C-169/00
ECLI:EU:C:2001:477
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COMMISSION v FINLAND
O P I N I O N OF ADVOCATE GENERAL GEELHOED delivered on 20 September 2001 1
I — Introduction I I — Legal framework
2. Article 2 of the Directive creates the basis for the levying of VAT by providing as follows:
1. In this case the Commission, pursuant to Article 226 EC, requests the Court to declare that the Republic of Finland, by maintaining provisions exempting both the sale of works of art by the artist himself or 'The following shall be subject to value by intermediaries and the importation of added tax: works of art purchased directly from the artist, has failed to fulfil its obligations under Article 2 of the Sixth Council Direc- tive (77/388/EEC) of 17 May 1977 on the 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 Direc- 1. the supply of goods or services effected tive'). 2 More specifically, the Commission for consideration within the territory of is of the opinion that the Directive offers the country by a taxable person acting room for the exemption from VAT of as such; services performed by artists during a transitional period, but that it does not make possible an exemption for goods supplied by them, for which the Finnish legislation provides.
1 — Original language: Dutch. 2 — OJ 1977 L 145, p. 1. 2. the importation of goods.'
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3. Article 12 of the Directive creates a basis entitled him to full deduction of value- for the application of the reduced VAT added tax.' rate. Paragraph 3(c) of the Directive states: 3
4. Article 13 of the Directive creates a basis for exemption from the levying of VAT. '[The] Member States may provide that the This article, under A(l)(n), provides for reduced rate, or one of the reduced rates, exemptions for 'certain cultural services which they apply in accordance with the and goods closely linked thereto supplied third paragraph of (a) shall also apply to by bodies governed by public law or by imports of works of art, collectors' items other cultural bodies recognised by the a n d a n t i q u e s as r e f e r r e d to in Member State concerned'. Article 26a(A)(a), (b) and (c).
5. Article 28(3) of the Directive, opening Where they avail themselves of this option, sentence and under (b), states: Member States may also apply the reduced rate to supplies of works of art, within the meaning of Article 26a(A)(a):
'During the transitional period referred to in paragraph 4, Member States may: — effected by their creator or his suc- cessors in title;
— effected on an occasional basis by a taxable person other than a taxable dealer, where these works of art have been imported by the taxable person (b) continue to exempt the activities set himself or where they have been sup- out in Annex F under conditions exist- plied to him by their creator or his ing in the Member State concerned.' successors in title or where they have
3 — As this provision now reads after amendment by Council Directive 94/5/EC of 14 February 1994 supplementing the common system of value added tax and amending Directive 77/388/EEC — Special arrangements applicable to second- 6. Annex F to the Directive gives a list of hand goods, works of art, collectors' items and antiques (OJ 1994 L 60, p. 16). activities, which may be exempted pur-
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suant to Article 28(3)(b) of the Directive. 8. Finnish tax legislation exempts from Item 2 of the Annex mentions: 'Services VAT the sale of a work of art of which supplied by authors, artists, performers, the maker is the owner. This exception lawyers and other members of the liberal applies to both the sale of the work by the professions, other than the medical and artist himself and its sale by an intermedi- paramedical professions...'. ary. The same exception applies to the importation of a work of art purchased directly from the artist.
7. Annex XV, Title IX, to the Act concern- ing the conditions of accession of the Kingdom of Norway, the Republic of Austria, the Republic of Finland and the I I I— Facts and procedure Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (hereinafter: 'the Act of Acces- sion'), 4deals with taxation. Paragraph 2(n) 9. On 16 February 1998 the Commission of this Title provides: sent the Republic of Finland a letter of formal notice for having maintained provi- sions in breach of the Directive which in certain cases exempt the sale and import- ation of works of art from the levying of VAT. '(n) For the purposes of implementing Article 28(3)(b), and so long as the same exemption is applied by any of the present Member States, the Repub- lic of Finland may exempt from value added tax: 10. The Finnish Government replied by means of a letter dated 6 April 1998. In its reply it stated that the provisions of the Act of Accession and Article 28(3) of and Annex F to the Directive, taking into consideration their objectives, permit the — services supplied by authors, artists Republic of Finland to maintain the excep- and performers referred to in tion. point 2 of Annex F;
11. On 4 November 1998 the Commission issued a reasoned opinion. In reply the ...'. Finnish Government repeated the view which it had stated earlier. In response to this the Commission lodged the present 4 — OJ 1994 C 241, p. 335. application on 8 May 2000.
