C-12/98
ECLI:EU:C:1999:160
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AMENGUAL FAR
OPINION OF ADVOCATE GENERAL LA P E R G O L A delivered o n 18 M a r c h 1 9 9 9 *
1. By this reference for a preliminary cle 13B, which is the subject of the refer- ruling, the Audiencia Provincial (Provincial ence for interpretation, provides: Court) of Mallorca has asked the Court to clarify whether Spanish law, by making subject to value added tax (hereinafter 'VAT') as a general rule, the letting or lease of immovable property in which an eco- nomic activity is pursued, has correctly 'Without prejudice to other Community transposed the Sixth Directive of the Coun- provisions, Member States shall exempt the cil on the harmonisation of the laws of the following under conditions which they M e m b e r States r e l a t i n g to t u r n o v e r shall lay down for the purpose of ensuring taxes — Common system of value added the correct and straightforward application tax: uniform basis of assessment ' (herein- of the exemptions and of preventing any after 'the Sixth Directive'). possible evasion, avoidance or abuse:
(a) ...
Community provisions
(b) the leasing or letting of immovable property, excluding:
2. The Sixth Directive introduced under Title x (Articles 13 to 16) a system of exemptions, by which some operations are not taxable and do not allow the deduction of VAT at the preceding stage. Cases of 1. the provision of accommodation, as exemption include, in particular, the leasing defined in the laws of the Member or letting of immovable property. Arti- States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday * Original language: Italian. camps or on sites developed for use as 1 — Council Directive 77/388/KEC of 17 May 1977 (OJ 1977 L 145, p. 1). camping sites;
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2. the letting of premises and sites for ings to be used exclusively for dwelling parking vehicles; purposes'. 2Lettings of business premises are therefore not exempt.
3. lettings of permanently installed equipment and machinery;
Facts of the case
4. hire of safes.
4. The main proceedings before the Audi- encia Provincial, which is the referring Member States may apply further exclu- court, concern the termination, on the sions to the scope of this exemption; ...' ground of failure to pay, of the contract by which Miguel Amengual Far leased business premises to his brother, Juan Amengual Far. At the time of the agree- ment — which was verbal — the parties did not agree specifically on whether the rent should include VAT, payable by the landlord under Spanish tax laws. The order for reference states that the tenant origin- National provisions ally considered that it should not be included. Juan Amengual Far made a first offer of payment which did not include VAT. The landlord did not accept the offer and took action to have him evicted for failure to pay before the Court of First 3. Under Spanish law, the levying of VAT is Instance in Inca. During the proceedings, at present regulated by Law No 37/1992 of the tenant repeated his offer, and also 28 December 1992 which replaced the lodged the sums due in court, but still not previous Law No 20/1985 of 2 August including the VAT. However, he later sent 1985. Under Article 11(2) of Law the sum due for VAT to his brother. No 37/1992, all lettings with or without the option to purchase are liable to the tax. Article 20(23)(a) provides for exemptions 2 — The same Law, however, provides for a series of cases in for lettings for 'building or parts of build- which exemption does not apply.
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In view of the repeated offers to pay, and The questions referred for a preliminary the payments made, even though they were ruling late, the application for termination of the contract was dismissed at the Court of First Instance. The landlord then brought an appeal at the Audiencia Provincial on various grounds, including the fact that 5. The Audiencia Provincial of Mallorca the tenant should have paid the monthly therefore submitted the following ques- rent including VAT in advance. For his part, tions: the defendant disputed the right of the landlord to charge him VAT, which was not specifically requested when the contract was concluded and thus until payment to the tax authorities. '(1)Has the Spanish Law on VAT, by making subject to that tax any letting or lease of immovable property in which an economic activity is pursued, transposed correctly Article 13B of Directive 77/388/EEC?
(2) Should the Court rule that Article 13B of Directive 77/388/EEC has not been correctly transposed, is that Commu- nity provision, in so far as it lays down a general exemption from VAT in respect of leases of immovable prop- erty, directly applicable?' Under Spanish legislation, any taxes pay- able to the tax administration form an integral part of the rent, so that failure to pay them constitutes an automatic ground for termination, without the need for any special notification. Consequently, the Audiencia Provincial considered that it should first of all establish whether VAT The first question was payable on the lease in question: the possibility was raised that Spanish law, which provides for the payment of VAT in respect of all lettings of business premises as a general rule, does not comply with 6. The first question asks whether the Article 13B of the Sixth Directive, which, Spanish Law implementing the Sixth Direc- in the opinion of the referring court, lays tive which subjects to tax any letting of down a general principle of exemption for immovable property in which an economic lettings of immovable property. activity is pursued has correctly transposed
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Article 13B of the Sixth Directive. This actual fact, the Directive allows the States provision exempts the letting and lease of to provide for further exceptions to the immovable property, except in specific exemption cases. situations — relating to the hotel sector, sites for parking vehicles, permanently installed equipment and machinery, and safes — also stating that Member States may 'apply further exclusions to the scope of this exemption'.
