether the services in question supplied by employer's liability. notaries and bailiffs fall within the scope of the common system of VAT and then the question whether those professional bodies might be regarded as 'bodies governed by (a) 16. In the applicant's view, it is unques public law' and therefore treated as tionable that the services of notaries and non-taxable persons. I shall go on to bailiffs are 'economic activities' within the consider the question whether the defendant meaning of Article 4 (2) of the Sixth was entitled, at least during a transitional Directive. That provision does not require period, to exempt the contested services the exercise of a profit-making activity or from VAT pursuant to Article 28 (3) (b). one subject to market forces, but only a permanent activity, pursued for con sideration. Like the analogous activities of lawyers or doctors, the services provided The scope of VAT by notaries and bailiffs cannot be exempted from VAT on the grounds that they are exercising public powers. Notaries and bailiffs cannot be equated with court clerks or tax bailiffs since the latter are officials or 12. Article 2 (1) of the Sixth Directive servants of the State or of other public provides that 'the supply of goods or bodies and provide services as subordinates services effected for consideration within of and for the account of their employers. the territory of the country by a taxable Notaries and bailiffs, on the other hand, person acting as such' is subject to VAT. pursue their activities for their own account,
OPINION OF MR LENZ — CASE 235/85
independently, and on their own responsi country by a taxable person acting as such bility in law. Even though the professions are in principle subject to VAT. That broad concerned are subject to the supervision of formulation suggests that VAT has a wide State authorities — and this they have in comprehensive application. Indications to common with other categories of taxable that effect are to be found in the preamble persons — they are not subordinate to an to the First Council Directive of 11 April employer, as would be the case if they 1967 3on the harmonization of legislation performed their functions as officials of a of Member States concerning turnover public body. taxes, in which it is stated that:
'a system of value-added tax achieves the highest degree of simplicity and of 17. The defendant first points out that neutrality when the tax is levied in as notaries and bailiffs, whose offices go back general a manner as possible and when its to a time when the role of a legal person scope covers all stages of production and governed by public law was hardly distribution and the provision of services; developed, have a special, independent position. An analysis of the functions of notaries and bailiffs and of the statutory organization of those professions shows, according to the defendant, that their acti vities consist of official acts carried out by a 20. In that connection it should be noted public body in the public interest. that, in implementation of Council Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources, 4 the budget of the Communities is financed completely out of the Communities' own 18. In assessing whether the provision of a resources irrespective of other sources of service may be regarded as an economic revenue. Those resources include VAT, activity, the nature of the service must be which is yielded by the application of a examined and the manner in which the acti common rate to a basis of assessment which vities are organized. In any event, no is uniformly defined in accordance with economic activity exists if the activity in Community provisions. question is not governed by the normal laws of economics, the remuneration for the activity is laid down by statute and it does not entail the provision of a true service for individuals but the services must, as a matter 21. Since VAT is therefore to be charged as of public policy, be solicited by them. generally as possible, the term 'economic activities' in Article 4 cannot be construed as restrictively as the defendant construes it. Even though Article 4 does not define 'economic activities' comprehensively, the definition given none the less suggests that it (b) 19. The first point to be borne in mind is intended to be an extensive one; that is with regard to the scope of VAT is that demonstrated by the examples given in under Article 2 (1) of the Sixth Directive all supplies of goods or services effected for 3 — Official Journal, English Special Edition 1967, p. 14. consideration within the territory of the 4 _ Official Journal, English Special Edition 1970 (I), p. 224.
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Article 4 (2), all of which are treated as and charges due to them. They pursue their economic activities. activities as members of a legal partnership or firm and do not therefore differ substan tially from lawyers, accountants or tax advisers. The purpose of their activities is to 22. It is not therefore necessary for services generate revenue for their own account, so to be primarily or exclusively orientated as to cover their overheads and provide towards the market or economic life in themselves with income. To that end they order to come within the scope of VAT; it supply services to third parties, on their own is sufficient that they are actually connected responsibility, thus acting 'independently' with economic life in some way or other. within the meaning of Article 4 of the Sixth Directive.
