C-68/92

O P I N I O N O F MB. G U L M A N N — CASE C-68/92

OPINION OF ADVOCATE GENERAL GULMANN delivered on 13 July 1993 "

Mr President, Under Article 9(1), 'the place where a service Members of the Court, is supplied shall be deemed to be the place where the supplier has established his busi- ness ...'. The Member State which is compe- tent to levy the tax is thus that in which the person supplying the service is established. 1. The Commission in the present cases seeks declarations that the French Republic, the Grand Duchy of Luxembourg and the Kingdom of Spain have introduced rules Article 9(2) contains a series of exceptions to resulting in a failure by those Member States this general rule. Places of supply other than to comply with Article 9(2)(e) of the Coun- the supplier's place of business are laid down cil's Sixth VAT Directive. ' The background for certain specified services, for instance, the to the cases lies in a disagreement between place where services are physically carried the parties as to the correct interpretation of out (such as in the case of entertainment the term 'advertising services' as used in activities). Article 9(2)(e) provides that the Article 9(2)(e) of the directive. place where the customer is established is the relevant place of supply for a number of practically important transactions (transfer of exclusive rights, services of lawyers, accountants and other consultancy services, 2. Title VI of the directive sets out the rules banking transactions, and so forth). The list which determine the pUce of taxable transac- includes 'advertising services'. tions. The rules are important in cases where the supply of goods and services affects sev- eral countries. The main purpose of the rules is to prevent a transaction being taxed twice or not being taxed at all. If a transaction is regarded as being an adver- tising service, it will be taxable in the coun- try of the customer, whereas if this is not so it will, in accordance with the general rule, be taxable in the country of the person sup- plying the service unless it comes under one Article 8 provides a definition for the place of the other exceptions set out in Article of supply of goods, while Article 9 deter- 9(2). mines the place where services are supplied.

France and Spain argue that the applications should be dismissed. Luxembourg did not lodge a defence. (b) services which may be supplied by an advertising undertaking when it is employed in connection with various events such as recreational functions, 4. As already mentioned, the dispute has its cocktail parties, etc.; origin in the differing views of the parties on the correct interpretation of the term 'adver- tising services' as used in Article 9(2). The Commission argues in favour of a broad (c) the production, in the strict sense, of interpretation, while the French and Spanish aids for advertising, for example, the Governments support a more restricted printing of advertising material by a interpretation. printer, or the construction of an adver- tisement hoarding.'

5. According to the Commission's state- ments, the cases concern clearly specified In the case of Luxembourg, the Com- national rules or administrative practices mission argues that it is contrary to the regarding the definition of advertising ser- directive for the authorities, on their vices for the purposes of national VAT legis- own admission, to engage in an admin- lation. In this connection, the Commission istrative practice under which the

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O P I N I O N O F MR G U L M A N N — CASE C-68/92

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COMMISSION v FRANCE

9. In my opinion, the Court's judgments in to advertise a product or the taxable person the present cases will form a sound basis for responsible for the sale of that product, irre- further negotiations on a practicable defini- spective of the method used. The Spanish tion of the provision's scope. Government also defines the term as includ- ing dissemination by any means whatsoever and preparatory services which are directly linked to or necessary for the dissemination 10. When the Court comes to consider the in question. cases, it may take as its starting point one single and incontrovertible fact. As used in Article 9(2)(e), the term 'advertising services' must be uniformly interpreted and applied in The main practical consequence of this defi- the Member States. This is also a matter on nition is that the provision does not cover which the parties are in agreement. Compli- marketing services such as competitions, ance with that requirement is absolutely vital demonstrations, cocktail parties and supply in order to ensure that the scope of national of goods and so forth in connection with an VAT legislation can be rationally delimited advertising service. and that conflicts of jurisdiction can be avoided. 3

The two Governments also point out that a uniform legal position will be attained whether one chooses their interpretation or 11. Essentially, the Commission argues that that of the Commission. the concept of advertising services, for the purposes of the directive, covers all services — irrespective of their nature — which are provided by advertising agencies and are 12. It is correct that, in order to avoid the designed to promote the sale of goods and double charging of tax or the charging of no services. tax at all, the only matter of importance is that one single interpretation should be taken as a basis.

13. The Commission initially argued that that they were adopted in different contexts neither the provision's context nor its objec- and with different objectives to those rele- tives can contribute to its interpretation, and vant in the area of VAT. that it is for that reason necessary to inter- pret it on the basis of ordinary usage. 4 15. The most important reason for my rejec- tion of any attempt to resolve the problem of The parties have also discussed how the term interpretation by means of the natural under- 'advertising services' is to be understood — standing of the term 'advertising services', whether by 'the man in the street' or by pro- however, is that substantial interpretative fessionals in the advertising business. These assistance can be found in the objectives of efforts are based on, inter alia, the definitions the provision when considered in the light of contained in French and Spanish dictionaries. the fundamental principles of the system of VAT. The two Governments have also based their interpretation on the definitions of the term contained in Directive 84/450 on misleading It should be recalled that the preamble to the advertising and Directive 89/552 dealing directive states that the country of the person with transfrontier television broadcasting, 5 to whom the services are supplied should be as well as that in a Convention of the Coun- the place of supply and consequently the cil of Europe of 15 March 1989 on transfron- country where the tax is chargeable 'in the tier television broadcasting. case of certain services supplied between tax- able persons where the cost of the services is included in the price of the goods'. 14. I trust that the Court will forgive me if I pass over those arguments, which are set out in more detail in the Reports for the Hear- In its reply in the case against Spain, the ing. Commission has also pointed out that the provision should be interpreted in the light of that recital in the preamble. The variety of results to which this attempt at a linguistic interpretation of the provision may lead gives rise by itself to some scepti- cism regarding the prospects of achieving an 16. The fundamental principle governing authoritative solution on this basis. VAT is that it must ultimately be borne by the end consumer, that is to say, the person purchasing the product in question, whether Nor is it possible to find any significant that product be in the form of goods or ser- interpretative assistance in the definition vices. contained in the abovementioned Commu- nity and other measures in view of the fact While it is of course correct to point out that the system of VAT contains a number of 4 — The Commission refers to the Court's judgment in Case exceptions to this principle, the principle 139/84 Van Dijk's Boekhltis v Staatssecretaris van Financiën [1985] ECR 1405, in which the word 'made' was interpreted must determine the interpretation of provi- in accordance with common usage. sions which do not unequivocally constitute 5 — See OJ 1984 L 250, p. 17, and OJ 1989 L 298, p. 23, respec- tively. such exceptions.

