C-116/96

REISEBÜRO BINDER v FINANZAMT STUTTGART-KÖRPERSCHAFTEN

OPINION OF ADVOCATE GENERAL LA PERGOLA delivered on 17 July 1997 *

I — The question referred for a preliminary periods between the various stages of the ruling and its legislative background transport operation — on the occasion of educational trips, for example — are not taken into account, or

1. By this question, the Bundesfinanzhof (Federal Finance Court) asks the Court to (b) the aforesaid provision contains no more provide such guidance to interpretation as is than rules concerning the place where necessary in order to decide how, for the the transport service is supplied, provid- purposes of VAT, the total consideration ing that solely the place of supply is to paid by the final consumer for provision of be determined having regard to the dis- road passenger transport on an all-inclusive tances covered, which means that the basis should properly be apportioned Member States are free to determine the between the various Member States in whose criterion according to which the total territory such a service is supplied. consideration is to be allocated between the taxable and non-taxable parts of the transport operation.

The legislative background is completed b y Paragraph 10(1) of the 1980 Law, which pro- vides that in respect of the supply of goods and services, the taxable amount is the recipi- ent's total outlay, net of VAT.

Article 3(1) (currently, Article 3(2)) " of the Sixth Directive provides that 'for the pur- poses of this Directive, the "territory of the country" shall be the area of application of 3. The above provisions of the 1980 Law the Treaty establishing the European Econ- essentially transpose into German domestic omic Community as stipulated in respect of law Articles 2, 3(1), 1 9, 2(b) and HA(l)(a) of each Member State in Article 227'. Directive 77/388/EEC, the Sixth VAT Direc- tive (hereinafter 'the Sixth Directive'). 2 3

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from the strict principle of territoriality, shall be the place where transport takes Article 9(1) of the Sixth Directive (under place, having regard to the distances cov- Title VI concerning the 'place of taxable ered*. 8 transactions') provides — for reasons of sim- plicity and to avoid difficulties of interpreta- tion arising from the use of concepts such as the place of utilization or exploitation 6 — that services are deemed to be supplied at 'the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the Lastly, Article 11 of the Sixth Directive absence of such a place of business or fixed introduced the common Community con- establishment, the place where he has his cept of the 'taxable amount', without which permanent address or usually resides'. full standardization of the VAT rate 9 and its use in determining the 'own resources' 1 0 would not lead to comparable results in all

Directive In particular, pursuant to Article 9(2)(b), 'the 91/680/EEC, cited in footnote 1 above, seventh recital in the preamble. See J. Meurant, Taxe sur la valeur place where transport services are supplied ajoutée', in C. Gavalda-R. Kovar (dir.). Répertoire de droit communautaire, Dalloz, Paris, 1992-(loose-Ieaf edition, March 1996), Vol.

March 1996), pp. 2351-62. The levying of VAT on supplies system of value added tax (OJ 1996 L 338, p. 89). of services which are actually offered to customers, in respect 10 — Under Council Decision 70/243/ECSC, EEC, Euratom of of which the purpose of Article 9(2) is identified, seems to be 21 April 1970 on the Replacement of Financial Contribu- the criterion most in keeping with the logic of a tax which is tions from Member Sates by the Communities' o w n charged on the consumer spending of individual consumers: Resources (OJ, English Special Edition 1970 (I), p. 224), the see M.-C. Boutard-Labarde, 'La localisation des services au own resources by which the Community budget is entirely regard de la TVA: l'article 9 de la sixième directive', in funded include a percentage of the VAT levied within the B. Necl-B. Plagnet (Editors), La fiscalàé du commerce

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the Member States, and would therefore be facilities m return for a single all-inclusive unjust. In particular, so far as is material consideration, which exceeds by far the mar- for our purposes, Article HA(l)(a) provides ket prices for 'transport-only' services that, within the territory of the country, the involving comparable distances. taxable amount in respect of 'normal' sup- plies of services n is 'everything which con- stitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies including subsidies directly linked to the price of such supplies'.

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the operator has his place of business — usu- Consequently, the Finanzamt decided — in a ally entails short spells of travel over rela- ruling later upheld by the Finanzgericht tively long distances (especially on the (Finance Court) — to rectify the amount motorway), whereas the foreign stage of payable by Binder. The figure subsequently such a trip typically entails a higher number set was higher than that previously arrived at of stop-overs as opposed to time spent in the by the company's calculations. vehicle.