23. For that reason, it cannot be relevant that the areas of activity of notaries and 27. Notaries and bailiffs, who pursue their bailiffs are regulated or prescribed by activities as independent persons, therefore statute. The same may be said of, for fall within the scope of VAT to which they instance, lawyers and auditors, whose acti are subject under Articles 2 (1) and 4 (1) vities are indisputably subject to VAT. and (2) of the Sixth Directive.
24. The decisive point, however, is that the The exemption of public bodies from payment Sixth Directive deals expressly with this of VAT question in Article 6 (1), in which it provides that a 'supply of services' may include inter alia 28. It now remains to examine whether Netherlands notaries and bailiffs are still not to be regarded as taxable persons because the derogation laid down in Article 4 (5) of 'the performances of services in pursuance the Sixth Directive could be applied to of an order made by or in the name of a them. public authority or in pursuance of the law'.
29. The relevant part of Article 4 (5) of the 25. When considered in the light of those Sixth Directive reads as follows: criteria, the whole range of activities pursued by notaries and bailiffs in the Netherlands must be regarded as the acti 'States, regional and local government auth vities of taxable persons. orities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in 26. Whilst it is true that notaries and bailiffs which they engage as public authorities, are appointed by the State and that their even where they collect dues, fees, contri activities are regulated and supervised by the butions or payments in connection with State, it must nevertheless be borne in mind these activities or transactions. that they carry on their activities indepen dently, without being integrated into the organization of the State. They pursue their However, when they engage in such acti activities for their own account and in vities or transactions, they shall be particular they themselves collect the fees considered taxable persons in respect of
OPINION OF MR LENZ — CASE 235/85
these activities or transactions where fixed fee is laid down by statute. Article 4 treatment as non-taxable persons would (5) of the Sixth Directive must be inter lead to significant distortions of compe preted according to the nature of the acti tition.' vities carried out and not according to their appearance (or the manner in which they are organized).
(a) 30. In the applicant's view, it is not the purpose of Article 4 (5) to exempt from VAT all acts connected with the exercise of 34. According to the defendant, the concept public authority, but only those acts relating of a body governed by public law covers all to the fundamental powers and functions of forms of public body existing in the various States and other bodies governed by public Member States. The independence of such a law in the field of public administration, body and the absence of a hierarchical the administration of justice, security and relationship do not preclude the application national defence. of Article 4 (5). Annex D to the Sixth Directive, to which the third subparagraph of Article 4 (5) refers, expressly subjects to VAT certain activities often carried out by 31. The applicant maintains that activities bodies which are legally independent of the which by their nature are carried out by public authorities. On the other hand, the independent undertakings with a view to last subparagraph of Article 4 (5) authorizes making a profit, or by members of the the Member States to regard certain acti liberal professions in consideration for a fee vities set out in Article 13 as activities of from those instructing them, cannot be public authorities even if they are carried regarded as being carried on in the exercise out by legally independent bodies. The of public authority; private individuals argument that notaries and bailiffs perform carrying out such activities do not meet the their functions as private individuals definition of a 'body governed by public overlooks the fact that they occupy official law'. positions and exercise fundamental powers and functions in the legal system.
32. According to the applicant, the very principle that VAT must be a general and (b) 35. In construing Article 4 (5) of the comprehensive tax on consumption dictates Sixth Directive reference should be made to a narrow interpretation of a transaction the preamble to the First Council Directive engaged in by a public authority acting as on turnover taxes, according to which a such. system of VAT achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all stages of 33. The defendant contends that, amongst production and distribution and the the activities reserved to public authorities provision of services. Reference should also or bodies governed by public law, a be made to the eleventh recital of the Sixth distinction must be drawn between Directive, according to which a common list economic activities which meet the real of exemptions should be drawn up so that needs of consumers and the public services the Communities' own resources may be which consumers are obliged by law to use collected in a uniform manner in all the for reasons of public policy and for which a Member States.
