C-23/98
ECLI:EU:C:1999:259
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HEERMA
OPINION OF ADVOCATE GENERAL COSMAS delivered on 20 May 1999 *
I — Introduction II — Legal framework
2. The scope of the common system of VAT introduced by the Sixth Directive is defined by Article 2 of the directive as follows:
'The following shall be subject to value added tax: 1. By this reference for a preliminary ruling made under Article 177 of the EC Treaty (now Article 234 EC), the Hoge Raad der Nederlanden (Supreme Court of the Neth- erlands) has referred to the Court a ques- 1. the supply of goods or services effected tion on the interpretation of Article 4(1) of for consideration within the territory of the Sixth Council Directive 77/388/EEC of the country by a taxable person acting 17 May 1977 on the harmonisation of the as such; laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment ('the Sixth Directive'). 1 Specifically, the Court is requested to interpret that provi- 2. the importation of goods.' sion in order to decide whether the letting of immovable property by a partner to the partnership of which he is a member constitutes an economic activity which is carried out 'independently', so that the partner in question, whose sole economic 3. Article 4 of the Sixth Directive, in Title activity is that letting, may be classified as a IV headed 'Taxable Persons', provides as taxable person with respect to value added follows: tax ('VAT') as defined by the Sixth Direc- tive.
* Original language: Greek. '1. "Taxable person" shall mean any per- 1 — OJ 1977 L 145, p. 1. son who independently carries out in any
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place any economic activity specified in Subject to the consultations provided for in paragraph 2, whatever the purpose or Article 29, each Member State may treat as results of that activity. 2 a single taxable person persons established in the territory of the country who, while legally independent, are closely bound to one another by financial, economic and organisational links.
2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. 5. ...' The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activ- ity.
4. Article 13B(b) of the Sixth Directive provides that the leasing or letting of immovable property is in principle exempt from VAT. However, under Article 13C(a) Member States may allow taxpayers a right of option for taxation in such cases. 3. ...
As the Commission 3and the Netherlands 4. The use of the word "independently" in Government 4 point out, Netherlands law, paragraph 1 shall exclude employed and in accordance with the abovementioned other persons from the tax in so far as they provisions of the Sixth Directive, provides are bound to an employer by a contract of for the possibility of opting for taxation employment or by any other legal ties where immovable property is let, as is the creating the relationship of employer and case in the main proceedings. employee as regards working conditions, remuneration and the employer's liability. 3 — See paragraph 1 of its written observations. 4 — In paragraph 5 of its written observations the Netherlands Government refers to the provisions of Article 11(1)(b) of 2 —This footnote concerns only the Greek version of the the 1968 Wet op de Omzetbelasting (Law on Turnover Tax), Opinion. which is also mentioned in the order for reference.
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III — Facts That request was refused by the tax inspec- tor on 14 October 1994. The administra- tive objection entered against that decision was likewise rejected by the inspector.
5. Mr J. Heerma, who lived in Welsrijp, had a farming business. As from 1 January 1994 he and his wife formed the partner- ship J. Heerma/K. Heerma-Graanstra ('the partnership'), established in Welsrijp, into which he brought the movable assets of his farming business together with the financial value of the other assets of that business. Mr Heerma brought an appeal against the latter decision before the Gerechtshof te Leeuwarden (Regional Court of Appeal, Leeuwarden), Netherlands which set aside both that decision and the original decision refusing the request and held that the lease of the cattle shed granted by Mr Heerma from 1 November 1994 was not exempt 6. Around June 1994 Mr Heerma began from turnover tax. the construction of a cattle shed. On 18 November 1994 Mr Heerma and the partnership entered into a lease of the cattle shed for a term of six years, commencing on 1 November 1994, at an annual rent of NLG 12 000. As the Netherlands Govern- ment states, that lease was approved on 23 December 1994 by the competent Chamber of Agriculture (Grondkamer voor Friesland). 8. In particular, the Gerechtshof found in its judgment of 4 October 1996 that, having regard to the circumstances, the case of Mr Heerma and the cattle shed was one where an entrepreneur was exploiting certain of his assets in order to obtain income from them on a continuing basis, as provided for in Article 7 of the 1968 Law 7. According to the referring court, on on Turnover Tax. It was to be noted that 15 August 1994 Mr Heerma and the part- the lease was not affected by the fact that nership lodged a joint request with the tax the lessor was a partner in the partnership inspector, in connection with the above- which constituted the lessee; there was mentioned lease, to be excluded, under nothing in Mr Heerma's connection with Article 11(1)(b)(5) of the 1968 Law on the partnership to prevent him from parti- Turnover Tax (1994 version), from the cipating in economic life by means of the exemption from turnover tax. letting at issue.
