C-186/89
ECLI:EU:C:1990:333
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VAN TIEM
OPINION OF MR ADVOCATE GENERAL VAN GERVEN delivered on 25 September 1990 *
Mr President, amounting to HFL 10 677.97. Immediately Members of the Court, after the purchase Mr van Tiem granted to Tiem's Electro Technisch Installatiebureau BV building rights in respect of the plot for a period of 18 years subject to the annual payment of HFL 3 000 (inclusive of turnover tax). On 20 October 1980 Mr van Tiem requested the Netherlands tax auth 1. The legal question submitted to the orities to exclude him with effect from 29 Court by the Hoge Raad der Nederlanden September 1980 from the exemption (Supreme Court of the Netherlands) applicable under Netherlands legislation to concerns Articles 4 and 5 of the Sixth VAT the grant of building rights. 2Mr van Tiem's Directive. 1 The Court is asked to rule on request was granted on the basis that his whether the grant of a right in rem (in this request concerned the letting of the case building rights) in respect of immovable immovable property. Some time later Mr property for a given period and subject to van Tiem submitted a turnover tax periodic payment may be regarded as an declaration in which he deducted the economic activity, so that the grantor of the amount paid on the purchase. The dispute right in rem is to be deemed to be a taxable in the main proceedings concerns the refusal person within the meaning of Article 4 of by the Netherlands tax authorities to allow the directive, even where the abovemen- that deduction. tioned transaction is to be regarded as a supply of goods within the meaning of Article 5 of the directive.
Background Under the 1968 Netherlands law on turnover tax, amended in 1978 in order to transpose the Sixth Directive, Mr van Tiem can claim a deduction whenever he acts as a trader, in regard both to the purchase of the land and the creation of building rights. The 2. I shall begin with a brief summary of the tax authority contends that he did not so act facts underlying the reference by the in the present case. For the sake of clarity I national court. On 29 September 1980 Mr should add that Mr van Tiem can only W. van Tiem bought a building plot. On the point to the abovementioned legal oper supply he was charged turnover tax ations, and not to any other activity, in order to prove his status as a trader. * Original language: Dutch. 1 — Sixth Council Directive of 17 May 1977 (77/388/EEC) on the harmonization of the laws of the Member Sutes 2 — Evidently that request was made for the purpose of relating to turnover taxes — Common system of value acquiring in respect of that transaction the status of a added tax: Uniform basis of assessment (OJ 1977, L 145, 'taxable person' (more on this later) and thus the right to p. 1, hereinafter referred to as the 'Sixth Directive'). deduct the turnover tax paid on the purchase.
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3. The point at issue between the parties in Court three questions on the interpretation the main proceedings is not (so much) the of the Sixth Directive. They are in the question whether Mr van Tiem can be following terms: regarded as a trader in respect of the purchase of the building plot, but whether he may be deemed to be a trader as regards the grant of building rights. Mr van Tiem's ground of appeal is based on Article 7(2)(b) '(1) Must the second sentence of Article of the Wet op de Omzetbelasting (Law on 4(2) of the Sixth Directive be inter turnover tax), which is worded as follows: preted as meaning that the relin quishment by the owner of immovable property of the use of that property to another person for a specified period in return for a sum to be paid peri •Where reference is made in this legislation odically, by the grant to that person for to traders, that should also be understood to such a period and in return for such a mpan · payment of a right in rem to use the immovable property, such as building rights, constitutes exploitation of tangible property for the purpose of (a) ... obtaining income therefrom on a continuing basis, within the meaning of that provision of the directive?
(b) the exploitation of tangible or intangible property for the purpose of obtaining income therefrom.' (2) In so far as a Member State has made use of the possibility provided in Article 5(3)(b) of the Sixth Directive to consider rights in rem giving the holder Specifically Mr van Tiem maintains that the thereof a right of user to be tangible grant of the building rights described above property, must Article 5(1) be inter must be deemed to be an exploitation of preted as meaning that the term tangible property for the purpose of "transfer" used in that provision also obtaining income therefrom on a continuing covers the creation of such a right? basis, so that he must be deemed to be a trader and is entitled to make the deduction.
