C-380/99

BERTELSMANN

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 6 March 2001 1

I — Introduction of supplies of goods and services is, 'every- thing which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer 1. In the instant case, the Bundesfinanzhof or a third party for such supplies'. (Federal Finance Court), Germany has referred to the Court the question as to whether, under the Sixth Council Directive 77/388/EEC of 17 May 1977 on the har- monisation of the laws of the Member States relating to turnover taxes — Com- mon system of value added tax: uniform 3. Subparagraph 2 of this provision speci- basis of assessment (hereinafter, 'the Sixth fies various items that must be included in Directive'), 2the taxable amount in respect the taxable amount, including in particular of the supply of a bonus payable in kind, under (b), 'incidental expenses such as which is sent to the recipient in exchange commission, packing, transport and insur- for recruiting a new customer, includes not ance costs charged by the supplier to the only the purchase price of the bonus but purchaser or customer. Expenses covered also the delivery costs. by a separate agreement may be considered to be incidental expenses by the Member States'.

II — Legal framework

B — National law

A — Community law

7. The Finanzamt (Tax Office) Wieden- briick, the defendant in the proceedings, 5. Apart from that, Paragraph 10(2)(2) of included in the taxable amount for the the UStG, which relates to the calculation purposes of the tax assessments for the of the taxable amount in the context of years 1985 to 1990 not only the purchase transactions of exchange and transactions price of the bonuses but also the delivery akin to exchange, provides as follows: 'In costs paid by the companies. the case of exchanges (first sentence of Paragraph 3(12)), transactions akin to exchanges (second sentence of Para- graph 3(12)) and in respect of surrender in lieu of payment, the value of one transaction constitutes the consideration 8. As Bertelsmann considered that the for the other transaction'. inclusion in the taxable amount of the delivery costs of the supply of the bonuses infringed the Sixth Directive, it raised a 'leap-frog' action (Sprungklage) in the Finanzgericht (Finance Court). The Finanz- gericht dismissed the action on the ground that in the assessment to be undertaken for the purpose of determining the taxable amount of the transactions akin to Ill — Facts and proceedings exchange in accordance with Para- graph 10(2)(2) of the UStG, account must be taken not only of the purchase price of the bonuses but also of the delivery costs for the supply of the bonuses. It was moreover the case, therefore, that, contrary to the submission of the plaintiff, there was 6. The plaintiff in the proceedings, Bertels- no breach of Article HA(2)(b) of the Sixth mann AG (hereinafter, 'Bertelsmann'), is a Directive either. company controlling several other compa- nies which are engaged in the business of book and record clubs. In the years 1985 to 1990, the Bertelsmann companies gave bonuses payable in kind, such as books, records and bicycles, to long-standing cus- tomers who recruited new customers as 9. Bertelsmann appealed against the judg- new members. These bonuses for introdu- ment of the Finanzgericht to the Bundesfi-

10. Since the Bundesfinanzhof did not consider the question as to the inclusion of incidental expenses in the taxable 12. Bertelsmann submits that the taxable amount as it arose in the instant case of amount for the supply of a bonus that is transactions akin to exchange to have sent to the recipient in exchange for received a clear answer in the cases Natu- recruiting a new customer includes only rally Yours Cosmetics 4 and Empire Stores, the purchase price of the bonus, and not the it stayed the appeal proceedings and by delivery costs. This follows from the judg- order of 5 August 1999 referred the fol- ment in Empire Stores, in which the Court lowing question to the Court for a pre- held that the purchase price alone, and not liminary ruling: any other amount such as, for example, the purchase price plus delivery costs, deter- mined the taxable amount. Although the case of Empire Stores concerned a mail- order business and delivery costs were incurred as a necessary consequence of that, the Court did not include them in the taxable amount.

11. Is Article 11A(1)(a) of the Sixth Coun- cil Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes (77/388/ EEC) to be interpreted as meaning that the Bertelsmann argues furthermore that only taking into account the purchase price 3 — Case C-33/93 Empire Stores [1994] ECR I-2329. under Article 11A(1)(a) of the Sixth Direc- 4 — Case C-230/87 Naturally Yours Cosmetics [19881 tive is also justified as a matter of sub- ECR 6365. stance, because the instant case concerns a

Article HA(l)(a), which, according to the Commission, is alone determinative, points to the 'consideration' in connection with the taxable amount. This concept must be Finally, Bertelsmann argues that delivery interpreted in conformity with the judg- costs are not to be taken into account as ments in Naturally Yours Cosmetics, Coöp- i n c i d e n t a l expenses u n d e r A r t i - eratieve Aardappelenbewaarplaats 6 and cle HA(2)(b) of the Sixth Directive either, Empire Stores. According to the Commis- because in the instant case it incurs them sion, this case-law decides that the follow- itself as the supplier of the service and does ing are the requirements for determining not charge them to its consumers, the the taxable amount corresponding to the existing customers who do the recruiting. value of the service: first, the existence of a direct link between the supply of the goods and the supply of the service provided as consideration; second, the possibility of expressing the value of the service received in a monetary amount; third, the subjective value of the consideration is to be used as the taxable amount, since the taxable

5 — For this analysis, see Case C-126/88 Boots Company [1990] ECR 1-1235. 13. The other participants in the proceed- 6 — Case 154/80 Coöperatieve Aardappelenbewaarplaats ings — the German Government, the Uni- [1981] ECR 445.

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BERTELSMANN

amount must correspond to the considera- 15. The German Government and the tion actually received. United Kingdom Government agree in substance with these submissions of the Commission.

