C-45/95
ECLI:EU:C:1996:479
- Súd
- Súdny dvor Európskej únie
- IČS
- 61995CC0045
- Zdroj
- eur-lex.europa.eu ↗
COMMISSION v ITALY
OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 10 December 1996
1. In this action the Commission alleges that notice to the Italian Republic to submit its the Italian Republic has failed to fulfil the observations on the alleged failure. N o reply obligation to bring part of its tax law into was received within the period allowed. conformity with Council Directive 77/388/EEC of 17 May 1977, Sixth Directive on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment ' ('the Sixth Directive' and 'VAT'). 4. Nevertheless, the Italian Government sent the Commission a letter dated 31 March 1993 admitting, with regard to the first part of the allegation, that 'the said Community provision has been only partly incorporated into national law'. With regard to the second 2. The Commission asks the Court to rule part of the allegation, the Italian Govern- that by enacting and maintaining in force a ment admitted that it was justified and provision concerning value added tax which added, 'the Italian tax authorities intend very does not exempt supplies of goods used shortly [...] to draw up the necessary provi- wholly for an activity which is exempted, or sions for incorporating the exemption to the supplies of goods excluded from the right of system laid down by the Sixth Directive'. deduction, the Italian Republic has failed to fulfil its obligations under Article 13B(c) of the Sixth Directive.
Procedure 5. In view of the continuing failure to fulfil the abovementioned obligations, on 19 July 1994 the Commission sent the Italian Gov- ernment a reasoned opinion to which no reply was received.
3. The Commission initiated the procedure laid down in Article 169 of the EC Treaty by a letter of 24 November 1992 giving formal
* Original language: Spanish. 6. An application was lodged with the Court 1 — OJ 1977 L 145, p. 1. on 13 February 1995. The defence lodged by
I - 3607
OPINION OF MR RUIZ-JARABO COLOMER — CASE C-45/95
the Italian Government opposed the claims (c) supplies of goods used wholly 2 for an in the application. activity exempted under this Article or under Article 28(3)(b) when these goods have not given rise to the right to deduc- tion, or of goods on the acquisition or production of which, by virtue of Article 17(6), value added tax did not become deductible; 7. The Commission's reply drew attention, among other points, to the document of 31 March 1993 originating from the Italian Government itself, which admitted the exist- ence of the failure. However, the Italian Government did not reply to those conten- tions as it did not lodge a rejoinder.
[...]'
The contested provisions
9. Article 17(6) in turn provides as follows: 8. Article 13B(c) of the Sixth Directive, •which in the Commission's opinion has not been correctly implemented by the Italian legislature, provides as follows:
'Before a period of four years at the latest has elapsed from the date of entry into force 'Without prejudice to other Community of this Directive, the Council, acting unani- provisions, Member States shall exempt the mously on a proposal from the Commission, following under conditions which they shall shall decide what expenditure shall not be lay down for the purpose of ensuring the eligible for a deduction of value added tax. correct and straightforward application of Value added tax shall in no circumstances be the exemption and of preventing any pos- deductible on expenditure which is not sible evasion, avoidance or abuse: strictly business expenditure, such as that on luxuries, amusements or entertainment.
2 — The Spanish translation of this part of the Sixth Directive, as published in the Special Spanish Edition of the Official Jour- nal, omitted the adverb 'wholly' which appears in the other [...] language versions.
I - 3608
COMMISSION v ITALY
Until the above rules come into force, Mem- able person may deduct from the VAT pay- ber States may retain all the exclusions pro- able on the transactions carried out by him vided for under their national laws when this the VAT he has paid to purchase goods or Directive comes into force'. 3 obtain services, in both cases in the context of carrying on a business or pursuing a pro- fession or occupation.
10. Article 10 of the Decree of the President of the Italian Republic of 26 October 1972, N o 633 ('the Presidential Decree') 4 concern- ing VAT, does not include among the exempt 13. Article 19(2) of the Presidential Decree transactions the supplies of goods referred to excludes a right to deduct the VAT paid on by the Community rules set out above. purchasing certain types of goods, such as motor vehicles, other self-propelled vehicles and pleasure boats in terms which I shall examine below.
