C-320/02
ECLI:EU:C:2003:411
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STENHOLMEN
OPINION OF ADVOCATE GENERAL STLX-HACKL delivered on 10 July 2003 1
I — Introduction That rule, which was inserted by Direc- tive 94/5/EC, 2is entitled 'Special arrange- ments applicable to second-hand goods, works of art, collectors' items and antiques'. 1. The present reference for a preliminary ruling concerns 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 assessment (hereinafter: 'the Sixth Directive'). The point at issue is whether live animals in 3. Article 26a(B) lays down special general, and horses in particular, can be arrangements for taxable dealers. Under considered to be second-hand goods. that provision, supplies of second-hand goods, inter alia, effected by taxable dealers are subject to taxation of the profit margin. The taxable profit margin is equal to the differential between the resale price and the cost price. Second-hand goods which are supplied to the dealer by a non-taxable person, for example, are covered. I I— Legal framework
A — Community law
4. Article 26a(A) contains a number of legal definitions. The legal definition of the 2. The relevant provision in the present case is Article 26a of the Sixth Directive. 2 — Council Directive 94/5/EC of 14 February 1994 supple- menting the common system of value added tax and amending Directive 77/388/EEC — Special arrangements applicable to second-hand goods, works of art, collectors' 1 — Original language: German. items and antiques (OJ 1994 L 60, p. 16).
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term 'second-hand goods' can be found in I I I— Facts, main proceedings and ques- Article 26a(A)(d). It states: tions referred for a preliminary ruling
7. Förvaltnings AB Stenholmen (herein- after: 'Stenholmen') intends to buy young horses from private individuals in order to 'second-hand goods shall mean tangible train them as riding horses and then sell movable property that is suitable for further them on. In order to clarify the tax use as it is or after repair, other than works consequences of its proposed business, the of art, collectors' items or antiques and company referred the following question to other than precious metals or precious the Skatterättsnämnden (Revenue Law stones as defined by the Member States'. Commission).
Is a horse — which is bought as an untrained young horse from a private individual (rather than a breeder) and is B — National law sold as a riding horse after training — to be regarded as second-hand goods at the time of sale, so that the rules on profit margin taxation can be applied?
5. Chapter 9a of the Mervärdeskattelag (1994:200) (hereinafter: the Law on value added tax) contains special provisions on second-hand goods, works of art, collec- 8. The Skatterättsnämnden replied to that tors' items and antiques. Under Chapter 9a question in the negative by a preliminary (4), second-hand goods are goods which decision of 12 November 2 0 0 1 , which was have been used and are suitable for further based on the following grounds: use as they are or after repair, with certain exceptions that do not apply in the present case.
9. Chapter 9a of the Law on value added tax contains provisions on 'profit margin taxation' on a taxable dealer's sales inter alia of second-hand goods. Under Para- 6. The rules in Chapter 9a of the Law on graph 4, second-hand goods are goods value added tax were devised in order to which have been used and are suitable for adapt to the rules of Community law on the further use as they are or after repair with subject. the exception of, broadly speaking, real
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property, works of art, collectors' items or having been used, the goods must be antiques, and goods which consist entirely suitable for further use as they are or or mainly of gold, silver or platinum, following repair. Under the definition, it including unmounted natural or synthetic seems that it must be determined whether precious stones. Works of art, collectors' the goods are second-hand at the time the items and antiques, to which the provisions — subsequent — dealer acquires them. of Chapter 9a are also applicable, are given That can also be inferred from the provi- their own definitions in the subsequent sions which define the term 'taxable dealer'. Paragraphs 5 to 7. A taxable dealer is The goods are thus sold on in the condition defined under the first subparagraph of in which they were acquired, or — it may Paragraph 8 as a taxable person who, in the be assumed — if they arc broken and thus course of his economic activity, acquires or do not fulfil a function which is normal and imports second-hand goods, works of art, expected in those goods, after they have collectors' items or antiques with a view to been rendered usable again by repair. selling them on.