The Finanzamt held that Binder could not possibly, using its preferred method of Moreover, according to Binder, in determin- apportionment, have arrived at a correct esti- ing the total price, account is specifically mation of all the cost factors entailed by its taken of the greater convenience for partici- package transport services. By contrast with pants of always having the same means of Binder's method, which it regarded as arbi- transport to hand throughout the trip. trary and difficult to monitor, the Finanzamt held the mileage criterion to be more reliable and to represent the only method capable of preventing double taxation or a tax loophole in respect of the services supplied abroad.

Binder therefore concluded that apportion- ment between the various Member States concerned of the total consideration paid by 9. Similarly, according to the judgment at the final consumer should be made in first instance given by the Finanzgericht accordance with the principles of business (against which Binder appealed to the management and having due regard for fac- Bundesfinanzhof), apportionment on the tual circumstances. In other words, the cal- basis of mileage ensures — by contrast with culation should take into account not only the method suggested by Binder — respect the cost factors related to the distances cov- for the principle of neutrality of competition ered (for example, fuel and general wear and and, in the majority of cases, for the prin- tear on the vehicle), but also those linked to ciple of fair taxation. the periods of time involved (for example, the driver's insurance and pay).

Ill — The answer to the question following its reformulation

12. In fact, the Bundesfinanzhof maintains that the last-mentioned provisions are open to two interpretations.

14. Let me confess at once that, in the light of the title and function of Article 9 of the Sixth Directive, it is hard to share the Ger- man Government's view in this case that O n the one hand, it is possible to construe Article 9(2)(b) lays down a criterion for them (as the Finanzamt did) as prescribing determination of the amount taxable by the apportionment based solely on mileage, Member States concerned in the case of thereby dismissing stop-over and waiting cross-frontier transport services of the kind periods abroad as irrelevant. in question.

13. O n the other hand, however, it could also be argued that Article 9(2)(b) of the As the Court has had occasion to confirm in Sixth Directive and Paragraph 3a(2)(2) of the earlier cases, Article 9(2)(b) merely lays 1980 Law merely lay down — consistently down a criterion for establishing territorial with their title and content — a rule for jurisdiction for tax purposes, delimiting it in determining the place of supply of transport accordance with the principle of territorial-

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13 — See above, paragraph 3. 14 — See Trans Tirreno Express, cited in footnote 7 above, para- graph 17. 15 — So far as is material for our purposes, the fourth recital in the preamble to the Sixth Directive provides that 'it should be ensured that the common system of turnover taxes is non-discriminatory as regards the origin of goods and ser- vices, so that a common market permitting fair competition That does not, however, dispel the reserva- and resembling a real internal market may ultimately be achieved'. The seventh recital states that 'the determination tions to which such an imprecisely drafted of the place where taxable transactions are effected has been the subject of conflicts concerning jurisdiction as between provision gives rise. The Court has already Member States, in particular as regards ... the supply of ser- emphasized on a number of occasions that vices; ... although the place where a supply of services is effected should in principle be defined as the place where certainty and predictability are requirements the person supplying the services has his principal piace of business, that place should be denned as being in the coun- which must be observed all the more strictly try of the person to whom the services are supplied, in par- ticular in the case of certain services supplica between tax- in the case of legislation, such as that on able persons where the cost of the services is included in the VAT, which is liable to entail financial conse- price of the goods' (emphasis added). To my mind, the recital in question is of doubtful relevance to the question quences, so that interested parties can know referred for a preliminary ruling, if for no other reason than that a transport service of the kind supplied by Binder, nor- the precise scope of their obligations. I 8 mally to final consumers, does not constitute a supply between taxable persons and is not reflected, as a cost fac- tor, in the price of goods offered at the same or the follow- ing stage in the marketing process.