11. Article 2(3)(h) of the Presidential Decree provides that 'supplies of goods purchased or imported by the supplier without a right Exemption of supplies of goods previously of deduction, pursuant to Article 19(2)' are used for an exempted activity not deemed to be supplies of goods.
12. Article 19 of the Presidential Decree in 14. The deduction of VAT regulated by turn regulates the right of deduction. A tax- Article 17 of the Sixth Directive is a key ele- ment of the VAT system. The deduction rule ensures that the VAT amounts paid by trad- ers do not give rise to any tax charge for 3 — On 25 January 1983 the Commission submitted to the Council a proposal for a Twelfth Directive on the harmoni- them, thus upholding the principle of neu- zation of the laws of the Member States relating to turnover trality on which the system of VAT, which is taxes — Common system of value added tax: expenditure which is not eligible for deduction (OJ 1983 C 37), which a tax on the final consumer and not on the was subsequently amended by a further proposal of 20 Feb- ruary 1984 (OJ 1984 C 56). The Council did not achieve the previous economic stages, is based. If there unanimity necessary to approve it. were no right to deduct the amounts of VAT 4 — The Presidential Decree regulates the legal system of VAT and was issued under a prior delegated legislative power. It paid, they would become one more tax was published in the Cazzeta Ufficiale delta Repubblica Ital- charge on traders, thus distorting the prin- iana (GURI) 292, 11 November 1972, and has been amended on numerous occasions. ciple of neutrality.
I - 3609
O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-45/95
15. VAT previously paid may be deducted in to deduct it subsequently) and decides to so far as the goods or services in question transfer it at a later date. (i. e. those the purchase or use of which determines the right of deduction) are pur- chased and used by the taxable person in turn to carry out transactions in the course of his economic activity.
19. This would give rise to double taxation if the Sixth Directive had not, in order to avoid this, provided for the exemption laid down by the first indent of Article 13B(c). The 16. This principle must be modified where Member States must exempt supplies of the taxable person purchases such goods or goods used wholly for an exempted activity services and uses them solely for exempt 'when these goods have not given rise to the transactions because in that case a right to right of deduction'. deduction does not arise and he becomes, so to speak, the 'final consumer' and is not entitled to deduct the amount of tax.
20. The reason for this exemption is merely technical. It avoids the double tax charge which arises where tax is charged on the 17. In this situation the taxable person must transfer by a trader who resells goods on pay the whole of the VAT passed on to him which he has already made a final VAT pay- by previous producers, traders and persons ment, without having been able in turn to supplying services (i. e. those who supplied deduct the amount paid. 6 him with the goods or services) and, in strictly legal terms, 5 he cannot deduct it. He is therefore in the same position as the final consumers, who are the true payers of VAT.
21. The Italian Government has not incor- porated this exemption into its tax system. 18. However, it may happen that a taxable person purchases a particular product under such conditions (i. e. paying VAT 'but unable 6 — Sec the judgment in Case C-50/88 Kühne v Finanzamt München Iil [1989] ECR 1-1925, which reaches the same conclusion in a case similar in some respects to the present case, in finding that 'such taxation of business goods on which the residual tax was not deductible would lead to double taxation contrary to the principle of fiscal neutrality 5 — It is a different m i n e r where, by way of an increase in prices, which is inherent in the common system of value added tax, a trader engaging in exempt transactions, for example an of which the Sixth Directive forms part'. In triat case, the insurance company in relation to most of its services, or a taxable person was not entitled to deduct the residual tax doctor in relation to certain health services supplied to because he had purchased the goods second-hand from a patients, shifts the tax burden on to customers. non-taxable person.
I-3610
COMMISSION v ITALY
This fact alone constitutes failure in respect 24. The defence changes this approach and of its obligation under Article 13 of the Sixth now attempts to justify the absence of the Directive because this provision requires the exemption by claiming that Article 2(3) of Member States to provide precisely for such the Italian Presidential Decree, instead of a tax 'exemption' with the features described adopting the exemption, preferred to declare above. that supplies of goods of that kind are 'out- side the ambit' of VAT, which, in its opinion, would lead to the same result as that desired by the Sixth Directive.
