The Commissioners for Her Majesty’s Revenue & Customs v RBS Deutschland Holdings GmbH.

• Jurisdiction: European Union
• Celex Number: 62009CC0277
• ECLI: ECLI:EU:C:2010:566
• Docket Number: C-277/09
• Court: Court of Justice (European Union)
• Procedure Type: Reference for a preliminary ruling
• Date: 30 September 2010

OPINION OF ADVOCATE GENERAL

MAZÁK

delivered on 30 September 2010 (1)

Case C-277/09

Commissioners for Her Majesty’s Revenue and Customs

v

RBS Deutschland Holdings GmbH

(Reference for a preliminary ruling from the Court of Session of Scotland (First Division, Inner House) (United Kingdom))

(Interpretation of Article 17(3)(a) of the Sixth VAT Directive – Transactions carried out with the sole aim of obtaining a tax advantage – Provision of vehicle leasing services in the United Kingdom by the German subsidiary of a bank established in the United Kingdom)

I – Introduction

1. By order of 10 July 2009, received at the Court on 21 July 2009, the Court of Session of Scotland (First Division, Inner House) (United Kingdom) referred questions to the Court of Justice under Article 234 EC for a preliminary ruling concerning 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 (2) (‘the Sixth Directive’).

2. The reference was made in proceedings between the Commissioners for Her Majesty’s Revenue and Customs (‘the Commissioners’), the United Kingdom authority responsible for the collection of value added tax (‘VAT’) and other taxes, and RBS Deutschland Holdings GmbH (‘RBSD’), concerning the Commissioners’ refusal to allow deduction of VAT on the purchase of motor vehicles used for cross-border leasing within the Community.

3. By its questions, the referring court essentially wishes to ascertain, in the first place, whether Article 17(3)(a) of the Sixth Directive must be interpreted as entitling the tax authorities of a Member State to refuse deduction of (input) VAT in respect of the purchase of cars for the purpose of leasing them in circumstances such as those of the present case where no (output) VAT was charged on the car leasing transactions either in that Member State or in another Member State concerned.

4. In the second place, the referring court seeks guidance as to whether the transactions at issue may be qualified as constituting an ‘abusive practice’ within the meaning of the Court’s decision in Halifax and Others. (3)

II – Legal framework

A – The Sixth Directive

5. Article 5 of the Sixth Directive provides, in so far as is relevant, as follows:

‘1. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.

…

4. The following shall also be considered supplies within the meaning of paragraph 1:

…

(b) the actual handing over of goods, pursuant to a contract for the hire of goods for a certain period or for the sale of goods on deferred terms, which provides that in the normal course of events ownership shall pass at the latest upon payment of the final instalment;

…’

6. Article 6 of the Sixth Directive provides:

‘1. “Supply of services” shall mean any transaction which does not constitute a supply of goods within the meaning of Article 5.

…’

7. Article 8(1) of the Sixth Directive states that:

‘The place of supply of goods shall be deemed to be:

(a) in the case of goods dispatched or transported either by the supplier or by the person to whom they are supplied or by a third person: the place where the goods are at the time when dispatch or transport to the person to whom they are supplied begins. ...

(b) in the case of goods not dispatched or transported: the place where the goods are when the supply takes place.

…’

8. Article 9 of the Sixth Directive provides as follows:

‘1. The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

…’

9. Article 17 of the Sixth Directive, entitled ‘Origin and scope of the right to deduct’, provides, in so far as is relevant:

‘…

2. 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 within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person;

...

3. Member States shall also grant to every taxable person the right to a deduction or refund of the value added tax referred to in paragraph 2 in so far as the goods and services are used for the purposes of:

(a) transactions relating to the economic activities referred to in Article 4(2), carried out in another country, which would be deductible if they had been performed within the territory of the country;

…’

B – Relevant national law

10. Schedule 4, paragraph 1(2) of the Value Added Tax Act 1994 (‘the VAT Act’), which contains a definition of the term ‘supply of goods’, provides:

‘If the possession of goods is transferred –

(a) under an agreement for the sale of the goods, or

(b) under agreements which expressly contemplate that the property also will pass at some time in the future (determined by, or ascertainable from, the agreements but in any case not later than when the goods are fully paid for),

it is then in either case a supply of the goods.’

