C-429/97

1. This infringement action concerns the I — The legal and factual background treatment of cross-border transactions under the Community VAT system. France is refusing to make refunds pursuant to the Eighth VAT Directive 2 of French VAT paid by German waste-disposal contractors in respect of upstream services provided to them by French-based subcontractors. The 2. The purpose of the Eighth Directive is Eighth Directive provides, where it applies, stated in the second recital in its preamble for a refund of VAT paid by a taxable as being to '... ensure that a taxable person person in another Member State instead of established in the territory of one member for the deduction of that amount as an country can claim for tax which has been input. The solution to the problem depends invoiced to him in respect of supplies of on the interpretation of the tax-localising goods or services in another Member State rules governing supplies of services con- or which has been paid in respect of tained in Article 9 of the Sixth VAT Direc- imports into that other Member State, tive. 3 thereby avoiding double taxation'. Arti- cles 1 and 2 of the Eighth Directive lay down two conditions to be fulfilled to establish the right to a refund. First, the claimant must be established in the terri- tory of another Member State and not have the seat of his economic activity, or a fixed establishment whence his business activities are effected, in the Member State from which the refund is requested, and, sec- ondly, he must not, in the relevant period, have 'supplied ... services deemed to have 1 — Original language: English. been supplied in that country'. The right to 2 — Eighth Council Directive 79/1072/EEC of 6 December 1979 a refund extends to VAT 'charged in respect on the harmonisation of the laws of the Member States relating to turnover taxes — Arrangements for the refund of services ... supplied to him by other of value added tax to taxable persons not established in the territory of the country, OJ 1979 L 331, p. 11 ('the Eighth taxable persons in the territory of the Directive'). country [from which the refund is sought], 3 — Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to in so far as such ... services are used [for the turnover taxes — Common system of value added tax: uniform basis of assessment, OJ 1977 L 145, p. 1 ('the Sixth purposes of his economic activities in his Directive'). Member State of establishment]'. In order

to determine whether such a claimant may General des Impôts (General Tax Code, be deemed to have supplied services in the hereinafter 'the CGI'), under which the Member State in question, it is necessary to place of supply of services physically car- consider the place-of-supply rules set out in ried out in France, including 'work and the Sixth Directive. valuations on/of movable tangible prop- erty', is deemed to be in France. It is not contested that this provision properly transposes Article 9(2)(c), fourth indent, into French law. However, the present dispute arises from an administrative cir- 3. Article 9 of the Sixth Directive is con- cular (hereinafter 'the circular') adopted in cerned with the place of supply of services. 1992 by the tax-legislation department of Article 9(1) lays down a general rule that: the French fiscal administration and addressed to all departments of the national administration responsible for applying VAT. In respect of waste-treatment con- tracts, the circular instructs the authorities concerned that, pursuant to Article 9(2)(c) of the Sixth Directive and Article 259-A-4e 'The place where a service is supplied shall of the CGI, not only must waste-elimina- be deemed to be the place where the tion operations effected in France be sub- supplier has established his business or ject to French VAT but so subject must also has a fixed establishment from which the be the service provided by the main con- service is supplied or, in the absence of such tractor to its clients, provided the contrac- a place of business or fixed establishment, tor invoices its clients for the entire cost of the place where he has his permanent performing the service required by the address or usually resides'. contract of which the essential element is represented by the price paid by it to a site operator in France who physically carried out work for it there. The fact that the main contractor performs none of the waste elimination operations is immaterial once However, Article 9(2) contains a number of they are assigned to the subcontractor. The specific rules for certain categories of effect of this instruction is to deny the right services. Article 9(2)(c) enumerates a num- of refund to main contractors in another ber of broad categories of services whose Member State. place of supply is deemed to be 'the place where those services are physically carried out'. The relevant category in the present case is that covered by the fourth indent of Article 9(2)(c), which concerns 'work on movable tangible property'.

