C-390/96

LEASE PLAN LUXEMBOURG v BELGIAN STATE

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 18 December 1997 *

3 I — Introduction 'deductions'. Under Article 17, which con­ cerns the Origin and scope of the right to deduct', taxable persons resident in Member States are granted the right to a deduction or 1. There are two aspects to this preliminary refund of the VAT which they pay on their reference from a Belgian court. The first two inputs. The essential principles governing questions concerning the place of supply for this right are contained in Article 17(3). VAT purposes of the provision of car-leasing Article 18, on the other hand, sets out the services have, as is accepted by all parties, 'rules governing the exercise of the right'. been effectively answered by the Court in its Article 18(4) is of particular significance in judgment in ARO Lease. 1 The remaining the present case. It provides that: live issue, raised by the third question, con­ cerns the compatibility with the Treaty of the application of differentiation in the rules regarding the amount and timing of the pay­ ment of interest on sums of VAT which must 2 be refunded. It is claimed that these rules arc discriminatory as being dependent on 'Where for a given tax period the amount of whether the taxable person, to whom the authorised deductions exceeds the amount of sums arc owed, is resident or non-resident in tax due, the Member State may either make a Belgium for VAT purposes. refund or carry the excess forward to the fol­ lowing period according to conditions which they shall determine.'

persons'. On 6 December 1979, the relevant under this Directive for examination of the rules were adopted in the form of the Eighth application, are submitted to the competent Council VAT Directive governing the reim­ authority referred to in paragraph 3. Refunds bursement of VAT to non-resident taxable shall be made before the end of the above- 4 persons. The personal scope of the Eighth mentioned period, at the applicant's request, Directive is set out in Article 1 : it covers a in either the Member State of refund or the taxable person who, in the Member State State in which he is established. In the latter from which the reimbursement is sought case, the bank charges for the transfer shall during the period covered by the claim, 'has be payable by the applicant. had ... neither the seat of his economic activ­ ity, nor a fixed establishment from which business transactions are effected ... and who ... has supplied no goods or services deemed to be supplied in that country ...'. Under Article 2, it is clear that the refund relates to the VAT 'charged in respect of services or movable property charged to [the taxable The grounds for refusal of an application person]' in respect of economic transactions shall be stated. Appeals against such refusals which, if they had been carried out in his may be made to the competent authorities in place of establishment, would have rendered the Member State concerned, subject to the the tax concerned eligible for deduction. same conditions as to form and time limits as those governing claims for refunds made by taxable persons established in the same State.'

refunds. Article 76(1) provides for a refund, est at a rate of 0.8% per month from the where it is requested, by a taxable person expiry of the specified three-month period. who is established in Belgium within three months of any excesses which are outstand­ 5 ing at the end of the calendar year. The right of taxable persons who are not estab­ lished in Belgium to recover VAT paid as part of the price of goods and services pro­ 7. In contrast, regarding claims for reim­ vided to them in Belgium by taxable persons bursement made by non-resident taxable resident there is recognised by Article 76(2) persons pursuant to Article 76(2) of the of the Code. The rules concerning such Code, Article 91(4) provides for the payment applications for refunds are prescribed by of interest on arrears at the rate fixed for Article 9(2), as amended, of Royal Decree civil matters and according to the rules gov­ No4 . 6 erning such matters. It emerges from the observations submitted to the Court that, first, until 31 August 1996, an interest rate of 8% per annum applied to such claims and, secondly, such interest becomes payable only following the service by the creditor of for­ 9 mal notice to pay on the Belgian State. Moreover, since Article 7(4) of the Eighth Directive allows the Member States a six- month delay to decide on claims made pur­ suant to that provision, such default pro­ ceeding could only effectively be brought after the expiry of that period.

