C-276/98
ECLI:EU:C:2000:645
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OPINION OF MR JACOBS — CASE C-276/98
OPINION OF ADVOCATE GENERAL JACOBS delivered on 23 November 2000 1
1. In these proceedings brought pursuant to The relevant legislative provisions Article 169 of the EC Treaty (now Arti- cle 226 EC), the Commission seeks a declaration that by introducing or main- taining in force a reduced rate of 5% applicable to the products listed in points 1.8, 2.11, 2.19 and 3.8 of List I annexed to the Portuguese VAT Code, including respectively wine, machinery Community provisions and equipment for alternative energy research, tolls charged on passage of the road bridge over the Tagus and, finally, agricultural tools and equipment, the Por- tuguese Republic has infringed Articles 12 and 28(2) of the Sixth VAT Directive2 2. Under Article 2 of the Sixth Directive, a (hereinafter 'the Sixth Directive') as amen- supply of goods or services effected for ded by Directive 92/77. 3 consideration by a taxable person acting as such is to be subject to VAT. According to Article 4(1), a taxable person is a person who carries out an economic activity, whatever the purpose or result of that activity. Economic activities include, under Article 4(2), the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continu- ing basis. The first subparagraph of Arti- cle 6(1) defines a supply of services as 'any transaction which does not constitute a supply of goods'.
1 — Original language: English. 2 — 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, OJ 1977 L 145, p. 1. 3 — Council Directive 92/77/EEC of 19 October 1992 supple- 3. Article 12(3)(a) of the Sixth Directive, as menting the common system of value added tax and amended by Directive 92/77, lays down the amending Directive 77/388/EEC (approximation of VAT rates), OJ 1992 L 316, p. 1. general rule that:
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'From 1 January 1993 Member States shall transitional period referred to in Arti- apply a standard rate which, until cle 28 1. 31 December 1996, may not be less than 15%. 4
(e) Member States which at 1 January 1991 applied a reduced rate to supplies of goods and services other than those Member States may also apply either one specified in Annex H may apply the or two reduced rates. The reduced rates reduced rate or one of the two reduced may not be less than 5% and shall only rates provided for in Article 12(3) to apply to supplies of the categories of goods such supplies, provided that the rate is and services specified in Annex H.' not lower than 12%.'
4. By way of exception, Article 28(2) of the 5. Article 4(5) of the Sixth Directive con- Sixth Directive, again as amended by tains rules on goods and services provided Directive 92/77, provides that: by public authorities. It reads as follows:
'Notwithstanding Article 12(3), the fol- 'States, regional and local government lowing provisions shall apply during the authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or 4 — In the version currently in force, Article 12(3)(a) provides transactions in which they engage as public that 'The standard rate of value added tax shall he fixed by each Member State as a percentage of the taxable amount authorities, even where they collect dues, and shall be the same for the supply of goods and for the fees, contributions or payments in connec- supply of services. From 1 January 1999 to 31 December 2000, this percentage may not be less than 15%.' tion with these activities or transactions.
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However, when they engage in such activ- 7. List I of the Portuguese VAT Code ities or transactions, they shall be consid- includes the following items of relevance ered taxable persons in respect of these for these proceedings: activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.
'1.8 Regular wine.
In any case, these bodies shall be consid- ered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible.
2.11 Appliances, machinery and other equipment designed exclusively or mainly for the following purposes:
Member States may consider activities of these bodies which are exempt under Article 13 or 28 as activities which they engage in as public authorities.' (a) Collection and use of solar energy, wind energy, or geothermal energy;
(b) Collection and use of other forms of alternative energy; National provisions
(c) Production of energy by the incinera- 6. Under Article 18(1) of the Portuguese tion or modification of detritus, gar- VAT Code, as approved by Decree No 394- bage, and other waste; B/84 of 26 December 1984 and amended by Law No 2/92 of 9 March 1992 and Law No 39-B/94 of 27 December 1994, the 'imports, transfers of goods, and supplies of services mentioned in List I, annexed to (d) Exploration of and search for oil and/ this legislative text, are subject to a VAT of or development of the discovery of oil 5%'. and natural gas;
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(e) Avoidance or reduction, by measuring Procedure and controls, of any form of pollution.
9. Taking the view that points 1.8, 2.11, 2.19 and 3.8 of List I, combined with Article 18(1) of the Portuguese VAT Code, were contrary to the Sixth Directive, the Commission sent, on 10 April 1996, a letter of formal notice in which it invited the Portuguese Government to present its observations within a period of two months. The Portuguese Government replied by two letters dated 2 July 1996 2.19 Tolls charged on passage of the Tagus and 20 November 1996. In those letters, it Bridge in Lisbon. informed the Commission of its plans to raise, during the budgetary year of 1997, the rate of VAT to 12% for those transac- tions which fell outside Annex H of the Sixth Directive and which were at that time subject to a rate of 5%. However, it mentioned that those plans might be diffi- cult to implement owing to the great economic significance for Portuguese society of the rate of VAT and the absence of a stable majority in the Portuguese parliament.