17. In accordance with the abovementioned sport, television and entertainment were recital in the preamble to the directive, Arti- invited along. The publicity event had been cle 9(2)(e) designates the country of the per- announced in the press and on local radio son to whom the services are supplied as stations, and no form of tax payment was being the country where the tax is charge- requested in that connection. The French able, subject to the specific condition that the authorities formed the view that the expenses services in question are supplied between associated with the event, which related to taxable persons and that the cost of the ser- invitations, hire of the ship, fees for the per- vices is included in the price of the goods. sonalities, the cost of the raised stage and security, as well as a portion of salaries, did not arise from advertising services within the meaning of the directive. The advertising Services which are designed to promote the agency took the opposite view. sale of goods or services to the end consumer are supplied by the person supplying the ser- vice (advertising agency) to the trader (man- ufacturer or dealer) who wishes to sell a The Cour d'Appel ruled that the term product to the end consumer. 'advertising services' covers 'all transactions which in fact make up such services.

18. Reference was made in the case brought "Bass" beer, in respect of which an overall against France to a decision given by the price had been agreed. . . . Since it is common Cour Administrative d'Appel de Paris on ground that the recipient of the advertising 10 December 1991 in a case where a French services provided by [the advertising agency] advertising agency had been commissioned is subject to VAT in another Member State by the Belgian Bass brewery to conduct an of the Community, the argument put for- extensive marketing campaign designed to ward in this case by the government author- increase French consumers' familiarity with ities [namely, that VAT was payable in 'Bass' beer. Among other things, the French France in respect of those services] cannot be advertising agency organized on one of the accepted.' quays along the Seine a promotional pan- orama consisting of a reconstructed English port, a terrace, a raised stage and a ship, which all together was supposed to consti- That decision, against which an appeal was tute an advertisement for 'Bass' beer. The brought before the Conseil d'Etat, is in my setting thus created was used for free sam- opinion correct and is also a good illustra- pling of 'Bass' beer by members of the pub- tion of the practical significance of the prob- lic, and personalities from the worlds of lems here under discussion.

21. There is, admittedly, a possibility that There is, in such a case, no reason to confer a this wide application of the concept of adver- narrow scope on the concept of advertising tising services may give rise to abuse. Mem- services. There is no reason to draw a dis- ber States must of course be in a position to tinction between the methods employed take action against any such abuse. That is according to whether they can be regarded as the reason why I have already mentioned belonging to the central features of the con- that the transactions in question must have cept of advertising services or whether other the genuine objective of promoting the sale marketing methods have been employed, of products. such as competitions and demonstrations, or again whether the advertising agency's expenses are in respect of advertising services in the narrow meaning or whether it has also incurred expenses with regard to compe- 22. It follows that the definition of the con- tition prizes, hire of premises or food and cept of advertising services laid down in drink in connection with advertising services French and Spanish law, which has the result in the wide meaning. that a series of transactions are not treated as advertising services, is contrary to the provi- sion contained in Article 9(2)(e) of the direc- tive. The Commission's application must for The determinant factor is that the expenses that reason be upheld. should have been genuinely incurred for the purpose of promoting the sale of the prod- ucts of the customer of the advertising ser- vices and that they are for that reason included in the price which the end con- sumer pays for the product. 23. I have not, in what I have said up to now, considered whether Article 9(2)(e), as argued by the Commission, covers only

services provided by advertising agencies, or give judgment by default, although it has whether advertising services, within the requested the Court not to give judgment meaning of the directive, can also be pro- prior to the conclusion of the proceedings in vided by persons or bodies other than adver- the cases brought against France and Spain. tising agencies. Article 94(2) of the Rules of Procedure pro- Nor have I addressed the issue whether there vides that the Court shall, before giving may be grounds for restricting the scope of judgment by default, consider 'whether the the provision in cases where advertising application initiating proceedings is admissi- agencies merely provide individual services ble, whether the appropriate formalities have which are not advertising services in the nar- been complied with, and whether the appli- row sense, such as a single event where cation appears well founded'. 7 Since there is potential customers of a product are invited no doubt that the application is admissible to stay at a hotel in order to attend a demon- and that the appropriate formalities have stration of the product. been complied with, and since in the light of the foregoing it can be assumed that the Commission's application appears to be well 24. As already mentioned, Luxembourg did founded, the Court should rule against not lodge a defence, and in view of this the Luxembourg in accordance with that appli- Commission has requested that the Court cation.

Conclusion

25. I accordingly propose that the C o u r t rule as follows:

(1) By excluding a series of economic transactions from the concept of 'advertis- ing services' in Article 9(2)(e) of the Sixth VAT Directive, the French Republic has failed to fulfil its obligations under that directive;

(4) The three Member States shall pay the costs in their respective cases.

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