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9. An appeal on a point of law against the meaning of Article 4(2) of the Sixth Direc- decision of the Gerechtshof was brought by tive, since the Gerechtshof had held — and the Staatssecretaris van Financiën (State this was not being challenged on appeal — Secretary for Finance). He submitted that that the purpose of the letting was to obtain the letting of the immovable asset in fact income on a continuing basis. represented the renting of a person's own business assets, that Mr Heerma restricted his activities to the letting of the immovable asset to the partnership, making it a case of transacting within a closed circuit, and that all those factors together meant that there 12. However, the Hoge Raad noted that was no participation in economic life and the plea on appeal raised the question thus no business relationship. whether Article 4(1) must be interpreted as meaning that, in a case such as that at issue here, having regard to the connection between lessor and lessee, the letting of immovable property is to be regarded as an independent economic activity, or that there is no such independence. In the latter case, that could mean that the partner who is the lessor must be identified with the partnership so that there would be only one 10. The Hoge Raad der Nederlanden taxable person within the meaning of that found, first, that the partnership, a combi- provision of the Sixth Directive. nation of natural persons, which lacked legal personality but possessed de facto collective autonomy, carried on economic activities independently and on that ground was to be deemed a taxable person within the meaning of Article 4 of the Sixth Directive. IV — The question referred for a prelimin- ary ruling
13. On the basis of the foregoing consid- erations in its judgment, the Hoge Raad referred the following question to the Court 11. The Hoge Raad then stated that, hav- of Justice for a preliminary ruling pursuant ing regard to the judgment of the Court of to Article 177 of the EC Treaty: Justice in Enkier, 5the letting of an immo- vable asset as described above was to be regarded as an economic activity within the
5 — Case C-230/94 Enkler v Finanzamt Homburg [1996] ECR 'Is Article 4(1) of the Sixth Directive to be I-4517. interpreted as meaning that, where a per- I-424
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son's sole economic activity consists in the such as that at issue in the main proceed- letting of tangible property to the partner- ings, which, although without legal person- ship of which he is a member, that letting, ality, possesses, as an association of natural whilst being an economic activity, cannot persons, de facto collective autonomy, can be regarded as an independent activity, for independently carry out economic activities the reason that the partner and the partner- and, therefore, can be deemed a taxable ship must together be deemed to constitute person within the meaning of Article 4 of a single taxable person within the meaning the Sixth Directive. of Article 4(1)?'
V — Reply to the question referred for a preliminary ruling
As the Commission rightly observes, this position under Netherlands law does not 14. By its question the referring court is conflict with the letter and spirit of the asking the Court of Justice to decide Sixth Directive. First, under Article 4(1) of whether, in the case where a partner in a the Sixth Directive a taxable person is 'any partnership lets a tangible asset to the person' who independently carries out the partnership, the letting constitutes an eco- economic activities specified in that article. nomic activity which is carried out 'inde- Second, in accordance with the aim of the pendently' within the meaning of Article 4 Sixth Directive of ensuring greater fiscal of the Sixth Directive, allowing both the neutrality by means of a broad definition of partnership and the partner who is the the term 'taxable person', the Court of lessor to be regarded as taxable persons, or Justice has repeatedly maintained in its whether, in the abovementioned case, the case-law that Article 4 of the directive has a partner and the partnership are equated very wide scope. 6 In general, the particular with each other, with the result that the legal form in which a given person exists activity is not carried out independently does not by itself affect whether that person and, consequently, that there must be may be deemed a 'taxable person'. In considered to be essentially only one tax- particular, therefore, the possession of legal able person. personality is not a sine qua non for the classification of an association of persons as a ' t a x a b l e person'. W h e r e , under national law, an association of persons lacking legal personality can, in practice,
15. It should first be noted that, as the referring court and the Commission point 6 — See, for e x a m p l e ,the judgment in Case- C-186/89 Van Tiem v Staatssecretaris van Financien [1990] ECR I-4363, out, under Netherlands law a partnership, paragraph 17.