22. The explanation for this situation given by the Italian tax authorities differs, depend- ing on whether one reads the statement to the Commission of 31 March 1993 7 or the 25. However, somewhat confusedly, the defence. defence manages to admit that the later sup- ply of goods 'must be deemed taxable' where it has not been possible to deduct the tax previously paid (because the goods were pur- chased or used for exempt transactions). It adds that such supplies must be deemed 'hypothetical because normally an exempt person purchases the goods for his own use and not with a view to selling them immedi- ately'. Consequently, the defence concludes that the amount of double taxation must be 23. According to the first statement, the Ital- limited because of the difference in value ian legislature considered that it should not between goods purchased at market prices introduce an exemption for supplies of and those sold second-hand. goods intended exclusively for an exempt activity because of the existing difficulties of verification. Taxable persons engaged in exempt activities normally carry out taxable transactions at the same time and this enables them to recover, by means of the deductible proportion rules, part of the VAT paid for the purchase of those goods. In any case, according to the statement, the double taxa- tion arising from the Italian provision is 'only marginal'. 26. I am not persuaded by these arguments. On the contrary, I consider that the Com- mission is right to claim that the Italian Gov- ernment should simply fulfil its obligation 7 — Delivered by the Permanent Representation of Italy to the European Communities (letter N o 2868). I referred to it in under Article 13 of the Sixth Directive. The my account of the prc-litigation procedure. nature of the obligation is quite specific: to
I-3611
O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-45/95
grant an exemption, not to exclude a particu- — the second (deeming to be 'non-supplies lar transaction from the ambit of the tax. 8 of goods' transactions which, in the terms of the Sixth Directive, are as a matter of law 'supplies of goods' but are exempt) because this means that the Italian provi- sion differs from the uniform definition which the Community legislature wished to give to transactions which are subject 27. Furthermore the Italian legislation dif- to the tax. fers on this point from the case-law of the Court of Justice, according to which, the purpose of the Sixth Directive is 'to base the common system of VAT on a uniform defi- nition of taxable transactions. This objective might be jeopardized if the preconditions for a supply of goods — which is one of the 29. This alone would be a sufficient reason three taxable transactions — varied from one for granting the Commission's application in Member State to another (see the judgment this first respect. In addition, it is not certain in Case C-320/88 Staatssecretaris van Finan- that the legal and financial consequences of ciën v Shipping and Forwarding Enterprise the Italian provision (in so far as it formu- Safe BV [1990] ECR 1-285)'. 9 lates as a case of non-taxation what should be a case of exemption) are the same as those ensuing from the correct incorporation of the Sixth Directive.
28. Both explanations (which, moreover, are contradictory) given by the Italian authori- ties are unsatisfactory:
30. In its reply, the Commission correctly points out that, if the Italian Government accepts the existence of double taxation as an actual effect of its legislation on the matter, it — the first (difficulty of verifying the actual is irrelevant that, financially, it is more or less use of the goods) because it distorts the 'insignificant', as claimed in the defence VAT tax system and gives rise to double (although no figures whatever are produced taxation; in support).
8 — Strictly speaking; a tax exemption can be said to exist only where there is an act which was previously chargeable, i. e. subject to tax. By definition, an exemption presupposes in initial obligation to pay tax which, on various grounds, is waived by the legislature. Consequently there must be a right arising from a mandatory positive reference in the law in order to provide for exemption from the duty to pay the tax. Before ascertaining whether a particular transaction 31. Even if the financial repercussions were meets the requirements for the exemption, it is necessary to ensure that it falls within the ambit of the tax. negligible, the de minimis rule does not 9 — Case C-291/92 Annbrecht [1995] ECR 1-2775, paragraph 13. apply in relation to the failure of Member
I-3612
COMMISSION v ITALY
States to fulfil their obligations with regard the first ground of the application, the tax- to legislation. The decisive factor is that able person purchasing items of this kind double taxation is inconsistent with the acts as the final consumer, who is the true scheme of the VAT system and precisely for taxpayer. that reason Article 13 of the Sixth Directive requires the Member States to exempt sup- plies of goods used wholly for an exempted activity.
