C-305/01

MGK-KRAFTFAHRZEUGE-FACTORING

OPINION OF ADVOCATE GENERAL JACOBS delivered on 6 March 2003 1

1. In the present proceedings, the Bundes- field of application of the Sixth Directive. If finanzhof (Federal Finance Court, Ger- so, it seeks by its second question to know many) asks the Court to clarify the status whether such factoring falls within one of under the Sixth VAT Directive 2 of what it the categories of exemption from VAT laid calls 'true factoring'. Factoring is a term down by Article 13B(d). used to refer to a variety of services supplied to creditors in connection with the management of their debts. A supplier of such services is known as a factor. True factoring, in the usage of the referring court, describes a transaction whereby the factor purchases debts owed to its client, and thereby assumes the risk of the debtor defaulting. It is thus differentiated from Legal framework 'quasi factoring' arrangements, in which a factor assists in the administration and collection of debts without any correspond- ing assumption of the risk of loss. 3. Under Article 2 of the Sixth Directive, a supply of goods or services effected for consideration by a taxable person acting as such is to be subject to VAT. According to Article 4(1), a taxable person is a person who carries out an economic activity, whatever the purpose or results of that activity. Economic activities include, under Article 4(2), 'all activities of producers, traders and persons supplying services' as 2. The Bundesfinanzhof raises two ques- well as 'the exploitation of tangible or tions concerning the analysis of true factor- intangible property for the purpose of ing. By its first question, it aims to establish obtaining income therefrom on a continu- whether true factoring is an economic ing basis'. activity which involves the supply of a taxable service so as to bring it within the

5. In the English and Swedish language versions of the Sixth Directive, the final clause of Article 13B(d)(3) contains an explicit reference to 'factoring' as a service which is excluded from the exemption. The other language versions make no such mention. The French text, for example, refers more generally to 'recouvrement de 9. It appears that, in its previous case-law créances'. applying the UStG, the Bundesfinanzhof has treated true and quasi factoring dif- ferently. Whereas it has regarded the activ- ities comprising quasi factoring as subject to taxation unless falling within an exemp- 6. By Article 13C(b), Member States may tion, it has held that true factoring does not allow taxpayers a right of option for constitute an economic activity or the taxation in respect of, inter alia, the trans- supply of a service and is therefore not actions covered in Article 13B(d). taxable.

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MGK-KRAFTFAHRZEUGE-FACTORIXC.

The facts and questions referred 13. MKG took the view that the true factoring services which it supplied to M-GmbH were taxable and on that basis sought in its tax declaration for 1991 to deduct tax in respect of goods and services supplied to it.

10. The facts as they appear from the order for reference are as follows.

14. MKG made its tax declaration to the defendant and appellant, the Finanzamt Groß-Gerau (Groß-Gerau Tax Office), which was the competent tax authority. 11. The applicant and respondent on After examining MKG's business, the appeal is the successor in title to MKG- Finanzamt refused to allow the deduction Kraftfahrzeuge-Factoring GmbH & Co. sought. It took the view, on the basis of the KG (MKG). MKG supplied factoring and Bundesfinanzhofs previous case-law, that financing services to MMC-Auto Deutsch- true factoring does not amount to an land GmbH (M-GmbH), a company which economic activity or to the supply of a imported Mitsubishi vehicles and dis- service, and is therefore not taxable. tributed them via its own dealer network on the German market.