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36. The exemptions contained in particular the exclusion of public authorities from the in Articles 13 and 28 of the Sixth Council application of VAT is a limited one. Not Directive cover inter alia a whole series of every activity carried on by a public activities which are carried on by bodies authority is exempted from VAT but only a governed by public law. Accordingly, the certain core of activities. In addition, the State and other bodies governed by public activities of public bodies may be subject to law are not, as a matter of principle, VAT if this is necessitated by the threat of excluded from VAT but exempt only in significant distortions of competition. respect of those activities in which they engage as public authorities. 5
40. In view of that conclusion and since it is 37. Thus, public bodies should be regarded accepted that the derogating provisions laid as non-taxable persons only when they act down in Article 2 of the Sixth Directive as public authorities in the strict sense of the must in principle be construed restrictively, term. However, even public bodies are to be it is not possible to give a broad interpre subject to tax when the activities in which tation to the derogation contained in Article they engage as public authorities would lead 4 (5) by extending its scope to persons to significant distortions of competition if engaged in activities in the private sector, they were not taxed. even if they act partly in performance of public functions or in the public interest.
38. The Sixth Directive therefore tends to enlarge the category of taxable persons and thus the scope of VAT itself, by allowing 41. Thus, as long as the offices of notary even public bodies to be treated as taxable and bailiff in the Netherlands are performed persons if the competitive situation so by persons engaged in private enterprise and requires. On the other hand, it provides no those offices are thus not performed by possibility for exempting from VAT taxable bodies governed by public law, there are no transactions conducted by private indi grounds for regarding those professions as viduals performing functions similar in non-taxable persons within the meaning of nature to the activities of public bodies. Article 4 of the Sixth Directive. That leaning towards a tax system which is as general as possible suggests that the tax must also be charged in marginal or dubious cases.
42. Moreover, there is no need to extend the derogation in Article 4 (5) of the directive. As is shown by the Belgian practice mentioned at the hearing, it was 39. At this stage it may therefore be stated quite possible under the Sixth Directive, at that the very wording of the relevant least at the time of its adoption, for the acti provisions of the Sixth Directive shows that vities of notaries and bailiffs to continue to be exempted from turnover tax under 5 — See the judgment of the Court of 11 July 1985 in Case 107/84 Commissionof the European Communitiesv Federal Article 28 (3) (b) read in conjunction with Republic of Germany [1985] ECR 2663, at paragraph 15. Annex F, Item 2.
OPINION OF MR LENZ — CASE 235/85
43. The defendant, however, did not rely is to be determined by reference inter alia to on or use that provision because it had transactions which Member States continue taken the view that notaries and bailiffs are to exempt pursuant to Article 28 (3) (b) of not to be regarded as taxable persons on the Sixth Directive. In other words, the account of their official activities. Above all, defendant ought to have taken into account, however, the defendant failed, as it as Belgium did, the 'official' transactions of conceded at the hearing, to draw the correct notaries and bailiffs when calculating and inferences from the application of the tran remitting the Communities' own resources. sitional provision contained in Article 28 of This, however, the defendant indisputably the Sixth Directive: under Article 2 (2) of failed to do. Council Regulation No 2892/77 of 19 December 1977 implementing in respect of own resources accruing from value-added 44. Since, therefore, the defendant did not tax the Decision of 21 April 1970 on the invoke Article 28 of the Sixth Directive or replacement of financial contributions from draw the correct inferences from it, Article Member States by the Communities' own 28 must be disregarded in these resources, 6the 'VAT own-resources basis' proceedings.
C — Conclusion
45. In conclusion, I propose that the Court should grant the application and order the defendant to pay the costs of the proceedings.
6 — Council Regulation No 2892/77 of 19 December 1977 on the implementation of the Decision of 21 April 1970, Official Journal 1977, L 336, p. 8.