3.8 Agricultural tools and utensils, mobile silos, garden tractors, power pumps, elec- tric pumps, tractors, and other machinery and equipment designed exclusively or mainly for the purpose of agriculture, 10. Having found the Portuguese replies stockrearing, or forestry.' unsatisfactory, the Commission issued, on 10 June 1997, a reasoned opinion pursuant to Article 169(1) of the EC Treaty (now Article 226(1) EC) calling on Portugal to take the necessary measures to comply within a period of two months. The Portuguese Government replied to that opinion by two letters dated 14 August 8. None of the goods or services listed in 1997 and 10 March 1998. In its replies, the points 1.8, 2.11, 2.19, or 3.8 fall within the Portuguese Government assured the Com- transactions specified in Annex H of the mission of its intention to seek to increase Sixth Directive. the rate of VAT in the next budgetary law,
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but it added that the political situation that the reduced rate may not be less than might impede the adoption of that measure 12%. By applying a rate of only 5%, and that the VAT rate applicable to wine Portugal has acted contrary to Arti- was in fact likely to remain unchanged. cle 12(3)(a) and Article 28(2) of the Sixth Directive and failed to fulfil its obligations under the Treaty.
11. In the light of those replies, the Com- mission lodged this application with the Court on 20 July 1998.
14. The Portuguese Government does not deny that Article 18 of the VAT Code is contrary to the Sixth Directive in so far as it applies a VAT rate of 5% rather than 12% to the transactions in points 1.8, 2.11 and Analysis 3.8 of List I. However, it states that it will soon take steps to resolve the problem and that its failure to comply with the Directive is due to the absence of a parliamentary 12. There are two aspects of the Commis- majority in favour of raising the rate of sion's claim, which must be examined VAT as required by the Sixth Directive. separately: the rate of VAT applied to the goods mentioned in points 1.8, 2.11 and 3.8 of List I, and the rate of VAT on the bridge toll mentioned in point 2.19 of List I.
15. It is settled case-law that the Court of Justice cannot in infringement proceedings take into account action taken by a Mem- ber State after the expiry of the time-limit laid down in the reasoned opinion,5 and The rate of VAT on certain goods that a Member State cannot rely on provi- sions, practices or circumstances related to its own internal legal order as an excuse for its failure to implement a directive within 13. The Commission points out that at the prescribed time-limit. 6 1 January 1991 the transactions listed in points 1.8, 2.11, and 3.8 were subject to a reduced rate of VAT. Portugal is therefore 5 — See Case 291/84 Commission v Netherlands [1987] ECR entitled to apply a reduced rate of VAT to 3483, paragraph 15 of the judgment; Case 240/86 Commis- sion v Greece [1988] ECR 1835, paragraph 14; and Case those transactions under Article 12(3)(a) C-71/97 Commission v Spain [1998] ECR I-5991, para- graph 18. and Article 28(2) of the Sixth Directive. 6 — See, most recently, Case C-236/99 Commission v Belgium, However, it follows from those provisions ECR I-5657, judgment of 6 July 2000, paragraph 23.
