C-155/01

COOKIES WORLD

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 10 October 2002 1

I — Introduction compatible with the Sixth Directive. In this connection Article 9 of the Sixth Directive, which relates to the place of taxable trans- actions, and Article 17, which governs the right to deduct input tax and the exemp- tions thereto, are of particular relevance.

1. In this case the Austrian Verwaltungs- gerichtshof has referred to the Court a question concerning the interpretation of 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 assess- ment 2 (hereinafter: 'the Sixth Directive').

A — European law 5. Article 9(1) of the Sixth Directive lays the principal rule governing the place where a service is supplied. Under this principal rule: 'The place where a service is supplied shall be deemed to be the place 4. Goods and services are defined in where the supplier has established his busi- Articles 5 and 6 of the Sixth Directive. In ness or has a fixed establishment from particular, Article 6(2) provides as follows: which the service is supplied or, in the 'The following shall be treated as supplies absence of such a place of business or fixed of services for consideration: establishment, the place where he has his permanent address or usually resides.' Article 9(2) provides for exceptions to this principal rule, inter alia also so as to allow, in special cases, the charging of VAT at the place where the customer of the service is (a) the use of goods forming part of the established (paragraph (e)). Such a special assets of a business for the private use case is the hiring out of movable tangible of the taxable person or of his staff or property which does not, however, cover more generally for purposes other than forms of transport. 4 those of his business where the value added tax on such goods is wholly or partly deductible;

6. Article 17(2) provides, in so far as is relevant, as follows,:

(b) supplies of services carried out free of charge by the taxable person for his own private use or that of his staff or more generally for purposes other than those of his business. 'In so far as the goods and services are used for the purposes of his taxable transactions,

9. The Eighth VAT Directive 5lays down the rules governing the reimbursement of VAT to undertakings established in another (c) v a l u e a d d e d t a x d u e under Member State. Article 2 of this directive Articles 5(7)(a) and 6(3).' provides: 'Each Member State shall refund to any taxable person who is not estab- lished in the territory of the country but who is established in another Member State, subject to the conditions laid down below, any value added tax charged in 7. Article 17(6) is particularly relevant to respect of services or movable property these proceedings. It provides: 'Before a supplied to him by other taxable persons in period of four years at the latest has elapsed the territory of the country or charged in from the date of entry into force of this respect of the importation of goods into the Directive, the Council, acting unanimously country.' Article 5 of the Eighth Directive on a proposal from the Commission, shall states: 'For the purposes of this Directive, decide what expenditure shall not be eli- goods and services in respect of which tax gible for a deduction of value added tax. may be refundable shall satisfy the con- Value added tax shall in no circumstances ditions laid down in Article 17 of Directive be deductible on expenditure which is not 77/388/EEC as applicable in the Member strictly business expenditure, such as that State of refund.' on luxuries, amusements or entertainment. Until the above rules come into force, 5 — Eighth Council Directive 79/1072/EEC of 6 December 1979 Member States may retain all the exclu- on the harmonisation of the laws of the Member States sions provided for under their national laws relating to turnover taxes — Arrangements for the refund of value added tax to taxable persons not established in the when this Directive comes into force.' territory of the country (OJ 1979 L 3 3 1 , p. 11).

In the view of the national court, this provision meant that leasing transactions relating to a car were deemed to have been carried out in Austria where the vehicle was In the view of the national court, this used predominantly in Austria. provision means that leasing transactions

6 — In the version published in BGBl. No 636/1975. 7 — In the version published in BGBl. No 410/1988.

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COOKIES WORLD

relating to a car are deemed to have been HI — Factual and procedural background carried out in the Member State from which the lessor operates its business, even if the vehicle is used predominantly in Austria. 17. Cookies World VertriebsgmbH iL. (hereinafter: 'Cookies World'), the claim- ant in the main proceedings, is a private limited company established in Austria which carries on a trading business. In the capacity of lessee, it leased a car from a German undertaking which it used in Austria for the purposes of its business.