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IV — Arguments of the parties regarding the first sale and the importation of a work of art. Even if a strict distinction is to be made between the concepts of 'goods' and 'services' in the Directive and if works of art as such are in general to be 12. In its application the Commission first considered goods, the interpretation of the points to Article 2 of the Directive, which exception for artists should, according to expresses the principle that the supply and the Finnish Government, still not be merely importation of goods are subject to VAT. based on the wording of the provisions. A The Commission then states that the Direc- strictly literal interpretation would reduce tive does not provide an exception for the the scope of the exception to virtually nil. supply and importation of works of art. For if, as the Commission would have it, The Commission refers to Article 12(3)(c) the exception only concerns visual art in so of the Directive, which merely permits the far as this does not take the shape of a Member States to apply a reduced rate. movable object, the exception only applies Finally, the Commission indicates that to the special situation where the work of although Annex F to the Directive, which art is directly applied by the artist to an lists the activities which the Member States immovable object, the purchaser of which are permitted to exempt from VAT pur- is the owner. 5According to the Commis- suant to Article 28(3) of the Directive, sion's interpretation the transfer of a work concerns the services of authors, artists of art made on commission, such as a and performers of works of art, it does not portrait, would, according to the Finnish concern the sale and importation of works Government, also be included in the con- of art, as this involves goods rather than cept of 'good', and thus be excluded from services. In short, in the opinion of the the exemption. Commission the Republic of Finland has failed to fulfil the obligation arising from Article 2 of the Directive.
13. The Finnish Government states that upon accession to the European Union an 15. This is connected with the fact that the exception was created permitting it to concept of 'artist' in Annex F, item 2, to the maintain the exemption for works of art Directive should, according to the Finnish of which the maker is also the owner. It Government, be interpreted as meaning points to the reference to Article 28(3)(b) visual artist, given that for other artists of, in conjunction with Annex F to, the the concepts of 'performers of works of art' Directive in the Act of Accession. and 'authors' have been included. I under- stand this view to mean this: that, for example, in the art of music the performing artist is a performer of works of art and the composer is an author.
14. The Finnish Government does not agree with the Commission's point of view 5 — One could think of a mural.
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16. The Finnish Government is of the Government, moreover lead to the unequal opinion that the object of the provision, treatment of the various artistic professions the other provisions of the Directive con- and thereby to the violation of the principle cerning cultural activities and the principle of tax neutrality. This principle is an of tax neutrality should be taken into important objective of the VAT system. account. The Finnish Government in this context refers to Ufficio distrettuale delle imposte dirette di Fiorenzuola d'Arda and Others 8 and to Gregg. 9
17. Further, the special nature of the first sale of a work of art should be taken into consideration. This activity should not be 20. The Finnish Government finally also considered as equivalent to the production refers to Article 13(A)(1)(n) of the Direc- and sale of consumer goods. The Finnish tive, which contains a permanent exemp- Government also points to three — less tion for certain cultural services. recent — Commission Proposals in which an exemption from VAT is proposed for transfers of works of art by the artist himself. 6 21. On the basis of the above, the Finnish Government concludes that the Act of Accession, as well as Article 28 of and Annex F to the Directive, imply that the first transfer of a work of art by the maker may be exempted from VAT. The Finnish 18. The Finnish Government also mentions Government deduces from Article 14(1) of a Commission report of 2 July 1992, 7 the Directive that this is also true for the which would reveal some uncertainty as importation of works of art. Finally, I to the classification of the transfer of a would like to point out that the Finnish work of art as a good or as a service. In its Government recognises the validity of the application, however, the Commission dis- application in so far as it concerns the putes that this report has any relevance to commission payable on works of art of the present case. which the maker is the owner.
