Finanzamt T v S.

• Jurisdiction: European Union
• ECLI: ECLI:EU:C:2022:944
• Date: 01 December 2022
• Docket Number: C-269/20
• Celex Number: 62020CJ0269
• Court: Court of Justice (European Union)

Provisional text

JUDGMENT OF THE COURT (First Chamber)

1 December 2022 (*)

Reference for a preliminary ruling – Value added tax (VAT) – Sixth Directive 77/388/EEC – Second subparagraph of Article 4(4) – Taxable persons – Option for Member States to treat as a single taxable person persons who are legally independent but closely bound to one another by financial, economic and organisational links (‘VAT group’) – National legislation designating the controlling company of a VAT group as a single taxable person – Internal supplies within the VAT group – Article 6(2)(b) – Supplies of services provided free of charge – Concept of ‘purposes other than those of the business’)

In Case C‑269/20,

REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decision of 7 May 2020, received at the Court on 18 June 2020, in the proceedings

Finanzamt T

v

S,

THE COURT (First Chamber),

composed of A. Arabadjiev, President of the Chamber, P.G. Xuereb (Rapporteur), T. von Danwitz, A. Kumin and I. Ziemele, Judges,

Advocate General: L. Medina,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– the German Government, by J. Möller and S. Heimerl, acting as Agents,

– the European Commission, by A. Armenia and R. Pethke, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 27 January 2022,

gives the following

Judgment

1 This request for a preliminary ruling concerns the interpretation of Article 4(4) and Article 6(2)(b) 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 (OJ 1977 L 145, p. 1) (‘the Sixth Directive’).

2 The request has been made in proceedings between the Finanzamt T (Tax Office T, Germany) (‘the tax authority’) and S, a German foundation governed by public law, concerning that foundation’s liability for value added tax (VAT) for the 2005 tax year.

Legal context

European Union law

3 The Sixth Directive was repealed and replaced, from 1 January 2007, by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1). However, in view of the date of the facts at issue in the dispute in the main proceedings, the dispute is still governed by the Sixth Directive.

4 Article 2 of the Sixth Directive provided:

‘The following shall be subject to [VAT]:

1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

…’

5 Article 4 of that directive provided:

‘1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

…

4. The use of the word “independently” in paragraph 1 shall exclude employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer’s liability.

Subject to the consultations provided for in Article 29, each Member State may treat as a single taxable person persons established in the territory of the country who, while legally independent, are closely bound to one another by financial, economic and organisational links.

5. States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions.

However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.

In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible.

Member States may consider activities of these bodies which are exempt under Article 13 or 28 as activities which they engage in as public authorities.’

6 Under Article 6(2) of that directive:

‘The following shall be treated as supplies of services for consideration:

(a) the use of goods forming part of the assets of a business for the private use of the taxable person or of his staff or more generally for purposes other than those of his business where the value added tax on such goods is wholly or partly deductible;

(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.

Member States may derogate from the provisions of this paragraph provided that such derogation does not lead to distortion of competition.’

7 Article 17(2) of that directive provided:

‘In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

(a) [VAT] due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;

…’

German law

8 Paragraph 2(2) of the Umsatzsteuergesetz (Law on turnover tax), in the version applicable to the dispute in the main proceedings (‘the UStG’), is worded as follows:

‘The industrial activity, commercial activity, craft or professional activity is not exercised independently:

…

2. if, in the light of the overall actual circumstances, a legal entity is financially, economically and organisationally integrated into the undertaking of the controlling company (tax group). The effects of the affiliation are limited to internal supplies between the constituent parts of the undertaking located in the country. These constituent parts are to be treated as a single undertaking. …

…’

9 Paragraph 3(9)a of the UstG provides:

‘The following shall be treated as another supply for consideration:

1. the use by a trader of goods forming part of the assets of a business which gave rise to the right to full or partial deduction of input tax, for purposes other than those of his business or for the private use of his staff, in so far as they are not courtesy gifts [to them]; that does not apply where the deduction of input tax is excluded under Paragraph 15(1)(b) or where an adjustment of the deduction of input tax is to be made pursuant to Paragraph 15a(6a);

2. supplies of other services free of charge by a trader for purposes other than those of his business or for the private use of his staff, in so far as they are not courtesy gifts [to them].’

10 Paragraph 73 of the Abgabenordnung (Tax Code), in the version applicable to the dispute in the main proceedings (‘the AO’), provides:

‘A controlled company shall be liable for the taxes of the controlling company for which their tax group is relevant for tax purposes. …’

The dispute in the main proceedings and the questions referred for a preliminary ruling

11 S, a German foundation governed by public law, is the controlling company of both a university medicine department and U-GmbH. S is liable for VAT in respect of the services which it supplies for consideration, whilst not being regarded as a taxable person for the activities which it carries out in the exercise of its powers as a public authority.

12 For the tax year in question in the main proceedings, U-GmbH provided S with cleaning, hygiene and laundry services, as well as patient transport services. As regards, in particular, the cleaning services, they were supplied for all of the building complex forming the university medicine department, which includes patients’ rooms, corridors, operating theatres, lecture rooms and laboratories.

13 It is apparent from the explanations provided by the referring court that, first, the hospital area, as such, in so far as it is dedicated to patient care, falls within the exercise of the economic activities carried out by S, for which S is liable for VAT. Second, the lecture rooms, laboratories and other premises are used for the teaching of students, an activity which that foundation carries out in the exercise of its powers as a public authority and in respect of which it is not considered to be liable for that tax. The proportion of the surface area of the building complex in question, for which cleaning services were supplied in respect of the latter type of activity, amounts to 7.6% of the total surface area of that building complex. For its services, U-GmbH received remuneration amounting to EUR 76 085.48 from S.

14 Following an audit, the tax authority adjusted S’s tax assessment for the tax year in question, taking the view that S’s establishments formed a single undertaking for which a single VAT return had to be drawn up and, therefore, a single tax assessment had to be issued.

15 According to the tax authority, the cleaning services received by S in respect of activities falling within its powers as a public authority were supplied to it by U-GmbH as part of the tax group (Organschaft) which those entities formed, for the purposes of Paragraph 2(2)(2) of the UStG, which is intended to implement, in German law, the possibility, provided for in the second subparagraph of Article 4(4) of the Sixth Directive, of...