C-134/97

VICTORIA FILM

OPINION OF ADVOCATE GENERAL FENNELLY delivered on 18 June 1998 *

1. This preliminary reference raises a number consideration within the territory of the of issues regarding the application of the country by a taxable person acting as such' is 'transitional' VAT exemptions which Member subject to VAT. Article 6 of the Directive is States have been permitted to continue to concerned with the 'supply of services', which, apply in accordance with Article 28(3)(b) of as defined in Article 6(1), includes 'assign- the Sixth Directive. 1 The Court is, in par- ments of intangible property whether or not ticular, asked whether Sweden was entitled it is the subject of a document establishing from its accession until 1 January 1997 to title'. Tide XVI, comprising Article 28, con- exempt from VAT royalties received from the cerns 'transitional provisions'. Article 28(3)(b) grant or assignment of exclusive rights to permits Member States, during the transi- exhibit motion pictures. However, in its obser- tional period, to 'continue to exempt the vations the Commission has queried the juris- activities set out in Annex F under conditions diction of the Court to answer the questions existing in the Member States concerned'. The referred on the basis that the referring body relevant provision of Annex F in the instant should not be regarded as a 'court or tri- case is that contained in point 2, which refers bunal' for the purposes of Article 177 of the to: Treaty.

I — Legal and factual context

A — The legal context 'Services provided by authors, artists, per- formers, lawyers and other members of the liberal professions, other than the medical and paramedical professions, in so far as these are not services specified in Annex B to the Second 2. Under Article 2(1) of the Sixth Directive, Council Directive of 11 April 1967.' 2 'the supply of goods and services effected for

— services supplied by authors, artists, and performers referred to in point 2 of Annex F;

4. O n 6 March 1996 Victoria Film A/S (here- inafter 'the applicant'), a Danish undertaking, applied to the Skatterättsnämnden (Revenue Board) for a preliminary decision on a ques- ... .' tion concerning the appropriate VAT treat- ment of dealings in film rights. The applicant through, inter alia, its Swedish subsidiary engages in the activity of commercial film production in Sweden and in other countries. Its application in the main proceedings con- cerned the filming, primarily for television, of 3. The relevant provisions of Swedish VAT detective novels written by certain Swedish legislation are contained in Article 11(1) of Tide 3 of the 1994 Mervärdesskattelagen (Law 4 — SFS 1994: 200. 5 — The period at issue runs until 31 December 1996. 6 — Reference is made to Articles 1, 4 or 5 of Law 1960: 729 on 3 — Act concerning the conditions of accession of the Kingdom Copyright in Literary and Artistic Works (lagen om upphovs- of Norway, the Republic of Austria, the Republic of Finland rätt till litterära och konstnärliga verk, hereinafter 'the 1960 and the Kingdom of Sweden and the adjustments to the Trea- Law'). ties on which the European Union is founded; OJ 1994 C 241, 7 — From 1 January 1997, turnover from such grants or assign- p. 21 (hereinafter 'Act of Accession'). ments has been made liable to VAT; SFS 1996: 1327.

I - 7026

VICTORIA H L M

authors. In order to finance the production of 7. The Skatterättsnämnden defined the main the films, due to begin in Sweden on 1 August issue as being whether dealings in rights such 1996, the rights to exhibit them on television as film rights come within the notion of ser- and in cinemas were assigned mainly to vices supplied by authors, artists or per- television-network undertakings in Sweden, formers for VAT purposes. It also pointed Denmark, the Netherlands and Germany. 8 out that, if the incompatibility of the national exemption were established, the direct effect issue arising 'would be somewhat unusual since the trader would be claiming that it was liable to pay VAT. Accordingly, it has decided to refer the following questions to the Court:

I - 7027

OPINION OF MR FENNELLY — CASE C-134/97

2. Does the fact that Article 28(3)(b) does not II — Observations allow national legislation to provide for an exemption from tax liability for the transac- tions referred to in Question 1 mean that this provision, Article 6(1) or any other provision of the Sixth Directive has so-called direct effect in this regard and can therefore be relied 8. Written and oral observations have been upon as against a national authority by the submitted in this case by the Riksskatteverket, the Kingdom of Sweden and the Commis- person dealing in such rights as a ground jus- sion; the Republic of Finland submitted only tifying treatment of those transactions as tax- written observations. able transactions?

