C-446/98

FAZENDA PUBLICA

OPINION OF ADVOCATE GENERAL ALBER delivered on 29 June 2000 *

I — Introduction 98 953 911 against the Câmara Municipal do Porto (Oporto City Council; hereinafter: 'the CMP') for the years 1991 and 1992 and January to April 1993 in respect of income from parking meters and car parks 1. The present proceedings for a prelimin- in the city of Oporto. ary ruling essentially concern the question whether and to what extent parking charges collected by a municipality are subject to VAT.

(b) the letting of areas for the parking of vehicles — whether in the street, with parking meters, or in CMP car parks, whether or not forming part of the public domain — is not an activity 7. In the view of the CMP, the collection of which comes within the specific sphere charges from parking meters and in car of their tasks as public authorities. It parks not under concession is an activity need merely be borne in mind that for intended to regulate parking on the public centuries that was not an activity highway by introducing the levying of coming within the specific sphere of charges and limits on parking times and the tasks of municipal authorities. It is accordingly forms part of public traffic an activity they have engaged in only in policy. This is an activity which the CMP recent years, in competition with pri- engages in pursuant to public law in the vate operators; exercise of its powers and within its terms of reference.

(c) it is not known whether there have been significant distortions of competi- tion, since the Minister of Finance has not said so in this case;

8. The same applies to car parks located on private property of the CMP. The operation of such car parks is merely intended to supervise and regulate traffic and differs greatly from that of car parks operated by (d) it is not known whether that activity of private persons who, as traders, operate the CMP has been carried out to an them solely in pursuit of profit. extent which is negligible ...;

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(e) in transposing the Sixth VAT Directive, (b) the activity is overseen by the munici- the Portuguese State did not regard as pal police; activities engaged in as a public author- ity the letting of areas for the parking of vehicles, nor could it do so since that activity is not exempt from VAT by virtue of Article 13(B)(b)(2) of the Sixth Directive; (c) offenders are recorded and subject to a fine, which is paid under public law, like a charge;

11. In order to be in a position to rule on the taxability of the CMP, the Supremo (d) Will the public authorities always be Tribunal Administrativo referred the fol- regarded as taxable persons provided lowing questions to the Court of Justice for that the activities in which they engage a preliminary ruling: are not negligible, or are they taxable persons only as regards the activities or transactions listed in Annex D, to which the third subparagraph of Art- icle 4(5) of the Sixth Directive refers?

'(a) Does the expression "activities or transactions in which they engage as public authorities" used in the first subparagraph of Article 4(5) of the Sixth VAT Directive cover the letting of spaces for the parking of vehicles (e) May a national law authorise the (both on streets and in car parks) by the Minister of Finance to define, case by public authorities (a municipality)? case, what activities are being engaged in on a negligible scale?

(b) May the significant distortions of com- petition referred to in the second sub- (f) For the purposes of the fourth sub- paragraph of Article 4(5) of the Sixth paragraph of Article 4(5) of the Sixth VAT Directive be defined case by case Directive, may a Member State regard by the Minister of Finance of a Mem- an activity of letting spaces for the ber State? parking of vehicles, when it is carried

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on by a municipality, as an activity in Scope which the municipality engages as a public authority, having regard to the provisions of Article 13 B(b)(2) of the Sixth Directive? 12. Article 2 provides that:

2. The economic activities referred to in In any case, these bodies shall be consid- paragraph 1 shall comprise all activities of ered taxable persons in relation to the producers, traders and persons supplying activities listed in Annex D, provided they services including mining and agricultural are not carried out on such a small scale as activities and activities of the professions. to be negligible. 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.' Member States may consider activities of these bodies which are exempt under Article 13... as activities which they engage in as public authorities.'

Exceptions

Exemptions and exceptions thereto 14. Article 4(5) provides as follows:

3. ...

18. Article 2 ends with paragraph 4, which 4. ... provides as follows:

(c) to (h) ...'

'For the purposes of paragraphs 2 and 3 of this article, the Minister for Financial Affairs and the Plan shall define, case by case, those activities which are liable to give rise to distortions of competition and those which are exercised on a negligible (2) Portuguese law scale.'