12. It clearly follows that, before the goods 10. In Chapter 1, Paragraph 6 of the Law are sold on, as long as they have been in the on value added tax, goods are defined as dealer's possession, they cannot have material objects, including real property acquired characteristics which affect their and gas, heat, refrigeration and electrical value other than by repair or similar. That energy. The Skatterättsnämnden considers may be considered to be the case irrespec- that, according to that definition, live tive of whether the characteristics were animals are goods for the purposes of value added through a biological process or in added tax. However, in the present case the some other way. Living, growing organ- question is whether horses which have been isms, whether animals or plants, undergo acquired with a view to being sold on after changes during their life cycles such that training constitute second-hand goods to they can be considered, to a greater or lesser which the provisions on profit margin extent, to be continuously acquiring new taxation could be applied. Goods such as characteristics which may affect their value. fixtures intended for use in a business are not covered, as there is no intention to sell them on.
13. Moreover, it must be borne in mind that, leaving aside the term 'second-hand 11. The definition of the term 'second- goods', there is no doubt that the goods hand goods' specifies that, apart from covered by Chapter 9a of the Law on value
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added tax constitute inanimate objects legislation on value added tax. Regarding a which, with the exception of certain collec- living animal as 'second-hand' is, however, tors' items, have been manufactured. In barely consistent with the usual usage of the normal usage the term 'second-hand goods' term. The question of the meaning of the tends to be reserved for such objects, rather expression 'second-hand goods' appears than living organisms, and the word 'repair' not to have been referred to the Court of suggests something manufactured, the func- Justice for a ruling thus far. tion of which can be restored by repair.
14. In the light of the above observations 17. The Regeringsrätten is in some doubt and since the animals in the present case as to how the term should be interpreted have, moreover, been endowed with skills and has made reference to the Court of as riding horses, which they did not have Justice pursuant to Article 234 EC for a previously, or at least when Stenholmen preliminary ruling on the following ques- acquired them, or did not have to the same tions: extent as when they were sold on, the Skatterättsnämnden finds that the sale of horses cannot be classified as sales of second-hand goods. The provisions of Chapter 9a of the Law on value added tax are thus not applicable to Stenholmen's business. 1. Can an animal be considered to be second-hand goods?
15. Stenholmen appealed to the Regerings- rätten (Supreme Administrative Court) against that preliminary decision, claiming If that question is answered in the affirma- that the question should be answered in the tive, the Court is asked to answer the affirmative. The Riksskatteverket (National following question. Tax Board) contends that the Regeringsrät- ten should uphold the preliminary decision.
2. Is an animal which is purchased from a private individual (rather than a bree- 16. In the view of the Regeringsrätten, der) and which is sold, after training animals and other living organisms are for a specific purpose, to be considered certainly goods within the meaning of the to be second-hand goods? I - 3514
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IV — The first question condition in which they were purchased nor r e p a i r e d . T r a i n e d horses c a n n o t be regarded as second-hand goods any more than other living organisms and their fruits, such as berries and mushrooms. In addi- 18. The first question seeks an interpreta- tion, a situation where no tax at all is tion of Article 26a(A)(d) of the Sixth incurred must be avoided. Directive.
21. The Commission states that Annex A to the Sixth Directive also covers stock A — Main submissions of the parlies farming and Annex C mentions, inter alia, horses. It follows that horses are also to be classified as second-hand goods.
19. Stenholmen first considers the posi- tions taken before and by the national authorities. Furthermore, Stenholmen refers to the Court's case-law 3 on the legal assessment of animals as goods under the legislation on value added tax. No other conclusion can be drawn from Article 26a B— Assessment (A)(d). Similarly, the objective of avoiding double taxation and the objective of equal treatment, in terms of competition, of trade in second-hand goods pursued by the system of profit margin taxation suggest 22. It should first be pointed out that the that animals are covered. question referred seeks to ascertain whether animals can be considered to be second- h a n d g o o d s within the m e a n i n g of Article 26a(A)(d) of the Sixth Directive and not whether they must be considered as such in all circumstances. 20. In the view of the Riksskatteverket, animals must be regarded as goods within the meaning of the Sixth Directive, but not as second-hand goods within the meaning of Article 26a. Animals are excluded because they can be neither sold on in the 2 3 . It must also be stressed that the classification of animals under civil law as goods or as a separate category is irrelevant 3 — Case 10/87 Taumalls [1988] ECR. 3281. for the purposes of resolving this point of
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value added tax law. First, the term 26. As regards the first element, 'property', 'second-hand goods' should be interpreted reference is made to a judgment of the autonomously under Community law and, Court according to which horses are to be secondly, the civil-law interpretation would regarded as goods for the purposes of be contrary to the principle of uniform turnover tax law. 4 interpretation, which is important in value added tax law, because, on account of the Member States' different civil-law provi- sions, the relevant Community law would be interpreted and applied differently from one Member State to the next. 27. The second element, 'movable', sug- gests that animals are also covered, since animals — the present case concerns live horses — can generally move by them- selves, unlike many goods.