9. In the light of the admissibility objection raised by the Commission in its observations, it is appropriate initially to consider the nature of the body which has made the reference in the present case, before subsequendy dis- cussing the content of the questions referred.

If, again, that question is answered in the negative, an answer to the following question III — Admissibility is sought:

A — The Skatterättsnämnden and the preliminary-decision procedure

'It is divided into two divisions, one for direct taxation and the other for indirect taxation. The Government appoints the members for a maximum period of four years and deter- mines the composition of the divisions. Cases A preliminary decision which has gained legal are determined after preparation and presen- force serves as a guide in matters of assess- tation of reports by civil servants at the ment to tax and — as far as value added tax Board's offices. is concerned — in relation to the account period concerned by the ruling and to the extent to which the party seeking the ruling demands. A preliminary decision is therefore binding on the State if the applicant makes a claim to this effect. However, this does not apply if, after the preliminary decision is An application for a preliminary decision must given, a statutory amendment is adopted such be made in writing. If the Board finds that, in as to affect the assessment to tax in the case view of its contents, the application is not to with which the preliminary decision is con- be dismissed immediately, the observations of cerned. the Riksskatteverket ... in the matter must be obtained.

In summary, it can be said that the Skat- terättsnämnden adopts decisions in forms If the application is taken up for examination, similar to courts of law in matters which con- the Board rules, to the extent considered nec- cern inter alios taxable persons, relations to essary, how the question referred to it is to be the public at large regarding their liability to determined in relation to the applicant's assess- tax.' ment to tax and, as far as value added tax is concerned, the position concerning the appli- cant's liability to tax.

14. It also refers to Article 9 of Chapter 1 of the Regeringformen (Swedish Constitution) under which the procedure followed by the Skatterättsnämnden must be both objective 13. In its written answers to a number of and impartial, a requirement secured by the questions put to it by the Court concerning, Brottbalken (Swedish Criminal Code), which in particular, the structure and organisation of contains provisions on active and passive cor- the Skatterättsnämnden, as well as the inde- ruption. Moreover, the Forvaltninglagen (Law pendence of its members and the extent to applicable to the administration) 1 1provides which requests for its preliminary decision rules concerning the right to object to a spe- must concern concrete disputes between the cific Skatterättsnämnden member sitting in a tax administration and taxpayers, Sweden first particular case. 12 emphasises that, under Article 2 of the 1951 Law, the Skatterättsnämnden is a permanent

11 — SFS 1986: 223. 12 — However, in response to a question posed at the hearing, counsel for Sweden confirmed that members of the Skat- 9 — Case C-393/92 [1994] ECR I-1477. terättsnämnden are not required, on appointment, to take a 10 — Case C-111/94 [1995] ECR I-3361. specific oath of office.

I - 7030

VICTORIA FILM

13 — At the oral hearing in the present case, Sweden confirmed that the bill to amend the law on preliminary opinions (Reformerat förhandsbesked i skattefrågor, m. m.), to which 18. It also emerged clearly at the hearing that it refers in its written reply to the Court's questions, was the Skatterättsnämnden is not bound to adopted on 21 April 1998 by the Swedish Parliament and will enter into force on 1 July 1998. The new law will permit the Riksskatteverket to request preliminary decisions of the Skattcrätt5nämnden. 14 — Case 36/73 Nederlandse Spoorwegen v Minister van Verkeer en Waterstaat [1973] ECR 1299 and Joined Cases C-69/96 15 — Case C-54/96 Dorsch Consult v Bundesbaugesellschaft Berlin to C-79/96 Garofalo and Others (hereinafter 'Garofalo'), (hereinafter 'Dorsch Consult'), [1997] ECR I-4961. [1997] ECR I-5603. 16 — Loc. cit., footnote 14 above.

