C-144/00

HOFFMANN

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 14 November 2002 1

I — Introduction ascertain whether soloists can be regarded as cultural bodies. The national court also asks whether performances by soloists which have a primarily commercial aim can be activities in the public interest.

1. In this case the Bundesgerichtshof (Fed- eral Court of Justice), Germany, has sub- mitted two questions on the interpretation 3. The questions afford the Court the of the Sixth Council Directive 77/388/EEC opportunity to refine the Gregg judgment. 3 of 17 May 1977 on the harmonisation of In that judgment the Court ruled that also the laws of the Member States relating to natural persons may — under certain con- turnover taxes — Common system of ditions — be regarded as charitable value added tax: uniform basis of assess- organisations for the purposes of ment 2 (hereinafter 'the Sixth Directive'). Article 13A of the Sixth Directive. The factual background to those questions is a series of performances by the three tenors Luciano Pavarotti, Placido Domingo and José Carreras. To what extent is VAT chargeable on those performances?

II — The legal framework

2. Those questions relate more particularly A — European law to Article 13A of the Sixth Directive, which exempts certain activities in the public interest from VAT. The exempt activities include cultural services supplied by cul- 4. Article 13A(1) requires the Member tural bodies. The national court seeks to States to exempt certain activities in the

'(a) Member States may make the granting to bodies other than those governed by — exemption of the services concerned public law of each exemption provided shall not be likely to create distortions for in (1)... (n) of this Article subject in of competition such as to place at a I - 2924

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disadvantage commercial enterprises (b) continue to exempt the activities set out liable to value added tax. in Annex F under conditions existing in the Member State concerned.'

(b) The supply of services or goods shall not be granted exemption as provided 7. Annex F gives a list of transactions for in (1)... (n) above if: which may be exempted pursuant to Article 28(3)(b). Point 2 of the Annex mentions:

— it is not essential to the trans- actions exempted,

'Services supplied by authors, artists, per- formers, lawyers and other members of the liberal professions, other than the medical and paramedical professions... .' — its basic purpose is to obtain addi- tional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.'

OPINION OF MR GEELHOED — CASE C-144/00

Activities which are carried out by certain may stipulate that tax payable in respect of p u b l i c bodies are e x e m p t u n d e r a number of activities is to be paid by it Paragraph 4(20)(a). Those bodies are: being withheld by the person to whom the theatres, orchestras, chamber music services are supplied. This applies inter alia ensembles, choirs, museums, botanical to activities carried out by a taxable person gardens, zoological gardens, archives, who is established abroad. The Minister for libraries and buildings and parks which Finance has used that power. are protected as national monuments. Those exceptions also apply to activities carried out by bodies of the same kind which are owned by other taxable persons (private bodies) in so far as the competent authority of a Land declares that they perform the same cultural functions as the public bodies listed in the previous sen- tence. 13. The Umsatzsteuer-Richtlinien comprise guidelines for the tax authorities on turn- over taxes. They give inter alia the follow- ing interpretation of Paragraph 4(20) of the Umsatzsteuergesetz: 10. Paragraph 4(20)(b) also exempts the organisation of theatrical performances and concerts in so far as these are carried out by the theatres, orchestras, chamber music ensembles or choirs referred to in Paragraph 4(20)(a).

— all groups of musicians and vocal ensembles consisting of two or more persons constitute orchestras, chamber 11. Paragraph 12 of the Umsatzsteuerge- music ensembles or choirs. The type of setz provides for a reduced rate of VAT for music is not relevant; the music may services provided by theatres, orchestras, also be light music. chamber music ensembles, choirs and museums and the organisation of theatrical performances and concerts by other econ- omic operators.