22. O n the other hand, it is not quite so simple to define correctly the consideration paid for the domestic component of the operation in question, which constitutes the Article HA(l)(a) provides that, in respect of taxable amount. transport services effected within the terri- tory of the country — including, presum- ably, those effected immediately before or after crossing the national frontier, and the services supplied abroad — the taxable amount consists of everything which has The difficulty, therefore, lies in identifying been obtained by the supplier by way of the criterion which is most rational and most consideration for the operation in question, consistent with the aims of the Sixth Direc- including all taxes (excluding VAT), inciden- tive, for the purpose of breaking down the all-inclusive consideration received by the supplier of transport services of the kind in question. It is precisely this that is at the 19 — However, the Court has consistently recognized that its jurisdiction under Article 177 of the Treaty includes the heart of the dispute in the main action. power, when confronted with imprecisely formulated ques- tions, to distil from the information provided by the national court and from the documents produced the points of Community law which need to be interpreted, having regard to the purpose of the dispute and taking into account abo rules to which the questions do not refer, but which appear relevant for the purposes of the decision in the main action. See ex multis Joined Cases 73/63 and 74/63 Handelsvereniging Rotterdam v Minister van Landbouw [1964] ECR 1; Case 70/77 Simmenthal v Amministrazione delle Finóme dello Stato [1978] ECR 1453; Case 35/85 Pro- 23. According to the German Government, cureur de la République v Tissier [1986] ECR 1207; Joined Article HA(l)(a) of the Sixth Directive gives Cases C-153/88 to C-157/88 Touque and Others [1990] ECR 1-649; Case C-241/89 SARPP [1990] ECR 1-4695; no express guidance on this point — a state- Case C-187/91 Belavo [1992] ECR 1-4937; Case C-114/91 Claeys [1992] ECR 1-6559; Case C-168/95 Aratro [1996] ment with which I agree — and, specifically, ECR 1-4705. does not enable any relationship to be estab-

24. According to Binder, however, the sim- I repeat this in order to emphasize the need plest and most easily verified criterion is the to take account of the methodology of the vehicle's length of stay, respectively, in the harmonized VAT system, as provided for by various tax collection areas. the Sixth Directive. In respect of the supply of services, application of Article 11A(1), which I have cited on a number of occasions, presupposes that the tax authorities of the Member State concerned verify the existence of a business (i) engaged in by a taxable per- son (ii) with a view to profit (iii) within the 25. Lastly, the Commission maintains that Article HA(l)(a) of the Sixth Directive does not preclude the part of the total consider- 20 — Incidentally, contrary to the German Government's argu- ment, the Commission's position is materially no different ation which corresponds to the domestic from that expressed in the proposal for a Council directive amending Directive 77/388/EEC as regards the value added component of the service at issue from being tax arrangements applicable to passenger transport, cited in calculated as a proportion of the overall cost footnote 8 above. Under Article I of that proposal, the place where passenger of the transport. transport services are supplied is the place of departure, that is to say, the place where the journey actually starts, as indi- cated on the ticket, or, where a journey involves several successive transport services, the place where each of these services starts provided that these services are not separated by transit stops (technical stop-overs or stops of limited duration). On the other hand, in cases where the same supplier pro- vides a number of successive transport services for an all-in price, 'the taxable amount shall be determined on the basis of a flat-rate breakdown of the price with reference to ele- ments such as the distances relating to each service'. In other According to the Commission, the notion of words, even according to the proposal in question, the cri- terion of distances covered was only one of several appro- overall cost embraces other cost factors (in priate criteria on the basis of which the Member States con- cerned could determine the taxable amount in respect of the addition to those refated to the distances cov- domestic component of a given cross-frontier passenger ser- ered), related to the vehicle and the driver's vice.