I - 2557

OPINION OF MR FENNELLY — CASE C-390/96

III — The facts and procedure before the to Luxembourg customers who leased sev­ national court eral vehicles simultaneously. All of these vehicles were purchased in Luxembourg, their insurance policies were concluded with Luxembourg insurance companies and they were leased pursuant to so-called 'compre­ hensive contracts': which means that the Luxembourg-based clients paid rental fees to cover, inter alia, both financing and insur­ 8. According to the order for reference, by ance as well as the costs of maintenance and an action initiated by a summons served on repair services (hereinafter 'garage services'). 10 20 July 1995, the plaintiff in the main pro­ Under such comprehensive contracts, the ceedings, Lease Plan Luxembourg SA (here­ invoices in respect of the provision of garage inafter 'LPL' or 'the plaintiff'), sought an services could be sent directly, by the order requiring the Belgian State to refund to garages, to LPL. it the sum of BFR 7 669 095, in addition to 1 further sums 1whose repayment became due during the proceedings, plus statutory interest thereon at the rate of 0.8% per month from the respective dates on which the various requests for repayment of VAT comprising the aforesaid sum, and any rel­ 12 evant future sums, were made. 10. During the refund period, Luxembourg- based clients of LPL sometimes made the vehicles available to their own employees, some of whom lived in Belgium. When the latter used the services of garage operators established in Belgium, invoices, including, of course, sums in respect of Belgian VAT, 9. LPL is a company established in Luxem­ were sent directly to LPL, which paid them. bourg where it carries on the business of leasing motor vehicles mostly to Luxembourg-based customers. During the refund period, the great majority of its fleet of vehicles was leased on long-term contracts

14. Since this claim was disputed by LPL, and having regard also to the concomitant dispute regarding the payment of interest on the postponed refunds, the national court decided to refer the following questions to the Court:

12. In its action before the Rechtbank van Eerste Aanleg (Court of First Instance), Brussels (hereinafter 'the national court'), the plaintiff is seeking a refund, with interest, of the VAT paid in each of the situations described, namely: VAT paid on garage ser­ '1 . Must the term "fixed establishment" in vices in respect of its contracts with Article 9(1) of the Sixth VAT Directive be Luxembourg-based lessees and that paid on interpreted as meaning that an undertaking the purchase price of those cars both from one Member State which hires or leases acquired and leased in Belgium. out a number of cars to customers estab­ lished in another Member State has ipso facto, by virtue of that hiring, a fixed estab­ lishment in that other Member State?

purchased in Belgium and maintained or small number of leased vehicles by a com­ repaired within Belgium? pany, whose established place of business is in Luxembourg, means that the lessor has a fixed establishment in Belgium. In the light of the decision of the Court in ARO Lease, all of the parties submitting observations to 3. Must Articles 6 and 59 of the EC Treaty the Court, including Belgium, now agree be interpreted as meaning that foreign tax­ that the first two questions can be simply able persons, who receive goods or services answered to the effect that LPL did not have in Belgium and subsequently request VAT a fixed place of establishment in Belgium refunds in respect of such goods or services from which it supplied services during the pursuant to the Eighth VAT Directive, can­ refund period. It follows that it is no longer not, in the event of late reimbursement, be disputed that LPL is entitled to the VAT granted a lower rate of interest, which, refunds that it claims. There is no agreement, moreover, begins to accrue only from the however, regarding the third question, con­ moment at which such foreign taxable per­ cerning LPL's claim for interest. This raises sons serve formal notice on the Belgian State, an apparently simple, but in reality quite dif­ whereas in the event of late reimbursement ficult, question of discrimination. At the to Belgian taxable persons, the latter are time the order for reference was proposed, it granted a higher rate of interest which, auto­ was a minor incidental issue, insufficiently matically and without serving formal notice, illuminated by explanations of the relevant begins to accrue as soon as the statutory national law. I shall, nevertheless, attempt to time-limit for reimbursement has expired?' provide an answer in the light of the details furnished by LPL and Belgium.

LEASE PLAN LUXEMBOURG v BELGIAN STATE

set out in Article 1. 14During the refund Member State in the territory of which they period, LPL had no fixed establishment and are established'. Hence the preemptory state­ could not be deemed to have supplied, for ment that decisions regarding applications VAT purposes, any services in Belgium. 'shall be announced within six months', Dealing precisely with Article 7(4) of the while the 'grounds for refusal of an applica­ 17 Eighth Directive, the Court has said in Com- tion shall be stated'. mission v Spain that 'it is established case-law that Member States are obliged to ensure that the provisions of a directive are applied 15 exactly and in full'. That case concerned systematic delays in making payments of refunds. In my opinion, the obligation imposed by Article 7(4) is precise and unconditional so as to create direct effect which may be relied upon by taxable persons 16 such as LPL. B — Observations submitted in respect of the third question

