C-398/99

YORKSHIRE C O - OPERATIVES

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 20 September 2001 1

I — Introduction the coupons either directly or in the form of cut-out coupons in newspapers and maga- zines. Each coupon either stated a sum of money or set out a means of calculating a sum of money (price reduction) and 1. The present case concerns the taxable expressly stated that a consumer who amount in relation to transactions of presented the coupon to a retailer willing retailers who allow final consumers price to accept it could buy the specified goods at reductions upon presentation of a coupon the normal retail price less the price reduc- when they purchase goods and who in tion. return receive from the manufacturer which issued the coupon a refund of an amount equal to the price reduction.

5. The price which Yorkshire had to pay to the manufacturer upon the purchase of the goods in question was determined without reference to the coupons. In some cases Yorkshire had bought the goods before the 7. By letter of 10 February 1997 the Com- manufacturer issued the relevant coupons missioners rejected Yorkshire's claim. to the public. Yorkshire had misinterpreted the decision in Elida Gibbs and the taxable amount in respect of supply of goods to its customers was the cash sum paid by the customers plus the amount in respect of the coupons. If the taxable amount in respect of the transactions between Yorkshire and its customers had, instead, been exclusively the cash sum paid by the customers, York- shire would, moreover, have had to adjust 6. By letter of 2 December 1996 Yorkshire the allegedly excess sales value by a cor- sought repayment of the allegedly excess respondingly lower value with respect to VAT it had paid in the accounting period the transactions between the manufacturers from February 1974 to January 1996 in and Yorkshire. connection with the refund granted by the manufacturer. It argued that in return for the supply of goods to its customers it had received only the cash sums from those customers and that the amount of the refund represented a rebate or a discount on the price of the original supply of the corresponding goods by the manufacturer 8. In 1998 Yorkshire appealed to the VAT to Yorkshire. As Yorkshire had, in respect and Duties Tribunal against the Commis- of the supply of goods to its customers, sioner's decision. The Tribunal has stated paid VAT on the amount of the reduced in its decision that it is not convinced of the price paid by the customers plus the correctness of Yorkshire's interpretation of amount of the coupon, it was entitled to the effects of the judgment in Elida Gibbs, repayment of the part of the VAT in respect but cannot reject the submissions of either of the amount of the coupon, because that party in that regard as unfounded. After amount was not part of the consideration hearing the parties submissions on the for the supply of goods by Yorkshire to its customers. As the manufacturers had not, however, issued credit notes to it, it did not 2 — Case C-317/94 [1996] ECR I-5339.

3 — Case C-38/93 [19941 ECR I-1679. (ii) that the manufacturer, when 4 — Case 230/87 [1988] ECR 6365. the retailer has sold the goods 5 — Case 126/88 |1990] ECR I-1235. in accordance with the terms 6 — Case C-33/93 |1994| ECR i-2329. of the coupon and has pres-

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ented the coupon to the manu- issued a credit note to the retailer for facturer, will pay to the retailer the reimbursement of the reduction?' a sum equal to the reduction,

(c) the retailer sells the goods to a I I I— Legal background customer on presentation of the coupon and on payment of the reduced price, A — Community law

(d) the retailer presents the coupon to 12. Article 11 of the Sixth Council Direc- the manufacturer and is paid a sum tive 77/388/EEC of 17 May 1977 on the equal to the reduction? harmonisation of the laws of the Member States relating to turnover taxes — Com- mon system of value added tax: uniform basis of assessment (hereinafter 'the Sixth Directive') 7 lays down the rules regarding Is the taxable amount: the taxable amount.

'1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes (a) taxes, duties, levies and charges exclud- place, the taxable amount shall be reduced ing the value added tax itself; accordingly under conditions which shall be determined by the Member States.

(b) incidental expenses such as commis- sion, packing, transport and insurance costs charged by the supplier to the purchaser or customer. Expenses covered by a separate agreement may However, in the case of total or partial be considered to be incidental expenses non-payment, Member States may derogate by the Member States. from this rule.'

3. The taxable amount shall not include:

B — National law (a) price reductions by way of discount for early payment;

16. The Sixth Directive is transposed into (b) price discounts and rebates allowed to national law in the United Kingdom pri- the customer and accounted for at the marily through the Value Added Tax Act time of the supply;...' 1994.