22. In response to the arguments put for- 19. A too narrow interpretation of the ward by the Finnish Government the Com- Directive would, according to the Finnish 8 — Joined Cases 231/87 and 129/88 Ufficio distrettuale delle imposte dirette di Fiorenzuola d'Arda and Others v Comune 6 — In its reply the Finnish Government further specifies that it di Carpaneto Piacentino and Others [1989] ECR 3233, was thereby not intended to also extend the material scope paragraph 22. of the exception. 9 — Case C-216/97 Gregg v Commissioners of Customs and 7 —SEC(92) 1006 def. Excise [1999] ECR I-4947, paragraph 20.
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mission recognises that the Republic of exceptions of Annex F, item 2, to the Finland is entitled to maintain exceptions Directive to virtually nil. The exception on the basis of the Act of Accession. It does not merely concern artists and per- disputes, however, that the Finnish Govern- formers of works of art (such as circus ment comes within the scope of Annex F, artists, singers and actors) but also con- item 2, to the Directive, to which the Act of cerns lawyers and other practitioners of the Accession refers. professions.
25. The Commission puts forward an 23. Annex F to the Directive provides a economic consideration. Where the per- case-by-case list of exceptions, involving a formance of a service is completed after the merely temporary competence for the performance itself, a good may be sold Member States to maintain exceptions. repeatedly. In the case of the delivery of a These must be interpreted strictly and work of art to, for example, a gallery, the literally. Here, the Commission refers to exemption from levying VAT would as a Bulthuis-Griffioen 10 and to Skripalle. 11 consequence also make it impossible for the The same approach applies to the Act of artist himself to deduct the VAT which he Accession of Austria, Finland and paid on the raw materials, like the paint Sweden. 12 The Commission finds that this and the canvas needed for a painting. The approach is even more applicable in the levying of VAT is transferred to the taxable present case, as the deviation may only be person who buys the work of art, for used for existing practices in the Member example, the gallery. This effect goes State. The Finnish Government's interpre- against the objective of relieving taxes on tation is contrary to the wording of the art. This economic consideration was, the Annex and would, according to the Com- Commission states, an argument against mission, even cause a book to be exempted the adoption of the proposals for the from the levying of VAT, which is in amendment of the Directive to which the violation of Annex H, item 6, to the Finnish Government refers. 13 Directive.
26. The Commission contests that its view gives rise to artificial distinctions as regards the supply of works of art. On the contrary, 24. The Commission does not agree with the difference in treatment arises from the the argument that its interpretation would type of contract which the artist has con- reduce the scope of application of the cluded. One may speak of the supply of a good, such as the sale of a painting or a sculpture, when the artist sells a work made 10 — Case C-453/93 Bulthuis-Griffioen v inspecteur der Omzet- belasting [1995] ECR I-2341, paragraph 19. by him. One may speak of the performance 11 — Case C-63/96 Finanzamt Bergisch Gladbach v Skripalle [19971 ECR I-2847, paragraph 24. 12 — The Commission refers to Case C-233/97 KappAhl [19981 ECR I-8069, paragraph 23. 13 — See paragraph 17 of my Opinion.
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of a service when the commissioning party after all provides a precise definition of a is the owner of a work of art as from the work of art. In the third place, the Finnish moment of its creation, for example, when Government considers the Commission's a portrait is commissioned. proposition that a good can be transferred more than once, whereas a service cannot, untenable. As an example the Finnish Government points to the transfer of a melodic work by the performer. In the fourth place, the Finnish Government points out that the seller, when reselling a 27. The Commission points out that every work of art, need only pay VAT on his own distinction in the treatment of different commercial margin, even when he obtained activities is subjective in character. The the work of art tax-free. Thus, no double principle of tax neutrality cannot here be taxation is involved, contrary to what the invoked as an argument against the strict Commission seems to imply. Furthermore, interpretation of the legislation. artists often sell directly to consumers.