2. Do such activities involve taxable transactions or transactions (they involve the latter in any event) for the 19. In support of its claim that true factor- purposes of Article 13B(d) of [the Sixth ing is not an economic activity, the German Directive] which may be taxed to the Government makes reference to the Court's extent that the Member States have judgment in Polysar Investments Nether- conferred on taxable persons a right to lands. 3 The Court held in that case that the opt for taxation? Which of the trans- mere acquisition and holding of shares in a actions listed in Article 13B(d) of [the company, in the absence of any direct or Sixth Directive] are involved?' indirect involvement in the management of that company, does not amount to an economic activity within the meaning of Article 4 of the Sixth Directive. The holding of shares cannot in itself be said to constitute the exploitation of property for 17. It is clear from the order for reference the purpose of obtaining income therefrom that by its first question the referring court on a continuing basis because any dividend is in essence seeking to ascertain whether yielded is merely the result of ownership of (contrary to its previous case-law) a person the property. 4 who undertakes true factoring can be said to perform an economic activity and there- fore to supply a taxable service within the 3 — Case C-60/90 [1991] ECR I-3111, paragraph 17. field of application of the Sixth Directive. If 4 — Paragraphs 13 and 14 of the judgment. For a discussion of so, the purpose of the second question is the subsequent case-law of the Court applying the principle established in Polysar Investment Netherlands, see the then to establish whether true factoring Opinion of Advocate General Léger of 12 September 2002 in Case C-77/01 EDM, at footnote 19, and the Opinion of none the less falls within one of the Advocate General Ruiz-Jarabo Colomer of 6 February 2003 in Case C-442/01 KapHag Renditefonds, paragraphs 25 to exemptions specified by Article 13B(d). 31, judgment of 26 June 2003 ECR I-6851, I-6853.

23. The Court has on a number of occa- sions confirmed that Article 4 gives the Sixth Directive a very wide scope, so that it comprises all stages of production, dis- 21. The German Government also argues tribution and the provision of services. 7 that true factoring is not taxable under the Sixth Directive because the factor does not supply any service within the meaning of Article 2 of the Directive. The only trans- action involved is the sale of a debt, in relation to which the factor is the con- sumer. It refers in that regard to the Mirror Group judgment, 5in which the Court was called upon to determine, inter alia, whether a lessee of commercial property 24. Moreover, the English and Swedish supplied taxable services to the lessor by language versions of Article 13B(d)(3) committing to the original lease and by expressly state that factoring is excluded exercising an option to lease additional from the exemption laid down by that property, in each case in exchange for provision, and thereby constitutes a taxable consideration. In addressing that question, transaction. 'Factoring' must surely be read the Court underlined the general proposi- as encompassing true factoring, given the tion that 'a taxable person who only pays general usage of that word, reflected in the the consideration in cash due in respect of a Bundesfinanzhofs choice of terminology. supply of services, or who undertakes to do Whilst the other language versions of so, does not himself make a supply of 6 — At paragraph 26 of the |udgment. 7 — Case C-186/89 VAN Tiem [1990] ECR I-4363, paragraph 17 5 — Case C-409/98 [2001] LCR I-7175. of the judgment.

26. Support for the proposition that such an activity constitutes a taxable service under the Sixth Directive can be derived from the Court's judgment in Bally. 8 The Court held that the issuer of a credit card supplies a service to a trader who accepts 29. As regards the second question the card from its customer in payment for referred, the German Government main- goods or services. That service consists in tains that, if true factoring is a taxable part in providing a guarantee of payment to service, it constitutes a 'transaction con- the trader for the purchases made. 9 Con- cerning debts' within the meaning of sideration for the service is supplied by the Article 13B(d)(3), and therefore falls within trader in the form of a commission calcu- the exemption laid down by that provision. MKG submits that true factoring is

8 — Case C-18/92 Bally [1993] ECR I-2871. 9 — Paragraph 9 of the judgment. 10 — Paragraph 11 of the judgment.

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MGK-KRAFTFAHRZEUGE-FACTORING

excluded from the exemption by the final Accordingly, I shall consider only the status clause of Article 13B(d)(3). of true factoring under Article 13B(d).

32. In my view, since the Bundesfinanzhof considers that a response to the second question referred is necessary for it to give judgment in the proceedings before it, it is appropriate for the Court to address it. 35. It therefore seems to me that true However, it appears to me that the second factoring is placed outside the exemption question relates only to true factoring contained in Article 13B(d)(3) by reason of transactions, such being the 'activities' the exclusion contained in the final clause which form the subject of the first question. of that provision.

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OPINION OF MR JACOBS — CASE C-305/01

Conclusion

36. Accordingly, I am of the opinion that the Court should answer the questions submitted for preliminary ruling as follows:

(1) on a proper construction 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 — a factoring company acts as a taxable person when it buys debts and assumes liability for the risk of loss in relation to those debts and may accordingly deduct from the tax which it is liable to pay tax which it has paid in respect of goods and services supplied to it for the purposes of its taxable transactions;