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carry out economic activities which are a continuing basis', 9has held that 'the subject to VAT in accordance with the hiring out of tangible property constitutes provisions of Article 4 of the Sixth Direc- exploitation of such property which must tive, it may, from the point of view of the be classified as an "economic activity" VAT system, be deemed a 'taxable person' within the meaning of Article 4(2) of the in exactly the same way as any person Sixth Directive if it is done for the purpose possessing legal personality. of obtaining income therefrom on a con- tinuing basis'. 10 In order for it to be determined whether, in a given instance, the hiring out of tangible property is carried on with a view to obtaining income on a continuing basis, the Court has held that 'it is for the national court to evaluate all the circumstances of the particular case' 11 and, in particular, to examine the nature of the property and the circum-
16. It should also be noted that, rightly, stances in which it is used. 12 neither the referring court nor any of the parties involved has disputed the 'economic nature' of the letting of the immovable asset by Mr Heerma to the partnership of 9 — As stated in paragraph 18 of the judgment in Van Tiem, which he is a member. cited in footnote 6, 'in accordance with the requirements of the principle that the common system of value added tax should be neutral, the term "exploitation" refers to all transactions, whatever may be their legal form, by which it is sought to obtain income from the goods in question on a continuing basis'. As regards the necessity of examining whether the activity in question is carried out with a certain degree of permanence and continuity, see point 15 of my Opinion in Enkler, cited in footnote 5. Thus, according to the case-law of the Court, activities which do not constitute economic activities conferring on the person w h o carries them out the status of a taxable erson include 'the mere acquisition of ownership in and the Eolding of bonds, activities which are not subservient to any other business activity, and the receipt of income there-
from. . .' (see the judgment in Case C-80/95 Harnas & Helm v Staatssecretaris van Financiën [1997] ECR I-745, para- The Court, which adopts a very wide graph 20), and also the mere acquisition and holding of shares in a company: T h e mere acquisition of financial interpretation of 'economic activity' and holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining 'exploitation of tangible or intangible prop- income therefrom on a continuing basis because any erty' 7 in Article 4 of the Sixth Directive, 8 dividend yielded by that holding is merely the result of ownership of the property' (see the judgment in Case provided that they are carried out 'for the C-60/90 Polysar Investments Netherlands [1991] ECR I-3111, paragraph 13).
The Court has also held that, since purpose of obtaining income therefrom on the receipt ofdividends does not constitute consideration for any economic activity within the meaning of the Sixth Directive, it does not fall within the scope of VAT (see the judgment in Case C-333/91 Sofitam [1993] ECR I-3513, paragraph 13). 7 — See paragraph 17 of the judgment in Van Tiem, cited in footnote 6, where the Court held that 'Article 4 of the Sixth 10 — See paragraphs 21 and 22 of Enkler, cited in footnote 5. Directive confers a very wide scope on value added tax, The Court has also held: 'The grant by an owner of comprising all stages of production, distribution and the immovable property to a third party of a building right provision of services.' over that property must be deemed to be an exploitation of the property if that right is granted in return for a 8 — On the connection between these expressions, and in consideration for a specified period.