14. Matthias Hoffmann, the accused in the main proceedings, had run a concert office in respect of pop and (later also) classical 17. In so far as is relevant the Landgericht music concerts since 1971. By the begin- gives the following grounds for that con- ning of the 1990s he was one of the most viction. The exemption provided for in important concert organisers in Germany. Paragraph 4(20)(a) of the Umsatzsteuerge- In 1996/1997 he organised the world tour setz applies only to organisations, which of the three tenors Luciano Pavarotti, excludes individual artists. In particular Placido Domingo and José Carreras. Two where performances by the three tenors of the concerts on that world tour were are concerned, it is the case that the held in Germany. personality of each of them is foremost, and not the show as a whole. Moreover, a separate contract was concluded with each of them. The Landgericht submits, fur- thermore, that even according to a broad interpretation of the Umsatzsteuer-Richtli- nien an organisation within the meaning of Paragraph 4(20)(a) of the Umsatzstcuerge- setz must consist of at least two members. 15. Mr Hoffmann failed to withhold turn- over tax on the fees paid to the three soloists and also failed to pay the tax concerned over to the German tax auth- orities. He was required to do so under the Umsatzsteuergesetz, 5 since the persons actually liable to pay VAT (the three soloists) were established abroad. 18. The Landgericht does not consider that interpretation of the national legislation to be contrary to Article 13 of the Sixth Directive. Article 13A(2) empowers the Member States to make exemption from VAT for bodies other than public bodies subject to conditions. That paragraph of the Article mentions among the conditions that may be laid down inter alia that a body 16. Mr Hoffmann was convicted of tax must not systematically aim to make a fraud, in particular in connection with the profit and that a body must be managed above offence. By judgment of 22 December and administered on an essentially volun- tary basis. The Community legislature is thereby indicating that the exemption is 5 — T h a t obligation follows from Paragraph 18(8) of the Law aimed primarily at economically weak and from implementing legislation. 'Fnat obligation is not under discussion in the proceedings before the Court. bodies which serve the public interest.

2 1 . The Public Prosecutor's Office takes a different position in the main proceedings. 1. Is Article 13A(1)(n) of the Sixth Coun- cil Directive to be interpreted as mean- 6 — Case C-453/93 Bulthuis-Griffioen v Inspecteur der Omzet- belasting [1995] ECR I-2341. ing that the term 'other [recognised] 7 — Cited in footnote 3. cultural bodies' used therein also

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covers a soloist who supplies cultural Justice case-law. This is true of the Direc- services? tive in general and of Article 13A in particular.

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27. In the recent Commission v Germany harmonisation must be interpreted strictly, judgment 8the Court enumerates a number since each exception results in further of elements which are important for this divergence of the level of the tax burden case. First of all the Court states that in the Member States. 9 Article 2 of the Sixth Directive contains a definition of liability to VAT. That provi- sion defines the transactions which are to be subject to VAT as the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such and the importation of goods. The Sixth Directive provides, particularly in Title X, of which Article 13 forms part, for exemption from VAT for 29. Following on from this I would men- certain categories of activity. An exemption tion a second of the Community legis- for which no provision is made in the Sixth lature's starting points, fiscal neutrality. Directive constitutes a deviation from the This refers to the Community legislature general rule laid down in Article 2 of the seeking to ensure that all economic activ- Sixth Directive. Such a deviation can only ities, whatever their purpose or results, be consistent with Community law if it is provided that they are themselves subject to permitted in accordance with the provi- VAT, are taxed in a wholly neutral way. 10 sions of that Directive.

B — Article 13A(1)

33. The Gregg judgment 15 is relevant in this connection. In that judgment the Court- 31. As regards the exemptions for cultural gives an interpretation of the restriction of activities, I would refer to my Opinion in the exemption to activities undertaken by Commission v Finland, in which I reached establishments or organisations. The Court the conclusion that the Community legis- states that those terms are in principle lature had opted for a measured system of sufficiently broad to include natural per- VAT on art. 1 3Certain cultural activities sons as well. In employing those terms, the may be exempt from VAT on the basis of Community legislature did not intend to Article 13 of the Sixth Directive, other confine the exemptions to the activities activities may be exempt for a transitional carried on by legal persons, but meant to period and Member States may apply a extend the scope of those exemptions to reduced rate of VAT to yet other activities. activities carried on by individuals. The terms 'establishment' and 'organisation' suggest the existence of an individualised entity performing a particular function, but that does not mean that normally only legal persons satisfy that condition. One or more natural persons running a business may 3 2 . T h e e x e m p t i o n s p r o v i d e d for in constitute an 'establishment' or 'organi- Article 13 of the Sixth Directive are granted sation'.

