C-438/01

2. The question referred to the Court raises The relevant legal provisions t w o issues. The first is w h e t h e r Article 9(2)(e) of the Sixth Directive applies to advertising services supplied indirectly to an advertiser (that is, the party who deter- mines what is to be advertised, and is 4. Under Article 2 of the Sixth Directive, a therefore the ultimate beneficiary of the supply of goods or services effected for services) and invoiced to a third party who consideration by a taxable person acting as in turn invoices them to the advertiser. As such is to be subject to VAT. According to regards this first issue, the Court has Article 4(1), a taxable person is a person who carries out an economic activity, whatever the purpose or results of that 1 — Original language: English. 2 — 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, OJ 1977 L 145, p. 1. 3 — Case C-108/00 [2001] ECR I-2361.

I-5619

OPINION OF MR JACOBS — CASE C-438/01

activity. Economic activities include, under supplier has established his business or has Article 4(2), the activities of persons sup- a fixed establishment from which the ser- plying services. The first subparagraph of vice is supplied or, in the absence of such a Article 6(1) defines a supply of services as place of business or fixed establishment, the 'any transaction which does not constitute place where he has his permanent address a supply of goods'. or usually resides.'

6. In pursuit of the objective indicated by that recital, Article 9(1) of the Sixth Direc- tive lays down the general rule that:

'The place where a service is supplied shall be deemed to be the place where the — advertising services...' I - 5620

DESIGN CONCEPT

The facts and question referred Article 9(1) of the Directive (with the consequence that VAT was payable in Belgium as the supplier's State of establish- ment), or within the rule concerning ser- vices connected with immovable property 8. Design Concept, a company established laid down by Article 9(2)(a) of the Direc- in Luxembourg, was commissioned by the tive (with the consequence that VAT was Luxembourg Ministry of Economic Affairs payable in Belgium as the place where the to organise display stands for the Ministry property was situated), or within the rule at a trade fair, known as HORECA, in concerning services related to cultural, Ghent, Belgium. In order to carry out its artistic, sporting, scientific, educational, commission, Design Concept contracted entertainment or similar activities laid with Flanders Expo, a Belgian company, down by Article 9(2)(c) (again with the for the supply of various services, including consequence that VAT was payable in the construction of two stands at the fair, Belgium as the place where the services the cleaning of those stands while the fair were physically carried out). was in progress, and the provision of staff to transport the material displayed.

9. When Flanders Expo submitted its invoice for the services which it had 11. Both the Tribunal de paix de Lux- provided, it included a sum representing embourg, at first instance, and the Tribunal the VAT payable on the transaction in d'arrondissement de Luxembourg, on Belgium under applicable Belgian law. appeal, found that the services supplied Design Concept, however, deducted from were not in the nature of advertising, and its payment the sum representing the VAT. therefore upheld Flanders Expo's claim to It argued that the services which had been the Belgian VAT. supplied to it were advertising within the meaning of Article 9(2)(e) of the Directive, and that VAT was therefore payable in Luxembourg, the place where it, as the customer, was established.

13. The Cour de cassation nonetheless 16. Written observations have been lodged considers that the applicability of the rule by Design Concept, Flanders Expo, the in Article 9(2)(e) to the circumstances of French Government and the Commission. the case remains in doubt. It notes that, Submissions were made on behalf of the according to the seventh recital, the place Greek Government at the hearing, at which for the supply of services should be defined Design Concept and the Commission were as being the place where the recipient of the also represented. services is located 'in particular in the case of certain services supplied between taxable persons where the cost of the services is included in the price of the goods'. In the view of the Cour de cassation, that recital is sufficient to raise a legitimate doubt as to whether it is an essential condition for the application of Article 9(2)(e) that the cost Assessment of the advertising services be included in the price of goods.

DESIGN CONCEPT

services supplied indirectly to an advertiser support of its position, it cites the following and invoiced to a third party who in turn passage from the Court's judgment in invoices them to the advertiser. Commission v France: 5

'As may be seen from the seventh recital in the preamble to the Sixth Directive, defin- 19. As all of the parties to the present ing the place of taxation of advertising proceedings observe, that question has services as the place where the person to already received an affirmative answer whom the services are supplied has his from the Court in the SPI case, 4in which principal place of business is justified by the it was held that 'Article 9(2)(e) must be fact that the cost of those services, supplied interpreted as applying not only to [adver- between taxable persons, is included in the tising] services supplied directly and price of the goods. The Community legis- invoiced by the supplier to a taxable lature therefore considered that, in so far as advertiser, but also to services supplied the person to whom the services are indirectly to the advertiser and invoiced to supplied customarily sells the goods or a third party who in turn invoices them to supplies the services advertised in the State the advertiser'. where he has his principal place of busi- ness, and charges the corresponding VAT to the final consumer, the VAT based on the advertising service should itself be paid by that person to that State. This reasoning is one of the factors which must be taken into account in interpreting the term 20. I shall therefore turn to the second issue "advertising services" in Article 9(2)(e) of raised by the question referred, namely the Sixth Directive.' whether Article 9(2)(e) of the Sixth Direc- tive applies to advertising services in cir- cumstances where the advertiser does not produce goods in the price of which the cost of the advertising services is to be 22. In my view, the French Government's included. argument with regard to the second issue cannot be accepted.