15. Paragraph 12(2)(2) of the UStG 1994 is — in so far as is relevant here — identical to Paragraph 12(2)(2) of the UStG 1972 as reproduced above. 18. By notice of 15 June 1996 the Finanz- amt (Tax Office) Schwaz assessed the turnover tax of Cookies World in respect of 1997. The rent for the lease car was added to the taxable transactions. That addition was made under Paragraph 1(1) of the UStG 1994.

(in addition to the taxation, in conformity 22. By order of the Verwaltungsgerichtshof with the Sixth Directive, in the State in (Austria) of 29 March 2001, received at the which the lessor has established his busi- Court Registry on 11 April 2001, a refer- ness). As a result the same transaction is ence was then made to the Court of Justice taxed twice. In the view of Cookies World, for a preliminary ruling on the following there is no possible justification for this question: under Article 17(6) of the Sixth Directive because that provision relates only to the exclusion of the right to deduct VAT. Furthermore, it merely allows existing laws to be retained. However, the chargeable event in Paragraph 1(1) of the UStG 1994 has been part of Austrian law only since 'Is it compatible with the Sixth Directive, in 6 January 1995. particular Articles 5 and 6 thereof, for a Member State to treat the following event as a taxable transaction: the incurring of expenditure relating to services supplied abroad that, if they had been supplied within the national territory to the trader, would not entitle the trader to a deduction of input tax?' 20. By decision of 20 July 2000 the Finanz- landesdirektion für Tirol (Tyrol Regional Tax Authority) dismissed the appeal brought.by Cookies World. It considered that the Member States could — pending any amendment of the Sixth Directive — retain national exclusions from the right to 23. In these proceedings written observa- deduct input tax. This power of the tions were submitted to the Court by Member States also covered taxation of Cookies World, the Austrian Government own consumption, as provided for in Aus- and the Commission. There was no hear- trian law. In the view of the Finanzland- ing. esdirektion, this serves primarily, for rea- sons of competition neutrality, to cancel out the effect of deduction of VAT claimed abroad.

26. If it must be concluded that this power 29. This principle is one of the bases which does exist — or at least if such possibility the Community legislature chose when cannot be excluded — the second part of drawing up the Sixth Directive and which the question arises. Then the answer given the Court has repeatedly confirmed. These by the Court will be determined to a large principles are as follows: extent by recent case-law concerning Article 17(6) and (7). I referred to the judgment in Metropol Treuhand and Stadler earlier at paragraph 3 of this Opinion. Two judgments of 14 June 2001 in Commission v France are also relevant. 9 — tax neutrality: ensuring that all econ- 9 — Cases C-345/99 [2001] ECR I-4493 and C-40/00 [2001] omic activities, whatever their purpose ECR I-4539. or results, provided that they are them-

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selves subject to VAT, are taxed in a 31. In the context as I have described it, it wholly neutral way; 10 is the guiding principle which determines the answer to the first part of the question referred by the national court.

32. In this regard I would like to return to — equality of tax treatment in order to the facts of the main proceedings. If it is counter distortion of competition. In established that the leasing in Germany this connection exceptions to harmon- constitutes a taxable transaction, it follows isation must be interpreted strictly. from this principle that the leasing in They apply only in the cases expressly Austria cannot be subject to VAT. This is provided for in the Sixth Directive. also the view which Cookies World and the That is because each exception results Commission take in the present proceed- in increased divergence in the tax ings. burden in the Member States. 11

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34. The facts in the main proceedings do property', the place where the services indeed show that there is own consumption are supplied is the place where the in Austria. However, this own consump- customer has established his business tion is not therefore the relevant chargeable or has a fixed establishment; event as regards the application of the Sixth Directive. That chargeable event is the leasing which took place in Germany. As the Court held in its judgment in ARO Lease, 12 the leasing of vehicles constitutes a supply of services within the meaning of Article 9 of the Sixth Directive. — since forms of transport may easily cross frontiers, it is difficult, if not impossible, to determine the place of their utilisation and in each case a practical criterion must therefore be laid down for charging VAT. Con- sequently, for the hiring out of all 35. Furthermore, as regards the leasing of a forms of transport, the directive pro- car the Court held as follows in that vided that the service should be deemed judgment: 13 to be supplied not at the place where the goods hired out are used but, with a view to simplification and in conform- ity with the general rule, at the place where the supplier has established his business.