(3) Is the answer to Question 1 different if The questions and in so far as Question 2 is answered in the affirmative?'
4. Article 7(2) of the Turnover Tax Law mentioned above was enacted in order to transpose Article 4(2) of the Sixth Directive. 5. Those questions relate to the scope of That is why the Hoge Raad referred to the VAT, as defined in the Sixth Directive.
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Under the terms of Article 2(1) of the It is not disputed by the parties to the main directive the following are subject to proceedings that, in regard to the trans value-added tax: 'the supply of goods or actions described above, Mr van Tiem was services effected for consideration within carrying on an independent activity and on the territory of the country by a taxable the basis of those transactions is to be person acting as such'. It is clear from that regarded as a trader or a supplier of provision that liability to tax presupposes a services. The question to be answered is taxable person and a transaction chargeable accordingly whether the purchase of the to tax. The former concept is defined in plot and the creation of building rights over Article 4 of the Sixth Directive, and the it should be deemed, either together or second in Articles 5 to 7. The first question separately, to be an 'economic activity'. submitted for a preliminary ruling concerns the interpretation of the concept of 'taxable person', which corresponds to the concept of 'trader' in the Netherlands legislation. The second and third questions ask whether 7. What guidance may be derived from the the definition of the concept of 'supply of case-law? In the first place the Court has goods' (one of the chargeable transactions stressed on several occasions that Article 4 mentioned in the directive) can affect the of the Sixth Directive attributes to VAT a assessment of status as a taxable person. 3 very wide scope. In fact the purpose of the VAT system is to ensure absolute neutrality by subjecting all phases of production, distribution and the provision of services to as general a system of taxation as possible. The notion of 'economic activity' must The first question therefore be broadly interpreted in the light 4 of the principle of neutrality.
6. In accordance with Article 4(1) of the Sixth Directive any person who indepen- It is in that light that it is necessary to read dently carries on an economic activity, the final sentence of the second whatever the purpose or results of such subparagraph of Article 4, which gives as an activity, is to be regarded as a taxable example of economic activity 'the exploi person. The expression 'economic activity' is tation of tangible or intangible property for defined in the second paragraph of Article the purpose of obtaining income therefrom 4, to which, as has been stated, Article 7(2) on a continuing basis'. The judgment in the of the Turnover Tax Law corresponds. That 5 Rompelman case in which the facts were to expression includes some extent similar to those of the present case, contains certain indications of relevance for the interpretation of that phrase.
3 — See for example the judgment in Case 235/85 Commission 'all activities of producers, traders and v Netherlands [1987] ECR 1471, paragraphs 6 to 8. persons supplying services ... The exploi 4 — See the judgment mentioned in the previous footnote and the Opinion of Mr Advocate General Lenz in that case, in tation of tangible or intangible property for particular at paragraphs 19 to 21. See also the judgment in the purpose of obtaining income therefrom Case 348/87 Stichting Uitvoering Financiële Acties (1989) ECR 1737, paragraphs 10 to 13. on a continuing basis shall also be 5 — Judgment in Case 268/83 Rompelman v Minister van considered an economic activity'. /ïnanrifti[1985] ECR 655.
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8. What was at issue in Rompelman was the business requires that the first investment acquisition of a right to the title in a expenditure incurred for the purposes of building under construction with a view to a and with the view to commencing a business subsequent letting. Just as in the present must be regarded as an economic activity. It case, turnover tax was paid on the transfer would be contrary to that principle if such of the immovable property and the fiscal an activity did not commence until the authority refused to allow the tax to be property was actually exploited, that is to deducted. The Court was requested to say until it began to yield taxable income. determine whether the acquisition of such a Any other interpretation of Article 4 of the right could be regarded as an economic Sixth Directive would burden the trader "" activity (more specifically the exploitation of with the cost of VAT in the course of his immovable property) within the meaning of economic activity without allowing him to Article 4(1) of the Sixth Directive, in such a deduct it .