That condition must particular the fact that the 'exploitation of tangible or be deemed to be satisfied when, as is the case in the main intangible property' as referred to in the second sentence of proceedings, the building rights are granted for a period of Article 4(2) of the Sixth Directive is not an exception but a 18 years in return for an annual consideration' (see Van particular embodiment of an 'economic activity' as referred Tiem, cited in footnote 6, paragraph 19). to in the first sentence of that paragraph, see paragraph 22 of the judgment in Enkler, cited in footnote 5, and 11 — See Enkler, cited in footnote 5, paragraph 30. points 12, 13 and 14 of my Opinion in that case. 12 — See Enkler, cited in footnote 5, paragraphs 23 to 29.
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In the present case, since, as the referring cumstances in which that activity is carried court states, the national court which had out; second, in so far as the 'independent' jurisdiction to evaluate the issues of fact exercise of the economic activity is a (namely the Gerechtshof te Leeuwarden, precondition for the classification of a whose findings of fact, as mentioned in the person as a 'taxable person', the purpose order for reference, are not subject to or results of that activity are irrelevant to review in the appeal on a point of law the import of the term 'independently', as before the referring court) held that the they are to that of the more general concept letting at issue in the main proceedings of a 'taxable person'; 1 3third, in accor- took place with a view to obtaining income dance with the aim of the Sixth Directive of on a continuing basis, it must be accepted ensuring greater fiscal neutrality, the con- that that letting of a cattle shed, which was cept of the 'independent' exercise of an agreed for a term of six years at an annual economic activity can be given a broad rent of NLG 12 000, is rightly regarded by interpretation, like the more general con- the referring court and all the parties cept of a 'taxable person'. 14 involved as an economic activity within the meaning of Article 4(2) of the Sixth Directive.
17. It follows from the foregoing consid- erations that, in the present case, the decisive question is in fact whether the economic activity concerned is carried out 19. The requirement for a broad interpre- 'independently' in accordance with the tation also follows from Article 4(4) of the meaning of that word in Article 4 of the Sixth Directive, which seeks to define Sixth Directive. negatively the meaning of the word 'inde- pendently' as used in Article 4(1). Specifi- cally, Article 4(4) provides for a case where legal independence is precluded (in the first subparagraph) and then for a case where two persons who, while legally indepen- dent, are closely bound to one another by financial, economic and organisational 18. In Article 4(1) of the Sixth Directive, links may by way of exception be treated the word 'independently' is used without as a single taxable person (in the second further definition. However, the following subparagraph). points must be accepted: first, judging by the wording of the paragraph as a whole, 'independence' does not describe at a 13 — See also, ID this connection, Enkler, cited in footnote 5, paragraph 25: '... as Article-1(1) of the Sixth Directive general level the legal regime or the occu- makes clear, the purpose or results of the activity are irrelevant as such for the purposes of determining the pation of the person carrying out an scope of the Sixth Directive'. economic activity, but the particular cir- 14 — See point 15 above.
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20. In view of the above, before analysing legal tie 'creating the relationship of the economic activity at issue in the main employer and employee as regards working proceedings on the basis of general obser- conditions, remuneration and the employ- vations regarding Article 4(1) of the Sixth er's liability'. The only question which Directive, it should be examined whether could be considered in this connection is, that activity might fall within the scope of therefore, whether in the case in point the the two subparagraphs of Article 4(4). lease between a partner in a partnership and that partnership constitutes a legal relationship which in any event creates ties of dependence of a strength similar to those created by an employment relationship between a person and his employer. 16
2 1 . In the first subparagraph of Article 4(4) of the Sixth Directive, the word 'indepen- dently' is defined negatively as excluding 'employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employ- 16 — In relation to the definition of those ties, see the judgment er's liability'. 15 in Case C-202/90 Ayuntamiento de Sevilla [1991] ECR I-4247, which concerned activities such as those of tax collectors entrusted with the collection of local taxes in
Spain. In that judgment the Court held as follows: (i) with regard to working conditions, there is no relationship of employer and employee where the person w h o carries out the economic activity procures and organises indepen- dently, within the limits laid down by law, the staff and the equipment and materials necessary for him to carry out his activities (paragraph 11); (ii) with regard to remuneration, there is no relationship of employer and employee where the person concerned Dears the economic risk entailed in his activity; and (in) the decisive criterion is the liability arising from the contractual relations entered into by the person concerned Ín the course of his activity and his liability for any damage to third parties.
