C-2/95

O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-2/95

OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 4 July 1996 *

1. The Østre Landsret, Denmark, has (Danish Association of Savings Banks). referred to the Court six questions for a pre- Under Danish legislation it is not itself a liminary ruling on the interpretation of credit establishment or a financial institu- Article 13B(d)3, 4 and 5 of the Sixth Council tion. 2 Prior to 1993 it carried out a whole Directive of 17 May 1977 on the harmoniza- range of services, primarily for the said sav- tion of the laws of the Member States relat- ings banks but also for other undertakings in ing to turnover taxes — Common system of the financial sector. 3 value added tax: uniform basis of assessment (77/388/EEC) > (hereinafter *the Sixth Direc- tive').

2. The purpose of the proceedings before the 4. Following the restructuring carried out in Danish Court is to determine whether or not 1993, SDC established a limited company certain services performed by the plaintiff for (SDC af 1993 A/S) which carries out all the a number of financial institutions (savings transactions previously carried out by the banks and banks) attract value added tax plaintiff, and which therefore took over the (hereinafter 'VAT'). To be specific, the court services supplied to the financial institutions. of reference -wishes to know whether the For organizational reasons, SDC af 1993 A/S rules on exemption from VAT set out in invoices the plaintiff which in turn makes Article 13B(d)3, 4 and 5 of the Sixth Direc- out invoices for the members of the SDC tive can apply to such services. association.

11. The latter decided on 20 April 1990 that only the credit transfer service 'as such' set out in Paragraph 4.7 of the plaintiff's 'prod- ucts catalogue' (user's guidelines) could be regarded as covered by the VAT exemption 8. O n 23 September 1986 the Distriktstold- rules set out in Paragraph 2(3)(j) of the Dan- kammer decided that that part of the plain- ish VAT Law transposing into Danish tiff's operations which consisted in effecting domestic law Article 13B(d) of the Sixth transfers between two financial institutions Directive. was exempt from VAT.

9. O n 18 July 1988 the applicant applied for a refund of some DKR 229 million corre- sponding to the amount of VAT which, in its 12. As a result of that decision the Told-og Skattestyrelse ordered the repayment to the plaintiff of the VAT overpaid (DKR 4 — In Denmark, according to the parties' written observations, 61 022 170), to which was added interest the banks and savings banks arc subject to the same legisla- tion. amounting to DKR 13 376 520.

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OPINION OF MR RUIZ-JARABO COLOMER — CASE C-2/95

13. The plaintiff appealed against that (2) The wording used in Article 13B(d)l decision to the Momsnævn (VAT appeal tri- and 2 of the VAT Directive is "by the bunal) which, as the administrative tribunal person granting [the credit]" (ved den of last instance, decided by a decision of 14 person, som har ydet lånene) and "by February 1992 that none of the services per- the person who is granting the credit" formed by the plaintiff was exempt from (ved den person, de har ydet kreditten). VAT. That description is not employed by Article 13B(d)3, 4 and 5.

tions wholly or in part from another (6) Following the plaintiff's reorganization, person, with the effect that the ser- is it significant, as far as application of vices performed by that other person Article 13B(d)3, 4 and 5 is concerned, are covered by Article 13B(d)3, 4 that the services in question are now and 5, or may particular require- provided by a company which supplies ments be made of that other person? the services to the associated financial institutions?

(4) H o w is the wording used in Article 13B(d)3, 4 and 5 "transactions ... con- It will be noted that the said services are cerning" to be interpreted? invoiced by the limited company to the plaintiff which in turn invoices its finan- cial institution members.'