. . and would create an arbitrary way as to confer entitlement to deduction distinction between investment expenditure (and to set off). The Court answered that incurred before actual exploitation of question in the affirmative on the basis of an immovable property and expenditure analysis of the fundamental characteristics incurred during exploitation. Even in cases of the VAT system. in which the input tax paid on preparatory transactions is refunded after the commencement of actual exploitation of immovable property, a financial charge will encumber the property during the period, which may sometimes be considerable, In the judgment it was pointed out that the between the first investment expenditure deduction system was intended fully to and the commencement of exploitation. relieve the trader from VAT paid or payable Anyone who carries out such investment by him in the context of all his economic transactions which are closely connected activities, thereby ensuring the absolutely with and necessary for the future exploi neutral fiscal treatment of all economic acti tation of immovable property must therefore vities, irrespective of the objectives or the be regarded as a taxable person within the
8 6 results of those activities. As regards speci meaning of Article 4' . fically the question of the time when the exploitation of immovable property commences, it was pointed out that the economic activities referred to in Article 4(1) of the Sixth Directive may consist in several consecutive transactions, such as the purchase of immovable property; those 9. In the present case the following preparatory acts must themselves be treated elements of the Rompelman judgment are of as constituting economic activity.
7 That relevance. First the purchase of immovable viewpoint was explained as follows: property with a view to its subsequent exploitation (for example by means of letting) is itself to be deemed to be an economic activity, so that the purchaser thereupon acquires the status of a taxable person and with it the right to deduct the tax paid at the time of the supply of the ' . . . the principle that VAT should be goods. Secondly, the principle of VAT neutral as regards the tax burden on a neutrality means that the economic activities 6 — Paragraph 19. 7 — Paragraph 22. 8 — Paragraph 23.
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referred to in Article 4(1) of the Sixth an exploitation of property. Just as in the Directive may consist in several consecutive case of the letting of property the owner is transactions. It follows that the act of seeking to derive income from the property investment (the purchase of the goods) and by granting building rights over it. subsequent exploitation may not be Accordingly, it would be contrary to the considered separately, with the consequence principle of tax neutrality to restrict the that in the course of exploitation a claim concept of 'exploitation' of an asset to the may be made to deduct the tax paid in the letting of that asset, thus favouring one legal
10 context of the investment transaction. arrangement over other legal transactions. As the Netherlands Government and the United Kingdom rightly pointed out, the concept of 'exploitation' must therefore be regarded as referring to all transactions, irrespective of their legal form, whereby it is 10. The Rompelman judgment did not sought to derive income from the asset in expressly define the term 'exploitation' of question. By the grant of building rights immovable property. But it leaves no doubt over a building plot for a period of 18 years that the letting of immovable property must it is doubtless sought to derive income 'on a be deemed to be the exploitation of that continuing basis' from that property within property.
In fact in the operative part of the meaning of Article 4(2) of the Sixth that judgment it is stated that the acquisition Directive. of a right to the future transfer of property rights in part of a building yet to be constructed with a view to letting such premises in due course may be regarded as an economic activity within the meaning of Article 4(1) from the very moment of the 11. Yet in the judgment of the Arnhem asset's acquisition. The fact that letting is by district court, against which Mr van Tiem implication but without doubt to be appealed to the Hoge Raad, it was stated regarded as an exploitation is borne out by that the grant of building rights cannot be the passage of the judgment dealing with regarded as an 'exploitation' of the property the exemption from VAT on lettings by the owner since the grantee of the provided for in Article 13 B(b) of the Sixth building rights under Netherlands law
Directive. The judgment states that the acquires the right of disposition over the lessor in Rompelman had exercised the asset so that it is the holder of the building option provided for in Article 13 C to be rights and not the owner who is exploiting taxed on lettings of immovable property and the asset. This view does not seem to me to held that the purchaser of immovable be correct under Community law. The fact property is to be regarded as a taxable 9 that the holder of the building rights (under person from the moment of purchase. national law) may 'dispose' of the immovable property, for example by erecting constructions on it, does not prevent the owner of the immovable property from exploiting that property within the meaning of Article 4 of the Sixth The present proceedings do not concern the Directive by the grant of building rights. letting of property but the grant of building
rights. However, there is no reason not to 10 — It 5hould however be noted that the Netherlands fiscal regard the grant of such a right of user as authorities granted Mr van Tiem's request to exclude him from exoneration from turnover ux in respect of the grant of building rights on the ground that the request related to 9 — Paragraph 21. the letting of immovable property (see above, paragraph 2).