This explanation is useful, but it does not eliminate the doubt concerning interpreta- tion. The referring court clearly starts from the presumption that, as stated in the case- law of the Court of Justice, Community law allows Member States to establish further exceptions in addition to those 7. The Spanish Government, which inter- specifically listed in Article 13B. However, vened to argue that the rules of implemen- it states that, under Spanish tax law, the tation comply with the Sixth Directive, subjecting of business lettings to VAT is the observes that the doubt concerning inter- result of the application of a general rule, pretation is in fact caused by an error in the not of an exception to the general principle drafting of the Spanish version of Arti- of exemption laid down in the directive. cle 13B, final subparagraph, of the Sixth Directive, which is worded as follows: 'Los Estados miembros podrán ampliar el ambito de aplicación de esta exención a otros supuestos.' The provision would therefore appear to exclude the power of Member States to limit the scope of the exemptions. However, from a comparison with the other language versions, it is clear that this version is not correct. 3Moreover, as the Agent for the Spanish Government pointed out, a provision which aims to 8. We must therefore ascertain whether extend the scope of a general rule would Spanish law respects the relationship not be meaningless in the tax scheme. In between the rule (of exemption) and excep- tion established by the Council regarding the letting of property. The Commission 3 — For example, the Italian text is as follows: 'Gli Stati membri considers that the choices of the Spanish possono stabilire ulteriori esclusioni al campo di applica- legislator are essentially correct. It notes in zione di tale esenzione'; the French version reads 'Les Etats membres ont la faculté de prévoir des exclusions supplé- particular that the general application of mentaires au champ d'application de cette exonération'; the German version is: 'Die Mitgliedstaaten können weitere VAT to business premises is in agreement Ausnahmen vom Geltungsbereich dieser Befreiung vorse- with the general aspect of VAT, a tax which hen'; finally, the English version reads, 'Member States may apply further exclusions to the scope of this exemption.' is levied on all supplies of goods and I-532
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provisions of services, and whose applica- be construed broadly. This was recently tion is in principle laid down for all stages confirmed in the Blast case. 8 of the production process. The general application also means that the person liable to the tax can recover any tax paid on purchases. 4As already stated by Advo- cate General Darmon in the Lubbock Fine case, a system of value added tax achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all the stages of production and distribution, and the provision of 9. In fact, apart from the provisions under services. 5For this reason, the exemptions, discussion, the directive as a whole allows the Member States a wide margin for which constitute an exception to the gen- assessing the economic situation.
It is eral principle of taxation, are interpreted particularly significant that, even though restrictively. 6This criterion has been con- Article 13B places the letting of immovable sistently followed in the case-law of this property generally amongst the exempt Court. 7 Likewise, therefore, the power of operations, Article 13C allows the Member the Member States to apply exceptions to States to give persons liable to tax the right the exemptions listed in the directive must to opt for taxation in the case of lettings and leases. 9 An observation should be
made here. Even though the power of Member States to derogate from the cases of exemption indicated in the directive is to be defined broadly, in this case, unlike those previously submitted to the Court, it is not a question of analysing a specific case to assess whether it falls within the general 4 — The person liable to tax recovers the tax he pays on purchases by obtaining credit with the State and recovers clause of exemption or within the excep- the tax payable to the State by the right of recovery towards those who purchase his goods and services.
