C-90/02

BOCKEMÜHL

OPINION OF ADVOCATE GENERAL JACOBS delivered on 23 October 2003 1

1. In this case the German Bundesfinanzhof Background and legislation (Federal Finance Court), seeks guidance on the interpretation of the Sixth VAT Direc- tive ('the Directive' or 'the Sixth Direc- tive'). 2 First, it asks whether the recipient of a service who is also liable to pay the relevant VAT may deduct that tax only if he is in possession of an invoice issued in accordance with the Directive. If so, it The Community VAT system further wishes to know what details the invoice must contain, in particular whether the amount of tax and the name and address of the supplier must be specified, and whether an incorrect definition of the taxable service constitutes a defect. Finally, it enquires, what legal consequences ensue 2. The essence of the VAT system is set out if it is impossible to establish that the in Article 2 of the First VAT Directive: 3 person who issued the invoice was the person who supplied the service?

'The principle of the common system of value added tax involves the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged.

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 3 — First Council Directive 67/227/EEC of 11 April 1967 on the turnover taxes — Common system of value added tax: harmonisation of legislation of Member States concerning uniform basis of assessment, OJ 1977 L 145, p. 1. turnover taxes, OJ, English Special Edition 1967, p. 14.

4. The Sixth Directive regulates the system in greater detail, although some matters are 7. A further important consideration is the left to the Member States. Under Article 2, a fact that VAT, although to a large extent supply of goods or services effected for harmonised by Community rules and an consideration within the territory of the important element in the Community's own country by a taxable person acting as such resources, remains from a national point of is subject to VAT, although certain transac- view a national tax and is subject to varying tions, not in issue here, are exempted under rates in different Member States. Where other provisions. A taxable person is cross-border transactions within the Com- defined in Article 4(1) as one who carries munity are concerned, there must therefore out an economic activity, whatever its purpose or result. Under Articles 5 to 7, taxable transactions are supplies of goods, 4 — This latter situation is sometimes known as 'reverse charge' supplies of services or imports. or 'tax shift'.

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be rules to determine the place where the and 28h, which form part of Title XVIa supply occurs. As regards most services, in concerning the Transitional arrangements particular those of the kind in issue in the for the taxation of trade between Member present case, those rules appear in Article 9 States'. of the Directive although, as will be seen, their relevance here is confined essentially to the fact that they may indirectly deter- mine who is liable to pay the tax.

Place where a service is supplied

— the supply of staff, (b) persons to whom services covered by Article 9(2)(e) are supplied ...; how- ever, Member States may require that the supplier of the service shall be held …' jointly and severally liable for payment of the tax;

(c) any person who mentions the value Persons liable to pay tax to the authorities added tax on an invoice or other document serving as invoice;

10. According to Article 21: …'

'The following shall be liable to pay value added tax:

Invoices

1. under the internal system: 11. Dealing with the obligations of persons liable for payment of the tax, Article 22(3) provides, inter alia:

8 — Council Directive of 20 December 2001 amending Directive 77/388/EEC with a view to simplifying, modernising and 7 — For certain types of supply not in issue in the present case, harmonising the conditions laid down for invoicing in Article 22(3)(b) also requires further details, including in respect of value added tax, OJ 2002 L 15, p. 24. Member particular the national VAT registration numbers of the two States are to adopt measures to implement Directive parties to the transaction. 2001/115 with effect from 1 January 2004.

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— 'the full name and address of the and provided that such obligations do not, taxable person and of his customer', in trade between Member States, give rise to formalities connected with the crossing of frontiers.'

— 'the extent and nature of the services rendered',

15. Since the material time, Directive 2001/115 has added a second subpara- graph to Article 22(8): 'The option pro- — 'the VAT amount payable, except vided for in the first subparagraph cannot where a specific arrangement is applied be used to impose additional obligations for which this Directive excludes such over and above those laid down in para- a detail' and graph 3'.

(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person liable for the tax within the territory of the country; 9

...' (d) when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formal- ities laid down by each Member State;

...' 17. Article 18(1) of the Directive, setting out the rules governing the exercise of the right to deduct, provides:

19. A withholding system was thus pro- vided for in Paragraph 51 et seq. of the 22. However, following objections from Umsatzsteuer-Durchführungsverordnung the Commission that it was not fully in (VAT implementing regulation, 'the accordance with Community law, that UStDV') 1993. withholding system was abolished with effect from 1 January 2002.

20. Under Paragraph 51 of the UStDV, the recipient of work and other services sup- plied by an undertaking established abroad was to withhold the relevant VAT and pay The main proceedings and the questions it to the competent tax office, even in the referred event of unresolved doubt as to whether the supplier was indeed established abroad.