Thus, as also pointed out by Advocate General Tesauro in his Opinion in It is clear that a partner in a partnership that case, 'an independent worker is one w h o does not form part of the organisation of an undertaking, who has who lets an immovable asset to the partner- sufficient freedom to organise the human and material resources necessary for the activity in question to be ship is not an employee, nor is that letting a carried out and who bears the economic risk of that activity' (point 6). See also the judgment in Case 235/85 Commission v Netherlands [1987] ECR 1471, paragraph 14: 'Notaries 15 — T h e Second Council Directive (67/228/EEC) of 11 April and bailiffs.
. . are not bound to the public authorities as 1967 on the harmonisation of legislation of Member States employees since they are not integrated into the public concerning turnover taxes — Structure and procedures for administration. They carry out their activities on their own application of the common system of value added tax (OJ, account and on their own responsibility; they are free, English Special Edition 1967, p. 16; 'the second Directive') subject to certain limits imposed by statute, to arrange how provided, in Annex A, under point 2 headed 'Regarding they shall perform their work and they themselves receive Article 4 ' (first sentence of the fourth paragraph): 'The the emoluments which make up their income.
The fact that expression "independently" is intended in particular to they are subject to disciplinary control under the super- exclude from taxation wage-earners who are bound to vision of the public authorities (a situation to be found in their employer by a contract of service'. other regulated professions) and the fact that their It should be noted that in the Sixth Directive the phrase 'in remuneration is determined by statute are not sufficient particular' no longer appears, but in my view that does not grounds for regarding them as persons who are bound by mean that the specific negative definition of the word legal ties to an employer within the meaning of Arti- 'independently' has ceased being indicative. cle 4(4)'.
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Irrespective of whether or not any such to say, within the contractual letting rela- application by analogy of the provision tionship, 18 ties of legal dependence within concerned to the case of a tenancy agree- the meaning of the first subparagraph of ment is legitimate, 17 it is also clear that, as Article 4(4) of the Sixth Directive. the Commission and the German Govern- ment rightly observe, a lease such as that at issue in the main proceedings does not contain ties of dependence between the contracting parties similar to those inherent in gainful employment or any other legal relationship relating to work which creates ties of dependence as regards working conditions, remuneration and the employ- It thus follows that there can be no er's liability. question of the particular circumstances of the main proceedings falling within the first subparagraph of Article 4(4) of the Sixth Directive.
22. The second subparagraph of Arti- The lease of an immovable asset which is at cle 4(4) of the Sixth Directive provides: issue in the main proceedings seems to 'Subject to the consultations provided for in create a legal relationship under which Mr Article 29, each Member State may treat as Heerma carries out the economic activity of a single taxable person persons established letting on his own account and own in the territory of the country who, while responsibility, does not receive recommen- legally independent, arc closely bound to dations and orders from the partnership one another by financial, economic and which is the lessee and bears the economic organisational links'. 19 The Netherlands risk and liability entailed in the letting. Nor has already complied with the prccondi- do the documents in the case indicate that the partnership relationship connecting the lessor with the lessee creates, in the circum- 18 — As I have stated, the examination as to whether a person carries out an economic aenvuy independently which is stances in which the economic activity conducted for the purpose of determining whether he can under consideration is carried out, that is be classified as a 'taxable person' within tile meaning of the Sixth Directive does not concern generally the legal regime to which he is subiect but relates solely to the particular circumstances in which he carries out the particular activity (see point !8 above). 1 7 — At first siglit, such an application by analogy might he 19 — 'the Second Directive provided in Annex A, under point 2 thought to be incompatible with the tact that the case of headed 'Regarding Article 4' (second sentence of the non-independent pursuit of an economic activity provided fourth paragraph): 'This expression [namely the word for in the first subparagraph of Article 4(4) of the Sixth "independently ' | also makes it possible for each Member Directive must, as an essentially negative definition of the State not to consider as separate taxable persons, hut as concept of a 'taxable person', be interpreted strictly. In my one single taxable person, persons who, although inde- view, however, the application by analogy can legitimately pendent from the legal point of view, are, however, be regarded as an autonomous interpretation of the word organically linked to one another by economic, financial 'independently' used in Article 4( 1 ) of the Sixth Directive, or organisational relationships. Any Member State intend- given that the abovementioned negative definition appears ing to adopt such a system shall enter into the consulta- to he indicative. See footnote 15 above. tions mentioned in Article 16'.