34. The counterpart of this restriction of the right of deduction should be, as with the first ground of the application, exemption from Exemption of supplies of other goods the VAT when the taxable person resells — or, in purchase or use of which has not given rise general, transfers — goods of this kind. Oth- to a right of deduction erwise, there would again be double taxation, which is contrary to the principles of the Sixth Directive and which Article 13 tries to avoid by means of the contested exemption.
32. The second ground of the application relates to the last part of Article 13B(c) which, as cited above, requires the Member States to exempt from VAT the later supply 35. O n the other hand, as there is generally of goods 'on the acquisition or production of no right to deduct VAT on the purchase of which [by the taxable person], by virtue of goods of that kind (subject to the qualifica- Article 17(6), value added tax did not tion which I shall consider below), the Ital- become deductible'. ian Presidential Decree does not grant an exemption on their subsequent transfer.
33. Article 17(6) refers to certain expendi- 36. Article 19(2) of the Presidential Decree ture described in general terms as 'that on regulates the deduction of VAT on the pur- luxuries, amusements or entertainment', 10 chase of goods of that kind, whether aircraft which is not strictly business expenditure and motor vehicles referred to in Table B(e), and which is not eligible for the deduction of irrespective of cylinder capacity, " or 'the VAT by the taxable person. As in relation to
11 — These are referred to by Article 19(2Xa), which extends this 10 — Further details or a list should have been given by the system not only to purchase or importation, but also to Council, as I mentioned in footnote 3, but successive supplies of services and maintenance relating to those attempts at doing so were unsuccessful. goods.
I - 3613
O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-45/95
other goods included in the said table B, sea- purchased goods is not exempt, as required going vessels and pleasure craft'. 12 The by the Sixth Directive. Instead of granting deduction is provided for as follows: the exemption, the Italian legislature pro- vided, by means of Article 2(3)(h) of the Presidential Decree, that such transfers would not be deemed supplies of goods (i. e. would not be deemed subject to VAT).
(a) The purchase of such goods gives a right to deduction only where they are the subject matter of the trader's activity itself; in the case of aircraft and motor vehicles, deduction is also possible where they are intended for use in the trader's own business. 13
38. To justify this action, the Italian Govern- ment states that classifying such supplies as (b) Deduction is excluded in the other cases non-taxable is 'consistent with the presump- of the purchase of such goods, and 'in tion that the purchase [of goods of that kind] any case for persons engaged in a trade 14 is not connected with carrying on a busi- or profession'. ness', citing for this purposes Article 17(3) of the Sixth Directive and Article 11(2) of the Second VAT Directive.
37. In these latter cases of exclusion of the right of deduction, the later transfer of the
12 — These ire referí«! to by Arricie 19(2)(b) of the Presidential Decree. 13 — It is logical that a trader providing a driving tuition service, or tuition for pilots, should be able to deduct the VAT'paid on the purchase of the vehicles or aircraft which it intends 39. I am not convinced by this argument, to use solely for that purpose. 14 — The term 'trade' appears to be used to mean an occupation which concerns a different problem from which requires a skdl and special knowledge on the part of that in the present case. The Commission is the person concerned. The Italian provision refers to 'gli essercenti arti o professioni'. not complaining in this case that Article
I - 3614
COMMISSION v ITALY
17(6) of the Sixth Directive has not been ful- depending on calculation of the deductible filled by reason of the fact that the right of proportion'. 16 deduction for professional persons or artists is excluded in any case under the Italian pro- visions cited above, when they purchase the goods in question. It would be debatable whether this general exclusion meets the requirements of the Sixth Directive. 15
42. However, the legal effects of the two concepts are not absolutely identical. It is precisely in the effect on the calculation of the deductible proportion w that the conse- quences of the Italian rule appear, with the 40. The failure of which the Commission difference in effect entailed by choosing one complains in this case refers, on the contrary, principle or the other. to the fact that the Italian Republic does not consider as exempt subsequent sales or sup- plies of goods which, when originally pur- chased, did not give rise to a right to deduct VAT, regardless of whether the taxable per- son is a professional person, artist or any other economic agent.