23. Mr Gerhard Bockemuhl runs a con- struction firm in Germany operating in particular in the superstructure, bridge 21. Paragraph 52 provided for certain building and tunnelling sectors. In 1995, exceptions to those obligations. Paragraph some work was done for the firm by 52(2) embodied the so-called 'Nullrege- workers from Jaylink Bau Ltd Building I - 3312

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Contractors. That company had a contact third, unknown undertaking, established address in the Netherlands. The referring outside Germany. Moreover, the services court notes that an Offshore' company with supplied were not defined correctly (refer- the name of Jaylink Building Contractors is ring not to the supply of staff but to the registered in England with its registered work done). Consequently it concluded office at an accountants' firm in Mayfair, that, as recipient of the services, Mr London. Bockemühl was liable to pay VAT of DEM 17 219.17 on those taxable transac- tions.

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those services was not clearly identifiable. in that capacity, to be in possession of Consequently, Paragraph 52(2) of the an invoice issued in accordance with UStDV was not applicable. The applicant Article 22(3) of Directive 77/388/EEC was thus liable to the tax as recipient of the in order to exercise his right to deduct services. input tax?

28. The Bundesfinanzhof observes that, according to its case-law, even under the 2. If so, what details must the invoice Paragraph 52(2) procedure there must be contain? Is it detrimental if, instead of an invoice. Further that invoice must be the supply of staff, the work carried issued by the person supplying the service out using that staff is given as the and the service should be so defined that the service supplied? taxable transaction can be accurately deter- mined and easily verified.

2 9 . The Bundesfinanzhof has however 3. What are the consequences in law of doubts about the interpretation of the unresolvable doubts that the person requirements of the Directive with respect issuing the invoice supplied the service to invoicing in a case such as the one at invoiced?' issue. It has therefore stayed the proceed- ings and referred the following questions to the Court for a preliminary ruling:

30. Written observations have been sub- mitted by the German Government and the '1. Is it necessary under Article 18(1)(a) of Commission. The Finanzamt, M r Bocke- Directive 77/388/EEC for a person to mühl, the German Government and the whom services are supplied, who is the Commission have also replied in writing to person liable to pay the tax under a question put by the Court on whether Article 21(1) of Directive 77/388/EEC Member States are empowered under Arti- and to whom the tax has been charged cles 18(1)(d) and 22(3)(c) of the Directive to

31. First, Paragraph 51 et seq. of the UStDV appear to have been intended to implement provisions of the Directive. 34. It is well established however that, in an area governed by a directive, national courts must interpret national law, whether adopted before or after that directive, as far as possible in the light of its wording and purpose in order to achieve the result aimed for by it. 10 It will therefore be for the referring court to determine to what extent 32. The Bundesfinanzhof recognises how- the national provisions at issue can be ever that those national provisions were not construed consistently with the Directive fully consistent with Community law and and hence be applicable in the instant case. that is why they have been repealed. The referring court is none the less of the view that the rule of liability of the service recipient and the 'Nullregelung' system in 10 — See, among others, Case 106/89 Marleasing [1990] ECR I- 4135, paragraph 8 of the judgment; Case C-91/92 Faccini Paragraph 52(2) of the UStDV are applic- Dori [1994] ECR I-3325, paragraph 26.

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35. Second, before examining the questions from the order for reference that Germany themselves, it is helpful to have in mind a has opted for that solution, so that in either schematic view of the way in which the case M r Bockemuhl is the person liable to Directive provisions set out above interact pay the tax. in their application to the circumstances in issue.

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which has not been challenged in the course 22(3) and, in cases such as the present, to of the proceedings — that Article 17(2)(a) is compliance with formalities laid down by the correct basis for deduction in such Member States. circumstances.

40. Third, it must be remembered that, when a taxable person has paid VAT (input tax) on goods or services acquired for the purposes of taxable supplies to be made by him, the VAT system requires that, in the 38. In order for the customer to exercise his absence of any express provision to the right of deduction under Article 17(2)(a), contrary, he must be able to deduct that Article 18(1)(a) requires him to hold an amount from any VAT (output tax) for invoice drawn up in accordance with which he must account to the tax autho- Article 22(3), that is to say issued by the rities in respect of the supplies which he supplier in compliance with certain specifi- makes, provided that he can establish cations. Where the customer himself is payment of the input tax and has complied liable for the tax pursuant to Article 21 with whatever formalities are legitimately (1), Article 18(1)(d) requires him to comply imposed. with the formalities laid down by the Member State in order to exercise the right of deduction.