24. The way to approach answering the first question is indicated by the Sixth Directive, which is the subject-matter of 28. The third element, 'tangible', is also the present case. Annex A 11(1) expressly satisfied by animals, and therefore by includes 'stock farming'. Services in con- horses, since they are creatures with a nection with stock, i.e. animals, are thus tangible body. expressly encompassed.
29. The remaining fourth requirement is that the property is 'suitable for further use as it is or after repair'. This can also apply to animals. 25. The legal definition of the term 'sec- ond-hand goods' in Article 26a(A)(d) of the Sixth Directive covers only 'tangible mova- ble property'. In this connection it should be pointed out that neither this nor any other provision expressly excludes animals from the scope of the special arrangements laid down in Article 26a. Nor do the 30. This is not precluded by the fact that elements laid down in that provision auto- animals — and not only horses — can also matically lead to the conclusion that ani- mals cannot be second-hand goods within the meaning of the Sixth Directive. 4 — Case 10/87 (cited in footnote 3).
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be trained and can thus be used in a regarded as second-hand goods. An answer different way to previously; for example, to those questions would not be admissible after a basic training, horses can be used as simply on procedural grounds, because the dressage and jumping horses, or even questions were not actually asked in the eventing horses. main proceedings.
31. In particular, the horses at issue in the present case were suitable for use as they were prior to the purchase by Stenholmen; 34. Lastly, reference is made to the purpose they needed only to be further trained. of Article 26a, inserted by Directive 94/5/ Horses are often sold on or exchanged by EC, which is to avoid double taxation. This their owners, even after they have already would not occur, however, if in certain been used at shows. The acquirer may be cases not only the profit margin was taxed, either another private individual or a but also the total value. dealer, who sells on the horse, in the present case after further training.
32. Even though it is entirely feasible to 35. Furthermore, Article 26a of the Sixth take the view that there are cases where an Directive is also intended to prevent com- animal is not to be considered to be second- petitive disadvantages for dealers in second- hand goods, it cannot be inferred that hand goods. However, this group of traders animals cannot in principle be considered not only includes antique dealers, but horse to be second-hand goods. However, the dealers can also be included. question asked by the referring court addresses precisely this fundamental possi- bility.
36. The answer to the first question must 33. In these proceedings, it is not therefore therefore be that an animal can in principle necessary to clarify the questions also raised be considered to be second-hand goods by the Riksskatteverket whether newborn within the meaning of Article 26a(A)(d) of horses or picked berries should also be the Sixth Directive.
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V — The second question 39. Furthermore, other Member States would also apply the system of profit margin taxation to horses.
A — Main submissions of the parties
40. The Riksskatteverket, which examines the second question only in the alternative, considers that the economic activity is not the selling on, but the training of the horse. However, Article 26a of the Sixth Directive 37. Stenholmen takes the view that the applies only where goods are purchased application of the special arrangements for with a view to being sold on. Nevertheless, second-hand goods should not depend on the activity of training consists specifically their characteristics. According to the legal in changing the goods, the horse. This is a definition contained in Article 26a(A)(d), normal activity of purchasing with a view the crucial factor is that the goods must be to changing the goods and subsequent 'tangible movable property'. Therefore, a selling on. If only the profit margin was distinction should not be drawn between taxed, in certain cases this could mean that different types (levels of training) of horses. only the added value obtained in the last They should not be regarded as a new phase of the chain would be taxed. article within the meaning of the judgment in Van Dijk's Boekhuis. 5No distinction should be drawn depending on the person who purchases the goods, i.e. whether a horse is purchased by the breeder or by someone else, for example a private indivi- dual. 41. In the view of the Commission, it is not the future use of the horse that is relevant, but the economic processes to which the horse was subject.before it was sold to the taxable person.
