C-247/95

1. By order of 21 March 1995, the Bundesfi- public law rely directly on Article 4(1) nanzhof referred the following questions to and (2) in conjunction with Article 4(5) the Court for a preliminary ruling: of Directive 77/388/EEC in order to oppose the application of a national provision even where the application of those provisions of the directive, albeit having an indirectly favourable effect through the deduction of input tax, also '1) Does the fourth subparagraph of Article has a burdensome effect?' 4(5) of Directive 77/388/EEC allow the Member States to treat tax-exempted activities, in respect of which, however, it is possible to opt to be taxed, of bod- ies governed by public law as activities which they engage in as public authori- ties, although they pursue them under the same legal conditions and in the same way as private traders? 2. The case in which the questions arose may be summarized as follows. Marktge- meinde Welden (to which I shall refer as 'the municipality'), a German local authority, erected a building and then let the premises to another person, who carries on a business 2) If the first question is to be answered in there. the negative: May the scope of the right of option to be taxed be restricted pur- suant to the second subparagraph of Article 13(C) of Directive 77/388/EEC in such a way that, where activities coming under the first subparagraph of Article 13(C) of that directive are engaged in by bodies governed by pub- lic law, they are treated as business The municipality, acting under the German activities only in certain circumstances? legislation, renounced the tax exemption which would otherwise apply to the rent it received. It should be pointed out that it did this in order to deduct from the tax the amount of tax which it itself had paid on the costs of erecting the building. The competent 3) If that question is also to be answered in tax office, Finanzamt-Augsburg Stadt, turned the negative: May a body governed by down its application. It did so on the ground that the municipality, by letting a building, had not commenced trading and was there- * Original language: Italian. fore not a trader within the meaning of the

national legislation. It followed that the immovable property from the circle of tax- municipality was not subject to the turnover able persons for the purposes of the applica- tax system and consequently was not entitled tion of the Sixth Directive. In suggesting that to renounce the tax exemption for letting that question should be answered in the transactions. The Finanzgericht (Finance negative, the Commission refers in the first Court) upheld an application brought by the place to the first subparagraph of Article 4(5) municipality, holding that it was a trader on of the Sixth Directive, which reads as fol- the basis of Directive 77/388/EEC 1 (herein- lows: 'States, regional and local government after 'the Sixth Directive'). The national authorities and other bodies governed by court held that a person could be denied the public law shall not be considered taxable capacity of trader under the Community leg- persons in respect of the activities or transac- islation only where the person in question tions in which they engage as public authori- was a legal person governed by public law ties, even where they collect dues, fees, con- acting as a public authority. That was not the tributions or payments in connection with case since the municipality had acted in a these activities or transactions'. The Com- similar way to any private economic opera- mission argues that the Court has consis- tor. If was therefore a trader and, as such, tently held that that provision should be could rely on the provisions of the directive. interpreted as meaning that 'activities pur- sued as public authorities ... are those engaged in by bodies governed by public law under the special legal regime applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private traders'. The pro- The Finanzamt appealed on a point of law vision therefore excludes their not being against that decision. The appeal court there- treated as taxable persons where they carry fore referred the questions set out above to out 'activities engaged in by them as bodies the Court for a preliminary ruling. governed not by public law but by private law'. 2 Since in this case the municipality had let immovable property in no different a manner than any private trader, the national law could not exclude it from being subject to the system of the Sixth Directive. The national court's first question

subject to the system established by the sion would be otiose. Yet that provision does directive in respect of those activities in make sense if it is considered that it was which it engages jus privatorum. In the judg- designed to give the Member State concerned ments cited by the Commission the Court the option of excluding from liability to tax has already clarified this point and it is legal persons subject to public law carrying unnecessary to dwell on it. The problem out activities exempted under Article 13 or arising here is a different one. The letting of Article 28. That choice, with which the immovable property is among the activities directive does not interfere, is therefore left exempted by Article 13 of the Sixth Direc- to the national legislator. What is more, what tive. In addition, the fourth subparagraph of the provision lays down is clear: it makes no Article 4(5) provides that 'Member States distinction at all between the various activi- may consider' — for the specific fiscal pur- ties listed in Article 13. 3 poses at issue here, of course — 'activities of these bodies which are exempt under Article 13 or 28 as activities which they engage in as public authorities'. Consequently, on the basis of that provision, a Member State may exclude from the circle of taxable persons a public body engaged in an exempt activity, such as the letting of immovable property. I therefore consider that the fourth subpara- graph of Article 4(5) should be interpreted as meaning that, with reference to exempt activities, it gives Member States the option of excluding public bodies carrying out such activities from being subject to the system of the Sixth Directive.

The fourth subparagraph of Article 4(5) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, must be interpreted as permitting the Member State con- cerned to exclude a body governed by public law engaged in an activity exempted under Article 13 of the directive from being subject to the system laid down by the directive. It is irrelevant in this regard that the activities are performed in a similar manner to those of a private trader.

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