I-2561

OPINION OF MR FENNELLY — CASE C-390/96

discrimination on grounds of nationality the event of a delay in making a refund, to contrary to the Treaty, since more non­ interest at the rate and under the conditions resident than resident taxable persons are prescribed by Articles 76(1) and 91(3) of the nationals of other Member States. Code. Conversely, Belgium submits that refund claims made by non-resident taxable persons such as LPL are treated no less favourably than those introduced from time to time by non-taxable persons established in 20 Belgium. Belgium also claims that the rules governing claims made by non-resident tax­ 20. LPL relies primarily on Article 59 of the able persons are occasionally more favour­ 21 Treaty, and, in the alternative, on Article 6. able than those affecting residents. Although the services provided to its Belgian-based clients are deemed for VAT purposes to be provided in Luxembourg, LPL submits that Article 59 still applies since its services were materially provided in Bel­ gium. The applicant also claims that it may, for the purposes of the application of Article 59, be regarded as a recipient of ser­ vices provided in Belgium, by both car deal­ ers and garages. In respect of both types of claim, it relies, in particular, upon The 18 Queen v IRC, ex parte Commerzbank to justify its demand to be paid interest at the same rate as resident taxpayers from the 22. The Commission shares the plaintiff's expiry of the six-month delay allowed under view that the difference in interest rates paid the Eighth Directive, and that however small to resident and non-resident taxable persons the differences may be in some cases, there is constitutes discrimination based upon the no de minimis rule in respect of unjustified place of establishment. Although the Eighth discrimination under Article 59 of the Directive does not require Member States to 19 Treaty.

I - 2562

LEASE PLAN LUXEMBOURG v BELGIAN STATE

pay any interest on overdue claims, where such as Articles 59 to 66 concerning services, such interest is paid in respect of comparable implement, within the scope of their field of claims by domestic taxable persons, it must application, the prohibition of discrimination 24 be paid on the same basis to non-resident on grounds of nationality. Since, therefore, taxpayers. The Commission also refers to the the third question refers to both Articles 6 possible application of Article 6 of the and 59 of the Treaty, I must first consider Treaty, which, it claims, applies generally to whether the application of the impugned forms of discrimination affecting legal per­ rules constitutes discrimination for the pur­ 22 sons based on their place of establishment. poses of Article 59 linked to the two ele­ ments in the VAT refunds in question.

C — Analysis of the third question

(ii) The prima facie application of Article 59 of the Treaty

(i) Introduction

22 — The Commission says that it has initiated infringement pro­ 24 — Sec, for example, Case 36/74 Walrave v Union Cycliste ceedings under Article 169 of the Treaty by a letter of for­ Internationale [1974] ECR 1405, paragraphs 5 and 6 of the mal notice sent to Belgium on 5 July 1995 concerning, inter judgment. alia, the difference in interest rates at issue in the present 25 — It is clear that LPL has always been liable for VAT in case. Luxembourg on its leasing activities. The circumstances of 23 — There is now a very extensive case-law dealing with the this case, accordingly, differ from those of Case C-302/93 scope of the prohibition contained in Article 6: sec, for Débouche v Inspecteur der Invoerrechten en Accijnzen example: Case 14/68 Wilhelm v Bundeskartellamt [1969] [1996] ECR I-4495, where a Belgian lawyer, who was ECR 1, paragraph 13 of the judgment; Case 293/83 Gravier exempt, under a transitional exemption applied by Belgium v City of Liige [1985] ECR 593, paragraph 15; Joined Cases under Article 28(3)(b) of the Sixth Directive, from VAT on C-92/92 and C-326/92 Collins and Others [1993] the lawyers' services provided by him in Belgium, sought a ECR I-5145, paragraphs 30 to 32; Case C-398/92 Mund & refund of VAT included in the cost of leasing a car from a Fester v Hatrex International Transport [1994] ECR I-467, leasing company in the Netherlands which he used exclus­ paragraph 14. ively for his professional activity in Belgium.

I - 2563

OPINION OF MR FENNELLY — CASE C-390/96

27. Consequently, it is necessary to assess whether, in fact, the different treatment in the impugned Belgian rules of resident and non-resident taxable persons constitutes dis­ crimination on grounds of nationality con­ trary to Article 59 and, if so, whether it can nevertheless be justified.