I - 7031

O P I N I O N O F MR FENNEIXY — CASE C-134/97

provide any ruling and that there is no appeal of the Directeur des Contributions Directes against a decision not to do so. et des Accises (Director of Taxation and Excise Duties) of Luxembourg, that the Director had an organisational link with the body that made the disputed tax assessment and was not, therefore, 'an authority acting as a third party in relation' to that body. 21 B — Analysis

17 — Sec in this respect, most recently, the judgments in Dorsch Consult, l o c at., paragraph 23 and Garofalo, l o c cit., para- graph 19. The dual reference to 'court or tribunal' in the 21 — Paragraphs 15 and 16. See paragraph 4 of the Opinion of English and Irish versions ('cúirte nó binse') of Article 177 Advocate General Darmon who noted that the soundness of of the Treaty, is not reflected in other language versions. the decisions of the Conseil d'État was disputed by eminent Accordingly, the correct inquiry is not to determine whether academic commentators, including the late Judge Schock- a body is first a 'court' and, if not, a 'tribunal', but, instead, 'weiler; see paragraphs 37 to 39. whether it is encompassed by the single Community con- 22 — The Court's approach prompted Advocate General Mancini, cept of 'court or tribunal'; see Anderson, References to the in his Opinion in one of the leading cases, to observe that: European Court (Sweet and Maxwell London, 1995), at p. 29. T h e criteria by which the Community concept of a "court 18 — Case 61/65 [1966] ECR 261. or tribunal" is defined could not be wider. That explains why the Court has permitted national judicial bodies of all 19 — As Advocate General Gand pointed out in his Opinion, '... kinds to consult it, irrespective of the nature and purpose of in spite of being called an Arbitration Tribunal, the Scheids- the proceedings in the course of which they raise a question gerecht has very little in common with such a body'; l o c or of whether the robe they are wearing when they do so is cit., p. 281. more or less markedly judicial'; see Case 14/86 Pretore di 20 — Case C-24/92 [1993] ECR I-1277. Salò v Persom Unknown [1987] ECR 2545, p. 2556.

21. In the present case, I am satisfied, on the 23. In the first place, the Skatterättsnämnden basis of the information provided in the order is not obliged to respond to applications for for reference, as supplemented by Sweden's a preliminary opinion. The first paragraph of written reply to the questions put to it by the Article 7 of the 1951 Law provides that, in Court, that the Skatterättsnämnden is an inde- effect, where the Skatterättsnämnden, having pendent body established by law, which exer- regard to the content of the request, considers cises its functions on a permanent basis, whose that it is not appropriate to give a preliminary procedures are adversarial, and which gives decision, it shall refuse the request. N o rea- its decisions based on the application of the sons need be given and such decisions are not appealable. From the information provided by Sweden, it seems clear that the power con- 23 — Loc. CIL, footnote 10 above. ferred on the Skatterättsnämnden by the 1951 24 — Job Centre, paragraph 9. Law is used to weed out spurious requests,

I - 7033

OPINION OF MR FENNELLY — CASE C-134/97

25. Secondly, the binding effect of prelimi- nary decisions is contingent upon the appli- cant taxpayer actually carrying out the trans- 25 — Case 244/80 [1981] ECR 3045, paragraph 18. actions covered by the request. However, I 26 — Case C-83/91 Meilicke v ADC/ORGA [1992] ECR I-4871, am not persuaded that the possibly contin- paragraphs 30 and 31. 27 — See, inter alia, Case C-415/93 Bosman and Others [1995] gent nature of Skatterättsnämnden prelimi- ECR I-4921, paragraph 61; Case C-291/96 Grado and Basbir nary rulings deprives them of the status of [1997] ECR I-5531, paragraph 12; and the recent orders of the Court of 25 May 1998 in Case C-361/97 Nour [1998] judicial decisions for the purposes of Com- ECR I-3101, Case C-362/97 Karner, not published in the ECR, and Case C-363/97 Lindau, not published in the ECR, munity law. In the present case, there seems in particular paragraph 12 of each of the orders.

I - 7034

VICTORIA H L M

28 — The three examples, taken from actual decisions of the Skat- terãttsnãmnden furnished by Sweden in its written reply to the Court's questions support this view. In two of the 29 — Job Centre, loc. cit. above, paragraph 9. examples, the applicants were actually engaged in economic 30 — In paragraph 16 of his Opinion in Job Centre, Advocate activities out of which the subject-matter of their requests General Elmer pointed out 'that the Pubblico Ministero was arose. Only in one was the transaction still anticipated at the heard in the case before the Tribunale ...'. time of the application. However, the request concerned the fiscal evaluauon of a certain aspect of a more general cor· 31 — Job Centre, paragraph 9. porate restructuring plan, which would appear to have 32 — Ibid., paragraph 11. already been in train. 33 — Ibid.

