C-136/99

MONTE DEI PASCHI DI SIENA

OPINION OF ADVOCATE GENERAL SAGGIO delivered on 13 April 2 0 0 0 *

1. This reference for a preliminary ruling Ministère de l'Economie, des Finances et de concerns the right to a refund of value l'Industrie (Ministry for the Economy, added tax, under Article 17 of the Sixth Finance and Industry) applications for the Council Directive 77/388/EEC of 17 May refund of value added tax for the years 1977 on the harmonisation of the laws of 1988 and 1989, respectively. These two the Member States relating to turnover applications were rejected on the grounds taxes — Common system of value added that the applicant had incurred the expen- tax: uniform basis of assessment, ' of a diture in connection with banking and company which, not being established in financial transactions carried out in Italy the State in which it paid the value added and that those transactions, not being tax and applied for a refund, requests subject to value added tax in the Member reimbursement in respect of expenditure State of establishment, did not give rise to a relating to transactions effected in the refund of value added tax paid for services Member State of establishment, of which received and goods acquired before the only some are subject to the subsequent transactions were effected. application of value added tax.

4. In this case the relevant Community provisions are Article 17(2) and (3)(a) of '1. Do Articles 2 and 5 of the Eighth Directive 77/388 and Articles 2 and 5(1) of Council Directive 79/1072/EEC of Directive 79/1072. 6 December 1979 on the harmonisa- tion of the laws of the Member States relating to turnover taxes — Arrange- ments for the refund of value added tax to taxable persons not established in the territory of the country 2 have the effect of granting to taxable persons established in a Member State of the Community where they are taxed only on a part of their turnover a right to a partial refund of the tax charged in 5. Article 17 of the Sixth Directive also another Member State in respect of accords the right to deduction of value goods or services which they have used added tax to taxable persons established in in order to carry out, in the State in another country,3 that is to say in a State which they are established, transac- other than that in which they are subject to tions of which some are not taxed? the tax and hence to its deduction. Para- graph 2 of this article stipulates that 'In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay (a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person'. More- 2. If they do, to what method of deter- over, according to subparagraph 3, Mem- mining the portion of refundable tax ber States shall also grant the right to a do those provisions refer, and, in parti- deduction or refund (assuming, of course, cular, is that portion to be determined that the tax has been collected) if the goods according to the rules applicable in the and services are used for 'transactions State where the taxable person is relating to the economic activities ... carried established, or according to the rules out in another country, which would be in force in the State required to make the refund?' 3 — According to Article 4 of the Sixth Directive, '"Taxable person" shall mean any person who independently carries out in any place any economic activity ... whatever the 2 — OJ 1979 L 331, p. 11. purpose or results of that activity'.

4 — Article 271 or the Code Général des Impôts states that: 'The value added tax charged on the price elements of a taxable transaction may be deducted from the value added tax applicable to that transaction. The right to deduct arises when the deductible tax becomes chargeable to the person liable'. In addition. Article 2 4 2 - 0 M stipulates that 'Tax- able persons established abroad may obtain a refund of the value added tax which they have been properly invoiced if, during the cjuarter or the calendar year to which the request 6. With regard to the national legislation, for a refund relates, they did not have in Erance the seat of their activity or a fixed establishment or, failing that, their the referring court and the French Govern- domicile or customary residence or carrv out there, during ment point out that the Code General des the same period, any supplies of goods or services subject to value added tax within the meaning of Articles 256, 256 A Impôts (General Tax Code) accords the to 258 B and 259 to 259 C of the Code Général des Impôts'. Finali)', according to Article 242-0 N, 'Value added tax right to deduct value added tax for transac- shall be refunded to taxable persons established in a tions carried out by businesses when value Member State of the European Economic Community where it was charged in respect of services supplied to them added tax has been charged on 'the price and movable goods which they acquired in, or imported into, France during the year or quarter referred to in elements of a taxable transaction' (Arti- Article 2 4 2 - 0 M in so far as such goods and services are used to carry out, or for the purposes of: (a) transactions cle 271). The same Code also extends this which are taxed abroad but which would be eligible for right to taxable persons established abroad deduction if they were taxed in France'.

8. The parties refer to the Débouche case of considered exempt from value added tax 1996, 5in which the Court, interpreting, even when incurred by taxable persons among other things, the abovementioned established in the territory of the country. provisions of the Sixth and Eighth Direc- tives, held that foreign taxable persons are entitled to a refund in a Member State other than that in which they are estab- lished when they do not benefit from exemption for the transactions carried out in the Member State of establishment and linked with the acquisition of goods or services on which value added tax has been The conclusions of the Court are very clear paid and when that same expenditure is in this respect. Thus, eligibility for refund exempt in the State of refund. of value added tax depends on two condi- tions being met, namely, the final transac- tion must be taxed in the Member State of establishment and the tax on which a refund is requested must also be deductible for taxable persons established in the territory of the State in which the corre- sponding application is made. On that occasion, the Court mainly relied on two considerations: firstly, it follows from Article 17(2) of the Sixth Directive that a taxable person who benefits from exemption for a downstream transaction, wherever it may be carried out, is not entitled to the deduction of tax paid upstream;6 secondly, the arrangements for application of the right to refund, as set out 9. Considering the source of the right to a in the Eighth Directive, must not — refund which the Sixth Directive expressly according to the fifth recital of the Eighth grants to non-established taxable persons Directive — be such as to lead to the and the scope of that same right which, by treatment of taxable persons differing virtue of Article 17, covers all the inter- 'according to the Member State in the mediate transactions for which value added territory of which they are established'. tax cannot be passed on to the next level of These rules must therefore be applicable production or trade and hence incorpo- without distinction to all businesses, whe- rated in the end price of the product, ther established in the national territory or regardless of the Member State in which in another Member State, with the result these transactions are carried out, it is quite that a non-established taxable person may obvious that the right to a refund cannot be not request a refund for expenditure not denied where, as 'in the present case, the transactions carried out by a taxable person in the .Member State of establishment give rise only to a right to partial deduction of 5 — Case C-302/93 Debouche v inspecteur der invoerrechten ett Accijnzen [1996] ECR I-4495. the value added tax paid on acquisitions or 6 — In Débouche, the Court refers to C-4/94 BLP Group v on services received upstream in another Commissioners of Customs & Excise [1995] ECR I-983, paragraph 28. Member State.