16. Article 2(2) of the Código do IVA (VAT Code) provides as follows: 19. The legal basis for the taxation is Article 9(30)(b) of the Código do IVA, which provides as follows:

'The State and other legal persons governed by public law shall not, however, be taxable persons as regards the tax where they undertake operations in the exercise of their powers as authorities even if, for 'The following shall be exempted from tax: those operations, they receive fees or other the letting of immovable property. This exemption shall not extend to the letting of areas for the garaging or collective parking 2 — Emphasis added. of vehicles.'

24. In their answers the German Govern- ment and the Commission draw a distinc- 21. For the further submissions of the tion according to the nature of the parking parties, I refer also to points 6 to 8 relating facilities in the case in question. The to the main proceedings. German Government submits that the Court of Justice has ruled that Article 4(5) excludes from the scope of the exemption those activities which a body governed by public law engages in as a body subject to private law and not on the basis of its 22. The Austrian Government submits that classification under public law. These two the municipality operates the car parks in activities must be distinguished in accor- the exercise of its powers as a public dance with applicable national law. In the authority in so far as it uses the classic light of the criteria laid down by the Court means of administration (tax law, monitor- of Justice it must therefore be concluded ing by bodies of public security, definition that the operation of parking meters or parking ticket machines is an activity engaged in as a public authority since it is 3 — In order to facilitate comparison, the questions are not a public safety measure intended to reg- numbered and the alphabetic listing of the national court has been retained. ulate traffic. However, such activity is an

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29. As regards the question when does a body governed by public law engage in an activity as a public authority, the Court of Appraisal Justice has observed that '[a] definition of the latter condition cannot be based ... on the subject-matter or purpose of the activity engaged in by the public body since those factors have been taken into account by other provisions of the directive for other purposes.' 6 26. Under the first subparagraph of Arti­ cle 4(5), bodies governed by public law are not to be considered taxable persons even where they provide services and in connec­ tion therewith collect consideration in the form of public charges and thus carry on 'economic activities' within the meaning of 30. It should also be borne in mind that Article 4(2). 4Consequently, this provision many tasks which were originally reserved constitutes an exception to the principle for public authorities are now performed laid down in Article 4(1) and (2) under by private persons and therefore a defini­ which any person who carries on an tion based solely on the subject-matter of economic activity must be considered a the activity is inappropriate. taxable person. 5 — See to this effect also Joined Cases 231/87 and 129/88 (cited in footnote 4. paragraph 121 with reference to Case 107/84 Commission v Germany [1985) LCR 2655 and Case 235/85 4 — S e c to this effect also joined Cises 231/87 and 129/88 Commission v Netherlands [1987| F.CR 1471. Ufficio Distrettuale delle împuşte Dirette til Viorenzitola d'Arda dild Others v Cununie di Carpando Piacentino and 6 — J o i n e d Cases 231/87 and 129/88 (cited in footnote 4, Others [1989] LCR I-3233, paragraph 11. paragraph 13).

34. However, it cannot conversely be in- ferred from the application of the definition criterion of the nature of the legal regime that any activity, that is to say even a purely 32. The Court classifies activities as activ- commercial one, could be declared an ities engaged in 'as public authorities' on activity engaged in as a public authority the basis of the way in which they are by a regime of public law. If that were so, carried out and states that: 'An analysis of there would be no need for the fourth the first subparagraph of Article 4(5) in the subparagraph of Article 4(5) under which light of the scheme of the directive shows activities exempt under Article 13 — these that it is the way in which the activities are are predominantly ones which serve the carried out that determines the scope of the public good or are in the public interest treatment of public bodies as non-taxable (such as the renting out of accommoda- persons. In so far as that provision makes tion) — may be considered as activities such treatment of bodies governed by which bodies engage in as public author- public law conditional upon their acting ities. The provision of the third subpara- "as public authorities", it excludes there- graph of Article 4(5) would also otherwise from activities engaged in by them not as be inconsistent, since it conversely makes bodies governed by public law but as certain activities — possibly also those persons subject to private law. Conse- engaged in as public authorities — subject quently, the only criterion making it possi- to VAT. ble to distinguish with certainty between those two categories of activity is the legal regime applicable under national law'. 7