Therefore, the tions; instead, we should assess whether or exemption only benefits the final consumer who purchases not the general category of business pre- the goods or service at a cost to which VAT is not added; it can even by disadvantageous for the person liable to tax mises can be subject to VAT. In my opinion, who carries out exempt operations, as the exempt opera- tions have limitations concerning the right to deduct VAT on purchases. See Tesauro, F., Istituzioni di diritto tributario, Milan, 1995, p. 211. 8 — Case C-346/95 Blasi v Finanzamt München I [1998] ECR 5 — See Opinion in Case C-63/92 Lubbock Fine & Co v I-481, at paragraph 18 (the provision of short-term Commissioners of Customs and Excise [1993] ECR I-6665, accommodation for persons other than friends and family at paragraphs 13 and 15. is considered to be taxable as the provision of accommoda- 6 — As observed by Advocate General Darmon 'there is all the tion). See also Case 173/88 Henriksen [1989] ECR 2763 more reason to construe exemptions restrictively since they (closed garages are included in the concept of 'letting of may disrupt the chain of deductions between taxable premises and sites for parking vehicles', exception to the persons and give rise to a tax burden owing to the fact principle of exemption stated in Article 13B(b)). that tax paid at the preceding stage ("input tax") cannot be 9 — See paragraph 17 of the judgment in Case C-381/97
deducted'. See his Opinion in Case C-63/92 Lubbock Fine, Belgocodex v Belgian State [1998] ECR I-8153: 'the cited above, at paragraph 20. Member States have a wide discretion under Article 13B 7 — In Case 107/84 Commission v Germany [1985] ECR 2655, and C. It is for them to assess whether they should or should at paragraph 20, the Court interpreted Article 13A(a) not introduce the right of option, depending on what they strictly literally, and barred this provision from including consider to be expedient in the situation existing in their services provided by public postal services. The need to country at a give time.' follow a restrictive interpretation is stated generally in Case In addition, regarding a different aspect, the Council has 348/87 Stichting uitvoering Financiële Acties [1989] ECR provided ample possibility for derogating from the provi- 1737, at paragraph 13; see also Case C-185/89 Velker sions in Article 10 concerning the moment when the tax International Oil Company [1990] ECR I-2561, at para- becomes payable. See Case C-144/94 Italittica [1995] ECR
graph 19. I-3653, at paragraph 15.
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we should look at the compatibility of the 10. I now come to the national legislation choices made by the Spanish legislator, under examination. The tax applies to an concerning the general and neutral nature operation which is part of an active pro- of the tax, but also concerning the logic duction process, following the reasoning of followed by the Council in providing for Jacobs. In exercising the power provided and regulating the cases of exemption. The for in Article 13B to establish further directive is intended to be applied uni- exclusions from the scope of the exemption formly throughout the Community and for in relation to the letting of property, the this purpose it establishes a harmonised Spanish legislature therefore legitimately system of exemptions. 10 Therefore, I do subjected to tax the letting of premises not agree with the opinion expressed by the used, in the course of business activity, for Agent for the Spanish Government when he taxable operations. states that the directive allows Member States to derogate from the exemption relating to lettings of property without any limit, if only for the reason that it make the scope of the exemptions derisive. Rather than resorting to quantitative cri- teria, we should consider whether the reasons on the basis of which the Council defined the cases of exemption apply. As The second question Advocate General Jacobs observed in the Blast case, the levying of VAT is not generally justified in regard to the letting of property, which, he stated, 'is normally a passive activity, not entailing significant 11. Given my answer to the first question, added value'. Advocate General Jacobs it is not necessary to answer the second. I concluded in that case that the common shall merely point out that, if the Spanish characteristic of the operations excluded legislation were to be incompatible with the from exemption under Article 13B(1) to (4) directive, according to the known and lies in the fact that they 'entail a more settled case-law of the Court, an individual active exploitation of the immovable prop- could not invoke against another individual erty, justifying further taxation, in addition the provision of the directive not correctly to that levied upon its initial sale'. 11 transposed into national law. 12
10 — As shown in the eleventh recital of the preamble to the directive, it was considered appropriate 'that a common list of exemptions should be drawn up so that the Communities' own resources may be collected in a uni- form manner in all the Member States.' 12 — See, ex mukis, Case 152/84 Marshall [1986] ECR 723, at 11 — Opinion in Case C-346/95 Blasi, cited above, at para- paragraph 4 8 , and most recently Case C-97/96 Daihatsu graphs 15 and 16. Deutschland [1997] ECR I-6843, at paragraph 2 4 .
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Conclusion
12. In view of the foregoing, I therefore propose that the Court answer the questions referred to it by the Audiencia Provincial of Mallorca (Third Chamber) as follows:
The Sixth Directive allows the Member States to extend the scope of the exclusions from the exemptions to cases not provided for, which may include, as in this case, the letting of property as an economic activity.
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