— the plaintiff's name is not made known to the individual savings bank customers and the plaintiff has not entered into any 16. In a system of judicial cooperation such legal obligation towards them; as that laid down by Article 177 of the E C Treaty, the duty of evaluating the evidence produced in the main proceedings devolves logically and exclusively upon the national court. The Court of Justice accordingly 'may — the plaintiff does not demand payment assume', as the order for reference literally from the individual customers but only states, that the plaintiff's services have the from its members; following characteristics:

— the plaintiff's services are essentially per- formed wholly or in part electronically. — the plaintiff performs the services only upon request from a member savings bank, one of such bank's customers or others who, by agreement with the cus- tomer, are authorized to requisition, for example, specific payments; 17. The following are, according to the order for reference, the four spheres of activ- ity in which the SDC performs its services:

— the request is made by the electronic transmission of information which may — credit transfers; result in the immediate performance of a service or involve several successive ser- vices over a shorter or longer period;

— advice on management of securities; 7 8

7 — As to the scope of this heading, see points 74 to 79 of this — a customer can only transmit information Opinion. 8 — Translator's note: The phrase used in the Danish text is 'Råd- after authorization by the financial insti- givning om handel med værdipapirer'.

23. In any event, the impact of this objection 20. In other words, SDC had not disputed is limited, since the purport of the questions before the Danish authorities (at least, so it raised by the court of reference would, as I see it, make it possible to give a general answer of principle without the need to

9 — The Monunzvn's decision is an example of reformatio in pejus since, on the basis of an administrative appeal brought by a party who has obtained only partial satisfaction of his claim and considers himself aggrieved thereby, it makes the 10 — Section 2 of the order for reference regarding the procedure appellant's legal situation worse to the extent of depriving followed before the national administrative authorities him even of the advantages allowed him by virtue of that describes the various stages of SDC's claim in the terms I partial satisfaction. have summarized in points 7 to 13 of this Opinion.

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OPINION OF MR RUIZ-JARABO COLOMER — CASE C-2/95

detail separately each one of the various required to introduce in their VAT legisla- transactions mentioned. tion. The sections of the article requiring interpretation are as follows:

'B. Other exemptions 24. For the sake of clarity, I shall set out the actual wording of the Community rule to be interpreted and then analyse the questions referred to the Court by dividing them into three groups: Without prejudice to other Community pro- visions, Member States shall exempt the fol- lowing under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible (a) those referring to the persons covered by evasion, avoidance or abuse: exemption (Questions 2, 3A and 6);

4) transactions, including negotiation, con- 27. The said activities — which, but for the cerning currency, bank notes and coins last-mentioned provision would necessarily used as legal tender, with the exception have attracted VAT — were: of collectors' items; "collectors' items" shall be taken to mean gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

(a) management of credit and credit guaran- tees by a person or a body other than the one which granted the credits (item 13 of Annex F); 5) transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding:

(b) debt collection (item 14 of Annex F);

— documents establishing title to goods,

(c) the safekeeping and management of shares, interests in companies and asso- ciations, debentures and other securities or negotiable instruments, excluding — the rights or securities referred to in documents establishing title to goods or Article 5(3).' securities referred to in Article 5(3) (item 15 of Annex F).

26. It should, however, be pointed out that Article 28(3)(b) of the Sixth Directive allowed Member States, during the transi- 28. The transitional period during which the tional period referred to in Article 28(4), to States were entitled by way of exception to continue to exempt certain activities set out continue the exemption finally came to an in Annex F under conditions existing in the end either on 1 January 1990 (in the case of Member State concerned. debt collection) or on 1 January 1991 (in the

The persons covered by the transactions exempted by Article 13B(d)3, 4 and 5 of the Sixth Directive 31. In general it seems clear to me that the provisions already quoted do not relate to any personal aspects concerning the exempt transactions. They are in fact rules drafted solely to take account of the objective nature of the transactions in question irrespective of who effects them. 29. Three of the questions raised in the order for reference ask the Court of Justice about the persons covered by the exemptions in question and, as they deal with related matters I think it is appropriate to deal with them together. 32. It is clear that some of the transactions exempted (particularly some of those described in Article 13B(d)3 and 4) normally correspond to the field of banking which, in certain Member States, has been reserved by law exclusively to specified banking institu- tions or to financial intermediaries. But that 30. The key question with regard to these is a matter of politico-economic choices aspects is Question 3A in which the court of made by the Member States in question and reference asks whether there is any difference not of the application of the Sixth Directive. „ in the application of the exemptions accord- ing to whether the exempted transactions were performed by financial institutions or by others. Question 2 relates to the same problem, enquiring whether the fact that