11. Pursuant to that rule, national law deems leasing to be a supply of goods only if it is provided for under conditions where, on expiry of the contract, title to the goods leased passes to the user or to third parties. In other cases, leasing is deemed to be a supply of services under section 5(2)(b) of the VAT Act, which provides that anything which is not a supply of goods but is done ‘for a consideration’ is a supply of services.

III – Factual background, procedure and questions referred

12. RBSD is a company established in Germany carrying on business providing banking and leasing services. RBSD is a member of the Royal Bank of Scotland Group. It does not have any place of establishment in the United Kingdom, but it is registered there for VAT purposes as a non-established taxable person.

13. In January 2000, Vinci plc (‘Vinci’), an unconnected company incorporated in the United Kingdom, was introduced, via Lombard North Central plc, to RBSD with a view to RBSD supplying lease finance to Vinci. To that end, on 28 March 2001, RBSD entered into a number of agreements with the Vinci Group.

14. First, RBSD purchased motor cars in the United Kingdom from Vinci Fleet Services (‘VFS’), a subsidiary of Vinci. VFS had acquired the cars from car dealerships established in the United Kingdom.

15. Second, RBSD and VFS entered into a Put Option Agreement in respect of the same cars. Under the terms of that agreement, VFS granted RBSD an option to require VFS to buy back cars which have been the subject of a lease agreement between RBSD and a company within the Vinci Group.

16. Third, a leasing agreement was concluded for a term of two years, which could be extended, called the ‘Master Lease Agreement’, under which RBSD acted as lessor and Vinci as lessee in respect of equipment identified in the schedules to that agreement as motor cars. On the expiry of the lease, Vinci was liable to pay to RBSD the full residual value of the cars. However, if (as was expected by the parties) RBSD sold the cars to a third person, Vinci would be entitled to or liable for the difference between the sale prices of the cars and their residual value, depending on the circumstances.

17. Between 28 March 2001 and 29 August 2002, RBSD charged rentals of GBP 335 977 to Vinci and charged no VAT on those transactions.

18. On 29 August 2002, RBSD assigned the agreements in question to a German subsidiary of the Royal Bank of Scotland Group, Lombard Leasing GmbH (‘LL’). LL then charged rentals of GBP 1 682 876 to Vinci and charged no VAT on those rentals during the period from 29 August 2002 to 27 June 2004.

19. Subsequently, and until 15 December 2004, LL exercised the put option with VFS in relation to the cars covered by the leasing agreements. VFS bought back the cars for GBP 663 158 and output tax totalling GBP 116 052 was charged to it by LL, which was then paid to the Commissioners.

20. The rental payments, received first by RBSD and then by LL, were not subject to VAT in the United Kingdom since, under United Kingdom law, the transactions in question were treated as supplies of services and were regarded as having been made in Germany, that is to say, where the supplier had his business. Nor were those payments subject to VAT in Germany since, under German law, the transactions in question were treated as supplies of goods and were regarded as having been made in the United Kingdom, that is to say, where the goods were located when the supplies took place.

21. Accordingly, no VAT was paid on the rental payments in either of the two Member States. However, as noted above, (4) VAT was levied in the United Kingdom on the proceeds of the sale of the cars following exercise of the put option by LL.

22. Before the national tax authorities, RBSD claimed deduction in full of the input VAT of GBP 314 056 charged to it by VFS when it purchased the cars from that company. (5) RBSD maintained inter alia that Article 17(3)(a) of the Sixth Directive entitled it to deduct the input tax on the acquisition of those goods. Furthermore, the conditions governing application of the doctrine of abuse of rights were not met in this case, since these were leasing transactions conducted between three independent traders operating at arm’s length.

23. The Commissioners refused to allow RBSD the VAT deduction it had claimed and demanded repayment of the input tax which had been credited to RBSD, contending in essence that Article 17(3)(a) of the Sixth Directive did not permit deduction of input VAT paid in respect of the acquisition of goods subsequently used for...