38. The applicability of profit margin taxation depends solely on the satisfaction of the requirements laid down in Article 26a(B)(2) of the Sixth Directive. However, those requirements are not the 42. The Commission also points out that subject of the question referred for a the Community's value added tax legisla- preliminary ruling. tion is intended to avoid double taxation. Whilst the value added tax system does not cover newborn animals, which are not subject to any value added tax before their 5 — Case 139/84 Van Dijk's Boekhuis [1985] ECR 1405. supply to the dealer, it does cover animals I-3518
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which were first supplied to a non-taxable is irrelevant here whether that private person and then sold to a dealer. individual acquired his horse, which he sold to a taxable person, the dealer, from a private individual or from a trader, for example the breeder. The dealer acquires the horse in order to train it. According to the facts of the main proceedings, the case concerns, to be precise, further training of an already trained horse. B — Assessment
43. It should first be pointed out that the second question also concerns only a certain aspect of the special arrangements laid down in Article 26a of the Sixth Directive (the system of profit margin taxation), namely 'second-hand goods' as 45. It is unusual, compared with the a condition for applicability. The question 'normal' sales chain, for a private indivi- therefore concerns the interpretation of dual to appear within the chain but this Article 26a(A)(d) of the Sixth Directive. does not occur only in the trade in horses. Unlike the first question, it does not address Article 26a(A)(d) of the Sixth Directive the general legal problem of the classifica- itself contains important examples of goods tion of animals in general, but — on the that are often purchased from private basis of the main proceedings — the specific individuals, such as jewellery or antiques. classification of an animal which is pur- chased from a private individual, rather than a breeder, and which is sold — after training for a specific purpose — as second- hand goods.
44. The point of law is raised in the light of 46. It follows from my arguments on the the law on value added tax against the first question concerning the wording of following economic background: Article 26a(A)(d) of the Sixth Directive, as far as the second question is concerned, that animals purchased from a private indivi- dual, rather than a breeder, can be con- sidered to be second-hand goods. Strictly speaking, however, the purchase from a In the present case there is, as usual, a sales private individual does not affect classifica- chain, but, leaving aside the final consumer, tion as second-hand goods, but represents it consists not only of economic operators. another condition for the applicability of In fact, one of the links in the chain is a the special arrangements laid down in non-taxable person, a private individual. It Article 26a of the Sixth Directive.
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47. It is equally irrelevant for the purpose in this reference for a preliminary ruling of classification as second-hand goods that, Stenholmen takes the view that the pur- after being purchased by the dealer, an chase concerned jumping horses, which animal, in this case a horse, is sold on by were merely to be given further training. him. This also relates to an aspect of the s p e c i a l a r r a n g e m e n t s laid d o w n in Article 26a of the Sixth Directive that is not at issue in the present case, namely the supply by a taxable dealer.
5 1 . In the latter case it can be assumed that the horses are — to quote Article 26a(A)(d) 48. On the other hand, it might be crucial of the Sixth Directive — 'suitable for that the goods, in this case the horse, are further use' as they are. They are suitable sold on by the dealer himself only after for further use before and after their training for a specific purpose. training. As Stenholmen rightly states, it is always the same horse and the same function. Such horses are therefore to be considered to be 'second-hand g o o d s ' within the meaning of Article 26a(A)(d) of the Sixth Directive.
49. It should be stressed in this connection that the referring court does not raise the question of the treatment of the training activity under the law on value added tax. However, the Riksskatteverket could pro- ceed from this basis.
52. However, a different view could be taken in the case of horses that are trained for a different purpose from that which they previously served. This would, at least, concern the case where the horse is to be 50. It is not clear from the papers in the broken in for the first time. But even in the case-file in what condition the horses were case of horses that were already being used at the time of purchase from the private as jumping horses, circumstances may mean individual, i.e. how they could be used. that they can no longer be used — by their Whilst the Skatterättsnämnden was asked present rider or by any other — as jumping the question a b o u t the t r e a t m e n t of horses, in particular at riding shows. Lastly, untrained horses, in its written observations mention should be made of the — admit-
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tedly rare — case where horses are first erally accepted views, is different from that used as dressage horses and then as jumping of the materials provided'. 6 horses or vice versa. However, this often happens without any separate training in the interim.