33. In so far as persons other than banking 11 — That was provided by Article 1(2) of the Eighteenth Coun- institutions or financial intermediaries may, cil Directive of 18 July 1989 on the harmonization of the laws of the Member States relating to turnover taxes according to their own domestic law, effect — Abolition of certain derogations provided for in Article the transactions envisaged in the indents 28(3) of the Sixth Directive 77/388/EEC (89/465/EEC) (OJ 1989 L 226, p. 21). already quoted, the exemptions in question

35. In paragraph 13 of the Muys judgment the Court stated that 'although the exemp- tions provided for in Article 13 are to be interpreted strictly (see Case 348/87 Stichting 37. That being the case, it is understandable Uitvoering Financiële Acties v Staatssecretaris why indents 3, 4 and 5 contain no reference van Financiën [1989] ECR 1737), neverthe- to the grantor, which occurs in other indents less, in the absence of any specification of the providing for exemption for 'the manage- identity of the lender or the borrower, the ment of credit by the person granting it' expression "the granting and the negotiation (indent 1) or 'the management of credit of credit" is in principle sufficiendy broad to include credit granted by a supplier of goods in the form of deferral of payment. Contrary 13 — The Court reinforces its argument by adding in paragraph to the Commission's view, the wording of 14 of the judgment: That interpretation is borne out by the objective of the common system introduced by tbc Sixth VAT Directive, which aims in particular to secure equal treatment for taxable persons. That principle would be dis- regarded if a purchaser were to be taxed on credit granted by his supplier, whereas a purchaser seeking credit from a 12 — [1993] ECR 1-5405. bank or another lender received an exempted credit.'

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O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-2/95

guarantees by the person who is granting the undertakings (to which I shall refer later) but credit' (indent 2). disappear if viewed subjectively.

The purpose of the exempted transactions 38. Indents 1 and 2 deal with restriction of according to Article 13B(d)3, 4 and 5 of the exemption to certain types of transaction: it Sixth Directive is only when the management of credit or credit guarantees is performed by the person granting them that a right to exemption arises. That right does not exist therefore •when the management is effected by a third party other than the one who granted the credit.

42. The Community legislature has granted the exemption at issue to a series of 'transac- tions' frequendy encountered in legal deal- ings, since otherwise tax would have fallen 40. Finally, the fact that those effecting the upon both normal commercial activity transactions in question may be associations, companies, natural persons or any other type of entity with legal personality makes no dif- 14 — The Spanish, French and Italian versions use the expres- sions 'operaciones siguientes', 'operations suivantes' and ference to the explanation I have just given. 'operazione seguenti'; the English and Danish versions use The problems concerning the involvement of the expressions 'followingtransactions' and 'følgende tran- saktioner' respectively. The German version uses the a company, which the last question referred expression 'folgenden Umsätze'. The word 'transacción', of Latin origin, used in its meaning of contract or business to the Court mentions, may be considered deal (not in its meaning of result or action of settlement) is from the point of view of the purpose of the perhaps legally more precise than the generic expression 'operación' to describe what types of act are entitled to the complex services and the interweaving of exemption in question.

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SDC v SKATTEMINISTERIET

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O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-2/95

19 — According to the order for reference (section 3.1) the ser- vices provided by SDC consist in a number of components 17 — To be specific, in Questions 1, 3 and 4. which together make up the services which each individual 18 — In its observations the Commission emphasizes that financial institution wishes to have performed. The docu- according to Article 2 of the SDC's statutes its object is to ment entitled Overall description of SDC's business' states handle data for its members and other associated institu- that 'each element of the service consists in activities tions or companies by designing and operating automatic intended for obtaining data, processing them and transmit- d a u processing systems. ting them by electronic means1 (my emphasis).

