C-381/97

* Original language: German. 1 — OJ 1977 L 145, p. 1. 2 — The proceeds of the leasing or letting will otherwise prob­ ably be subject to income tax or some comparable tax.

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(b) the leasing or letting of immovable prop­ of the option provided by Article 13C of the erty ... Sixth Directive. Article 44(3)(2)(c) provides that value added tax is payable on 'lettings to a taxable person for the purposes of his eco­ nomic activity of buildings ... where the lessor has given notice of his intention to let the ...'. building subject to tax; the King shall deter­ mine the form of the option, the manner of exercising it and the conditions which the leasing contract must meet.' The Law came into force on 1 January 1993. The King, how­ ever, never issued the measures provided for 4. Pursuant to Article 13C of the Sixth Direc­ by the Law. tive, Member States may, however, make avail­ able the option of subjecting the leasing of immovable property to tax. Article 13C thus provides:

6. The plaintiff considers that it may opt for 'Member States may allow taxpayers a right taxation and thereby claim the right to deduct of option for taxation in cases of: input tax. The Belgian Government, on the other hand, views the letting and leasing of immovable property as a tax-exempt activity, basing this view on the fact that the Law of July 1994 ('the 1994 Law') repealed Article (a) letting and leasing of immovable prop­ 44(3)(2)(c) of the Belgian VAT Code with ret­ erty; roactive effect. Furthermore, argues the Bel­ gian Government, the right of option pro­ vided for could not have had any legal effect as the King never issued the implementing measures.

tions. This is set out in Article 2 of the First tion of the laws of the Member States relating Council Directive 67/227/EEC of 11 April to turnover taxes — Common system of value 1967 on the harmonisation of legislation of added tax: uniform basis of assessment, and 3 Member States concerning turnover taxes has thus given its taxpayers the right to opt (hereinafter 'the First Directive'). The first for taxation of certain lettings of immovable paragraph of Article 2 provides: 'The prin­ property, from abolishing, in a subsequent ciple of the common system of value added law, that right of option and thus reintro­ tax involves the application to goods and ser­ ducing the exemption in full?' vices of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and dis­ tribution process before the stage at which tax is charged.' The second paragraph pro­ B — Opinion vides: On each transaction, value added tax, calculated on the price of the goods or ser­ vices at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components.'

9. The national court refers in its question to both the First and the Sixth VAT Directives. Accordingly, one must first consider the rela­ tionship between the two directives. Article 8. Because of the questions arising as to the 1(1) of the First Directive provides that the interpretation of the Sixth Directive, the court Member States are to replace their existing hearing the case has referred the following system of turnover taxes by the common question to the Court for a preliminary ruling: system of value added tax, which is described in Article 2 of the First Directive.

11. This leads the Commission to conclude which, in the absence of implementing mea­ that the application of the common system of sures which were to have been adopted by taxes is governed in particular by the provi­ the King, could have no legal effect and that sions of the Sixth Directive. It further implies it therefore could simply be revoked with ret­ that the provisions of the Sixth Directive can roactive effect. As all parties have submitted, no longer be called into question by reference it is, however, for the court referring the to the provisions of the First Directive on the question for a preliminary ruling to rule on common system of value added tax. This this point. There is much to support the applies, for example, to tax exemptions pro­ argument that the Law acquired legal force vided for under the Sixth Directive. The despite the absence of the royal implementing 11 recital in the preamble states that a measures, as it would not otherwise have common list of tax exemptions should be needed to be expressly repealed by the 1994 drawn up in order to ensure a uniform col­ Law. As long as it existed, one could reason­ lection of own resources in all the Member ably expect that the royal measures would be States. These common tax exemptions are adopted. These were probably not an express defined in the Sixth Directive as part of the precondition for the validity of the Law. How­ entire system of value added tax and its appli­ ever, as I have explained, this point is one cation. They may very well — and this is also which ultimately must be determined by the the argument advanced by the Belgian Gov­ national court. ernment — derogate from the general system.

It is true that in considering whether a Member 18. The Commission refers in this context to State has availed itself of the option allowed the judgment in the Italittica case. In that by Article 13C, the question is not whether judgment, the Court held with reference to or not the Sixth Directive has been imple the provisions of the Sixth Directive — in mented. Thus, the taxable person could not that case Article 10(2) — that these were to have acquired a right to deduct tax by virtue be interpreted broadly, as the Community of the direct effect of the Directive. As the legislature had allowed the Member States a Belgian Government has, however, already broad discretion. enacted and then repealed the Law in ques tion, it might be thought.that the Govern ment had committed itself in some way to granting a right of option in accordance with the Sixth Directive, thereby allowing a par allel to be drawn with direct effect in relation 19. The Belgian Government submits in this to the right to deduct tax., regard that Article 13C clearly does not have direct effect due to the broad discretion given

The Commission and the Belgian Government say that it could. 20. It should be noted, furthermore, that the Sixth Directive assumes, in principle, that the letting and leasing of immovable property are to be exempt from tax, even if this represents a derogation from the system of tax as defined in the First Directive. Under the Sixth Direc tive, a Member State can give taxable persons 17. In this regard, it must be observed first of the possibility of opting for taxation.