11 — Paragraphs 44 and 45 of the judgment. 14 — See the judgment in Case 107/84 Commission v Germany 12 — Judgment in Case C-174/00 Kennemer Golf [ 2 0 0 2 ] [1985| FCR 2655, paragraph 13, and paragraph 11 of the Gregg judgment, cited in footnote 1. ECR I-3293, paragraph 19. 15 — Cited in footnote 1. 13 — Opinion in Case C-169/00 |2002| FCR I-2433.

36. Article 13A(2) of the Sixth Directive specifies additional conditions which Member States may lay down for the 39. The Zoological Society of London granting of certain exemptions listed in judgment deals with the second indent.

16 — See on these lines also the judgment in Case C-141/00 18 — As follows from paragraph 18 of the Commission v Spain Ambulanter Pflegedienst Kügler [2002] ECR I-6833, judgment cited in footnote 17. paragraph 30. 19 — Cited in footnote 12, in particular paragraph 32 et seq. 17 — Judgment in Case C-124/96 [1998] ECR I-2501, 20 — Judgment in Case C-267/00 Zoological Society [2002] paragraphs 11 and 12. ECR I-3353, in particular paragraph 20 et seq.

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40. Essentially, the second indent gives A — Framework for the assessment Member States the opportunity to interpret the public interest objective where the exemption benefits bodies other than those governed by public law. The Community legislature evidently proceeded on the assumption that the activities carried on by bodies governed by public law are by 42. The first question concerns the term their nature in the public interest. 'cultural body' 21 used in Article 13A(l)(n) of the Sixth Directive. Can a soloist — i.e. one natural person — be regarded as a body as well? That question cannot be answered without first defining the content and scope of the terms 'cultural service' and 'cultural body' contained in Article 13A(l)(n) of the Sixth Directive. 41. The Community legislature also pro- ceeds on the assumption that non-commer- 21 — IN the Dutch version of the text the word 'instelling' is used cial bodies are more likely than commercial in item (n), wink' m other pans of Article 13A(1) 'innch- bodies to serve the public interest. The ting' and 'organisatie' are used. There is no significance in this t e r m o l o g i c a l difference. In many language versions Community legislature therefore expressly including the French, English and German language versions) this difference is not made. Moreover, it can gives the Member States the power to treat also he inferred from GREGG that the same thing is meant.

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43. I would point out for the record that as far as bodies other than those governed paragraph (2) of Article 13A plays no part by public law are concerned, since the VAT here. Quite apart from the fact that the exemption need only be granted to cultural referring court's question focuses on bodies that have been recognised by the paragraph (1), paragraph (2) does not give Member State concerned. The Court must the Member States the power to lay down rule on the extent to which the national conditions regarding the (minimum) size of legislature may stipulate a minimum size a body. The list of conditions contained in for a body as a condition of its recognition. paragraph (2) is exhaustive in nature.