— it is evident from the preamble to the directive 14 that, as regards the hiring out of forms of transport, Article 9(1) should, for reasons of control, be strictly applied, the place where the supplier has established his business 36. To sum up, this case-law of the Court being treated as the place of supply of leaves no scope for the charging of VAT on such services; leasing in the Member State of use. In this regard I also refer to the guiding principle governing the charging of VAT, as I have described it above, that is to say there must be no double taxation of the same event.

40. Although I generally attach great 38. It could be argued that the VAT in importance to the elimination of distortions Austria was charged in respect of another of competition within the common market, event, that is to say the own consumption I do not consider this argument to be a itself. In that case there would be no strong one. The taxable transaction takes transaction with the leasing company but place in another Member State which use of goods forming part of the assets of a applies the Sixth Directive in full (including business for the private use of the taxable the right to deduct input tax). Austria person to be treated as supply of a service makes use of an exception to the Sixth for consideration as laid down in Directive. Naturally, use of this exception Article 6(2) of the Sixth Directive. The can in no way result in the taxable persons final sentence of that provision allows the established in their own Member State Member States the necessary scope. How- having no entitlement to a benefit available ever, this argument does not bear scrutiny. to them under the law of the other Member The facts in the main proceedings show State and which, it should be noted, is clearly that the taxable transaction con- based on an EC directive. 16 cerns the leasing in Germany. The tax assessment of the Finanzamt Schwaz at issue relates to the rent for the leased vehicle. Paragraph 1(1) of the UStG 1994, which the Austrian Government takes as a basis, also shows that it is the same event that is taxed.

41. Cookies World also states that the national legislation at issue, which serves solely to protect Austrian suppliers, is contrary to Article 49 EC. I consider that this argument is not relevant to the present 39. To a large extent the Austrian Govern- case. Only if it is established that the ment bases its reasons for the permissibility of the measure at issue on an appreciation of the provisions of the Sixth Directive in 16 — In this connection see, in particular Articles 2 and 5 of the relation to one another. It puts forward Eighth VAT Directive.

Austrian legislature has the power to regu- 43. Finally, I should point out the follow- late the charging of VAT in a case such as ing. Article 17(6) of the Sixth Directive the present — if such charging has not grants the Member States the power, under (yet) been fully harmonised — does certain circumstances, to retain an exemp- Article 49 EC come into play. Having tion to the right to deduct VAT. I will regard to the above considerations, the examine the content of this power below Austrian legislature has no such power. when considering the second part of the question. Prior to doing so, I should state in this regard that this power cannot be used to change the place of a chargeable event, as follows from the Sixth Directive. There- fore, Article 17(6) has no bearing on the answer to the first part of the question. In that sense I agree with Cookies World and the Commission in so far as they contend 42. By way of illustration, I refer in this that the Member States can make use of regard to the recent judgment in Cura Article 17(6) only to retain an exception to Anlagen. 17 That judgment does not relate the right to deduct input tax which exists in to turnover tax but to restrictions in Aus- their national law. trian legislation on leasing cars outside Austria. In this judgment the Court referred to its case-law according to which Article 49 EC also precludes the appli- cation of any national legislation which has the effect of making the provision of services between Member States more dif- ficult than the provision of services purely within one Member State. Such a restric- tion on freedom of movement can be justified only by a reason relating to the public interest recognised in EU law and, moreover, the principle of proportionality VI — The second part of the question: must be observed. 1 8In my view, the derogation from the principle of the deduc- Austrian measure at issue does not, by tion of VAT definition, have the effect of making the leasing of a vehicle in another Member State more difficult than within that Member State. It results precisely in more equal conditions. Therefore, if such an examination in the light of Article 49 EC were necessary — quod non — the ques- tion would still arise as to whether or not the Austrian provision at issue constitutes an infringement of that article of the 44. I stated above that the Sixth Directive Treaty. grants no power to charge VAT in the Member State in which a vehicle leased in another Member State is used. This being 17 — Case C-451/99 [2002] ECR I-3193. so, the second part of the question need not 18 — In particular paragraphs 30 and 32 of that judgment. be answered. Therefore, my consideration