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'(1) For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under 18. By way of introduction, Yorkshire this Act, be determined in accordance with describes the operation of the coupon this section and Schedule 6, and for those system and states that the coupons at issue purposes subsections (2) and (4) below in the main proceedings correspond to have effect subject to that Schedule. those in the Elida Gibbs case. 8 The manu- facturers' aim in issuing the coupons is to ensure that the final consumer obtains the benefit. By requiring the retailer to sell at a reduced price, the manufacturers are reduc- ing the consideration for the supplies. (2) If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration. First, with regard to determining the tax- able amount, Yorkshire states that it is apparent from the explanatory mem- orandum to the proposal for the Sixth Directive that such determination must be (3) If the supply is for a consideration not applicable to each individual transaction. consisting or not wholly consisting of Moreover, according to the case-law of the money, its value shall be taken to be such Court of Justice, the consideration for tax amount in money as, with the addition of purposes is the consideration actually the VAT chargeable, is equivalent to the received, not the objective value, and must consideration. be capable of being valued in money. Furthermore, there must be a direct link between the supply of the goods or services and the consideration received. Finally, the consideration constituting the taxable amount for any person in the chain of production and distribution prior to the (4) Where a supply of any goods or services final consumer cannot exceed the price is not the only matter to which a consider- paid by the final consumer. ation in money relates, the supply shall be deemed to be for such part of the consider- ation as is properly attributable to it....' 8 — Cited in footnote 2 above.

Unlike in the case of cash-back coupons, in the case of a price reduction coupon the refund is made by the manufacturer to the Secondly, Yorkshire submits that only the retailer. Consequently the sales price paid consideration from a final consumer can be by the final consumer to the retailer must included in a retailer's taxable amount. A be adjusted. If wholesalers were involved in payment made by a person forming part of the chain, they would not, however, have the chain of production and distribution to make any price adjustments because only cannot be taken into account. A price the acquisition price paid by the retailer is reduction coupon issued by a manufacturer adjusted following the refund by the manu- cannot be regarded as third-party consider- facturer. ation. Although the coupon has value to the retailer, the value merely consists in the fact that it enables him to obtain a refund in respect of the price paid to the manufac- turer. Fourthly, Yorkshire submits that the Court of Justice has held, in relation to the supply of services, that in order for the supply of the service to be deemed to be made for consideration within the meaning of the Sixth Directive there must be a legal relationship between the provider and the Third, the contention that the manufac- recipient of the service pursuant to which turer is to be regarded as a third-party in there is a reciprocal performance. By anal- regard to the refund given by him is ogy therewith, in order to determine the contrary to the principle that VAT must taxable amount in the case of supplies of be levied at each stage of the production goods, regard must be had to the legal and distribution chain in proportion to the relationship between the participants. In amount actually received. It also contra- the case of the sale of goods to a final venes the principle that no one in that chain consumer there is basically a legal relation- should pay VAT on an amount greater than ship only between him and the retailer. The the price paid by the final consumer. In that relationship between manufacturer and regard Yorkshire submits that there is a retailer is relevant only if the retailer difference between the price reduction accepts a coupon from a final consumer

19. The German Government submits that In the light of those submissions, the price reduction coupons are in the nature of German Government proposes that the a rebate for the supply by the retailer. The taxable amount is only the amount paid acceptance of the coupon should be irrel- by the final consumer. evant to determination of the taxable amount in respect of the supply of the goods. The German Government does not share Yorkshire's view that a limitation of the taxable amount follows from the judg- ment in Elida Gibbs. That judgment con- cerns a supply by a manufacturer to a 20. The Irish Government submits pri- retailer and is silent on the question of how marily that the taxable amount for the the taxable amount is to be determined in supply of the goods is made up of both the the case of the supply by a retailer to a final money received from the final consumer consumer. In the case of the coupon system and the refund received from the manu- at issue in the main proceedings, there is a facturer. The taxable amount within the reversal in the relationship in the supply meaning of Article 11A(1)(a) of the Sixth chain (manufacturer — retailer — end Directive is made up of everything which consumer) in respect of part of the con- constitutes the consideration which has sideration. been or is to be obtained by the supplier for his transactions. Regard must be had to the consideration actually received. More- over, the following three tests laid down in the Court's case-law should be applied: direct link between the supply and the There can be a reduction in the taxable consideration; consideration capable of amount for the purposes of Article 11A(3)(b) being expressed in money; subjective value of the Sixth Directive only as a result of an of the consideration. In the present case, event (rebate, discount, refund) relating to those tests have been met.

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Kingdom Government submits that the In the light of those considerations, the argument advanced by Yorkshire is United Kingdom Government suggests that contrary to paragraph 33 of that judgment. the taxable amount is the amount paid by It is clear from that judgment that the fact the final consumer together with the sum that the manufacturer's taxable amount is equal to the refund paid by the manufac- reduced by the value of the coupon does turer. not mean that the retailer's acquisition price and his taxable amount must necess- arily be reduced by the same amount. That conclusion applies equally to price reduc- tion coupons. The price reduction coupon has no effect on the price between the manufacturer and the retailer or on the 22. The Netherlands Government con- amount ultimately received by the retailer cludes, on the basis of an analysis of the for the supply of the goods. That price is coupon system at issue in the main pro- always the normal retail price. ceedings and the relevant case-law of the Court of Justice, that the consideration for the sale of a particular product consists of the price paid for it by the final consumer plus the refund from the manufacturer, if the purchase has been made using a coupon.

The incorrectness of Yorkshire's view becomes clear in cases in which a retailer has not bought the goods from a manu- facturer but from a wholesaler. In such a situation the price at which the retailer Pursuant to the principle of the neutrality purchased the goods does not depend on of the VAT system, the retailer's taxable the presence of coupons and whether or not amount must not be lower than the amount the manufacturer subsequently makes a which he actually received for the supply. refund.