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differentiate in the context of this case, accused in the main proceedings, paid to which concerns classical concerts, between the three soloists. In order to answer the two services. The first service is the service question referred it is essential to examine supplied to the concert-goers in return for whether also the service ensuing from the the purchase of an entry ticket. The pur- legal relationship into which the perform- chase of the ticket entitles them to attend a ing artist enters and which involves that concert or, in other words, to receive a artist giving the organiser of a concert an cultural service. They may assert that undertaking that he will perform falls entitlement against the other party, irre- within the scope of Article 13A(l)(n). spective of whether that other party is the theatre in which the concert is being held, an independent organiser such as the accused in the main action in this case or the music group itself. According to the legislative history of the Sixth Directive, 22 the term 'cultural service' covers in any event services which are supplied to the 49. It does not appear from the legislative public. The consideration for such services history of the Sixth Directive in so many is constituted by the prices the public pays. words that this service too comes under the There is no doubt that such services are VAT exemption. Moreover, provision was exempt from VAT, provided of course that made in Article 28(3)(b) in conjunction the other conditions laid down in with Annex F, point 2, of the Sixth Direc- Article 13A are satisfied. That conclusion tive for a separate exemption from liability is not contradicted in these proceedings. to VAT for a transitional period for services provided by performing artists (per- formers). Furthermore, under Article 12(3)(a) of the Sixth Directive, 23 the reduced rate of VAT may be applied. In view of the premiss underlying the Court's case-law — a strict interpretation of the exemptions from liability to VAT — these points militate in favour of keeping the service concerned outside the scope of Article 13A.

performing artist is not as such under incurred by Hoffmann in providing a ser- discussion in the proceedings before the vice were therefore taxed, that would Court. Thus, the German Government too reduce the effectiveness of the VAT exemp- is of the opinion that after expiry of the tion, and the purpose of the rule — which t r a n s i t i o n a l period referred to in I would describe in this respect as more Article 28(3) performing artists may con- favourable treatment of certain cultural tinue to enjoy the VAT exemption provided activities — would thus be thwarted. that the conditions laid down in Article 13A(1)(n) are satisfied. The German national legislation also permits that exemption in principle (except for soloists). At the hearing the Commission confirmed that in its view the service concerned could be exempt from VAT. According to Hoff- mann that service is so closely connected with the service which the organiser supplies to the public that it would be contrary to the purpose of the exemption to make the fee subject to VAT. That purpose is, precisely, to keep the price of a cultural service low by means of a fiscal measure.

54. At this point I come to the restriction of the exemption to cultural services which are supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned. The Sixth Directive not only provides that activities intended to achieve certain objectives are exempt from VAT but also governs who — and this is an extra requirement — may supply the exempt activities. 24

56. The requirement that a body must be of a cultural nature should be interpreted as 55. When interpreting that restriction the far as possible in the same way as the following four points merit attention: cultural nature of the service provided. 2 8 Restricting myself to the sector to which the main proceedings relate, I would state for the record that the Community legis- lature had in mind primarily bodies in which cultural activities take place, such as — what is the significance of applying the concert halls and theatres. Because concert restriction to cultural bodies? halls and theatres are government bodies at one time and structures governed by private law at another, it was necessary not to restrict the exemption to bodies governed by public law. The purpose of the rule is not, after all, to give government bodies a fiscal advantage over bodies governed by — are commercial bodies excluded from private law. The Sixth Directive therefore exemption? affords the Member States the possibility of exempting similar cultural bodies governed by private law as well. By way of illus- tration I would point to the German national legislation, which lays down as a criterion for the exemption of bodies gov- — how does this restriction relate to the erned by private law that such bodies must principle of fiscal neutrality?

60. The third point is that Article 13A(1)(n) 58. The second point concerns the issue of of the Sixth Directive therefore does not the extent to which commercial bodies are treat all taxable persons equally. The excluded. This point is relevant primarily exemption only benefits certain taxable on account of the Kennemer Golf judg- persons. Thus the rule is at odds with the ment, 2 6 in which the Court states that the principle of fiscal neutrality: it looks like purpose of the exemptions listed in similar cases are receiving different fiscal Article 13A is to provide more favourable treatment in connection with the aim of treatment, in the matter of VAT, for certain activities. 27 The Court defends this organisations whose activities are directed unequal treatment in so many words in towards non-commercial purposes. I would the Kennemer Golf judgment. 28 It can be also point out that the bodies recognised by seen from that judgment that the principle the Member States are mentioned in the of fiscal neutrality is not always the decid- same breath as bodies governed by public ing factor. law which by their nature are no

27 — See regarding this principle point 34 of this Opinion. 26 — See point 38 of this Opinion. 28 — See point 37 et seq. of this Opinion.