I - 7035

O P I N I O N O F MR FENNELLY — CASE C-134/97

I - 7036

VICTORIA FILM

IV — Substance its accession, of 'the same exemptions' in any of the then 12 Member States. It seems clear that this requirement was satisfied. In the first place, neither the order for reference nor any of the observations submitted to the Court query Sweden's entitlement, on the basis of 33. The substantive issues raised by the ques- the Act of Accession, to invoke the transi- tions referred in this case are relatively straight- tional exemption set out in point 2 of Annex F. forward in comparison with the thorny ques- Secondly, the Commission's report of 2 July tion of admissibility. The Skatterättsnämnden 1992 to the Council on the transitional provi- essentially wishes to know whether sions resulting from Article 28(3) of the Sixth Article 28(3)(b) and point 2 of Annex F of the Directive and Article 1(1) of the Eighteenth Sixth Directive permit a Member State to Council Directive of 18 July 1989 states, in continue to exempt royalties received from respect of point 2 of Annex F, that 'six Member the grant or assignment of exclusive film- States are currently applying the F2 deroga- exhibition rights from liability to VAT and, if tion (Belgium, Denmark, Spain, Greece, Ire- not, whether the taxable person may rely on land and the Netherlands)'. 38 the right to deduction provided by the direc- tive notwithstanding the fact that no output tax has been paid.

A — Question 1 (ii) The application of Annex B to the Second Directive

(i) The Act of Accession

34. Assuming that the assignments of rights 35. The services listed in point 2 of Annex F at issue can be considered to have been 'ser- may only fall within the scope of the transi- vices supplied by authors, artists and perform- tional exemption granted by Article 28(3)(b) ers', it seems beyond doubt that they are cov- 'in so far as these are not services specified in ered by both point 2 of Annex F and the Annex B to the second Council Directive of provisions of the Act of Accession quoted at 11 April 1967'. It is, thus, necessary to con- paragraph 2 above. The Act of Accession pre- sider the effect of this reference. scribes, as a precondition for Sweden's right to rely upon Article 28(3)(b) and point 2 of Annex F, the continued application, prior to 38 — See SEC(92)1006 final.

37. Furthermore, the intention underlying the reference to the Second Directive emerges from the legislative history of point 2 of Annex F. In its proposed amendments of 11 October 1974 39 to its initial 1973 pro­ posal, 4 0 the Commission had proposed the 38. Accordingly, I am satisfied that the 'ser­ following addition to Article 14 B of the main text of the 1973 draft: '(n) supplies of services vices specified' in Annex B must be excluded by authors, writers, composers, lecturers, jour­ from the scope of the transitional exemption nalists, actors, musicians, where they are not permitted by point 2 of Annex F to the Sixth themselves involved in the publishing or repro­ Directive. It remains to consider what ser­ duction of their works'. This amendment was vices are covered by the Annex B exclusion. not adopted by the Council, which, instead, chose merely to permit, in Article 28(3)(b) and point 2 of Annex F (the text of these latter 41 — This principle has been stated on many occasions by the provisions not having been contained in either Court: see Case 348/87 Sachtinį Uitvoering Financiële Atties of the Commission's proposals), the transi­ v Staatssecretaris van Financien [1989] ECR 1737, para- graph 13; Case C-453/93 Bulthuis-Griffioen v Inspecteur der Omzetbelasting [1995] ECR I-2341, paragraph 19; and, most recently, Case C-346/95 Blasi v Finanzamt München / [1998] ECR I-481, paragraph 18. 42 — See Case 173/88 Skatteministeriet v Henriksen [1989] 39 — Amendments to the proposal for a sixth Council Directive ECR 2763, paragraph 12. To my mind, the natural corollary on the harmonisation of legislation of Member States con­ of the principle of the strict interpretation of exemptions is cerning turnover taxes — Common system of value added that exceptions to exemptions must be construed broadly; tax: uniform basis of assessment; OJ 1974 C 121, p. 34. see paragraph 37 of my Opinion in Case C-468/93 Gemeente 40 — Proposal for a sixth Council Directive on the harmonisation Emmen v Belastingsdienst Grote Ondernemingen [1996] of legislation of Member Sutes concerning turnover taxes ECR I-1721, and paragraph 21 of the Opinion of Advocate — Common system of value added tax: uniform basis of General Gulmann in Case C-74/91 Commission v Germany assessment; OJ 1973 C 80, p. 1. [1992] ECR I-5437..