29. That said, it requires immediate qualifi- cation. By no means should costs incurred So far as is relevant for present purposes, the by the supplier be taken into account (and, Court has affirmed — on the premiss that, for example, deducted in whole or in part) in pursuant to the Sixth Directive, the supply of determining the absolute value of the consid- goods or services is subject to VAT only if eration. 22 The latter, as we are all aware, is a effected for consideration, and the taxable gross value which must exactly match the part of such transactions is anything received final consumer's total actual outlay, indepen- by way of consideration — that, for a given dently of the production and marketing costs transaction to be classified as 'taxable', there of the goods or service in question. 23 must be a direct link between the service supplied (or the goods sold) and the price received. 2I 22 — For the purposes of the Sixth Directive, the taxable person's margin —defined as the difference between the total amount to be paid by the traveller, exclusive of value added tax, and the actual cost to the travel agent of supplies and 21 — In accordance with that principle, the Court ruled — with services provided by other taxable persons — is taken to be reference to a cooperative operating a warehouse, which the taxable amount for transactions performed by travel refrained from making the storage charge to its members agents and tour operators, in the context of the special for two consecutive years — that the resulting reduction in scheme established by Article 26. As pointed out (see foot- the value of the members' shares in the association did not note 3 above), however, that scheme does not apply to the constitute a 'consideration' for the purposes of the Second supply of services of the kind offered by Binder. VAT Directive: see Case 154/80 Coöperatieve Aardappelen- 23 — For example, the Court has ruled that, in the case of sup- bewaarplaats [1981] ECR 445, paragraph 12. See also Case plies of goods paid for by means of a credit card, the tax- 102/86 Apple and Pear Development Council v Commis- able amount for VAT purposes owed to the tax authorities sioners of Customs and Excise [1988] ECR 1443, paragraphs by the seller includes tne sum deducted by way of commis- 11 and 12, Case 230/87 Naturally Yours Cosmetics v Com- sion by the issuer of the card at the time of payment of the missioners of Customs and Excise [1988] ECR 6365, para- price to the sellen see Case C-18/92 Bally [1993] ECR graphs 10 and 12, and Case C-33/93 Empire Stores [1994] 1-2871. See also M. E. van Hilten, Bancaire en financiële ECR 1-2329, paragraphs 12 to 16. prestaties m de Europese BTW, Deventer, 1992, p. 241.

It is not my intention, when advocating that ing on the cost of the range of production reference to production costs (including factors employed by the supplier of the ser- those linked to distances covered) be permit- vice. 25 ted in the apportionment of the taxable amount between the various countries con- cerned, to cast any shadow of doubt on the established principle that the consideration constitutes a 'subjective' value (being the amount actually received) rather than a 'nor- mal' value (assessed according to objective

31. In economic terms, the price represents acknowledged in the Court's case-law applying Article 86 of the Treaty to cases of abuse of dominant position the subjective measure of the benefit which through the fixing of unfair or excessive prices (see Case 27/76 United Brands v Commission [1978] ECR 207), or the final consumer derives from the consid- predatory prices (sec Case C-62/86 AKZO v Commission eration. Accordingly, it can hardly be denied [1991] ECR 1-3359 and Case C-333/94 P Tetra Pak v Com- mission [1996] ECR 1-5951). that the benefit will normally vary depend- 26 — It therefore surprises me somewhat that, according to the German Government, length of stay is not a significant fac- tor in the context of transport services since during stop- overs there is no consideration. That may perhaps be true of stop-overs (brief and few) in the context of 'transport-only' 24 — Sec, ex mulos. Coöperatieve Aardappelenbewaarplaats, services for passengers, but not of all-inclusive services, for cited in footnote 21 above, paragraph 13. the reasons indicated in the text.

33. Moreover, reference to the costs incurred by the taxable person in performing the tax- able transaction is not without precedent in the Court's case-law on the interpretation of Article HA(l)(a) of the Sixth Directive, albeit in a different context (determination of the taxable amount in respect of the supply I admit that this observation has no practical of goods, where the consideration does not importance, if — as appears to be the case consist of money). with cross-frontier cargo transport services and transport-only services for passengers 2 7 — the cost structure for both (or more) components of a single service can be regarded as identical or very similar. 28 Specifically, in Empire Stores, 29 — concern- ing the supply of an article without extra charge on the part of a mail-order company, 27 — That is to say, which do not include other services (such as either to (a) a person who introduces himself meals, accommodation and courier services, available in a single package for an all-inclusive price) in connection with as a potential new customer or (b) an exist- the transfer of persons from one place to another. ing customer who introduces a third person 28 — Indeed, it is not difficult to imagine that, starting with an all-inclusive price for the entire service, a rational and bal- as a potential new customer — the Court anced determination of the taxable amount could be held that the consideration for the goods achieved in the case of the two examples given in the text, exclusively in terms of a proportion of the distances cov- supplied was the service supplied, respec- ered. However, use of that criterion is by no means obliga- tory under Article 9(2)(b) of the Directive, which if any- tively, by the new or existing customer. thing constitutes the application to a particular set of circumstances of the general criterion of reference (through the direct link with the consideration) to a service's produc- tion costs. Accordingly, the fact that the criterion which I have pro- posed and the criterion based on mileage lead to the same results in the case of cross-frontier cargo transport and 'transport-only' passenger transport does not mean that the mileage criterion should be exdunvely and generally Furthermore, the value of such consideration applied — on application of Article HA(l)(a) of the Direc- — that is to say, the taxable amount for the tive — to ail transport services. I think that, for present purposes, such an inference is especially to be ruled out in the case of complex transactions, like those in issue here, in respect of which, typically, the taxable and the non-taxable components of the operation are characterized by different temporal dimensions (duration and continuity). 29 — See footnote 21 above.