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62. The principle of fiscal neutrality does, 64. My conclusion, then, is that the restric- according to the Court in the Gregg judg- tion, referred to in the previous point, of ment, preclude economic operators carry- the persons covered by the exemption is ing on the same activities from being permitted. The exemption does not have as treated differently, on the basis of their its object, contrary to what the Landgericht legal form, as far as the levying of VAT is claims in the main proceedings, to place concerned. economically weak bodies at an advantage, but to lower the threshold for theatre visits by the public. The threshold constituted by the level of the entry price exists primarily in the case of (more difficult) cultural performances which do not of themselves attract a wide public. That threshold does not exist, or at any rate exists to a far lesser degree, in the case of commercial perform- ances which are in themselves profitable. 63. Nevertheless, it appears to me appro- The public is far more prepared to pay the priate to look once again at the relationship price demanded by the organiser. The VAT exemption mechanism — which, more- over, still leads to only a relatively limited 29 — Cited in footnote 13; point 41 of that Opinion. price reduction — therefore fails in such 30 — See point 43 of this Opinion. cases to achieve the objective pursued.

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Since the exemption also entails a loss of the principle of fiscal neutrality. I support tax revenue, I consider it reasonable to the Commission in that view and would regard the exempt and non-exempt activ- state it in more precise terms as follows. ities as similar but not the same. Where a Member State makes use of the discretion granted to it to recognise bodies, such use is bound by general principles of Community law. I am thinking in particu- lar of the following:

HOFFMANN

prescribed by a directive. Specifically, we usual meaning of a word. Hoffmann and are dealing here with a power of discretion the Commission take a different view. which is not subject to any provisos. That discretion is wide, but use thereof must not negate the system. 32 In the present case it is therefore necessary to consider whether the national measure excluding soloists from the VAT exemption can negate the system.

69. It can be seen from Gregg that the legal form of the body is not important, although there must be an individualised entity performing a particular function. The Gregg judgment concerned two natural persons performing a function together. They ran a business (more specifically, a nursing home) and acted outwardly like a unit. The present case concerns a different D — Can one person also be regarded as a sector, the cultural sector, and more spe- body? cifically the performance of music.

70. A case similar to the one in Gregg occurs where a musical duo or trio acts outwardly as a unit, including where 68. This brings me to the third element of contracts with concert organisers are con- the question posed, namely the question cerned. There is no doubt in my mind that, w h e t h e r one n a t u r a l person can be by analogy with Gregg, such a music group regarded as a body. This is the crux of the consisting of two or more persons can be national court's question. The German, regarded as a cultural body within the United Kingdom and Netherlands Govern- meaning of the Sixth Directive. ments submit that this is not possible. The German Government points out, moreover, that a term taken from a body of Commu- nity rules must be interpreted literally as far- as possible. In its opinion there must be a minimum degree of concurrence 33with the

74. In short, Community law does not exclude a soloist from the exemption.

72. The foregoing does not mean that an individual who provides a cultural service E — The Member States' discretion in the can be regarded in all circumstances as a matter cultural body. In my view, what is decisive is whether the individual (soloist) acts outwardly as an entity. Moreover, the service on which VAT is or is not levied must be an individualised service which the 75. I now come to the fourth element which I identified in point 65 above: in so far as the bodies concerned are not public 34 — Guidelines of the Advisory Committee provided for in bodies, the VAT exemption set out in Article 29 of the Directive, issued at the 41st meeting on 28 February and 1 March 1994. Article 13A(1)(n) applies only to cultural

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76. The interpretation of the German Law is of course reserved for the national court. These proceedings before the Court are concerned only with whether a Member State which makes the possible recognition of a body conditional upon the number of participants in the body is overstepping the limit of the discretion granted to it. The Commission takes the view that the general exclusion of soloists does not fall within the 78. As the Court stated in Gregg, the limit of that discretion, given that the principle of fiscal neutrality precludes Member State bases the difference in treat- economic operators carrying on the same ment on subjective criteria. activities from being treated differently, as far as the levying of VAT is concerned, on the basis of their legal form. In my view that opinion can be applied by analogy to the present case. The unequal treatment applies here to music groups with one participant on the one hand and music groups with two or more participants on the other, who carry on the same activities.