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tions of that article and is entitled to avail pertinent. The fact that the Netherlands itself in general of the possibility provided administration has not invoked the second for by it. 20 subparagraph of Article 4(4) of the Sixth Directive indeed seems to mean that that provision is inapplicable for two reasons: first, because procedurally it is for the Netherlands administration to plead and prove that the preconditions for application According to the Commission, there is no of the exception introduced by that provi- question of that possibility applying here sion are met; and second, because, under for two reasons: first, the partnership has Netherlands law, the treatment of two no legal personality and, hence, no legal persons as a single taxable person for the independence; and second, the Netherlands purposes of VAT liability on the ground administration has not pleaded that there is that they form a single tax unit must be a single taxable person pursuant to the based on a prior formal act of the tax abovementioned provision. inspector and cannot be the result of an a posteriori interpretation of the particular circumstances in which the persons con- cerned carry out an economic activity. 22
As regards the first part of the Commis- sion's comments, lack of legal personality should not, in my view, be relied on as a basis for there being no legal independence in the present case. The fact that, under Netherlands law, the partnership concerned It follows that there can equally be no constitutes an entity possessing the capacity question of the particular circumstances of to conclude a valid lease 21 endows it with the main proceedings falling within the the legal independence needed in order to special exception provided for by the raise on a formally sound basis the question second subparagraph of Article 4(4) of the of possible financial, economic and organi- Sixth Directive. It therefore remains to sational dependence. examine the facts of the main proceedings in the light of the general interpretation of the word 'independently' within the mean- ing of Article 4(1).
The second part of the Commission's comments is, on the other hand, more
20 — See footnote 9 of the Opinion of Advocate General Van Gerven in Polysar, cited above. See also First Report from 23. In connection with that interpretation, the Commission to the Council on the application of the common system of value added tax, C O M (83) 426 final, the Commission, relying on the spirit and 13 September 1983, pp. 10 and 1 1 . In relation to the same possibility under the system laid down by the Second Directive, see the judgment in Joined Cases 181/78 and 229/78 van Paassen v Staatssecretaris 22 — See, for example, A. Boomsma et al. (eds.), in Ernst and van Financiën [1979] ECR 2063. Young, VAT in Europe, Sweet & Maxwell, London 21 — See point 10 above. (1989), p. 146.
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purpose of the exception introduced by the prove tax evasion or avoidance. 25 Further- second subparagraph of Article 4(4) of the more, the referring court has neither asked Sixth Directive, 23 observes, inter alia, that the Court of Justice to examine any such Mr Heerma and the partnership should not issue nor, as the German Government also be classified as a single taxable person observes, provided it with all the facts and because there is no probability of infringe- information regarding national law needed ment or abuse of the provisions of the Sixth for such an examination. 26 Directive with a view to tax evasion or avoidance. 24
It should be recalled that, according to the case-law of the Court, 'it is for the national courts alone, before which the proceedings are pending and which must assume 24. It should be pointed out at the outset responsibility for the judgment to be given, with regard to that observation that the to determine, having regard to the particu- Court does not have at its disposal the lar features of each case, both the need for a evidence needed even to make the negative preliminary ruling to enable them to give determination that there is no such prob- judgment and the relevance of the questions ability, nor does the provision by the Court which they refer to the Court'. 27 of a useful answer to the question referred for a preliminary ruling depend on exam- ining the probability of such infringement or abuse.