45. In my earlier opinions concerning Article 17 of the Sixth Directive, I pointed 47. As regards Austria, this means that it to the nature of the Sixth Directive and the may retain the exceptions to the ability to role which the right to deduct input tax deduct input tax in so far as they existed at plays therein. The Court construes the the time of accession to the European principal rule of Article 17(2) as a right in Union (1 January 1995). After that time it principle. Therefore, it follows that the may no longer adopt measures which possible exceptions to the ability to deduct increase the extent of existing exclusions, VAT are limited in nature. In Lennartz the thus diverging from the objective of the Court held that the right to deduct input Sixth Directive. If an existing exclusion is tax must be exercised in respect of all the withdrawn wholly or in part it cannot taxes charged on transactions. Such limi- subsequently be reintroduced. 21 tations on the right of deduction must be applied in a similar manner in all the Member States and therefore derogations are permitted only in the cases expressly provided for in the Sixth Directive. More- over, provisions which contain possible exceptions must be interpreted strictly. 19 48. It is established that the national meas- ure at issue, namely Paragraph 1(1) of the UStG 1994, was not introduced until 6 January 1995, that is to say a few days after accession. The Austrian Government puts this down to a logistical reason con- nected with the national legislative pro- cedure. 4 6 . The second s u b p a r a g r a p h of Article 17(6) constitutes an exception to this principle 2 0 and is applicable until the Council lays down the provisions referred to in the first paragraph of Article 17(6). It is a standstill clause in nature which permits the Member States to retain the 49. In my view, the fact that the relevant provision was incorporated into Austrian 19 — See, most recently, my Opinion in Metropol Treuhand and Stadler cited above in footnote 3, paragraph 32. 20 — See the judgment in Metropol Treuhand and Stadler cited 21 — Case C-40/00 Commission v Trance, cited above in above in footnote 3, paragraph 44 et seq. footnote 9, paragraph 17 et seq.

52. This brings me to the power of a Member State to create an exclusion to the right to deduct input tax on grounds of competition pursuant to Article 17(7) of the Sixth Directive. This power likewise cannot be used in the present case. The judgment in Metropol Treuhand and Stadler leads inevitably to this conclusion. The Court places two conditions on use of 50. I should also note that, to my mind, it is this power. Firstly, a Member State may immaterial that under Paragraph 3(11) of make use thereof only following consul- the UStG 1972 in force until 1 January tation as provided for in Article 29 with the 1995 — at least according to the national committee referred to therein. No such court — leasing transactions were deemed consultation was held in this case. Sec- to have been carried out in Austria where ondly, the rules relating to the deduction of the vehicle was used predominantly in VAT must contain an indication as to their Austria. The Austrian legislature deliber- temporal limitation. 22 There is no evidence ately chose not to incorporate this provi- of this in the present case. sion in this form into the UStG 1994. Consequently, this provision was no longer valid law, irrespective of whether or not 22 — In Metropol Treuhand and Stadler, cited above in footnote 3, the Court also states that they cannot fotm part of a Paragraph 3(11) of the UStG 1972 is package of structural adjustment measures whose aim is to substantively the same as Paragraph 1(1) reduce the budget deficit and allow State debt to be repaid. In the present case this is immaterial, at least in the of the UStG 1994. proceedings before the Court.