C-20/91

My Lords, ing contractor, purchased a plot of land with an existing building. H e did not pay VAT on the land. He was subsequently granted per- mission to build two dwellings on it. On 30 July 1979 he sold approximately half of 1. The Netherlands Hoge Raad seeks a rul- the land to a third party, Mr Dolfing. H e did ing on the interpretation of the Sixth VAT not charge VAT on the sale. Mr de Jong then Directive (Council Directive 77/388/EEC, demolished the existing building and con- OJ 1977 L 145, p. 1), in particular the provi- structed two dwellings on the entire plot, sions on the application of business goods one for Mr Dolfing and one for himself. The for private use in Articles 5(6) and HA(l)(b). dwellings were completed in 1980 and The central issue in the case is whether a 1981 respectively. Since Mr de Jong had builder who acquires land for private use and deducted VAT on the acquisition of the builds a dwelling on it in the course of his goods and services used in the construction business must account for a charge, in of the dwellings, he recorded on his VAT respect of that private use, based on the value return by way of liability to tax (Output of both the land and the building, even tax') an amount equal to the tax deducted where he deducted VAT only on the acquisi- ('input tax') on the goods and services used tion of the goods and services used for the for the construction of the dwelling put to purpose of building the dwelling and not on private use. However, the VAT Inspector the acquisition of the land. considered that, for the purposes of the Netherlands provisions on the taxation of the private use of business assets (Article 3(l)(g) of t n e Netherlands Turnover Tax Law 1968), Mr de Jong was to be deemed to have made to himself a single supply of goods The facts and the questions put by the consisting of both the land and the dwelling; national court accordingly the Inspector sought to include the value of the land in the basis of assess- ment. Mr de Jong's appeal is based on the ground that, since he acquired the land in his private capacity, it never formed part of his business assets and hence was not transferred 2. The facts of the case are as follows. O n from business to private use for the purposes 15 August 1978 Mr de Jong, who is a build- of the Netherlands provisions.

(3) If the answer to the second question is that the whole immovable property '(1) Is Article 5(6) of the Sixth Directive to constitutes a supply of goods as pro- be interpreted as meaning that a taxable vided for in Article 5(6) of the Sixth person (a building contractor) who Directive, is Article HA(l)(b) of the acquires land solely for his private use directive to be interpreted as meaning and subsequently erects on that land in that the taxable amount laid down the pursuit of his business a building (a therein must be based on the cost price dwelling) and finally puts the building of the whole immovable property, that together with the land on which it is to say including the cost price of the stands and possibly the surrounding land, or is the amount limited to the land to his private use has applied goods part of the cost price with regard to forming part of his business assets for which value added tax is deductible?' his private use within the meaning of the directive not only as regards the building, but as regards the building together with the land on which it stands and possibly the surrounding The Community provisions land?

4. The provisions of the Sixth Directive con- cerning supplies of goods and services for private use are contained in Articles 5(6) and 6(2), in conjunction with Article HA(l)(b) and (c). (2) Is the condition laid down in Article 5(6) of the Sixth Directive regarding the assimilation of the application of goods forming part of business assets for pri- Article 5(6) provides that: vate use to a supply that the value added tax on the goods in question or the component parts thereof has been wholly or partly deductible to be under- 'The application by a taxable person of stood as meaning that where goods goods forming part of his business assets for

Article HA(l)(b) provides that the taxable amount for supplies referred to in Article 5(6) is to be 'the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of supply'. 6. Article 5(1) of the directive defines a sup- ply of goods as the transfer of the right to dispose of 'tangible property' as owner. As tangible property, land therefore falls to be classified as 'goods' for the purposes of Arti- Article HA(l)(c) provides similarly that for cle 5 and may be the subject of a deemed supplies referred to in Article 6(2) the supply under Article 5(6).

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OPINION OF MR JACOBS — CASE C-20/91

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DE JONG v STAATSSECRETARIS VAN FINANCIËN

taxation of any building constructed on that 12. In the present case it is questionable land in the course of his business. The con- whether it is correct to regard the taxable trary view would go beyond what is neces- person as making a supply of goods consist- sary to achieve the aim of the provision, that ing of the completed building. The construc- aim being to prevent private consumption by tion of a dwelling by a builder on a custom- taxable persons from escaping tax. If Mr de er's land might equally be analysed as a Jong instructed a third party to construct a supply of services consisting of the perfor- building on his land, there would be no mance of building work on the customer's question of the third party making a supply land or a mixed supply of work, use of of land as well as the building. VAT would equipment and materials. The construction be chargeable solely on the price paid for the by a taxable person of a building for his own building. Imposition of a private-use charge occupation on privately held land would by in respect of the land in the circumstances of analogy fall to be taxed under Article 6(2) as the present case would therefore result in a well as Article 5(6). O n that analysis the greater tax burden than if Mr de Jong acted question of a single, indivisible supply of as a normal consumer. immovable property comprising the land and the completed building would not arise.

whoĽy or partly deductible means that, given the uncertainty surrounding the facts where no VAT was deductible on the land, of the case, the Court should reply to the there is a supply neither in respect of the second question and in so doing consider the immovable property as a whole nor in possibility that the land was acquired pri­ respect of the building. vately but was subsequendy 'given a busi­ ness intention'. I do not consider this to be necessary. A reading of the order for refer­ ence shows that the second question was not prompted by any factual uncertainty; rather, it was put on the hypothesis that, as a matter of law, a builder converts privately held land into a business asset by constructing a build­ 15. In the operative part of its decision the ing on it for his private use, a view which I H o g e Raad does not expressly state that the have already rejected (see paragraphs 10 to second question is put only in the event of 12 above). Moreover, it may be noted that an affirmative reply to the first question. It is the second question raises rather broader none the less clear that that is the case. The issues concerning the purpose and effect of second question clearly follows from the the provisions on the taxation of private use, first as a matter of logic, since it expressly including some that are more directly re­ postulates that land forming part of business levant to another case currently pending assets is applied for private use — which is before the Court, namely Case the very point on which a ruling is sought by C-193/91 Mohsche. the first question — and goes on to raise a separate question concerning the effect of the deductibility condition in Article 5(6). That the second question is dependent on an affirmative answer to the first question is, moreover, confirmed by a reading of the body of the order for reference (in particular paragraphs 4.3 to 4.7), where the Hoge Raad prefaces its discussion of the issues raised by Third question the second and third questions with the words 'If the answer to that first question is " y e s " ' (paragraph 4.3). Since in my view the first question should be answered in the neg­ ative, it is unnecessary to consider the second question.

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