6. The main contractors in question com- plained to the Commission about the refusal of reimbursement. The Commis- sion, by letter of 23 October 1992, informed France of the complaint and 8. France, by a letter of 6 August 1993, sought an explanation of the basis for the maintained its position. The contractors in relevant refusals. The French authorities, at question might, however, register for VAT a meeting on 17 November 1992 and in a in France and thus claim a right of deduc- note to the Commission of 7 January 1993, tion, in accordance with Article 17 of the contended that the tax-allocation rule of Sixth Directive, in respect of the French Article 259-A-4e of the CGI and Arti- VAT included in the invoices received from cle 9(2)(c) of the Sixth Directive applied. their subcontractors. In their view, the essential feature of a waste-treatment contract of the type at issue, irrespective of whether part of the work involved is subcontracted, comprises the elimination or treatment of the waste in question. The mere fact that such work is executed in France by taxable persons 9. The Commission, on 10 April 1996, established there is irrelevant, because the adopted a reasoned opinion which particu- entire contract should be treated as a single larly contested the French authorities' view whole and the work carried out in France that the main and subcontracts could be be deemed to have been carried out there assimilated for the purpose of deeming the by the main contractors. The latter were, main contractor responsible for the treat-

(b) Order the French Republic to pay the 4 — France relies, inter alia, on Case 52/90 Commission v costs. Denmark [1992] ECR I-2187, paragraph 17.

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raises in a general form the correct inter- cover only part of the scope of the French pretation of Article 9(2)(c). Its formal con- legislative provisions in question'. 10 This clusion is worded in identical general terms case, however, is different. It is not Arti- to that of the formal declaration which the cle 259-A-4e of the CGI but its application Commission now seeks from the Court. by a circular that is claimed to be incom- Accordingly, the present infringement patible with the Community law. The wider action cannot be declared inadmissible complaint made in the application to the because of any lack of correspondence Court may well be justified but, in my between the application to the Court and opinion, whether this is so is inextricably that outlined by the Commission during the linked with the interpretation of Article 9 pre-litigation procedure. 8 of the Sixth Directive and should be assessed by the Court when considering the substance of the case.

17. It does not follow, however, that the claim, though admissible, is well founded in its broad form. B — Substance

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11 — Case C-327/94 Dudda v Finanzamt Bergisch Gladbach [1996] ECR I-4595, paragraph 20 (hereinafter 'Dudda'). 12 —Case C-190/95 ARO Lease v Inspecteur der Belasting- dienst [1997] ECR I-4383, paragraph 15 (hereinafter 'ARO Lease'). 13 — Dudda, paragraph 21. 14 — Dudda, paragraph 20. 15 — See its most recent statement in ARO Lease, para- 24. It is important not to lose sight of two graphs 13 and 16. simple points of reference. It is common

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25. Before considering the issue in the light of the scheme, purpose and working of Article 9 of the Sixth Directive, I must dispose of two particular legal arguments advanced by France.

27. Secondly, France relies on two infringe- ment actions about 'advertising services' for the purposes of the second indent of Article 9(2)(e) of the Sixth Directive. 18 In these cases, the Court held France and 26. Firstly, France supports its case for a Luxembourg to be in breach of their global approach with the definition of obligations under the Sixth Directive 'waste management' given in the waste because of the exclusion (in the first case, directives: 'the collection, transport, recov- by means of an administrative circular, in ery and disposal of waste, including the the second case by practice) of certain types supervision of such operations and after- care of disposal sites'. 16These operations correspond, no doubt, in whole or in part 17 — Case C-349/96 Card Protection Plan v Commissions of Customs and Excise [1999] ECR I-973 regarding 'insur- ance transactions' in Article 13(B)(a) of the Sixth Direc- tive, interpreted in the light of directives concerning 16 — Article 1(d) of Council Directive 75/442/EEC of 15 July insurance. 1975 on waste (OJ 1975 L 194. p. 39), as amended by 18 — Case C-68/92 Commission v France [19931 ECR I-5881 Council Directive 91/156/EEC of 18 March 1991 amend- and Case C-69/92 Commission v Luxembourg [1993] ing Directive 75/442/EEC on waste (OJ 1991 L 78, p. 32). ECR I-5907 (the 'Advertising services' cases).