27 — The Court has consistently held that wholly internal situa­ tions do not fall within the scope of Article 59; see, for example, Case C-41/90 Höfner v Eber [1991] ECR I-1979, paragraph 37 of the judgment and Case C-70/95 Sodemare 26. The second type of transaction concerns and Others v Regione Lombardia [1997] ECR I-3395, para­ graph 38. the garage services. The underlying transac­ 28 — It refers to Joined Cases 286/82 and 26/83 Luisi and Car- tion, the provision of leasing services to bone v Ministero del Tesoro [1984] ECR 377, paragraph 16 of the judgment, and Case 186/87 Cowan v Trésor Public Luxembourg-based lessees, does not fall [1989] ECR 195, paragraph 15. 29 — In Case 352/85 Bond Van Averteerders v Netherlands State [1988] ECR 2085, the Court held (paragraph 16 of the judg­ ment) that, as regards a service provided by a cable network operator established in one Member State to broadcasters 26 — See Case 168/84 Berkhoh v Finanzamt Hamburg-Mitte- established in another, it was '... irrelevant that the broad­ Altstadt [1985] ECR 2251, paragraph 14 of the judgment casters generally do not themselves pay the cable network and Case C-167/95 Linthorst, Pouwels and Scheren v operators for relaying their programmes', since 'Article 60 Inspecteur der Belastingdienst [1997] ECR I-1195, para­ does not require the service to be paid for by those for graph 10. whom it is performed'.

treatment of a taxable person registered in In order to assess whether the rules are dis­ Belgium and in another Member State. Thus, criminatory, it is essential in the present case for example, a Belgian undertaking operating to determine whether the situation of a non­ a vehicle-leasing business from a Luxem­ resident taxable person such as LPL is truly bourg subsidiary would be subject to the comparable with that of resident taxpayers. same Belgian rules as LPL. So, according to Belgium's observations, would a taxable per­ son resident in Belgium who only occasion­ ally engages in economic transactions that are subject to VAT. However, since more non-Belgian than Belgian undertakings are likely to pay VAT on goods and services supplied in Belgium in circumstances enti­ tling them to make refund claims pursuant to the Eighth Directive, any less generous rules applied in respect of claims made by non­ residents are consequently capable of adversely affecting more non-nationals than nationals. They may therefore constitute covert or indirect discrimination on grounds 30. Belgium maintains that the situations of 30 of nationality. resident and non-resident taxable persons, though both are economically active, are not comparable. In its view, a Luxembourg tax­ able person who incurs VAT inputs in Bel­ gium is to be compared with a Belgian tax­ able person who only irregularly engages in taxable economic activities and who, thus, 29. Nevertheless, the concept of discrimi­ merely occasionally makes VAT declarations nation is not purely formal. As the Court has in Belgium, or, indeed, with a taxable person on many occasions emphasised, '... the differ­ who, though regularly subject to VAT on ent treatment of non-comparable situations its business activities, makes a declaration

31. I do not agree because I do not find the analogy between the desultory transactions cited by Belgium and the regular business 33. In my opinion, the simple fact that such activities of LPL convincing. VAT has been applications are inherently likely to occur levied in Belgium on a taxable person and much less frequently in the case of resident paid as part of the price of transactions taxable persons — since the VAT liability on entered into in that Member State for the their outputs is likely in normal trading cir­ purposes of carrying on a taxable vehicle- cumstances to exceed their VAT inputs — leasing activity in another Member State. The than in that of non-residents is not relevant. only material difference for VAT purposes LPL, it must be remembered, will be liable between the circumstances of such a tax­ to pay VAT in the Member State where its payer and a resident taxpayer, who is also a services are deemed to be supplied in accord­ competing Belgian vehicle-leasing company, ance with Article 9 of the Sixth Directive; to is that, under Article 9 of the Sixth Directive, wit, Luxembourg in the present case. such competitors would be liable to pay VAT on their services in Belgium. The mere non-residence of the taxable person making the claim does not justify his situation being compared only with those who either make occasional VAT returns in Belgium or seek refunds in the special situation of an indi­ vidual selling a house at a loss and claiming a 34. Furthermore, no distinction in principle refund of VAT. is made in Article 17 of the Sixth Directive between the right to deduct of resident tax­ payers and the right to a refund of non­ residents. Instead, Article 17(4), in obliging the Council to adopt rules, as it did by the Eighth Directive, to facilitate the exercise by non-resident taxable persons of the right to a 32. The appropriate comparison, in my view, refund, refers to 'refunds' being made 'in is between a resident and a non-resident tax­ accordance with paragraph 3', which, in turn, payer at the moment a refund application is obliges Member States to grant 'to every tax­ made; namely, on the one hand, by a resident able person the right to a deduction or taxpayer who has an excess for the purposes refund of the value added tax referred to in of Article 18(4) of the Sixth Directive paragraph 2 ...'; i.e., VAT paid on the pur­ and, on the other hand, by a non-resident chase of goods and services '... used for the taxpayer who has incurred VAT inputs in purposes of his taxable transactions'. The fifth recital in the preamble to the Eighth Directive (quoted in paragraph 18 above) proclaims that the treatment of taxable 33 — See paragraph 21 and footnote 20 above.