First question

39. In summary, Article 9(2) determines the place of supply (here, Germany) and, on that basis, Article 21(1) determines the person liable to pay the tax (here, the 4 1 . By its first question, the Bundesfinanz- customer). Article 17(2) determines the hof asks whether a recipient of services who customer's right to deduct, and Article 18 is liable to pay the VAT on those services in ( 1 ) lays down rules governing the exercise accordance with Article 21(1) of the Direc- of that right. Those rules refer to possession tive, and has been charged with its pay- of an invoice in accordance with Article ment, may exercise his right of deduction

43. Under Article 17(2)(a) of the Directive, a taxable person is entitled to deduct from the tax that he is liable to pay the VAT paid in respect of supplies made to him by another taxable person, provided that those supplies are used for the purposes of his taxable transactions. Article 18(1)(a) expressly and clearly provides: 'to exercise his right of deduction, a taxable person 46. If VAT is to be deducted, there must be must ... in respect of deductions pursuant proof that it has been incurred. In the to Article 17(2)(a) ... hold an invoice drawn context of the Community VAT system, an up in accordance with Article 22(3)'. Such invoice is an important — and probably the language leaves little room for doubt. clearest — means of providing that proof. It is the 'ticket of admission' to the right to deduct. 13 For that reason any taxable person who is entitled to deduct input VAT must be meticulous in obtaining and keeping the necessary documentation, so as to avert the possibility that a claim may be rejected as unsubstantiated. The proper issuing and keeping of invoices is also of crucial importance for the checks carried 44. Indeed, the referring court accepts that the wording is quite clear. It suggests however that, where the person liable to 13 — As Advocate General Slynn defined it in Joined Cases C-123/87 and C-330/87 Jeunehomme [1988] ECR 4517, pay the tax is the recipient of the supply, the at p. 4534.

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out by the relevant tax administration to 'every taxable person shall issue an invoice, ensure compliance with the relevant VAT or other document serving as invoice, in rules. respect of goods and services which he has supplied or rendered ...', is of general application.

48. That approach is consistent with other provisions of the Directive. Under Article 21(1)(a), where goods are supplied by a 50. By its second question, the Bundesfi- person established in another Member nanzhof asks what contents the invoice State, the tax is due by the recipient should have. In its reasoning, it specifies provided that, inter alia, there is an 'invoice that it is particularly interested in the issued by the taxable person not established question whether the invoice should state within the territory of the country' that (i) the amount of the tax and (ii) the name 'conforms to Article 22(3)'. And, according and address of the supplier. Furthermore, it to Article 22(3)(a), an invoice is required wishes to know (iii) whether the taxable also in the case of supply of goods that are transaction must be accurately described, exempted under Article 28c(A). In my view, specifically whether a reference to work it may safely be considered that the done by staff supplied, rather than the requirement in Article 22(3)(a), whereby supply of the staff itself (when that is what

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was actually provided) affects the validity recipient of the service is liable to pay the of the invoice for VAT purposes. tax, or refers to the provision which establishes that liability. The Commission in that context suggests that a reverse- charge transaction should be treated, for the purposes of Article 22(3)(b), as if it were an exemption.

51. It may be useful to consider the tax amount and the two other aspects sepa- rately, since the former is specifically mentioned in Article 22(3)(b), whereas the latter are not.

57. First, it would in principle render the supplier liable to pay the tax in accordance with Article 21(1)(c) — a result which could either lead to tax being levied twice or simply negate the whole reverse-charge mechanism. It is certain that no such result was intended by Article 21(1)(c), which is 59. The evident incoherence and impracti- essentially a guard against fraud or loss of cality of this aspect of the legislation may revenue, 16but the provision is clear and well be due to the fact that, to a large unmitigated by any exception. extent, it was not drafted with reverse- charge cross-border transactions in mind. Prior to 1993, the VAT system operated, essentially, independently within each Member State, cross-border supplies of goods being in principle exempted (with deduction of input tax) in the Member State of origin and taxed on importation into the Member State of destination. While the essentials of all the provisions concerning services with which we are concerned in the present case were already in place in the 1977 version of the Directive, Article 22 in 58. Second, on a more practical level, it particular seems to have been designed to would mean that the supplier must be fully deal with domestic rather than cross-border conversant with the differing rules govern- situations. It is headed Obligations under ing VAT rates in each Member State in the internal system', in contrast to 'Obliga- which he provides services. The task is by tions in respect of imports' in Article 23. no means impossible, but it would be Prior to 1993, however, imports were 'into infinitely better carried out by the customer the territory of the country', whereas they are now 'into the Community'. 17 The

61. With regard to Article 22(3)(b), one point is clear: 'as well as' cannot bear a 63. Whilst it seems clear that the new literal interpretation where a single supply version is considerably more than a clar- is invoiced. A supply is either taxed or ification of the old, I do not find the exempt, it cannot be both. If a supply suggestion unreasonable even on the pre- consists of various elements, some of which sent wording. From the supplier's point of are taxed (perhaps at differing rates) and some exempt, they must be itemised sepa- rately but each item can fall only within a 18 — See paragraph 13 above.