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16. The Commission's claim should there- because it consists in the performance of fore be upheld in relation to points 1.8, acts falling within the prerogatives of the 2.11 and 3.8 of List I. public authority'. 9As regards the second condition, the Court held that activities pursued as public authorities are those which are 'engaged in by bodies governed by public law under the special legal regime which is applicable to them and do not include activities pursued by them under the same legal conditions as those that The rate of VAT on the toll charged on apply to private traders'. 10 passage of the Tagus Bridge
17. The lawfulness of the rate of VAT 19. At the hearing, the Commission and the applied to the Tagus Bridge toll falls to be Portuguese Government appeared to accept considered in the light of Article 4(5) of the that the body which is responsible for Sixth Directive and the recent judgments of providing access to the Tagus Bridge is a the Court of Justice in a group of cases body subject to public law acting in this concerning that provision. 7 context as a public authority within the meaning of Article 4(5), but to consider that that provision was an optional excep- tion to the general principle that all sup- plies of goods and services are subject to VAT. 18. In those cases, the Court of Justice held that the first subparagraph of Article 4(5) 8 applies to tolls charged on the use of infrastructure installations such as roads and bridges if two conditions are fulfilled. 20. Article 4(5) provides that the bodies to First, the provision of the installation must which it applies 'shall not be considered be an activity carried out by a body taxable persons'. Contrary to the position governed by public law. Secondly, the body taken by the parties at the hearing, that must be acting as a public authority when wording clearly indicates that Article 4(5) providing that activity. As regards the first is a mandatory provision rather than an condition, the Court held that 'an activity optional exception. 1 1Article 4(5) does not carried on by a private individual is not grant the Member States the freedom to excluded from the scope of VAT merely
9 — Commission v United Kingdom, cited in note 7, paragraph 7 — Judgments of 12 September 2000 in Case C-359/97 Com- 55 of the judgment citing Case C-202/90 Ayuntamiento de mission v United Kingdom ECR I-6355, Case C-276/97 Sevilla [1991] ECR I-4247, paragraph 19. Commission v France ECR I-6251, Case C-358/97 Com- 10—Commission v United Kingdom, paragraph 50 of the mission v Ireland ECR I-6301, Case C-408/97 Commission judgment. v Netherlands ECR I-6417 and Case C-260/98 Commission 11 — See similarly the Opinion of Advocate General Mischo in v Greece ECR I-6417. See also the Opinion of Advocate Joined Cases 231/87 and 129/88 Ufficio distrettuale delle General Alher of 29 June 2000 in Case C-446/98 Fazienda imposte dirette di Fiorenzuola d'Arda and Others v Pública v Gâmara Municipal do Porto. Comune di Carpaneto Piacentmo and Others [1989] 8 — Sec text at paragraph 5 above. ECR 3233, paragraph 12.
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choose whether to apply the normal VAT for providing access to the two bridges over rules to the transactions covered by that the Tagus in Lisbon. provision, to apply one of the reduced rates mentioned in Article 28, or to apply any other rate of VAT. Transactions covered by Article 4(5) are not subject to VAT.
22. It follows, in my view, that Point 2.19 of List I, annexed to the Portuguese VAT Code, is contrary to Article 4(5) of the Sixth Directive in so far as it applies a VAT rate of 5% to the tolls charged on passage of the Tagus Bridge.
21. The only exception to that rule, apart from the transactions listed in Annex D which are not in point here, is where treatment of the public authority as a non-taxable person 'would lead to signifi- cant distortions of competition'. 12 There is however no evidence that the treatment of 23. However, it is well established that, in the body responsible for providing access to infringement proceedings, the Court cannot the Tagus Bridge as a non-taxable person find an infringement different from that in would entail significant distortions of com- respect of which a declaration is sought. 13 petition. According to the Portuguese Gov- In this case, the Commission alleged in its ernment's statements at the hearing, there reasoned opinion and in its application that are two road bridges over the river Tagus. Portugal had failed to fulfil its obligation The access to both of those bridges is under the Treaty by charging a lower rate provided by public bodies. The toll — and of VAT than what is required by Articles 12 the rate of VAT applied to the toll — on and 28(2) of the Sixth Directive. It did not the two bridges is the same. Neither the toll allege a breach of Article 4(5) of the Sixth nor the rate of VAT is determined freely by Directive. the bodies responsible for providing access. The rate of VAT is determined by law; the toll is determined by the Portuguese Gov- ernment in the context of a contract which grants the relevant public body a conces- sion to handle, manage, and maintain the Tagus bridge. On the basis of those state- ments, the correctness of which was not 24. The Commission's claim should there- contested by the Commission at the hear- fore, in my opinion, be rejected in relation ing, it appears that there is no significant to point 2.19 of List I. competition between the bodies responsible
13 — See, for example, Case 7/69 Commission v Italy [1970] ECR 111, paragraph 5 of the judgment; Case C-306/91 12 — Article 4(5) of the Sixth Directive. Commission v Italy [1993] ECR I-2133, paragraph 22.
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Costs ordered to pay the costs if they have been applied for in the successful party's plead- ings. The Commission has succeeded in most of its claims, and has applied for costs. I therefore consider that Portugal 25. Under Article 69 of the Rules of Pro- should be ordered to pay the Commission's cedure, the unsuccessful party is to be costs.
Conclusion
26. In the light of the foregoing observations, I am of the opinion that the Court should:
(1) declare that by introducing or maintaining in force a reduced rate of 5 % applicable to the products listed in points 1.8, 2.11 and 3.8 of List I annexed to the Portuguese VAT Code, including respectively wine, machinery and equipment for alternative energy research, and agricultural tools and equipment, the Portuguese Republic has infringed Articles 12 and 28(2) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisa- tion of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment as amended by Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC;
(2) for the rest, dismiss the application;
(3) order the Portuguese Republic to bear the costs.
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