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The owner transfers his power of dispo paragraph already applied to economic acti sition over the property for a certain time vities carried on on an occasional basis. subject to a periodic remuneration. In that sense he is 'exploiting' the property. In other words, the term 'exploitation' is a Community concept which implies that in the application of VAT the national (civil) The Commission further rightly pointed out law may not lead to a situation where one that the Community legislature was seeking form of exploitation but not another is in Article 4(3) to achieve a better tax regarded as an economic activity depending neutrality by extending the concept of on the nature of the power of disposition taxable person to those persons carrying on enjoyed by the holder of the user rights economic activities on an occasional basis. under national law. The view of the Arnhem The same objective also underlies the final Gerechtshof would lead precisely to a sentence of Article 4(2): the exploitation of situation in which the Community concept an asset for the purpose of obtaining income of 'exploitation' is tied to a national law therefrom on a continuing basis is also to be concept having a different objective and considered an 'economic activity' conferring content, thus infringing the principle of the status of taxable person. I am in VAT neutrality. 11 agreement with the Commission that in such a case the element of regularity may be inferred from the intention of deriving income on a continuing basis from an asset, in other words that the element of regularity is subsumed within the 'continuing basis'.
12. On the first question it remains to examine a point raised by the Commission: is it a prerequisite for the status of taxable person for the economic activity to be The second and third questions carried on on a regidar basis? That requirement was contained in the Second 12 Directive but is missing from Article 4(1) of the Sixth Directive. Nevertheless, as the Commission rightly points out, that 13. As has already been mentioned, the requirement must be accepted as continuing concept of 'taxable transactions' is more to be of general application. Indeed Article particularly described in Articles 5 to 7 of 4(3) gives Member States the possibility of the Sixth Directive. The first kind of taxable treating as a taxable person anyone who on transaction is the supply of goods, which is an occasional basis carries out a transaction defined in Article 5(1) as: relating to the activities referred to in the second paragraph of that article. That provision would be superfluous, if the first 'the transfer of the right to dispose of 11 — The same reasoning was followed by the Court of Justice in connection with the expression 'goods from customers' tangible property as owner'. materials' in Article 5 of the Second and the Sixth Directives (judgment in Case 139/84 Van Dijk'i Boekhuii [1985] ECR 1405, in particular paragraphs 15 to 17), and with regard to the concept of 'supply' in Article 5(1) of the Sixth Directive (judgment in Case C-320/88 (Shipping and Forwarding Enterprise Safe BV [1990] ECR 1-285, in particular paragraphs 6 to 9), more on this in The third paragraph (under (b)) of that paragraph 14. article permits the Member States to regard 12 — See Article 4 of Directive 67/228/EEC of 11 April 1967 (OJ, English Special Edition 1967, p. 16). as tangible property:
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'rights in rem giving the holder thereof a Member States' option, to place transactions right of user over immovable property'. (for example the creation of a right of user over immovable property) which are econ omically equivalent to the supply of immovable property on the same footing as regards the imposition of turnover tax. In that respect Article 5 makes no distinction The Netherlands availed themselves of this according to the nature of the right of user possibility in Article 3(2) of the Turnover (provided it is a right of user in rem) or Tax Law. In that connection the Hoge according to the extent of the powers Raad wishes to ascertain in its second conferred by the right over the immovable question whether Article 5(1) is to be inter property. In other words the creation of a preted as meaning that the expression right of user in rem is classified as a supply 'supply of goods' includes the creation of a as a result of the (optional) assimilation right of user over the property. without its being necessary, pursuant to the guidelines given in the Safe judgment, to take into consideration the powers conferred by the right of user over the asset in question.