36. How then do the situations compare in 37. Secondly, I think that the difference in the present case? First, under the normal the rate of interest payable constitutes a dis­ rules for taxable persons resident in Belgium, criminatory restriction on the freedom of interest begins to accrue either from the non-Belgian taxable persons to provide or expiry of three months from the end of the receive services. The rate of interest paid calendar year in which the excess arose or, if automatically and on a monthly basis to resi­ the third subparagraph of Article 8(1)(3) of dent taxpayers, following the expiry of the Royal Decree No 4 applies, three months period permitted under the Code or Royal after the trimester in which the excess arose. Decree No 4, exceeds that payable to those In addition, the taxable person concerned non-resident taxpayers who have served for­ must have requested a refund and made all mal notice on Belgium. the appropriate returns within the time, fol­ lowing the expiry of the tax period in which 34 the claim arose. In contrast, for non­ resident taxable persons, interest will not accrue until formal notice to pay has been served on the Belgian State. Such notice may,

38. For the reasons stated above (in particu­ 34 — Apparently by 20 January of the following year where the caicndar-ycar-plus-thrcc-months rule applies and, where lar, paragraphs 35 to 37), the rules are returns arc made each trimester, by the 20th day of the month following the end of the trimester: sec the second capable of discriminating against non- subparagraph of Article 8(1)(3) of Royal Decree No 4. Belgian vehicle-leasing undertakings who

40. It is for the national court to interpret the relevant provisions of the Code and Royal Decree No 4 and then to make all the necessary findings of fact so as to ensure that non-resident taxable persons receive equal treatment. However, it should perhaps be 39. It does not follow that the precise appli­ stated that the amount of LPL's claims cation of the principle of non-discrimination would seem to be such that, if it were a tax­ is easy. In particular, it does not necessarily able person resident in Belgium, it would mean that the non-resident taxable person is have been entitled to interest sooner than automatically entitled to interest from the three months after the end of the calendar expiry of the six-month period prescribed by 35 year in which its various claims arose. Article 7(4) of the Eighth Directive. What does equal treatment entail in a case such as that in the main proceedings? Since a Belgian taxpayer whose excess is not refunded will, 35 — To recapitulate, where returns are made each trimester, it would appear that an excess of BFR 25 000 must, if depending on the amount involved and the requested, be refunded within three months of the trimester temporal basis upon which it makes its VAT in which it arose: see Article 8(1)(2) and 8(1)(3) of Royal Decree No 4 discussed in footnotes 5 and 8 and also in returns, receive interest automatically from paragraph 36 above.

I-2568

LEASE PLAN LUXEMBOURG v BELGIAN STATE

VII — Conclusion

43. In the light of the foregoing, I propose that the Court answer the questions referred by the Rechtbank van Eerste Aanleg, Brussels as follows:

(1) The first two questions referred should , in accordance with the reasoning underlying the ruling of the Court of 17 July 1997 in Case C-190 / 95 ARO Lease v Inspecteur der Belastingdienst Grote Ondernemingen, Amsterdam, be

I - 2569

OPINION OF MR FENNELLY — CASE C-390/96

answered to the effect that a leasing company established in Member State A does not supply services from a fixed establishment in Member State B, if, in the absence of an office or other physical or human resources in Member State B, the company merely leases a number of vehicles purchased in Member State B to clients established in that State and discharges maintenance bills incurred by other clients resident in Member State A on foot of the use of leased cars in Member State B;