Aktiebolaget NN v Skatteverket.

• Jurisdiction: European Union
• Celex Number: 62005CJ0111
• ECLI: ECLI:EU:C:2007:195
• Date: 29 March 2007
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Docket Number: C-111/05

Case C-111/05

Aktiebolaget NN

v

Skatteverket

(Reference for a preliminary ruling from the Regeringsrätten)

(Sixth VAT Directive – Supply of goods – Article 8(1)(a) – Fibre-optic cable between two Member States running in part outside Community territory – Tax jurisdiction of each Member State limited to the length of cable installed on its territory – Non-taxation of the part lying in the exclusive economic zone, on the continental shelf or on the seabed)

Opinion of Advocate General Léger delivered on 14 September 2006

Judgment of the Court (Third Chamber), 29 March 2007

Summary of the Judgment

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Supply of goods

(Council Directive 77/388, Art. 5(1))

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Supply of goods

(Council Directive 77/388, Art. 8(1)(a))

3. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Sixth Directive – Scope of territorial application

(Council Directive 77/388, Arts 2, point 1, 3 and 8(1)(a))

1. A transaction for the supply and installation of a fibre-optic cable linking two Member States and sited in part outside Community territory must be considered a supply of goods within the meaning of Article 5(1) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 2002/93, where it is apparent that, after functionality tests carried out by the supplier, the cable will be transferred to the client who will dispose of it as owner, that the price of the cable itself clearly represents the greater part of the total cost of that transaction, and that the supplier’s services are limited to the laying of the cable without altering its nature and without adapting it to the specific requirements of the client.

The fact that the supply of that cable is accompanied by its installation does not, in principle, preclude the transaction falling within the scope of Article 5(1) of the Sixth Directive. Firstly, it follows from Article 8(1)(a) of the Sixth Directive that tangible property can be installed or assembled, with or without a trial run, by or on behalf of the supplier without the transaction necessarily losing its classification as ‘supply of goods’. Secondly, that provision does not distinguish between the methods of installation, such that movable property may be installed in the ground in such a way as to be incorporated in it without for that reason necessarily having to be classified as ‘works of construction’ within the meaning of Article 5(5) of the Sixth Directive.

(see paras 34-35, 40, operative part 1)

2. Article 8(1)(a) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that the right to tax the supply and laying of a fibre-optic cable linking two Member States and sited in part outside the territory of the Community is held by each Member State pro rata according to the length of cable in its territory with regard both to the price of the cable itself and the rest of the materials and to the cost of the services relating to the laying of the cable.

It is true that, in order to function, a rule of conflict of laws must allow for attribution of tax jurisdiction in order to make a transaction subject to value added tax in only one of the Member States involved. To that effect, where goods have to be installed, the supply is deemed, in principle, to take place only in the territory of a single Member State and, where installation of the goods consists of their incorporation in the ground, it is the site of that incorporation which determines the State having jurisdiction to tax the supply. That still does not mean that the second sentence of Article 8(1)(a) of the Sixth Directive does not apply where installation of goods in the territory of one of the Member States continues into the territory of another Member State. Where those goods are installed in the territory first of one Member State then in that of a second, the place of supply is deemed to be in the territory of each of those States in succession. It follows that, in such a case, each Member State must have the right to tax the transaction in respect of that part of the goods installed in its territory.

(see paras 45-47, 50, operative part 2)

3. Article 8(1)(a) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, read in conjunction with Articles 2(1) and 3 of that directive, must be interpreted as meaning that the transaction concerning the supply and laying of a fibre-optic cable linking two Member States is not subject to value added tax for that part of the transaction which is carried out in the exclusive economic zone, on the continental shelf and at sea.

The rules laid down in the Sixth Directive have binding and mandatory force throughout the national territory of the Member States within the meaning of Article 299 EC, which, pursuant to Article 2 of the United Nations Convention on the Law of the Sea, signed at Montego Bay on 10 December 1982, extends to the territorial sea, its bed and its subsoil.

However, the sovereignty of the coastal State over the exclusive economic zone and the continental shelf is merely functional and, as such, is limited to the right to exercise the activities of exploration and exploitation laid down in Articles 56 and 77 of the Convention on the Law of the Sea. To the extent that the supply and laying of an undersea cable is not included in the activities listed in those articles, that part of the operation carried out in those two zones is not within the sovereignty of the coastal State. That finding is confirmed by Articles 58(1) and 79(1) of the Convention, which permit, subject to certain conditions, any State to lay undersea cables in those zones. It follows that that part of the transaction cannot be regarded as having been carried out in the territory of the country within the meaning of Article 2(1) of the Sixth Directive. The same is true, a fortiori, of that part of the transaction which is carried out at sea, a zone which, pursuant to Article 89 of the Convention on the Law of the Sea, is outside the sovereignty of any State.

(see paras 55-57, 59-61, operative part 3)

JUDGMENT OF THE COURT (Third Chamber)

29 March 2007 (*)

(Sixth VAT Directive – Supply of goods – Article 8(1)(a) – Fibre-optic cable between two Member States running in part outside Community territory – Tax jurisdiction of each Member State limited to the length of cable installed on its territory – Non-taxation of the part lying in the exclusive economic zone, on the continental shelf or on the seabed)

In Case C-111/05,

REFERENCE for a preliminary ruling under Article 234 EC from the Regeringsrätten (Sweden), made by decision of 24 February 2005, received at the Court on 4 March 2005, in the proceedings

Aktiebolaget NN

v

Skatteverket,

THE COURT (Third Chamber),

composed of A. Rosas, President of the Chamber, A. Borg Barthet, J. Malenovský, U. Lõhmus (Rapporteur) and A. Ó Caoimh, Judges,

Advocate General: P. Léger,

Registrar: R. Grass,

having regard to the written procedure,

after considering the observations submitted on behalf of:

– Aktiebolaget NN, by U. Grefberg Nyberg, processansvarig,

– Skatteverket, by B. Persson, acting as Agent,

– the Commission of the European Communities, by L. Ström van Lier and D. Triantafyllou, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 14 September 2006

gives the following

Judgment

1 This reference for a preliminary ruling concerns the interpretation of Articles 2(1), 3(1), 5, 6, 8(1)(a) and 9(2)(a) 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), as amended by Council Directive 2002/93/EC of 3 December 2002 (OJ 2002 L 331, p. 27; ‘the Sixth Directive’).

2 The questions referred by the national court have arisen in the context of an action brought by Aktiebolaget NN (‘Aktiebolaget NN’), established in Sweden, against a preliminary opinion given by the Skatterättsnämnden (Revenue Law Commission) with regard to the application of the provisions relating to value added tax (‘VAT’) to the installation, between Sweden and another Member State, of a fibre-optic cable, part of which must be laid on the seabed in international waters.

Legal context

Community legislation

3 Article 2 of the Sixth Directive provides:

‘The following shall be subject to value added tax:

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

…’

4 Article 3 of that directive provides:

‘1. For the purposes of this Directive:

– “territory of a Member State” shall mean the territory of the country as defined in respect of each Member State in paragraphs 2 and 3,

– “Community” and “territory of the Community” shall mean the territory of the Member States as defined in respect of each Member State in paragraphs 2 and 3,

– …

2. For the purposes of this Directive...