39. The notion of 'assignments of patents, trade marks and other similar rights, as well as the granting of licences in respect of such rights', is, to my mind, sufficiently broad to encompass the assignment of copyright. Such a provision is particularly suited for the appli- cation of the ejusdem generis principle of construction. 43 The application of that prin- ciple presupposes that a genus can be identi- fied from the matters enumerated in the text under scrutiny which precedes the general words; in other words, whether a common element emerges from perusal of a number of specific words which may be used in con- struing the general words. In this case I am satisfied that such an element exists. The spe- 40. Such assignments are clearly taxable sup- cific references to 'patents' and 'trade marks' plies for the purposes of Article 2(1) of the call to mind two of the principal types of Sixth Directive, which subjects to VAT 'the intellectual property provided in the laws of supply of goods or services effected for con- the Member States and recognised in the sideration ... by a taxable person acting as case-law of the Court. Without further words, such'. Since the assignment of such cinemato- the provision would, of course, refer only to graphic rights consists of the assignment of those two. However, the general words 'and intangible property, it is covered by the first other similar rights' must be given a meaning by reference to the elements suggested by the indent of Article 6(1), and should be treated as a supply of services which is taxable under Article 9(1), in principle, in the Member State where the supplier has established his busi- 43 — For a brief discussion of the nature of this principle, see ness or has a fixed establishment from which paragraph 21 of my Opinion in Case C-167/97 Linthorst, Pouwefs and Scheres v Inspecteur der Belastingdienst [1997] the service is supplied. Consequently, I rec- ECR I-1195 (hereinafter 'Linthorst'), as well as paragraph 67 of the Opinion of Advocate General Darmon in Case ommend that the Court answer the first ques- C-63/92 Lubbock Fine v Commissioners of Customs & Excise tion referred to the effect that national-law [1993] ECR I-6665. It has also been invoked as an aid to interpretation by Advocate General Sir Gordon Slynn in his provisions which seek to exempt such sup- Opinion in Case 218/86 SAR Schotte v Parfums Rothschild [1987] ECR 4905, p. 4911. The Court in Linthorst, although plies from VAT are incompatible with the not referring by name to the principle, considered it in that case before finding it to be inapplicable; see paragraph 20. Sixth Directive.

(iv) Alternative view the Court on numerous occasions in relation to the Community VAT system. 4S Since VAT applies to the supply for consideration of goods or services, it is reasonable to assume that the Community legislature had in mind the exemption of the commercial exploitation of creative or artistic works when it included the 'services of authors, artists, performers' in point 2 of Annex F. I see no reason in prin- ciple or logic for limiting that exemption to supplies made by natural persons. If authors, artists or performers wish to form legal per- 41. In the event of the Court not regarding sons for the purposes of the commercial assignments of copyright as covered by point 1 exploitation of their works, the principle of of Annex B to the Second Directive, I would fiscal neutrality, as well as the need to avoid offer, ex abundante cautela, the following distortions of competition, requires that they comment on the alternative view that could be treated no differendy for VAT purposes be taken of the scope of point 2 of Annex F from those who choose not to adopt such a to the Sixth Directive. I should say straight- form. Moreover, given the generally high costs away that I do not think that such assign- of film production, it is likely that most films ments may be regarded as falling within the will be produced by corporate bodies. To notion of 'services supplied by ... members of limit the scope of the exemption to natural the liberal professions', as Sweden has sub- persons would, thus, effectively exclude film mitted. In the absence of a specific indication production, a very important modern outlet by the Community legislature that it intended for the collective provision of services by to adopt a very broad notion of what would authors, artists, and performers, from the traditionally be viewed as 'the liberal profes- scope of the exemption. sions', I do not think that the services of authors, artists, performers are included. I draw support for this view from the state- ment of the Court in Linthorst, where, refer- ring to that part of the third indent of Article 9(2)(e) which covers 'services of con- sultants, engineers, consultancy bureaux, law- yers, accountants and other similar services', B — Questions 2 and 3 the Court declared that 'the only common feature of the disparate activities mentioned in that provision is that they all come under the heading of liberal professions'. 44 H o w - ever, I agree with the observations of Finland and Sweden that it would be inappropriate to construe the exemption provided in point 2 of Annex F as limited to services provided by 42. As regards the second and third ques- natural persons. Finland has referred to the tions, it is sufficient to observe that the Court principle of fiscal neutrality, enunciated by has consistently held that the provisions of