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view, a reverse-charge transaction is very whenever the right to deduct is based on similar, in terms of liability to tax and Article 17(2)(a). In that case it would be for entitlement to deduct, to an export transac- each Member State to lay down the tion exempted under Article 15 of the Sixth formalities to be complied with, and a Directive, with deduction or refund of input statement of the amount of tax need not tax pursuant to Article 17(3)(b) — and be one of them. from the customer's point of view it is comparable to an importation taxable under Article 2(2) with deduction under Article 17(2)(b). I thus favour an interpre- tation of Article 22(3)(b) to the effect that, for each item invoiced, the supplier must state the price exclusive of tax and, as the case may be, either the amount of tax to be charged or the exemption or reverse-charge mechanism applicable.

66. I therefore take the view that, in the between domestic transactions and intra- version applicable at the material time, Community transactions, and that there are Article 22(3)(b) requires the supplier to no formalities connected with the crossing state, for each item invoiced, the price of frontiers. The explanatory memorandum exclusive of tax and, as the case may be, to the Commission's Proposal for a Sixth either the amount of tax to be charged or Directive 20 states that it was not considered the exemption or reverse-charge mechanism necessary (at that stage) to harmonise the applicable, and that, if either of those numerous and detailed national provisions statements is omitted, the invoice may be concerning the delivery of invoices, and refused as justification of the customer's recital 1 in the preamble to Directive right to deduct. 2001/115 recognises that 'the current con- ditions laid down for invoicing and listed under Article 22(3) ... are relatively few in number, thus leaving it to the Member States to define the most important such conditions'.

Supplier's name and address — identifica- tion of the taxable transaction

67. The applicable version of Article 22(3) (b) does not however expressly require any further details except, in special circum- stances which do not include those in the present case, the supplier's and customer's VAT registration number and certain parti- culars relating to new means of transport.

69. By contrast Directive 2001/115 now fully harmonises the contents of the invoice for VAT purposes, with effect from 1 January 2004. The list of required state- ments under Article 22(3)(b) has been significantly extended, including inter alia 68. The list of details required is not 'the full name and address of the taxable however exhaustive. Member States may person and of his customer' and 'the extent require further statements on the invoice. and nature of the services rendered'. According to Article 22(8), 'Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion', 20 — Bulletin of the European Communities, Supplement 11/73, at p. 21; what is now Article 22 was Article 23 in the provided that there is no discrimination original proposal.

22 — Their omission hitherto may have been due simply to the assumption that any commercial invoice must necessarily 21 — See also the second subparagraph to Article 22(8) added by identify the supplier and the supply in order to be of any Directive 2001/115 (quoted above in paragraph 1 5). practical use in normal trade.

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74. In the case at issue, the invoice men- if those particulars are absent or materially tioned construction work done whereas the incorrect. tax authorities consider that it should have mentioned the supply of staff to do that work. If a description of services invoiced is incorrect and thus liable to give rise to an incorrect application of VAT, it seems to me that the invoice may legitimately be regarded as invalid for VAT purposes in accordance with such rules as a Member State has adopted to that effect. It seems however that in Mr Bockemühl's case the 76. In Jeunehomme 2 3 the Court made it tax authorities may have been motivated clear that 'as regards the exercise of the principally by concerns relating to possible right to deduction ... the Sixth Directive circumvention of national provisions of does no more than require an invoice employment and social security law. Such containing certain information. Member concerns, whilst clearly very important, are States may provide for the inclusion of extraneous to the VAT rules and should not additional information to ensure the correct in my view be regarded as relevant to the levying of value added tax and permit ruling to be given in the present case. supervision by the tax authorities'.

78. The third question concerns the con- sequences in law of difficulties in establish- ing that the person who issued the invoice is the same as the supplier of the taxable service; it appears from the order for reference that the national court is con- cerned in particular with whether the burden of proof falls on the tax authority or the claimant.

81. However, as the Court held in Jeune- homme, 27the obligations imposed on the taxable person invoking the right to deduc- 79. Although the Directive does not deal tion must not be such as to render the explicitly with the issue of the proof by the exercise of that right in practice impossible taxable person of his right to deduct, I agree or excessively difficult. It seems to me that with both Germany and the Commission that must be true irrespective of whether that the answer can again be found in those obligations are of substantive or Article 22(8). procedural nature. It is therefore for the national court to apply its own rules of proof in compliance with that requirement.

26 — See also Case C-85/95 Reisdorf [1996] ECR I-6257, paragraph 29 of the judgment. However, it is to be noted that, as from 1 January 2004, it is expressly provided that the service provider and the issuer of the invoice need not 80. Pursuant to that provision, Member be the same person (see note 15 above). States may impose other obligations which 27 — Quoted in paragraph 78 above.

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Conclusion