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31. At first sight, it seems strange that a 28. Neither the definition of 'waste man- taxable person established in Germany agement' nor the decisions in the Advertis- would have to charge French VAT to its ing services cases are of assistance in German clients for services supplied to determining that central issue. them in Germany. The general rule of Article 9(1) of the Sixth Directive would be entirely displaced. As the Commission has said, this would expose the German final clients of such a taxable person to uncertainty about the rate of VAT to be paid, since the non-applicability of Arti- 29. The essence of the French position is cle 9(1) would depend on whether the that the main contract has to be treated as contract as a whole may be characterised indivisible and as classified by reference to by reference to those of its component its claimed essential character. Thus, elements that constitute 'work on movable although a substantial number of the tangible property'. operations which that contract encom- passes do not relate to 'work on movable tangible property', and are not physically performed in France, the entire of the services which are to be provided there- under should be deemed to be provided in France. 32. The Court had occasion to consider the applicability of the fourth indent of Arti- cle 9(2)(c) of the Sixth Directive in Lin- thorst. 19 There the Court ruled that veter- inary surgeons' care for animals did not constitute 'work on movable tangible prop- 30. Consequently, in France's view, as explained at the hearing, the German main contractor should make a declaration and 19 — Case C-167/95 Linthorst, Pouwels and Scberes v Inspec- teur der Belastingdienst [1997] ECR I-1195 (hereinafter nominate a fiscal representative in France, 'Linthorst').

erty'. That phrase, in its view, 'calls to the present case. These operations are taxed mind, in common parlance, purely physical in France, but not necessarily because of action on movable tangible property which the operation of Article 9(2)(c), since no is, by nature, neither scientific nor intellec- conflict has arisen between the application tual'. 20 Emphasising that 'the principal of Article 9(1) and (2) in that respect. duties of a veterinary surgeon basically consist ... in the provision of therapeutic treatment administered to animals in accor- dance with scientific rules', the Court held that the occasional 'physical action on the animal' which might be necessary was 'not sufficient for it to be described as "work"'. 21 While France cites this decision as authority for its proposition that the 33. The contention of France involves, in collection, grouping, stocking, sorting, sto- any event, for the reasons given at para- rage, treatment, incineration and most graph 31 above, an artificial interpretation recycling operations constitute work on of the main contract. By deeming the main 'movable tangible property', I believe the contractor to provide services which it decision demonstrates, on the contrary, the subcontracts to others to be performed very limited scope of the latter term. 'Purely independently, that interpretation deems it physical action' would not include, in my to be supplying services to itself. Self- view, any of the items listed by France, with supply may, of course, arise by express the possible exception of incineration and provision, in particular via Article 6(2) of recycling. Waste-treatment work is not, as the Sixth Directive. However, where there the Commission aptly points out, the are, in fact, two taxable persons involved, subject of any specific Article 9(2) heading. there is no basis for it. It ignores that Linthorst, moreover, gives no support for a autonomy of the supplies of services in the global approach to the allocation of con- distribution chain which is central to the tracts between Article 9(1) and (2). In the VAT system. result, some only of the operations involved in waste treatment come within the scope of Article 9(2)(c). Presumably they are part of the work performed by the subcontrac- tors involved in the contracts underlying

would be achieved in a way consistent with the deduction system which operates within the supposition, underlying its approach, of a single Member State. The adoption of a a 'global' interpretation of the main con- different approach where two Member tract based on its essential characteristic. I States are concerned would complicate believe that the Commission's fears of the rather than simplify the system. The prin- dangers of double taxation are thus well cipal service provider (the main contractor founded. The main contractor provides a in this case) would, as the Commission has comprehensive waste-treatment service to said, be required to establish an artificial or its German clients and, being established in fictitious establishment in a second Mem- that Member State, is ordinarily bound to ber State. pay VAT there. France's reliance on Genius Holdings 22 for the proposition that 'Mem- ber States [should] provide ... for the pos- sibility of correcting any tax improperly invoiced where the person who issued the invoice acted in good faith' is misplaced. That dictum concerns only the special circumstance there described, namely the effects of incorrect invoices. It is not a substitute for the correct application of 36. In the result, I believe that France is Article 9 of the Sixth Directive. clearly incorrect in refusing to make refunds in accordance with the Eighth Directive. Its refusal is based on a mistaken interpretation of the fourth indent of Arti- cle 9(2)(c).

(2) Order the French Republic to pay the costs of the present action.

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