It is therefore for the national court, which has a better knowledge of the facts of the case and the details of the Netherlands legislation, to examine in the first place, if necessary referring a question on the matter The order for reference does not indicate to the Court of Justice for a preliminary that the main proceedings involve admin- ruling, whether any issue is raised of abuse, istrative simplification or possible abuse of tax avoidance or tax evasion, affecting the the provisions of the Sixth Directive by Mr Heerma and the partnership; certainly, a relationship between family members or 25 — See, in this connection, the judgment in Case C-63/96 Finanzamt Bergisch Gladbach v Skripalle [1997] ECR between associated persons does not, in I-2847, paragraphs 24, 25 and 26. itself, constitute sufficient evidence to 26 — For example, it is not stated specifically whether the partnership (a farming business) is covered DV the common flat-rate scheme for farmers, and if so, subject to what conditions. 2 7 — See, in particular, the judgments in Case C-67/91 Asocia- 23 — The Commission refers to its statement of reasons for ción Española de Banca Privada [1992] ECR I-4785, Article 4 of its original proposal of 20 June 1973 for the paragraphs 25 and 26; Joined Cases C-332/92, C-333/92 Sixth VAT Directive (Bulletin of the European Commu- and C-335/92 Eurico Italia and Others [1994] ECR I-711, nities, Supplement 11/73, p. 8). It stated there that the paragraph 17; Case C-369/89 Piageme [1991] ECR purpose of being able, by virtue of that provision, to treat I-2971, paragraph 10; Case C-231/89 Gmurzynska-Bscher legally independent undertakings as a single taxable person [1990] ECR I-4003, paragraph 19; Case C-343/90 Lour- was either administrative simplification or the avoidance enço Dias v Director da Alfandega do Porto [1992] ECR of certain abuses (for example, the splitting up of one I-4673, paragraph 15; Case C-62/93 BP Supergas v Greek undertaking among several taxable persons in order to State [1995] ECR I-1883, paragraph 10; and Joined Cases benefit from a special regime). C-422/93, C-423/93 and C-424/93 Zabala Erasun and 24 — See the observations of the Commission, paragraph 16. Others [1995] ECR I-1567, paragraph 14.
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decision regarding whether the economic pendently' would essentially result in a activity at issue is carried out indepen- wide interpretation of that provision. Such dently. 2 8 an interpretation is not, however, consistent with the fact that the provision in question constitutes a negative definition of 'inde- pendently' in Article 4(1) of the Sixth Directive, a word which can be given a broad interpretation. 2 9
25. I am, however, of the opinion, with regard to the foregoing observation of the Commission, that in the context of the general interpretation of the word 'inde- 26. In the context of the general interpre- pendently' within the meaning of Arti- tation of the abovementioned word it is cle 4(1) of the Sixth Directive it would therefore my view that in the main pro- not, in any event, be right to raise the ceedings, on the basis of the meaning of the question of the exception provided for in relevant provisions of the Sixth Directive, it the second subparagraph of Article 4(4) in cannot be denied that the economic activity circumstances not involving the particular of letting the cattle shed is carried out formal and substantive preconditions spe- 'independently' merely on the ground that cified in that subparagraph. First, the fact the lease is granted by a partner in a that the subparagraph concerned, with a partnership to that partnership. view to simplifying administration or avoiding any abuses, leaves it to the discretion of the Member States to decide whether two persons who, while legally independent, are nevertheless closely bound to one another by financial, economic and 27. I am led to this conclusion by the fact organisational links should be treated as a that the lease was concluded between two single taxable person means that under the persons who are not equated with each Sixth Directive the existence of such links other in legal terms. In so far as the two between two persons does not necessarily contracting parties are separate legal enti- and automatically prevent the economic ties possessing, under Netherlands law, the activity which is carried out between them capacity to conclude a valid lease of an from being independent in nature. Second, immovable asset, the legal transaction any introduction of the question of the concluded between them was carried out second subparagraph of Article 4(4) of the in a legally independent manner and in Sixth Directive into the context of the principle reciprocal rights and obligations general interpretation of the word 'inde- were created such as those which would be created between third parties who enter into a contract and are not simultaneously 28 — It is also for the national court to consider the points of linked by a relationship as members of a national law which the Commission mentions in the introductory section of its observations: namely, in what partnership. Furthermore, the fact that M r circumstances acts of a partner are binding on the Heerma concludes an agreement with a partnership of which he is a member and whether the marital property arrangements adopted by M r Heerma and his wife affect the contractual capacity of the parties concerned as regards the immovable asset in question and hence the validity of the lease. 29 — See point 18 above.