law referred to in the first subparagraph of Court. To do so it must assess all the Article 4(5) of the Sixth Directive engage in circumstances of the specific case. activities "as public authorities" within the meaning of that provision when they do so under the special legal regime applicable to them. On the other hand, when they act under the same legal conditions as those 39. Therefore, as regards the question that apply to private traders, they cannot whether the letting of areas for the parking be regarded as acting "as public author- of vehicles constitutes an activity which the ities"...' 8 CMP engages in as a public authority, the ownership of the areas used is not impor- tant, in particular where the parking con- ditions on separate sites are the same as those for parking areas with parking meters and parking ticket machines on public 37. It follows from this case-law that a highways. body governed by public law engages in an activity as a public authority where it acts as a body governed by public law under the special legal regime applicable to it. There- fore, what is decisive is national law which 40. Where the CMP operates parking determines whether the activity to be meters on public highways and car parks classified must be regarded as constituting on public or private municipal property or the exercise of public administrative law or other private property, the only decisive as private law which applies equally to all factor for classifying the activities as economic operators. engaged in 'as public authorities' is whether the CMP as a body governed by public law engages in these activities under the special legal regime applicable to it and not under the rules of private law.

available for parking and aid traffic flows applicable to them — as bodies governed or merely to cover parking, whether a by public law — and in this case it is distinction is drawn between car parks in irrelevant to whom the areas belong. It is terms of restricted short-stay car parks and for the national court to classify the activity unrestricted long-stay car parks or whether in question in the light of that criterion and long-term car parks are involved, or of the way in which it is carried out. whether charges are made for them by parking meter, parking ticket or long-term parking permit. Furthermore, it may be significant whether or not the places are guarded and whether exceeding the parking time is punishable by a fine or provision is Question (b) (May a significant distortion made merely for an additional payment or of competition be defined case by case by a contractual penalty (under civil law). the Minister of Finance? — second sub- paragraph of Article 4(5) of the Sixth Directive)

43. It must be concluded that the CMP engages in an activity as a public authority Arguments of the parties in so far as the operation of parking meters and the operation of car parks — irrespec- tive of the ownership thereof — takes place under the special legal regime applic- able to it and the CMP acts as a body 45. The German and the Portuguese Gov- governed by public law. The second sub- ernments submit that it is for the individual paragraph of Article 4(5), which provides Member States to determine in which cases for taxability as an exception to the excep- failure to tax bodies governed by public tion where significant distortions of com- law leads to significant distortions of petition occur, is sufficient as a counter- competition, in order to implement the balance in favour of private operators. objectives of the Sixth Directive.

respect of the form and methods which the by private individuals, in cases in which Member States employ to achieve that their treatment as non-taxable persons result. could lead to significant distortions of competition, but they are not obliged to transpose that criterion literally into their national law or to lay down precise quant- itative limits for such treatment.' 11 47. The Commission points to the spirit and purpose of the Sixth Directive and to the need for a uniform interpretation of its provisions. The regulation of what must be regarded as a significant distortion of competition in a specific case cannot, therefore, be effected through a simple 50. When the Court of Justice states that administrative act. the Member States are not obliged to transpose that criterion literally into their national law, it is referring to the criterion of significant distortions in competition. The Member States are free to choose any Appraisal other wording or to lay down a general, quantitative limit unrelated to a specific case — corresponding, for example, to the special scheme in Article 24(2) for small undertakings with a fixed amount of 48. The second subparagraph of Arti- annual turnover — in order to make cle 4(5) of the Sixth Directive makes an bodies governed by public law taxable exception to the exception in the first where their treatment as non-taxable per- subparagraph and thus reverts to the gen- sons could lead to significant distortions of eral rule concerning taxability. In this case competition as envisaged in the directive. bodies governed by public law are subject to VAT where their treatment as non- taxable persons would give them an advan- tage leading to significant distortions of competition and adversely affecting com- petitors. 51. However, as is clear from the wording of the directive, the Member States are obliged to subject bodies governed by public law to tax without exception where 49. The Court has held that 'the second their treatment as non-taxable persons subparagraph of Article 4(5) of the Sixth could lead to significant distortions of Directive must be interpreted as meaning competition, irrespective of the legal form that the Member States are required to in which the Member States transpose this ensure that bodies subject to public law are criterion. treated as taxable persons in respect of activities in which they engage as public authorities where those activities may also 11 —Case C-4/89 (cited in footnote 10. paragraph 131 with reference to Joined Cases 231/87 and 129/88 (cited m be engaged in, in competition with them, footnote 4, paragraph 23).