14. The concept of supply of goods arose in 13 the recent Safe judgment in which the Court made clear that it does not refer to transfer of ownership under procedures prescribed by the applicable national law but covers any transfer of tangible property by For the sake of completeness I would add one party which empowers the other party that the guidelines contained in the Safe actually to dispose of it as if he were the judgment must be applied when the right in 14 rem created is a right in rem over another owner of the property. Whether there is a transfer of the owner's power to dispose of right in rem, for example, a right of usufruct tangible property (that is to say the actual or a mortgage on building rights whereby power, which can be wider than the legal the holder of the right cannot dispose of the concept of ownership) must be determined latter right as an owner. Should such a case by the national court in each individual case arise — which does not seem to be the 15 situation in the present proceedings — then on the basis of its facts. under the terms of Article 5 of the directive the person entitled would not be able to dispose as owner of a right of user in rem assimilated to tangible property.
In the case of the creation of a right of user over immovable property, the situation is somewhat different when a Member State has availed itself of the option afforded by Article 5(3)(b). The (optional) assimilation 15. The third question seeks to ascertain of rights of user over immovable property to whether, assuming that under the answer to tangible property is intended, at the be given to the second question the creation of building rights is to be regarded as a 13 — Cited above in footnote 11. 14 — Paragraph 7. supply, the owner of the asset may continue 15 — Paragraphs 10 to 12. to be presumed to be exploiting the
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immovable property in question and thus to 4 (thus giving rise to the status of taxable be deemed to be a taxable person within the person). This determination is not affected meaning of Anicie 4 of the Sixth Directive. by the fact that a Member State may have The Commission and the Netherlands availed itself of the possibility afforded by Government maintain that the question Article 5(3) to deem the creation of certain whether the creation of building rights is to rights in rem to be tangible property (with be deemed to be a 'supply' within the the consequence that the creation of meaning of Article 5 is distinct from the building rights is deemed to be a supply question whether a person is to be regarded within the meaning of Article 5(1)). That as a taxable person in accordance with the option is certainly of importance in defining criteria set out in Article 4. I am also of the the term 'taxable transaction' and may also view that both questions must be answered be of relevance in the taxation of the trans separately, for the following reasons. action because the rules applicable to the supply of goods differ from those applicable l6 to the provision of services, but it is not intended to affect the determination of the The status of taxable person must be concept of 'taxable person'. Indeed the assessed solely on the basis of the criteria harmonization sought by the Sixth Directive stated in Article 4. The examination of the would be jeopardized, if the scope of Article first question showed clearly that the grant 4 could differ from Member State to of building rights can very well amount to Member State according to whether use is an economic activity as mentioned in Article made of the option offered by Article 5(3).
Conclusion
16. On the basis of the foregoing considerations I suggest that the questions referred to the Court by the Hoge Raad should be answered as follows:
'(1) The grant by the owner of immovable property to another person of building rights in respect of that property, by authorizing that person to use the immovable property for a specified period in return for payment, must be regarded as exploitation of tangible property for the purpose of obtaining income therefrom on a continuing basis within the meaning of the second sentence of Article 4(2) of the Sixth Directive.
16 — Sec for example Anieles 8 md 9 (place of taxable trans- actions) and Article 11 (taxable amount).
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(2) In so far as a Member State has made use of the possibility provided for in Article 5(3)(b) of the Sixth Directive to consider rights in rem giving the holder thereof a right of user to be tangible property, the creation of such a right must be taxed as the supply of immovable property.
(3) The answer to Question 2 has no effect on the answer to Question 1.'
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