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OPINION OF MRS STIX-HACKL — CASE C-380/99

20. The question in the instant case is whether the costs of delivery of bonuses, 19. In respect of the taxable amount, the that delivery being itself a supply of a United Kingdom Government further service, are to be included in the taxable

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amount under Article IIA of the Sixth Directive cannot be the legal basis for Directive where the only possible consid- calculating the taxable amount. eration is the supply of a service.

24. Under the Sixth Directive, the taxable 21. Before Article HA(l)(a) can be consid- amount in the case of the supply of goods ered, it is necessary, in accordance with the or services is the consideration actually judgment of the Court in Boots Company, received for that supply. Article HA(l)(a) first to examine the applicability of Arti- provides that what is included is, 'every- cle HA(2)(b). 8 thing which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies'. In respect of the service of delivery, what must be considered is whether the person making the delivery has received considera- tion for it and, if so, in what amount. If the 22. The delivery costs in the instant case introduction is not the consideration for the are indeed transport costs within the mean- delivery as well, then the latter is a ing of Article HA(2)(b), but that provision gratuitous service which is not a taxable requires the supplier to charge them to the supply within the meaning of Article 2(1) purchaser or customer. This rule would of the Sixth Directive and which is further- appear to serve two purposes. In the first more irrelevant to the taxable amount place, it is intended to ensure that what is under Article HA(l)(a). included in the taxable amount is only the value that the taxable person actually receives, without further qualification; in the second place, a particular act is required of the taxable person, as is indi- cated by the word 'charged'. 25. In respect of the inclusion of delivery costs, all the parties made submissions on Empire Stores, though the effect of the judgment was disputed.

30. What must next be considered is the question as to what, in the instant case, is to be regarded as the value of the con- sideration that serves as the taxable amount. As the Court held in its judgment in Empire Stores, referring to its judgment 27. It is against this background that the in Naturally Yours Cosmetics, 'the consid- first question put to the Court in Empire eration for a supply of goods may consist in Stores is to be understood. What the a provision of services, and so constitute national court wanted to know by this the taxable amount within the meaning of question was what represents the consid- Article HA(1)(a) of the Sixth Directive in eration for the supply of the bonuses if it is respect of such supply, if there is a direct not the amount in monetary terms to be link between the supply of goods and the paid to the supplier for goods ordered from provision of services and if the value of his catalogue. It was only the second those services can be expressed in question that referred to the taxable money'. 10 As the Sixth Directive treats amount and specified a number of alter- goods and services in the same way, these natives: the purchase price paid, the hypo- criteria must also apply to services. thetical sale price or 'some other and if so what amount'.

31. Therefore, the first point to examine is 28. Where the Court refers in its judgment whether the introduction, that is, the ser- in Empire Stores to the 'supply' of goods, it vice supplied by the existing customers, is refers exclusively to the supply of the directly linked to the bonus and its delivery. object. Because the Court had not up to As appears from the judgment in Naturally that point considered the delivery, it had no Yours Cosmetics, a service can in principle reason to speak itself on the costs of be the consideration for a supply of goods. delivery.

35. In that regard it may be assumed that the delivery is an ancillary supply of a 38. In conclusion it must therefore be principal supply consisting of the bonus. affirmed that the value of the bonus and According to the judgment in Card Protec- the value of the delivery together comprise tion Plan, a service must, 'be regarded as the taxable amount within the meaning of ancillary to a principal service if it does not Article 11A(1)(a). constitute for customers an aim in itself, but a means of better enjoying the principal service supplied'. 13 In this way, the bonus and delivery constitute a single supply, the

11 — Sec Case C-258/95 Filhbeck [1997] ECK I-5577. para- 39. As the requirement that the value of the graph 16 and Case C-16/93 Tolsma |1994] ECU I-743, paragraph 13. service, in this case the delivery, is capable 12 — See the judgment in Case C-33/93 (above, footnote 3), of being expressed in money is satisfied, paragraph 16. what remains to be determined is the 13 — Judgment in Case C-349/96 (above, footnote 7), para- graph 30. subjective value of the consideration, which

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OPINION OF MRS STIX-HACKL — CASE C-380/99

is, according to the judgment in Naturally 43. In the instant case, the expenses of Yours Cosmetics, decisive. 14 delivery, that is to say, the delivery costs, are to be ascribed to the supply of the delivery.

42. Moreover, this approach is not alien to the Sixth Directive. It is, for example, 45. Article HA(1)(a) of the Sixth Directive applicable to the supply of services that is therefore to be interpreted as meaning are not provided in return for payment of a that the taxable amount in respect of the monetary amount, that is to say, for so- supply of a bonus payable in kind, which is called equivalent services within the mean- sent to the recipient in exchange for ing of Article 6(2). In respect of these, recruiting a new customer, includes not Article HA(1)(c) provides that the taxable only the purchase price of the bonus but amount is the amount of the expenses also the delivery costs. incurred by the taxable person in providing the service. 16 — On the point that in Article HA(1)(a) no distinction is made between consideration in the form of monetary payments and consideration in the form of the supply of goods, see the judgment in Case C-330/95 Goldsmiths 14 — Judgment in Case C-230/87 {above, footnote 4), para- [1997] ECR I-3801, paragraph 23: '[S]ince the two situa- graph 16. tions are, economically and commercially speaking, iden- 15 — Judgment in Case C-33/93 (above, footnote 3), para- tical, the Sixth Directive treats the two kinds of graph 19. consideration in the same way'.

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VI — Conclusion

46. For these reasons, I suggest that the question referred by the national court should be answered as follows:

Article 11A(1)(a) of the 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 is to be interpreted as meaning that the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new customer, includes not only the purchase price of the bonus but also the delivery costs.