56. The Court has ruled on this point that '[t]hat limitation placed on the rule of treatment as non-taxable persons is thus only a conditional limitation, and whilst it 53. However, in view of the wording of the is true that its application involves an second subparagraph of Article 4(5) it must assessment of economic circumstances, that be assumed that bodies governed by public assessment is not exempt from judicial law become taxable persons where the review.' 13 circumstances indicating a significant dis- tortion of competition arise, without a constitutive declaration by the Minister of Finance being necessary. 57. Consequently, it is the duty of the national court to determine whether there is a significant distortion of competition. It is clear from this case-law — as an argu- mentum e contrario — that the Member 54. The underlying aim of the directive is States are barred by the directive from to harmonise the rules governing VAT, not authorising an administrative office to to impose, without reasonable grounds, define, case by case and with binding VAT on public bodies in respect of activities effect, which distortions of competition which they engage in as public authorities, are significant for the purpose of the second and to ensure the neutrality of VAT. 12 subparagraph of Article 4(5) of the Sixth Directive.

58. Therefore, the national court must 55. In order to ensure uniform application determine whether a competitive market of the directive, it must be guaranteed that exists for these activities or transactions, the economic circumstances which could that is to say, whether these services are lead to a significant distortion of competi- also offered by private persons. In the case tion are assessed in a uniform manner. It of the letting of areas for the parking of follows that the answer to the question vehicles the national court will have to

Arguments of the parties

63. However, Community law precludes the national VAT Code in this respect, and therefore there is no conflict between 60. The Treasury and the Portuguese Gov- Community law and the national constitu- ernment do not consider that it is necessary tion.

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64. As the Commission correctly submits, are subject to VAT in any case, without this there is therefore no need to answer this list being exhaustive. question in the present case.

68. The Commission answers the question Question (d) (Will the public authorities to the effect that the authorities must in always be regarded as taxable persons principle be regarded as taxable persons in provided that the activities in which they respect of their economic activities, even engage are not negligible, or are they where these activities are not listed in taxable persons only as regards the activ- Annex D, unless these activities are negli- ities listed in Annex D provided that they gible, which is not so in the present case on are not negligible? — third subparagraph account of the amounts of money involved. of Article 4(5) of the Sixth Directive)

ensure that certain categories of economic these activities are subject to VAT even activity the importance of which derives where they are engaged in as public author- from their subject-matter are not excluded ities. from VAT on the ground that they are carried out by bodies governed by public law as public authorities.' 15

74. As the Court states, 'a body governed by public law may rely on Article 4(5) of the Sixth Directive for the purpose of opposing the application of a national 71. Even though the provision de facto provision making it subject to VAT in constitutes a return to the rule, de jure it is respect of an activity in which it engages an exception to an exception and as such as a public authority, which is not listed in must be construed strictly. Annex D and whose treatment as non- taxable is not liable to give rise to signifi- cant distortions of competition.' 16

72. Therefore, the exception contained in the third subparagraph of Article 4(5) can- 75. Consequently, case-law rules out the not be applied to activities which are not possibility of extending the catalogue in listed in Annex D. The catalogue in Annex Annex D, since a body governed by public D gives no indication that it is merely a list law could challenge such unauthorised of examples. It must be assumed, therefore, extension by a Member State. that the list is enumerative. It cannot be extended by the Member States.

76. A body governed by public law must be regarded as a taxable person in respect of activities referred to in Annex D where 73. Although it could be concluded from those activities are not negligible. Under the the expression 'in any case, these bodies second subparagraph of Article 4(5), it is shall be considered taxable persons' that taxable in respect of activities not listed in cases other than those listed in Annex D are Annex D only where its treatment as a non- conceivable, the expression 'in any case' taxable person would lead to significant must be construed only as meaning that distortions of competition.