56. This case-law could now be generally applied in such a way that the change in function is isolated as a criterion and made 53. A further point of law is raised by the into a general distinctive characteristic. acquisition of an additional skill, e.g. However, this is militated against by the training through endurance tests, that is to fact that the judgment concerned the inter- say training as an eventing horse. pretation of the term 'made' and it is not possible for a new horse to be made through training of any kind.
54. Trade with inclusive training of horses can therefore cover a wide variety of cases. 57. However, even taking the change in Since, however, in a reference for a function as the basis, the question is raised preliminary ruling the Court does not have whether and when such a change takes to resolve all cases that actually arise or the place in the case of horses. It is thus specific facts of the case, in these proceed- perfectly possible to hold the opinion — ings it is only possible to list general legal which is supported by generally accepted criteria which national courts have to take views — that dressage, jumping and event- into consideration in dealing with the ing horses, as well as Andalusians or horses specific facts of the case. that are trained in the Western riding style, have the same function, that is to say as saddle horses in general. On the other hand, driving horses, racehorses or trotters could form a s e p a r a t e category. H o w e v e r , another argument against this is the fact that at an even more abstract level all these horses have the same function: they serve as 55. For the set of problems at issue, a sports horses. These should be distin- distinction should be drawn between 'sec- guished from — increasingly rare — work- ond-hand goods' and 'new' articles. To that horses. Another separate category would be end, reference is made to the judgment in formed by horses that are traded for their Van Dijk's Boekhuis, which has been meat. mentioned several times in these proceed- ings. According to that judgment, an article is 'new' 'when the work ... results in an article whose function, according to gen- 6 — Case 139/84 (cited in footnote 5), paragraph 22.
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58. Aside from these distinctive features be fully taxed once again. On the other relating to the different possible uses for hand, horses that were sold directly by one horses in general, the question arises as to private individual to another private indi- what is important in assessing the function: vidual, i.e. without the horse trader who the intention of the seller, the intention of provides training (the dealer) as an inter- the purchaser (e.g. acquisition for partici- mediary, would be subject only to the tax pation in jumping competitions from a that is incurred on the sale to the first certain level), the objective suitability of private individual. This difference in treat- the horse in question or its former use. ment would lead to a distortion of competi- tion between direct sales and transactions through commercial channels. 7 However, it is the objective of Article 26a of the Sixth Directive and the intention of the Commu- nity legislature to avoid such distortion, as can be seen from Directive 94/5, which introduced these special arrangements. In 59. These circumstances show that in the absence of special arrangements for the practice the criterion of the change in trade in horses, the contested provisions on function raises extremely difficult issues of second-hand goods are therefore also classification, at least in connection with applicable to cases such as the main animals. Because of the associated legal proceedings. uncertainty for the economic groups con- cerned, such a criterion does not therefore appear to be very suitable.
60. Treating the horse purchased by an economic operator from a non-taxable person as second-hand goods is consistent with the objective of avoiding double 62. In conclusion, it should also be pointed taxation, pursued by the insertion of out that the application of profit margin Article 26a of the Sixth Directive. That taxation does not mean that the value objective is intended to be guaranteed added by the training of the horse is through profit margin taxation. untaxed. On the contrary, the profit margin taxation assesses specifically the profit margin, i.e. the differential. The higher the value added, which is expressed in the selling price obtained, the higher the profit margin. It is thus ensured that the training
61. If the horses were not treated as second-hand goods within the meaning of 7 — With regard to these negative effects against the background the provision in question, they would — of the former legal situation, see the judgment in Case 17/84 Commission v Ireland [1985] ECR 2375, paragraphs 14 reintroduced into commercial circulation — and 17.
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of horses is taken into account in the same 63. The answer to the second question way as the repair expressly provided for in must therefore be that an animal which is Article 26a(A)(d), which applies in the case purchased from a private individual (rather of antiques for example. than a breeder) and which is sold, after training for a specific purpose, can be considered to be second-hand goods.
VI — Conclusion
64. In the light of the foregoing, it is proposed that the Court give the following answers to the questions referred for a preliminary ruling:
1. An animal can be considered to be second-hand goods within the meaning of Article 26a(A)(d) 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 assessment.
2. An animal which is purchased from a private individual (rather than a breeder) and which is sold, after training for a specific purpose, can be considered to be second-hand goods within the meaning of Article 26a(A)(d) 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 assessment.
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