12. What, then, in this case, is the scope of the French legislation, that is to say the legislation of the Member State of refund? On this point I share the view of the Commission, according to which once the It is not possible to share this view. It percentage of transactions giving rise to implies that not all taxes deductible, in so deduction has been established, in confor- far as they have been levied on expenditure mity with the relevant provisions of the linked to successive transactions which Member State of establishment, the Mem- according to the law of the State of ber State in which a refund has been establishment give rise to deduction, might requested may, on the basis of this refund- be refunded. Thus, the interpretation of the able percentage, exclude those expenses provisions of the Eighth Directive proposed which, under its national legislation, do not by the French Government would have the give rise to a right to refund. This inter- effect of restricting the scope of the right pretation is consistent not only with that which Article 17(3)(a) of the Sixth Direc- adopted by the Court in Debouche but also tive expressly confers on businesses. As the with the meaning of the Sixth Directive Court held in Debouche, the Eighth Direc- which, in Article 17(3)(a), stipulates that tive — and hence Article 5 thereof — con- value added tax is refundable in so far as tains provisions for implementing the Sixth the goods and services for which deduction Directive and cannot be construed as a is requested are used for the purposes of measure amending the latter. Accordingly, transactions 'which would be eligible for it cannot have any bearing on the exercise deduction of tax if they had occurred in the of the rights conferred by the previous territory of the country', that is to say other d i r e c t i v e . M o r e o v e r , Article 5 itself than those which are not eligible in this expressly states that, for the purposes of respect.

The subsequent directives on the harmoni- 13. At the hearing, the French Government sation of value added tax do not appear to claimed that the rejection of the refund have affected the scope of these provisions applications submitted by Monte dei Paschi and Articles 2 and 5 of the Eighth Directive di Siena was due to the practical difficulties should therefore be construed in the light of of calculating the percentage deductible. these principles. Thus, according to the This percentage, which is determined from recitals in the preamble to the Eighth the ratio of the total amount, exclusive of Directive, 'rules are required to ensure that value added tax, of turnover per year a taxable person established in the territory attributable to deductible transactions to of one member country can claim for tax the total amount, exclusive of value added which has been invoiced to him in respect tax, of turnover per year attributable to of supplies of goods or services in another transactions in respect of which VAT is not Member State' (second recital) and the deductible, should have been calculated on Community rules on the harmonisation of the basis of data which were not available refund arrangements must not 'lead to the at the material time, namely the taxable treatment of taxable persons differing person's turnover, the amount of the var- ious transactions and the nature of those transactions, for the purpose of assessing 7 — OJ, English Special Edition 1967, p. 16. the right to deduction or possible exemp-

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MONTE DEI PASCHI DI SIENA

On this point, too, I am inclined to accept The respondent in the main proceedings the arguments of the Commission. The denies that insufficient data were available, French Government's proposal for solving pointing out that, in support of its applica- the problem of procuring the information tions and its appeal to the Administrative necessary to calculate the proportion of tax Appeal Court, it produced all the compa- refundable would lead to denial of the right ny's annual income tax returns, with copies to refund of value added tax charged in certified by the Ufficio IVA de Siena (Siena respect of all goods and services used for VAT office), together with vouchers relating the purposes of taxable transactions. On to the transactions for which a refund was the other hand, it is correct to assume that requested and, more especially, attestations it is the responsibility of the taxable person supplied by the chairman and members of to supply the necessary information. Under the bank's board of auditors. The Commis- Article 3 of the Eighth Directive, the tax- sion also disputed the observations of the able person is required to attach to the French Government, noting that a taxable refund application 'originals of invoices or person who requests a refund would have import documents' and, moreover, must to furnish all the particulars relating to the 'produce evidence, in the form of a certifi- nature of the transactions carried out and cate issued by the official authority of the the amount of value added tax; this person State in which he is established, that he is a would then have to indicate the percentage taxable person for the purposes of value of the transactions in respect of which added tax in that State'. At the same time, value added tax was deductible on the as the Commission points out, there is no basis, of course, of the law of the State of reason why, in the event of difficulty in establishment and provide all the necessary obtaining details of regulations or factual evidence. If the authorities of the State of information, the national authorities refund had difficulty calculating the per- should not apply to their counterparts in centage, they could apply to their counter- the State of establishment.

— this percentage must be determined on the basis of the proportion of transactions in respect of which value added tax is deductible in the Member State of establishment; within this percentage, expenditure exempt under the provisions of the Member State in which refund is requested are not, however, refunded.

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