Becker. In its reasons the Court stated inter alia 'that Article Member State is at liberty to decide whether 13(C) docs not in any way confer upon the Member States the right to place conditions on or to restrict in any manner and in what manner it will grant such a right whatsoever the exemptions provided for by Part (B). It merely of option, there is no obvious reason why it reserves the right to the Member States to allow, to a greater or lesser degree, persons entitled to those exemptions to opt should not also be able to withdraw such a for taxation themselves, if they consider that it is in their interest to do so' (Case 8/81 Becker v Finanzamt Münster-

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has availed itself of this derogation should during a certain transitional period, to con­ not be allowed to revert to the basic rule, tinue to tax, for example, certain turnover which provides for tax exemption. The fact exempt from tax pursuant to Article 13 or that this tax exemption is — as the plaintiff grant the taxable persons the possibility to claims — actually a derogation from the gen­ opt for taxation of the transactions exempt eral system of value added tax is immaterial. from tax under Annex G. It is permitted under the Sixth Directive and, therefore, cannot — as already mentioned — be contrary to the First Directive.

24. The case-law cited cannot be applied to the granting of a right of option pursuant to Article 13C. Article 28 is part of Title XVI of the Sixth Directive, headed 'Transitional Pro­ 22. The plaintiff, unlike the Commission and visions'. It contains provisions applying to the Belgian Government, takes the view that, the transition or adaptation of national laws once it has exercised the option provided for to the Sixth Directive. Accordingly, the pro­ under Article 13C to tax lettings and leasings visions of Article 28(3) are only intended to — at the option of taxable persons — a apply for a 'transitional period'. As Belgium Member State can no longer go back on its rightly argues, they entail a temporary autho- decision. In support of this view, the plaintiff cites the case-law of the Court on Article 28 of the Sixth Directive. Article 28(3) of the 7 — Judgment in Case C-35/90 Commission v Spain [1991] ECR Sixth Directive allows the Member States, I-5073, at paragraph 7.

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BELGOCODEX v BELGIAN STATE

risation to tax or exempt from tax certain conform with the provisions of the First transactions, which do not correspond to the Directive, it may no longer — just as in the general effect of the Sixth Directive. Against case of Article 28 — go back on its decision. this background, the Court held that this possibility could no longer be used if the Member State had already laid down rules or provided for taxation in a certain field in accordance with the Sixth Directive.

28. The plaintiff also refers in its argument to the Opinion in Case C-35/90 cited above. In that case, the Advocate General also reached the conclusion that the derogation available under Article 28 could no longer be used if a regulation conforming with the Directive had been introduced or already existed. The plain­ 26. The plaintiff goes on to argue that if a tiff relies in particular on the argument that Member State adapts its tax laws by granting this '... would be contrary to the principles of a right of option pursuant to Article 13C to general application and neutrality of the tax,'

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which underlie the Directive and which 'are tive.' This also suggests for him that it was an essential key in interpreting derogating the provisions of the Sixth Directive and the provisions ...'. 8The plaintiff considers that exemptions or impositions of tax provided the reintroduction of the exemption in the for therein which mattered and not the First present case is contrary to the principles of Directive, which merely established the system neutrality and the general application of the but does not govern its implementation. tax and that on this ground alone it cannot be allowed.

10 — Opinion in Case C-35/90 (cited in footnote 8), point 5, and 8 — Opinion of Advocate General Tesauro in Case C-35/90 (judg­ judgment in Case 73/85 Kerrutt v Finanzamt ment cited in footnote 7), point 5. Mönchengladbach-Mitte [1986] ECR 2219, at paragraph 17. 9 — Opinion in Case C-35/90 (cited in footnote 8), point 5 (my 11 — Judgment in Case C-35/90 (cited in footnote 7), at paragraph emphasis). 9.

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BELGOCODEX v BELGIAN STATE

be revoked with retroactive effect. Even the The Commission and the Belgian Govern­ Commission considers that this might pose ment agree that these existing deduction rights problems in relation to rights to deduct tax should be respected. which have already arisen. The common system of value added tax of the First Direc­ tive as well as of the Sixth Directive provides that the taxable person may deduct value added tax due or paid in respect of goods and services supplied to him by another taxable 35. As regards the case before the national person and which he has used for the pur­ court, however, the Belgian Government poses of his own taxable transactions (Article points out that the plaintiff did not expressly 17(2) of the Sixth Directive). Article 17(1) exercise its right of option. According to the provides that this right to deduct arises when Court, the exercise of a right of option which the deductible tax becomes chargeable. There has been granted is a matter for the taxable is thus a link between taxation and the right person alone. 14 On the other hand, the last to deduct. sentence of Article 13C provides that the Member States are to fix the details of its use. Accordingly, and this is common ground, it is for the national judge to decide whether or not the plaintiff's exercise of its right of option was effective.

authorities and charged the relevant taxes on — and such measures have still not been the rent and passed these on to the State. As adopted under Belgian law — it must none previously mentioned, it is, however, a matter the less be remembered in the present case for the national judge to decide this point that the reason why taxable persons who having regard to the link between taxation decide to use the option cannot properly and the right to deduct. exercise it is precisely because the relevant measures have not yet been adopted by the Government. So, the requirements placed on the exercise of the right of option must not 38. It is appropriate at this stage to draw be too strict, as otherwise the right of deduc­ attention once again to the considerations tion under Article 17 of the Sixth Directive, mentioned at points 14 and 15 above, given which is an integral part of the system of that the same must apply to the exercise of value added tax, would be affected. Where the right of option as to the introduction or the right to opt for taxation is withdrawn validity of the right of option itself. Even if with retroactive effect, only persons who have Article 13C of the Sixth Directive leaves it to not in any way indicated their decision to the Member States to restrict the scope of the exercise the right of option should be denied right of option and to fix the details of its use the right to assert a claim.

C — Conclusion

39. On the basis of the foregoing considerations, I propose that the question referred to the Court should be answered as follows: