C-267/00

ZOOLOGICAL SOCIETY

OPINION OF ADVOCATE GENERAL JACOBS delivered on 13 December 2001 1

1. In accordance with the second indent of The Sixth Directive Article 13(A)(2)(a) of the Sixth VAT Direc- tive, 2Member States may make certain VAT exemptions subject to the condition that the entity benefiting from the exemp- tion is managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest in the 3. Under Article 2 of the Sixth Directive, a results of the activities concerned. supply of goods or services effected for consideration by a taxable person acting as such is subject to VAT. According to Article 4(1), a taxable person is a person who carries out an economic activity, whatever the purpose or result of that activity. However, certain transactions are or may be exempted from VAT under the terms of the directive.

5. Under Article 28(3)(a) read in conjunc- implemented in the United Kingdom until tion with Annex E, point 5, Member States the Value Added Tax (Cultural Services) were not obliged to exempt transactions Order 1996 ('the 1996 Order') came into under Article 13(A)(1)(n) during the tran- force on 1 June 1996. That Order amended sitional period; however, that possibility the Value Added Tax Act 1994 by intro- was withdrawn with effect from 1 January ducing a new category of exempt supplies 1990. 3 for the supply by an eligible body of the right of admission to, inter alia, a zoo. An 'eligible body' is defined as any body (other than a public body) which, inter alia, 'is managed and administered on a voluntary basis by persons who have no direct or indirect interest in its activities'. The 6. Article 13(A)(2) provides for a number omission of the word 'essentially' does not of limitations to be imposed on certain of appear to give rise to any dispute; it is the exemptions in Article 13(A)(1), includ- accepted that the Order must be interpreted ing those under subparagraph (n). Subpara- in conformity with the Sixth Directive. graph (2)(a) lists conditions which Member States may impose in each individual case on the granting of such exemptions to bodies other than those governed by public law. The condition set out in the second indent is that the bodies in question 'shall be managed and administered on an essen- tially voluntary basis by persons who have no direct or indirect interest, either them- selves or through intermediaries, in the results of the activities concerned'. The proceedings

9. The difference of opinion stems from differing interpretations of the way the Society is organised and administered. The following facts are however common 12. In addition, the Society employs several ground between the parties. hundred staff, including a director general and four directors, who must not be members but to whom it may pay 'reason- able and proper' remuneration. The direc- tor general and directors are involved with the Society's activities in accordance with their areas of responsibility, and attend 10. The principal object of the Society meetings of the council and the manage- (which is not a public body) is the advance- ment boards and committees as appropri- ment of zoology and it may under its ate but are not members thereof. There is a charter carry on a number of activities in finance director, a personnel director and pursuance of that object. In that context it one director for each of the Society's two owns and operates London Zoo and Whip- zoos, the latter being responsible for the snade Wild Animal Park, to which day-to-day operation of the zoos. members of the public are admitted for a charge.

13. The disagreement between the Com- missioners and the Society concerns the 11. The Society comprises some 4 000 indi- extent to which the Society's paid staff, in vidual members who elect a president, particular the directors, are involved in the secretary, treasurer and council. None of management and administration of its the officers or members of the Society or of activities for the purposes of the exemption. its council receives any remuneration from, or has any financial interest in, the Society. Members of the council, including the officers, may receive only reimbursement of proper expenses. The council is the governing body of the Society, with general 14. Following rejection of its claim for a responsibility for management, control and refund, the Society brought proceedings

(i) to the extent to which the manage- ment and administration of the body is conducted by remunerated and unremunerated persons (a) what are the criteria for determining by respectively, and if so, how is the whom a body is managed and admin- test to be applied;

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ZOOLOGICAL SOCIETY

or terms used to specify the exemptions pro- vided for by Article 13 of the Sixth Direc- tive are to be interpreted strictly since they constitute exceptions to the general prin- ciple that VAT is to be levied on all services (ii) to the individual financial basis supplied for consideration by a taxable upon which each of the persons person, 4together with its corollary that conducting the management and any limitations on such exemptions should administration of the body per- be construed broadly. forms that role (for example, none of those persons must receive more than nominal remuneration);

18. The Society further submits that it is or necessary to ascertain the underlying pur- pose of the exemption within the context of Article 13(A) as a whole. An exemption may even be extended beyond its actual wording in order to give effect to its (iii) to some other test or criterion, and underlying purpose, 5and a discretionary if so, what is that test or criterion?' exemption must be exercised in line with that purpose. 6The Commission points out that 'strict' does not necessarily mean 're- strictive'; the terms of an exemption which have been unambiguously laid down do not 16. The Society, the United Kingdom Gov- call for a particularly narrow interpre- ernment and the Commission have all tation. 7 submitted both written and oral observa- tions.

Commission is right in that regard to appropriate to the circumstances not only contrast the notions of 'strict' and 're- of Article 13(A)(l)(n) but also of subpara- strictive' interpretation. As a corollary, graphs (b), (g), (h), (i), (1) and (m), to which limitations on exemptions should not be it may also be applied. Moreover, although interpreted narrowly, but nor should they Member States are free to apply or not any be construed so as to go beyond their terms. of the discretionary conditions in Both the exemptions and any limitations on Article 13(A)(2)(a), each one must be inter- them must be interpreted in such a way that preted uniformly throughout the Commu- the exemption applies to that to which it nity and not as each Member State thinks was intended to apply and no more. Thus, I fit. Those conditions allow the Member would agree with the Society that it is States to confine the exemption to activities appropriate to consider the purpose of the carried out on a non-commercial basis and relevant provisions in their context. to avoid distortion of competition with taxable commercial undertakings. The sec- ond indent reinforces the first 8by ensuring that a formally non-profit-making organi- sation does not produce private profit for those who direct its activities.

The purpose of the provisions

23. I am unconvinced by the United King- dom's arguments in this regard. The need to maintain fiscal neutrality as between 25. It seems clear to me from the wording commercial and non-commercial undertak- that the condition in question reflects ings was indeed clearly a concern when another concern which was manifestly felt Article 13(A) of the Sixth Directive was in the drafting of Article 13(A), that of being drafted, but it is amply and explicitly ensuring that certain activities should not dealt with in that provision. In three benefit from exemption if they are run for subparagraphs of Article 13(A)(1), the commercial profit. Two exemptions are exemption is specifically subject to the explicitly confined to 'non-profit-making proviso that it must not be 'likely to cause organisations' 9 and the same group of distortion of competition' and seven seven, including Article 13(A)(1)(n) in issue exemptions — including the one in issue here, may be subjected under the first here — may under the fourth indent of indent of Article 13(A)(2)(a) to the con- Article 13(A)(2)(a) be subjected to the dition that 'they shall not systematically condition that 'exemption of the services aim to make a profit, but any profits concerned shall not be likely to create nevertheless arising shall not be distributed, distortions of competition such as to place but shall be assigned to the continuance or at a disadvantage commercial enterprises improvement of the services supplied'. subject to value added tax'. It may be assumed that, for the remaining exemp- tions, the legislature considered the public interest in exempting the relevant supplies more important than the concern to pre- vent distortion of competition.

29. Whilst underpinning its views with an interpretation of the intended purpose of the provision with which I have disagreed The meaning of 'managed and administe- above, the United Kingdom relies also on red' the use of the words 'management and administration' (and their equivalents in other language versions) to argue that all functions above the purely routine were intended to be covered. The Society, on the other hand, considers that the concept can 28. It is clear that acts of management and apply only to the senior controlling organs administration, in the broadest sense, are of the body concerned, not to paid man- carried out at different levels in almost agers or administrators who have no inter- every organisation. In themselves, the terms est in its financial results; there would be no are not specific and might apply wherever coherent purpose in withholding the decisions must be taken; in turn, decisions exemption from bodies as soon as they may be taken in any field from that of employ a single paid manager. Both the general policy formation to that of its Society and the Commission point out that detailed implementation. It has been paid managers and administrators are not pointed out in the context of the present only common but necessary in many of the case that the director of London Zoo, its areas of activity to which the indent may be head keeper and the keeper of, say, the applied — such as hospitals and edu- reptile house may all in some way be cational establishments. The Commission's described — together with many other view is that not all persons exercising staff — as carrying out management and management functions in a broad sense

33. In the present case, such management 31. If a Member State applies that indent and administration undoubtedly fall within alone, the aim and effect appear to be a the realm of the 'central controlling man- 'separation of powers'. Certain individuals agement' exercised by the Society's council may have an interest in 'the results of the and management boards, but might also activities concerned' but must not be in a include some of the responsibilities of its position to influence those results, whilst directors; even if those persons are not others, who may be in a position to empowered to take the relevant decisions influence the results, must have no interest themselves, they may none the less have a in them, so that whatever decisions they significant influence on policy if for take will be unaffected by considerations of example their recommendations to the private gain, whether direct or indirect. council and/or boards are generally fol- lowed. Their day-to-day operational man- agement and administration duties how- 10 — At paragraph 26. ever, including the power to take decisions

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merely implementing policy laid down at a more than nominal remuneration. The higher level, would be excluded. It is of United Kingdom Government considered course for the national court to examine that the expression did not refer to the body the exact scope — in practice, and not but meant that the individuals involved in merely in terms of the constitutive docu- management and administration must pro- ments of the organisation — of the direc- vide their services on an essentially volun- tors' duties and to ascertain whether they tary basis, for no more than nominal take or significantly influence policy remuneration. decisions such as determine the results of the Society's activities.

In the second indent of Article 13(A)(2)(a) of the Sixth VAT Directive, the concept of management and administration is to be interpreted as referring to the taking of policy decisions such as determine the results of the activities of the body in question, including the exertion of a significant influence on those decisions but excluding day-to-day operational management and administration or the taking of decisions which merely implement policy laid down at a higher level.

The requirement in the same indent that management and administration be conducted on an essentially voluntary basis is to be interpreted as meaning that substantially all the management and administration, thus defined, of the body in question must be conducted by unremunerated persons. However, the fact that paid staff intervene in such activities occasionally or in a peripheral manner, or that nominal or token payments are made to the persons responsible for management and administration, is not contrary to that requirement.

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