28. The Commission further discusses Article 13(A)(1)(n) of the Directive. This provision contains a derogation from the V — Assessment principle of levying VAT and must con- sequently be interpreted strictly, says the Commission. Furthermore, the provision is directed at services. The derogation can 30. The dispute in essence centred on the only benefit the supply of goods when such interpretation of the provisions of Article 28 supply is closely connected with, and of, in conjunction with item 2 of Annex F thereby to a certain degree subordinate to, to, the Directive. Can the concept of the performance of a service. 'services supplied by... artists' be under- stood to also include the first supply of a work of art by the maker? The Commission answers this question in the negative. It starts from the viewpoint that the provision involved must be read strictly and literally by reason of the fact that it contains a 29. In rejoinder the Finnish Government derogation. The Finnish Government emphasises once more that the view of the answers this question in the affirmative, Commission renders the exception of whereby it takes the context and purpose of Annex F, item 2, to the Directive virtually the provision into consideration. insignificant for artists. This does not alter the fact that this Annex is also applicable to professional groups other than artists. Sec- ondly, the Finnish Government does not share the Commission's view that the distinction between works of art and con- 31. I share the Commission's point of view. sumer goods is subjective. The Directive It has already been established that the
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provision is of a derogating nature and Directive obliges the Member States to levy adversely affects the harmonisation of VAT VAT both on goods and for services. systems as regulated by the Directive. The However, the exception referred to in provision offers Member States the oppor- Annex F, item 2, to the Directive concerns tunity to deviate — temporarily — from services only. The supply of goods, there- the principle according to which VAT is fore, is subject to the levying of VAT. owed. Such a provision has consequences for the weight of the tax burden. According to the Court's case-law, deviations like these are only allowed in cases expressly provided for by the Directive. 14 Fur- thermore, according to the Court's case- 33. I thereby point out that the legislature law, provisions constituting a deviation must have made a conscious choice to from a principle should be interpreted exclude the supply of goods from the strictly. 15 Advocate General Fennelly, in exemption. In other parts of Annex F to his Opinion in the Victoria Film case, has the Directive goods are, after all, expressly already noted that 'there is no reason why mentioned, sometimes alongside the per- the principle of strict construction of formance of services. In this context, I exemptions should not apply in respect of would especially wish to mention the Annex F' to the Directive. 16 formula used in item 5 of Annex F to the Directive, which reads 'services and supplies of goods incidental thereto' sup- plied by public postal services in the field of telecommunications. Article 13 of the Directive, using similar wording, exempts 'certain cultural services and the supply of goods closely linked thereto'. 32. Thus, for me, the primary point is the strict and literal interpretation of the derogating provision contained in the Act of Accession in conjunction with Article 28(3), opening sentence and under 34. The Finnish Government's line of argu- (b), of, and Annex F, item 2, to, the mentation is broadly to the effect that the Directive. In so interpreting, I attach distinction between services and goods in importance to the distinction between the activities of artists cannot be properly goods and services as made in Article 2(1) made or, at least, that it results in an of the Directive. This distinction follows undesirable outcome. directly from the EC Treaty itself. The
14 —See, inter alia, Joined Cases C-177/99 and C-181/99 Ampafrance and Sanofi (20001 ECR I-7013, paragraph 34, concerning the right to deduct VAT. 15 — See, inter alia, Case C-83/99 Commission v Spain [2001] 35. It escapes me how the Finnish Govern- ECR I-445, paragraph 19, concerning Article 12(3) of the Directive. ment could have arrived at the reasoning 16 — Opinion in Case C-134/97 Victoria Film [1998) ECR that a distinction between goods and ser- I-7023. This case, like the present case, also concerned the interpretation of the Act of Accession in conjunction with vices in the activities of visual artists cannot Article 28(3), opening sentence and under (b), of, and be properly made. Where this is concerned, Annex F, item 2, to, the Sixth Directive. The Court did not get round to interpretation. the visual artist is no different from any I - 2442
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other professional. I would mention ubiquitous than the example given by the writers. The activity of writing itself may Finnish Government: the mural in the be considered a service, while the book, artist's home or business premises. which is the result of the writing, can be considered a good. The Finnish Govern- ment in this context also seems to contend that a work of art cannot be compared with a random consumer good. Undoubtedly 38. Neither can I deduce from the object of many art lovers will share the Finnish the exemption provision, nor, for that Government's point of view, but legally matter, from other provisions of the Direc- speaking it evidently fails to be convincing. tive that concern cultural activities, that the Act of Accession in conjunction with Article 28(3), opening sentence and under (b), of, and Annex F, item 2, to, the Directive could also pertain to the supply of goods. It was obviously not the intention of the Community legislature to exclude all activities of artists from the levying of VAT. In the first place, I would point out 36. Next, I point to the Finnish contention that the exception, which the Finnish that a strict distinction between services Government is relying on, is of an optional and goods would cause the exemption to character. Moreover, the exception only lose any practical significance — at least applies during a transitional period. for artists. In my opinion this result could Further, the Directive itself contains an indeed occur. However, such a result, instrument which should enable the which may well be considered undesirable Member States to limit the burden of taxes by a Member State from a policy perspec- on art: pursuant to Article 12(3) of the tive, cannot induce the Court to give a Directive they can apply a reduced rate. broad interpretation to an exemption in the Article 13(A)(1)(n) of the Directive carries Directive, which would conflict with the this still further for certain services and wording of the Directive. Only the Com- supplies. This provision provides an munity legislature could, by amending the exemption from VAT when these services Directive, alter this result. and supplies have been performed by bodies governed by public law or by other cultural bodies recognised by the Member State concerned.