The Commission considers that it is arguable that the refund by the manufac- turer could be regarded as a refund of part of the original acquisition price paid by the B — Assessment retailer. However, that makes no difference to the amount of VAT for which the retailer is liable. That amount is unchanged, irrespective of how the amount 24. First of all it is necessary to clarify refunded by the manufacturer is appraised. certain matters relating to the first ques- tion.

Furthermore, the argument raised by York- 25. Thus, 'customer' is to be understood as shire according to which a reduction in the meaning 'final consumer' within the mean- retailer's input tax depends on the issue of a ing of the Sixth Directive. Moreover, it credit note by the manufacturer, is incor- should be noted that the price reduction is rect. granted by the retailer. The payment of the

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reduction by the manufacturer to which the 28. As the present case concerns the tax- national court refers is therefore more able amount of the retailer, it is therefore precisely a refund by the manufacturer to necessary to determine the value of the the retailer. It is only because the amount of consideration which he receives. that refund is the same as the amount of the price reduction that one can say that the manufacturer pays the price reduction.

29. As consideration, the retailer receives, first, the amount which the final con- 26. Furthermore, the additional situation sumers, his customers, pay to him. That referred to in the national court's questions, amount is either the 'normal' final sales in which the goods are sold by the manu- price or — if a coupon is presented — the facturer to a wholesaler should not be dealt price reduced by the amount of the price with in these proceedings. It is, as expressly reduction. stated, a hypothetical factual situation and thus a hypothetical question. It is settled case-law of the Court of Justice 9 that such questions are inadmissible. Moreover, it is not necessary to examine such a set of circumstances in order to provide an answer in the case in point.

34. It can be deduced from the judgment in Elida Gibbs that not only price reductions which are granted directly between two parties to a contract, as for example between manufacturer and final consumer, are of relevance to determining the taxable amount, but also such reductions which are 32. Also favouring characterisation of a granted 'through retailers'. " coupon as a consideration is the judgment of the Court in Argos Distributers, accord- ing to which 'the subjective consideration... is constituted wholly or in part by the vouchers presented by the buyer of the goods'. 11 35. Just as the amount of the price reduc- tion and the corresponding refund must be taken into account with regard to the manufacturer, so it must also be taken into account with regard to the retailer. How- ever, as the retailer is not the payer, but the recipient of that amount, that amount cannot be taken into account in the same way as it is with regard to the manufac- turer. It cannot be that not only the 33. It already follows from the wording of supplier, but also the recipient of a supply, Article HA(l)(a) of the Sixth Directive that had either not to include that amount or the consideration can be paid not only by could include that amount but then deduct the purchaser but also by a third-party. it again. Thus, in the Bally case the Court recog- nised that the payment of the price through the 'intervention' 12 of a third-party, in that case the intervention of a credit card company, was 'consideration' within the meaning of Article HA(l)(a) of the Sixth Directive. In the present case, a third-party 36. As the Irish Government correctly is also used, namely the manufacturer, who states, in the present case the following pays part of the 'normal' price — that is to three requirements for characterisation as consideration arc satisfied: the direct link

42. However, it also follows from the 39. Finally, each part of the consideration judgment in Elida Gibbs that the retailer fulfils the requirement that it should have a may not readjust his value added tax. subjective value. While that is obvious in According to that judgment 'there is no

14 — Case 154/80 Coöperatieve Aardappelenbewaarplaats [1981] ECR 445 and the judgments in Case 126/88 (cited 15 — Case C-317/94 (cited in footnote 2), paragraph 24. in footnote 5) and in Case C-33/93 (cited in footnote 6). 16 — Ibid., paragraph 34.

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need to readjust the taxable amount for the amount is instead taxed only once. It also intermediate transactions'. 17 prevents the tax authority from losing VAT or collecting too much tax.

43. If the retailer were allowed a cor- 46. Finally, this result is in accordance with responding adjustment, not all of his the Sixth Directive's value added tax sys- receipts would be subject to tax and the tem, whose underlying idea is that at each value added tax would have an effect on his stage of the supply chain the added value operating profit because it would represent produced at that stage should be taxed. an income item for him.

from its input tax and that repayment of 5 1 . The Netherlands Government submits output tax does not depend upon the issue that the principle of the tax neutrality of of a credit note or debit note. The issue of VAT requires that an adjustment takes such notes is even precluded by national place if the taxable amount is only the law in a situation such as that in the main amount paid by the final consumer. proceedings. Yorkshire therefore submits that the retailer does not have to readjust his input VAT.

(1) The answer to the first question — leaving aside the hypothetical case of the involvement of a wholesaler — is that, in a case such as that at issue in the main proceedings, the taxable amount is the cash sum paid by the customer together with the sum equal to the reduction paid by the manufacturer.

(2) Having regard to my proposed answer to the first question, there is no need to answer the second question.

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