77. To begin with, the test for effectiveness: it is necessary to examine whether the 35 — SEE IN particular Kennemer Golf, cited in footnote 12.

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That distinction bears no relation what- like the service which the organiser ever, moreover, to the aim pursued by the supplies to the public, fall within the rule. I therefore regard this distinction as scope of Article 13A(1)(n) of the Sixth unequal treatment of equivalent cases. Directive.

79. Since the activities concerned here are the same and not comparable, I take the view that the German Government is in breach of the principle of fiscal neutrality. — the Member States have wide discre- This does not mean that Community law tion to recognise 'cultural bodies' other itself is being breached. A Member State than public bodies as eligible for the may put forward a special ground as VAT exemption. They may use the justification. A distinction might be necess- non-commercial or commercial nature ary, for example, for inspection reasons. of a cultural body as a criterion. No special justification for the distinction has been put forward in the present case, however.

VI — Assessment of the second question

81. As I have answered the first question in the affirmative, it is also necessary to answer the second question referred by the national court. 84. I would point out to begin with that the heading of an article docs not form part of the regulatory part of a body of rules. Like the title of the body of rules as a whole or of a part of it, the title (the heading) of an Article describes the subject-matter of what 82. This question relates to the restriction follows. A title is explanatory in nature. of t h e e x e m p t i o n p r o v i d e d for in The essential difference between the regu- Article 13A to activities in the public latory part of a body of rules and the interest. The term 'public interest' is used explanatory part is expressed well in in the heading of the article. the I n t e r i n s t i t u t i o n a l A g r e e m e n t of 22 December 1998 on common guidelines for the quality of drafting of Community legislation. 36 Nevertheless, the legislature's intention can be inferred from the title of a provision. In that sense, such a title may play a part in the Court's assessment. I also 83. M r Hoffmann points out that the interpret the term 'public interest' con- various exemptions listed in Article 13A tained in the title of Article 13A in that are worded precisely and that they all entail way. The term therefore does not entail any a subsidy with a view to the public interest. direct restriction, but does determine the The German Government's observations interpretation of the exemptions listed in tend in the same direction, given that they Article 13. point out that the heading does not entail any restriction at all on the Member State when it is transposing the provision into 36 — OJ 1999 C 73, p. 1.

86. Moreover, the term 'public interest' can also be interpreted in a second way in this context, namely as a non-commercial interest. The discussion of the first question gives a sufficiently definite answer as regards that interpretation as well. Indeed, — the term 'public interest' in the title of the Court has pointed out that the purpose Article 13A has no independent mean- of the VAT exemptions is to provide more ing. favourable treatment, in the matter of VAT, for certain organisations whose activities are directed towards non-com- mercial purposes. That purpose is also expressed in the c o n d i t i o n s w h i c h a M e m b e r State m a y , on the basis of Article 13A(2), impose on the exemption of bodies not governed by public law. 3 7 The heading has no independent meaning — the Sixth Directive does not exclude commercial bodies from the exemption 37 — See the much-cited Kennemer Golf judgmentreferred to in footnote 12, paragraph 19. by virtue of their nature.

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VII — Conclusion

88. On the basis of the foregoing considerations I propose that the Court give the following answer to the questions referred by the Bundesgerichtshof:

— As regards the first question: A soloist may be regarded as a 'cultural body' within the meaning of Article 13A(l)(n) 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, provided that he appears outwardly as an entity and the service on which VAT is or is not levied is an individualised service. The absolute exclusion of soloists in a national rule does not impair the effectiveness of the Sixth Directive. Such a rule does infringe the principle of fiscal neutrality. Exclusion is therefore contrary to Community law, save where there is special justification.