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partnership of which he is himself a mem- determine the precise cases in which the ber but within which, as the Netherlands acts of a partner arc deemed, having regard Government itself also points out, he does to the overall structure, to be acts of the not bear sole liability for its contractual partnership and hence are imputed to it, the obligations, does not justify the view that, partnership tie which exists in the present in letting the cattle shed to the partnership, case does not seem to affect the lease which he is in fact renting his own assets. was entered into in such a way that the letting of the immovable asset cannot be regarded as legally independent of the lessor's capacity as a partner of the lessee.
28. Correspondingly, as the Commission mentions, any natural person has the right to set up partnerships or legal persons and there is nothing to prevent those natural 30. Conversely, the activity of letting the persons, partnerships or legal persons from immovable asset in question to the partner- supplying goods or services to the associ- ship cannot, as a matter of principle, be ated persons and simultaneously being equated to a contribution made by Mr classified as taxable persons with respect Heerma to the partnership in the context of to VAT. This observation also follows the partnership relationship. In letting the indirectly from the grounds of the judgment cattle shed at an agreed annual rent of in Skripalle, 30 where the C o u r t , by NLG 12 000 Mr Heerma is exploiting that- acknowledging that a relationship between immovable asset with a view to obtaining family members or between associated income from it on a continuing basis. persons is not, in itself, sufficient to prove Consequently, as any third party might tax evasion or avoidance, seems to accept a do, he is effecting a supply to the partner- fortiori that such a relationship can in ship for consideration within the meaning principle be subject to VAT. of Article 2 of the Sixth Directive, not a supply which is counterbalanced by parti- cipation in the profits and losses of that partnership.
29. Furthermore, in acting as the lessor of a n i m m o v a b l e a s s e t of h i s o w n , Mr Heerma is carrying out an activity which clearly has no connection with the management or representation of the part- 31. Accordingly, the combined presence of nership of which he is a member, inasmuch a lease and capacity as a partner, as in the as he is acting as lessor in his own name main proceedings, does not seem, as a and not as an organ of the partnership. 31 matter of principle, to make it necessary to Therefore, although it is for the national conclude that the letting in question, whilst court, which has a better knowledge of the being an economic activity, is not an national law and the facts of the case, to independent activity and that the partner who is the lessor and the partnership which is the lessee must therefore together be 30 — Cited in footnote 25. deemed to constitute a single taxable 31 — Sec also, in this connection, point 6 of the Opinion of person within the meaning of Article 4(1) Advocate General Van Gerven in Polysar, cited in footnote 9. of the Sixth Directive.
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OPINION OF MR COSMAS — CASE C-23/98
VI — Conclusion
32. In view of the foregoing considerations, I would propose that the Court reply to the question referred to it for a preliminary ruling by the Hoge Raad der Nederlanden as follows:
On a proper construction of Article 4(1) of 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, the fact that a person's sole economic activity consists in the letting of tangible property to the partnership of which he is a member does not, in itself, mean that that letting, whilst being an economic activity, is regarded as not being an independent activity and that the partner and the partnership must, in consequence, together be deemed to constitute a single taxable person within the meaning of Article 4(1).
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