the Sixth Directive are capable of having direct invoiced to him by his suppliers or to pass on effect. 46 To my mind, this applies a fortiori any charge whatsoever to the person fol- with regard to both Article 6, which defines lowing him in the chain of supply'. 48 Con- the notion of 'supplies of services' for the sequently, since '[a]n exemption from VAT purposes of giving effect to the distinction may therefore lead to an increase in his tax made by Article 2(1) between the taxable burden', he may 'have an interest in being supply of goods and services, and Article 17 subject to VAT'. 49 There is therefore nothing concerning the right of deduction. The cor- untoward in seeking to register for VAT. nerstone of the VAT system is that a taxable person pays VAT only on the difference between the tax included in the supplies of goods and services which he has purchased from his suppliers and that due on his own supplies.

As I have already noted, the fundamental basis of the right of deduction recognised in Article 17 of the Sixth Directive is that VAT inputs 'may be deducted only in so far as the goods and 43. The Skatterättsnämnden has sought spe- services in respect of which those inputs have cific guidance as to whether any special con- arisen constitute "price components'* of a siderations apply where a taxable person taxable transaction'. 50 Accordingly, the Court invokes the directly effective provisions of has held that, in general, 'where a taxable the Sixth Directive in order to assert its person supplies services to another taxable liability to pay VAT. Although a taxpayer person who uses them for an exempt transac- would not normally voluntarily seek to pay tion, the latter person is not entitled to deduct tax, the nature of the VAT system is such the input VAT paid'. 51 Sweden refers to the that, occasionally, liability to VAT will be fact that, since the assignment of the rights at beneficial to a taxable person. As Advocate issue was exempt in Swedish law, no VAT General Darmon pointed out in his Opinion was charged by the applicant, and contends in Lubbock Fine v Commissioners of Customs that, if the applicant were now to be per- & Excise, 'where a taxable person carries out mitted to register for VAT and seek to deduct an exempt transaction, he is not obliged to its VAT inputs, the ex post facto recovery of pay tax on the transaction, but he is also unable to deduct the tax which has been

I-7041

O P I N I O N OF MR FENNELLY — CASE C-134/97

the VAT which should have been charged on 'rules governing the exercise of the right to the assignments would probably be very dif- deduct', will, thus, only be that by which its ficult. In consequence, Sweden asserts that it inputs exceed its outputs. Thus, the applicant would be contrary to Article 17(2) of the will be required to account for VAT on its Sixth Directive to allow the right of deduc- supplies, whether or not it added it to the tion in such circumstances. I do not agree. price charged to its customers for the assign- ments at issue. Moreover, it is not the respon- sibility of the applicant to ensure that the VAT which should have been included in the price of the assignment transactions is actu- ally reflected as an input in the VAT return of the assignees. In so far as those assignees are registered for VAT in Sweden, it is up to them to claim deduction of inputs. 52

I - 7042

VICTORIA FILM

V — Conclusion

48. In the light of the foregoing, I recommend that the questions referred by the Skatterättsnämnden be answered as followed:

(1) The assignment of rights to exhibit motion pictures by a film-production undertaking does not come within the scope of the transitional exemption pro- vided for in Article 28(3)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, read in conjunction with point 2 of Annex F to that Directive;

(2) It follows, in particular, from Articles 2(1), 6(1) and 17 of the Sixth Council Directive that a person who makes taxable supplies of exclusive rights to exhibit motion pictures may rely upon those provisions against a national tax authority which refuses to permit it to make a VAT declaration in which that person seeks to deduct the VAT component of the goods and services used for the purposes of producing the films in question from the VAT which should have been included in the price charged on the assignment of those rights;