produces goods or services 6 in the price of to demonstrate that the term to be read into which the cost of the services which he the text was unequivocally supported by receives will be included. the purposes underlying the provision and was necessary to give effect to them. I am not convinced that such is the case here for the following three reasons. 24. The rule in Article 9(2)(e) has been shaped in several respects by that objective. First, the provision requires that the recipi- ent of the services which it specifies must be a taxable person. The recipient will thus be involved in an economic activity, and will 27. First, it is important to note that the ordinarily, therefore, pass on the costs of seventh recital indicates that VAT should services received, including the VAT pay- be payable in the State where the recipient able thereon, to his or her own customers. of services is situated in particular where Secondly, the services specified in the VAT would be passed on by the recipient to provision are all of a kind which makes its own customers. The recital therefore them likely to constitute inputs to other implies that there may be other valid economic activities. objectives justifying the payment of VAT in the State of the customer which may be served by Article 9(2)(e). By way of example, a purpose which underlies a number of provisions of the Sixth Directive 25. As the Court has held, the seventh is the avoidance of distortions of compe- recital is therefore a useful aid in inter- tition resulting from differences in the level preting the meaning of the terms of at which VAT is set from State to State. By Article 9(2)(e). 7The approach advocated making VAT payable on services in the by the French Government does not, how- State of the customer in circumstances ever, employ the recital to assist in estab- where the VAT will not be passed on, a lishing the meaning of a term actually risk of competitive distortion arises. It contained in Article 9(2)(e), but as a basis cannot therefore be assumed that a narrow- for reading into that provision an addi- ing of the application of Article 9(2)(e) in tional element which is nowhere to be the manner suggested by the French Gov- found in the text of the provision itself. ernment would not undermine other objec- tives which the provision was also intended to pursue.

the price of goods or services produced by provisions, they should all be interpreted in the advertiser itself, such an approach such a way as to ensure the legal certainty would prevent Article 9(2)(e) from apply- upon which the effective operation of such ing in circumstances such as those in the a scheme depends. present proceedings where services are supplied to an intermediate customer, who then includes the cost of those services in the price of the services which it supplies to the advertiser. That approach cannot therefore be justified by reference to the specific objective set out in the seventh recital. 31. In addition to any loss of legal certainty which might be thought to result as a consequence of departing from the text of the provision, the approach advocated by the French Government would seem to me 29. Thirdly, such an approach would to give rise to a number of practical appear to be in tension with the more uncertainties in its application. general objective of Article 9, which is to avoid instances of double taxation or non- taxation through the establishment of a common scheme for allocating the place of taxation of services. That purpose is appar- ent from the seventh recital's reference to 'conflicts concerning jurisdiction as between Member States', and has been confirmed by the Court on numerous 32. Suppliers of advertising services, as occasions. 8 It has been held also to underlie well as the relevant authorities of the the provisions of Article 9(2). 9 Member States, would be required to determine whether in a given case an advertiser could be said to produce goods or services in the price of which the cost of the advertising services would be absorbed. The assessment would be complicated by the fact that advertising services may be 30. It follows from the status of Article 9 as supplied to the advertiser indirectly via a a scheme for allocating jurisdiction among third party. In such cases, enquiries would the Member States that, whatever the more need to extend beyond the supplier's particular purposes justifying its various immediate customer. Nor would it necess- arily be apparent from the services them- selves whether the advertiser produced 8 — See Case 168/84 Berkholz [1985] ECR 2251, paragraph 14 goods or services in the price of which the of the judgment; Case 283/84 Trans Tirreno Express IVA [19861 ECR 231, paragraph 14; Case C-68/92 Commission cost of the services might be entered, given v France, paragraph 14; Case C-327/94 Dudda [1996] ECR I-4595, paragraph 20; and Case C-108/00 SPI, paragraph that, as the Commission points out, an 15. organisation such as a producers' collective 9 —Case C-108/00 SPI at paragraphs 16 and 17 of the judgment. may advertise goods without actually pro-

I - 5626