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SDC v SKATTEMINISTERIET

53. In the second case, with which these 56. The principle of fiscal neutrality, which proceedings are concerned, the legal relation- is at the basis of VAT, is not affected by the ship between the customer and the savings exercise of that option. In fact, the charge- bank continues unaltered, just as if the bank able event for VAT, as affecting 'supply of had actually performed those tasks with its services', is that there should be two inde- own resources. All that changes is the inter- pendent taxable persons, in a legal relation- nal method of working of the financial insti- ship, one of whom performs an action on tution itself, but that has no significance for behalf of another. the customer whose contract is exclusively with the bank or savings bank, which is solely liable to him.

58. Business policy decisions may lead an undertaking to opt to carry out certain tasks with its own resources using its paid staff. In such a case, there is no chargeable event sub- ject to VAT. It may, on the other hand, choose to contract with third persons, legally 55. Consequendy, it is impossible to accept the plaintiff's argument as to the alleged tax discrimination between banking undertak- 20 — It is not therefore a mere exemption. Properly speaking, there is tax exemption only when there is an event previ- ings which have their own data-handling ously chargeable, that is, subject to tax. The concept of resources and the others which are obliged exemption presupposes an initial obligation to pay tax for which the legislature grants, for various reasons, a dispensa- to engage the services of a third person for tion from paying. It depends therefore on there being an express reference in the law to an exemption from the duty such purposes. As I shall explain later, that is to pay the tax. Before examining whether a given transac- the logical consequence resulting from the tion meets the requirements for benefiting from exemption, it is necessary to ascertain that it falls within the field of tax structure specific to VAT. application of the tax.

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O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-2/95

distinct from the undertaking, for the supply transactions and taxable transactions but of its services: in that case, the transaction is between transactions not liable to tax and subject to VAT. taxable transactions.

62. The Danish Government rightly empha- sizes that if the plaintiff's line of argument 60. In relation to a similar problem, were to be followed any independent under- although with different aspects, the Court, in taking contracting with a banking institution its judgment in Case C-4/94 BLP Group1,1 to provide it with a service more or less came to a similar decision, distinguishing the linked to typical banking 'transactions' tax consequences of traders' choices between which the Sixth Directive regards as exempt exempt transactions and taxable transactions. would also be able to claim exemption, such Identical considerations may be applied to as the telephone undertaking which is instru- the cases, such as that now before the Court, mental in transmitting the orders for transfer in which the choice is not between exempt or the transport and security company which physically transports the funds from one branch to another and so on. 21 — In paragraph 26 of that judgment [1995] ECR I-9S3 at p. 1-1011 the Court stated: "... a trader's choice between exempt transactions and taxable transactions may be based on a range of factors, including tax considerations relating to the VAT system. The principle of the neutrality of VAX as defined in the case-law of the Court, does not have the scope attributed to it by BLP. That the common system of VAT ensures that all economic activities, whatever their purpose or results, are taxed in a wholly neutral way, pre- supposes that those activities are themselves subject to VAT (see in particular Case 268/83 Rompelman v Minister van 63. Such examples, and similar ones which Financiën [1985] E C R 655, paragraph 19).' might be added, show the need to keep the

65. In fact, I have emphasized that SDC 68. With regard to credit transfers (section does not, properly speaking, effect transac- 3.1. A of the order for reference), which con- tions with the individuals and companies stitute the major part of SDC's operations, I which are customers of the banks or savings have indicated that the transaction which is banks. On the contrary, it merely supplies exempt is the legal operation agreed between those financial institutions with certain tech- the customers and the financial institution nical resources or services for the better and not the instrumental services which third companies or persons make available to the savings bank or bank for effecting such a 22 — In the sense mentioned in footnote 13. legal operation.