78. Consequently, the answer to question (d) must be as follows: 80. The question is actually irrelevant to the present case, because in terms of the wording the qualification 'negligible scale' relates only to activities referred to in Annex D. However, there is no such activ- Municipalities and bodies governed by ity in this case. public law are not always taxable persons where the activities in which they engage are not negligible, but only as regards the activities or transactions listed in Annex D, in so far as these activities which they engage in as public authorities are not 81. The power of the Minister of Finance negligible. to define what activities are engaged in on a scale that is negligible makes the applica- tion of the third subparagraph of Art- icle 4(5) conditional on a decision of the national administration. Question (e) (May the Minister of Finance define what activities are being engaged in on a scale that is negligible? — third subparagraph of Article 4(5) of the Sixth Directive) 82. The directive does not expressly grant the Member States the right to empower the Minister of Finance to define activities which are engaged in on a scale that is negligible. Arguments of the parties

83. Although the directive makes it possi- 79. The Treasury and the Portuguese Gov- ble to exclude negligible activities from the ernment conclude that the Minister of scope of the third subparagraph of Art- Finance may determine, case by case, what icle 4(5), according to the case-law the activities are being engaged in on a scale Member States are not required to do

85. It is therefore for the national court to ensure uniform application of the directive 88. The Austrian Government takes the by defining, case by case, what constitutes view that a Member State may not regard activities engaged in only on a scale that is an activity of a body referred to in the negligible. fourth subparagraph of Article 4(5) which is excluded from the scope of the exemp- tion in Article 13 as an activity engaged in as a public authority. 86. Therefore, the answer to question (e) must be that the third subparagraph of Article 4(5) of the Sixth Directive is to be interpreted as precluding a national provi- 89. The Portuguese Government considers sion which authorises the Minister of that a distinction must be drawn between Finance to define, case by case and with the assessment of taxability on the one binding force, what activities are being hand and of exemption on the other. engaged in on a scale that is negligible for Although Article 13B(b)(2) provides for the purposes of the third subparagraph of an exception from the exemption relating Article 4(5). to letting, this has no bearing on the application of the criterion of non-taxation under Article 4(5) which relates to taxable 17—Joined Cases 231/87 and 129/88 (cited in footnote 4, paragraph 27). persons.

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90. The Commission considers that since icle 4(5). Therefore, there is no need at all the letting of premises and sites for parking to regard it as such within the meaning of cars is taxable under Article 13 B(b)(2), this the fourth subparagraph of Article 4(5). means that it is an economic activity which falls within the scope of VAT and cannot be regarded as an activity engaged in as a public authority.

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Question (g) (May the national court apply Justice and not within that of the national Community law even though the parties court. This is intended to ensure the uni- have not relied thereon?) form interpretation and application of Community law. Under Article 177 of the EC Treaty (now Article 234 EC), where doubts exist as to the interpretation of Community law national courts may or, as the case may be, must stay proceedings and Arguments of the parties refer a question concerning interpretation to the Court of Justice.

96. The Treasury, the Portuguese Govern- ment and the Commission point out that the courts of the Member States must apply Community law of their own motion. 99. According to the case-law of the Court of Justice, 'that obligation to refer is based on cooperation, with a view to ensuring the proper application and uniform interpreta- Appraisal tion of Community law in all the Member States, between national courts, in their capacity as courts responsible for the application of Community law, and the Court of Justice.' 19

97. As the Commission, the Portuguese Government and the Treasury correctly submit, the national courts must, of their own motion, comply with and apply the provisions of Community law. According to the case-law of the Court, 18 this applies even where the parties have not relied on these provisions. 100. Consequently, the answer to this question must be that the national court must, of its own motion, apply the provi- sions of the directive when giving its final decision, even where none of the parties to the main proceedings has raised any ques- 98. The interpretation of Community law tion of the application of that directive. It is falls within the jurisdiction of the Court of not for the national court to interpret the provisions of the directive.

(2) The second subparagraph of Article 4(5) of the Sixth VAT Directive 77/388/ EEC is to be interpreted as precluding a national provision which authorises the Minister of Finance to define, case by case and with binding force, when there is significant distortion of competition within the meaning of the second subparagraph of Article 4(5).

(3) Municipalities and bodies governed by public law are not always taxable persons where the activities in which they engage are not negligible, but only

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as regards the activities or transactions listed in Annex D, in so far as these activities which they engage in as public authorities are not negligible.

(4) The third subparagraph of Article 4(5) of the Sixth Directive is to be interpreted as precluding a national provision which authorises the Minister of Finance to define, case by case and with binding force, what activities are being engaged in on a scale that is negligible for the purposes of the third subparagraph of Article 4(5).