43. If the supply of the contested goods were excluded from the ambit of VAT, which is what the Presidential Decree does, the tax- able person's total turnover used in calculat- ing the deductible proportion would be 41. May exemption be replaced by non- liability to tax? At first sight, it might appear that the practical effect is the same. In its 16 — In the opinion of P. Filippi, in his work Le cessioni di beni defence, the Italian Government's defence nell'imposta sul valore aggiunto (Padua 1984), there is some contends that non-liability depends on confusion in the Italian VAT legislation with regard to the concepts of exclusion and exemption. Certain situations establishing the Objective impossibility of described as exemptions should be regarded as exclusions and vice versa. According to this author, the excessive num- deduction', whereas exemption means the ber of exclusions makes it difficult to understand the crite- ria used when opting for one concept or the other. 'subjective impossibility of deduction [...] 17 — Regulated by Article 19 of the Sixth Directive. The deduct- ible proportion arises where the taxable person simulta- neously carries out transactions in respect of which VAT is deductible and transactions for which it is not deductible. In such a case, it is necessary to determine the degree of use 15 — In paragraph 3 of the operative part of the judgment in of the goods and services purchased in relation to each cat- Case C-97/90 Lennartz v Finanzamt München [1991] ECR egory of transaction, establishing the percentage (of all the 1-3795, the Court held that 'a rule or administrative practice taxable person's transactions) which is attributable to those imposing a general restriction on the right of deduction in giving a right of deduction. Article 17(5) of the Sixth Direc- cases where there is a limited, but none the less, business tive permits the Member Sutes certain alternatives to the use constitutes a derogation from Article 17 of the Direc- deductible proportion rule. In the case of Italy, this is regu- tive and is valid only if the requirements of Article 27(1) or lated by Article 19(3) of the abovementioned Presidential Article 27(5) of the Directive arc met,' Decree.
I-3615
O P I N I O N O F MR RUIZ-JARABO C O L O M E R — CASE C-45/95
reduced. l s The reduction in this figure, refers, I consider that there is a clear, specific which is the denominator of the fraction, and unconditional obligation to classify as increases the final result or percentage by exempt a subsequent supply of the goods in reference to which the deductible proportion question. Therefore exemption cannot be is calculated. replaced by a different principle, particularly where the legal and practical consequences of the two options differ.
44. Such increase in the percentage of the deductible proportion also results in increas- ing the amount which may be deducted from 47. In this connection I must repeat what I the VAT previously paid by a taxable person have already said with regard to the defini- who carries out transactions -with and with- tion of taxable transactions given in the Sixth out a right of deduction, without distinction. Directive. If it is desired to ensure the uni- form application of VAT, such definition does not allow a 'supply of goods' to be con- verted, by a decision of the national legisla- ture, into a 'non-supply of goods'.
45. Even apart from the effect on the deductible proportion rule, I consider that the legal system applied by the Presidential Decree to these supplies of goods is contrary 48. Furthermore, the same position was to the Sixth Directive. adopted by the Italian authorities in the let- ter to the Commission to which I have already referred. The Italian Avvocato dello Stato has not offered any argument, even in the course of the oral procedure, to justify the change, as against the preceding official argument, made by the defence.
46. However wide 'the legal scope for the States' discretion in implementing this Direc- tive' to which the defendant Government
18 — To calculate the deductible proportion, it is necessary to determine the percentage or the total turnover which is 49. I therefore find that the application attributable to transactions giving rise to a right of deduc- tion. The result of multiplying by one hundred the turn- should be granted in full. The defendant over with a right of deduction and dividing it by the tota! should pay the costs in accordance with amount of taxable transactions is precisely the percentage which determines the deductible proportion. Article 69(2) of the Rules of Procedure.
I-3616
COMMISSION v ITALY
Conclusion
50. Consequently I propose that the Court grant the Commission's application by:
(1) declaring that, by enacting and maintaining in force a provision concerning value added tax which does not exempt supplies of goods used wholly for an activity which is exempted, or supplies of goods excluded from the right of deduction, the Italian Republic has failed to fulfil its obligations under Article 13B(c) of Council Directive 77/388/EEC of 17 May 1977, Sixth Directive on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment;
(2) ordering the Italian Republic to pay the costs.
I-3617