39. It is my opinion that the Community 37. Still, however, it becomes clear from legislature has thus opted for a balanced the way the Commission interprets the system for levying VAT on art. The tem- exemption that it is accorded some practi- porary e x e m p t i o n p u r s u a n t to cal significance. The Commission states Article 28(3), opening sentence and under that commissioned works of art can profit (b), of, and Annex F, item 2, to, the from the exemption. Commissioned art Directive is only of secondary importance. would seem to me to be rather more It is therefore out of the question that a
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strict interpretation of this exemption precisely activities which always come would conflict with the object of the under the ordinary VAT rate, activities Directive, if a different interpretation which come under the reduced VAT rate would be possible at all. and activities which may even be exempted entirely. In a system of such detail activities with a somewhat comparable, though not identical, content will automatically be treated differently in some cases.
40. In this dispute the effect of the principle of tax neutrality was also put forward. This principle underlies the common VAT sys- tem of which the Directive forms a part. It precludes entrepreneurs who carry out the same activities from being treated differ- 43. The Directive has thus created many ently when it comes to the levying of borderline cases, which stem from the fact VAT. 17 In this context, the Court has, that the boundaries maintained are not more particularly, recently reconfirmed always created naturally, but are deter- that double taxation goes against the mined by the way in which the Community principle of tax neutrality. 18 legislature uses its margin of discretion. The boundary which is the most obviously natural is that between goods and services. I therefore fail to understand why uphold- ing this boundary could be made imposs- ible by invoking the principle of tax neu- 41. In my view it cannot follow from this trality. principle that the supply of works of art by the artist should be liable to fall under the exemption. The supply of a work of art and the performance of a service by the artist, such as, for example, painting a portrait on commission, cannot, after all, be con- sidered to be the same activities. As the 44. The dispute further also involves the Commission rightly puts it, these are dif- question whether the exemption from tax- ferent activities whereby the determining ation on works of art can lead to double factor is the type of contract the artist has taxation. As it already follows from the concluded. above that such an exemption does not fit in with the Directive's system, I will decline to discuss the risk of double taxation any further.
42. I would also point out that in various places the Directive distinguishes quite
17 — See, inter alia, Gregg, above, footnote 9. 18—Joined Cases C-322/99 and C-323/99 Fischer and Bran- 45. For what it may be worth, I would add denstein [2001] ECR I-4049, paragraph 76. the following. From the defence it can be
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deduced that during the negotiations con- judging the present case. What the wishes cerning accession the Finnish Government of one of the parties to the negotiations also aimed to exempt the first supply of were is not the point; what is decisive is the works of art from the levying of VAT. This outcome of the negotiations as laid down in aim cannot be taken into consideration in the text of the Act of Accession.
VI — Conclusion
46. In the light of the facts and circumstances set out above, I propose that the Court should:
(a) declare that, by maintaining legislation exempting both the sale of works of art by the artist himself or by intermediaries and the importation of works of art purchased directly from the artist, the Republic of Finland has failed to fulfil its obligations under Article 2 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.
(b) order the Republic of Finland to pay the costs in accordance with Article 69(2) of the Rules of Procedure.
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