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O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-2/95

73. In particular, the description of the 71. The creditors and debtors in the credit credit transfers given in the order for refer- transfers to which the order for reference ence makes it clear that SDC's instrumental refers are the customers (individuals and function is data-handling on behalf of the companies in their capacity of those giving the orders or beneficiaries) and institutions

25 — During the hearing certain interveners tried to emphasize that the description of exempt transactions in Article 13B(d)3, 4 and 5 of the Sixth Directive was couched in 23 — Proposal for a European Parliament and Council Directive purely objective terms and that such provisions did not on E U credit transfers (OJ 1994 C 360, p. 13, as amended require a nexus or direct link between the customers and by OJ 1995 C 199, p. 16). This has now taken the form of the banking institutions. As I have already emphasized ear- C o m m o n Position (EC) N o 32/95 adopted by the Council lier in this Opinion on the subjective aspect of the exemp- on 4 December 1995 in accordance with the procedure laid tions at issue, there would be nothing from the point of down in Article 189b of the Treaty with a view to adopting view of the Sixth Directive to prevent undertakings other a directive of the European Parliament and of the Council than financial institutions (including SDC) from effecting on cross-border credit transfers (OJ 1995 C 353, p. 52). genuine payment transactions, that is to say, from perform- 24 — The Commission adopted Recommendation 90/109/EEC ing the relevant financial service, assuming the appropriate of 14 February 1990 on the transparency of banking condi- duties and risks. It happens, however, that the part played tions relating to cross-border financial transactions (OJ by SDC, according to the background set out in the order 1990 L 67, p. 39) laying down a number of principles in for reference, is not that of a financial intermediary but of a order to provide greater transparency in customer infor- data-processing undertaking providing the financial institu- mation and standards of invoicing such transactions. tions with technical assistance.

27 — My emphasis. By the expression 'management' used in this section of trie order, trie court of reference appears t o be 26 — The subject of the procedure does not extend to actual bank referring not to the typical operations of managing securi- clearing transactions which may be carried out by elec- ties (including normally portfolio management and safe- tronic exchange of information. Inter-bank settlements arc keeping, the collection of dividends or interest and similar in fact often organized by a joint system of electronic clear- tasks) but to negotiation and buying and selling. Manage- ance. The United Kingdom emphasized at the hearing triat ment operations, properly so called, are referred to in sec- in that event payment transactions effected by and between tion 3.1. C of the order for reference under the heading banks, distinct in this respect from relations between finan- 'management of deposits'. cial institutions and customers, also have the benefit of the 28 — Translator's note: The phrase used in the Danish text is exemption at issue. 'Rådgivning om handel med vxrdipapirer'.

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OPINION OF MR RUIZ-JARABO COLOMER — CASE C-2/95

77. O n the other hand, if SDC negotiated, tions for the specific items referred to in purchased and sold securities for its custom- Annex F to the Sixth Directive. 29 ers' account, such a transaction would indeed be entitled to the exemption provided for in Article 13B(d)5 of the Sixth Directive.

81. The characteristics of these transactions (during the period prior to 1 January 1991) as described in the order for reference, raise 78. However, that does not seem to be the certain doubts and do not make it possible to position. Once again, SDC seems merely to decide with certainty what legal system is provide its members (banks and savings applicable. banks) with the necessary technical support to enable them in their turn to effect the transactions of acting as intermediaries in the purchase and sale of securities for their cus- tomers' account.

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SDC v SKATTEMINISTERIET

84. The same may be said with regard to the 85. Finally, as regards what is referred to as management of purchase contracts and loans, 'tasks concerning members' internal adminis- where the legal relationship established is tration' (section 3.1. D of the order for refer- that between the customers and the financial ence), the answer given by SDC to the ques- institutions. The latter retain responsibility tion put to it by the Court of Justice for the management towards their customers, regarding the content of its application for who are not even aware of SDC's action, exemption confirms that the association at which is restricted to supplying the banking no time claimed to qualify for such exemp- institutions with the relevant data. tion regarding those transactions. That makes it unnecessary to give any reply regarding the tax system applicable to them.

Conclusion

86. In view of the foregoing considerations, I suggest that the Court of Justice should reply as follows to the questions referred to it by the Østre Landsret:

(1) The exemptions provided for in Article 13B(d)3, 4 and 5 of the Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assess- ment (77/388/EEC) do not make the transactions concerned necessarily dependent upon a part being played by a financial institution, bank or savings bank.

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