35. First and foremost, and on a realistic view, I do not consider that too much weight should be accorded to the possibility that the taxable persons concerned (such as Binder) Furthermore, if the German Government's would be encouraged to adjust their package reasoning were adopted, similar distortions tour itineraries so as to increase out of all of competition could not altogether be ruled proportion the length of time and the out, even if the relevant legislation were number of stop-overs (and the relative costs) based exclusively on reference to the involved in the service supplied abroad, mileage-only criterion: for example, if depar- simply to obtain the VAT exemptions for tures were organized from localities closer to the national frontier, the distances covered within the territory of the country would be 30 — Id., paragraph 19. The Court rejected the argument put for- reduced as a result of this device, and those ward by the United Kingdom and Portuguese Govern- covered in the territory of States where VAT ments that in such cases the taxable amount of the transfer of goods was rather the retail price which would have been exemptions applied would be correspond- charged for the articles in question, if they had been included in the company's sales catalogue. ingly increased.

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Moreover, the total duration, the stop-overs and the related costs — not to mention the mileage covered by the vehicles (and the The conclusion which I have reached is clearly without prejudice to the German authorities' right, pursuant to Article 27 of the Sixth Directive, to ask the Council for 31 — At the hearing, the Commission also referred to Council authorization to introduce simplification Regulation (EEC) N o 218/92 of 27 January 1992 on admin- istrative cooperation in the field of indirect taxation (VAT) measures 'in order to simplify the procedure (OJ 1992 L 24, p. 1), which — in order to avoid tax revenue losses on the part of the Member States — established pro- for charging the tax or to prevent certain cedures for the electronic exchange of VAT-related infor- types of tax evasion or avoidance'. 32 mation on 'intra-Community transactions' between the competent national authorities. Such information is gath- ered, filed and processed in special databanks by those authorities on the basis of the returns mentioned in Article 22(6)(b) of the Sixth Directive. However, I do not consider the reguladon in question to have any bearing on services 32 — The Federal Republic of Germany availed itself of this pos- of the kind supplied by Binder. In fact, the intra- sibility in connection only with cross-frontier passenger Community transactions contemplated by Regulation N o transport effected by foreign carriers for holiday trips in 218/92 are confined, in respect of supplies of services, to motor-coaches: see Paragraph 10(6) of the 1980 Law, under those referred to in Article 28c of the Sixth Directive which VAT on such transactions is charged on the basis of — C (intra-Community transport of goods), D (ancillary the average consideration for the transport, per person and intra-Community transport of goods) and E (services car- per kilometre, over the distances covered within the terri- ried out by intermediaries acting in the name of and on tory of the country, that average being calculated and fixed behalf of third parties) — which was inserted by Article on the basis of the prices actually charged, so as not to have 1(22) of Directive 91/680, cited in footnote 1 above. any appreciable impact on the amount of tax payable.

Those overall costs include both cost factors which are related to the distances covered and those whose monetary equivalent depends on the duration and con- tinuous nature of the service, including periods of stopping and waiting between the various stages of the operation, provided that all those factors are documented by the taxable person in a certain and objective manner.

In the event of dispute in this regard, it is for the national court to ascertain whether (and, if so, in what measure) the cost factors entailed by a service of the kind described above — the monetary equivalent of which depends on the dura- tion and continuous nature of the service — are documented in a certain and objective manner, for the purposes of determining the taxable amount for the transactions in question.

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