CELEX: 62018CJ0388
Reference for a preliminary ruling
Taxation
Harmonisation of fiscal legislation
Directive 2006/112/EC
Common system of value added tax (VAT)
Point 1 of the first paragraph of Article 288 and Article 315
Special scheme for small enterprises
Special arrangements for taxable dealers
Taxable dealer falling under the margin scheme
Annual turnover determining whether the special scheme for small enterprises is applicable
Profit margin or amounts received

This request for a preliminary ruling concerns the interpretation of point 1 of the first paragraph of Article 288 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (
OJ 2006 L 347, p. 1
; ‘the VAT Directive’).
The request has been made in proceedings between Finanzamt A (Tax Office A, Germany) and B, who carries on business as a second-hand vehicle dealer, concerning the method by which B’s annual turnover is to be calculated for the purposes of applying the special scheme for small enterprises provided for by the VAT Directive.
Legal background
EU law
Article 73 of the VAT Directive provides:
‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’
Title XII of the VAT Directive, which is headed ‘Special schemes’, contains a Chapter 1 relating to the ‘Special scheme for small enterprises’. Section 2 of that chapter, which is headed ‘Exemptions or graduated relief’, contains Articles 282 to 292 of the directive.
Under Article 282 of that directive, the exemptions and graduated tax relief provided for in that section 2 apply to the supply of goods and services by small enterprises.
Article 288 of the VAT Directive provides:
‘The turnover serving as a reference for the purposes of applying the arrangements provided for in this Section shall consist of the following amounts, exclusive of VAT:
(1)
the value of supplies of goods and services, in so far as they are taxed;
(2)
the value of transactions which are exempt, with deductibility of the VAT paid at the preceding stage, pursuant to Articles 110 or 111, Article 125(1), Article 127 or Article 128(1);
(3)
the value of transactions which are exempt pursuant to Articles 146 to 149 and Articles 151, 152 or 153;
(4)
the value of real estate transactions, financial transactions as referred to in points (b) to (g) of Article 135(1), and insurance services, unless those transactions are ancillary transactions.
However, disposals of the tangible or intangible capital assets of an enterprise shall not be taken into account for the purposes of calculating turnover.’
Article 289 of the directive provides that ‘taxable persons exempt from VAT shall not be entitled to deduct VAT in accordance with Articles 167 to 171 and Articles 173 to 177, and may not show the VAT on their invoices’.
Article 290 of the directive reads as follows:
‘Taxable persons who are entitled to exemption from VAT may opt either for the normal VAT arrangements or for the simplified procedures provided for in Article 281. In this case, they shall be entitled to any graduated tax relief provided for under national legislation.’
Chapter 4 of Title XII of the VAT Directive concerns ‘Special arrangements for second-hand goods, works of art, collectors’ items and antiques’. Section 2 of that chapter, which is headed ‘Special arrangements for taxable dealers’, contains a Subsection 1 concerning the ‘Margin scheme’, which in turn contains Articles 312 to 325 of that directive.
Article 313(1) of the directive provides:
‘In respect of the supply of second-hand goods, works of art, collectors’ items or antiques carried out by taxable dealers, Member States shall apply a special scheme for taxing the profit margin made by the taxable dealer, in accordance with the provisions of this Subsection.’
Article 314 of the directive provides:
‘The margin scheme shall apply to the supply by a taxable dealer of second-hand goods, works of art, collectors’ items or antiques where those goods have been supplied to him within the [Union] by one of the following persons:
(a)
a non-taxable person;
(b)
another taxable person, in so far as the supply of goods by that other taxable person is exempt pursuant to Article 136;
(c)
another taxable person, in so far as the supply of goods by that other taxable person is covered by the exemption for small enterprises provided for in Articles 282 to 292 and involves capital goods;
(d)
another taxable dealer, in so far as VAT has been applied to the supply of goods by that other taxable dealer in accordance with this margin scheme.’
Article 315 of the VAT Directive reads as follows:
‘The taxable amount in respect of the supply of goods as referred to in Article 314 shall be the profit margin made by the taxable dealer, less the amount of VAT relating to the profit margin.
The profit margin of the taxable dealer shall be equal to the difference between the selling price charged by the taxable dealer for the goods and the purchase price.’
German law
Paragraph 1 of the version of the Umsatzsteuergesetz (Law on turnover tax) which applies to the dispute in the main proceedings (BGBl. 2005 I, p. 386; ‘the UStG’) provides, under the heading ‘Taxable transactions’:
‘(1)   The following transactions shall be subject to turnover tax:
1.
supplies of goods and services made for consideration within national territory by an undertaking acting in the course of its business …’
Paragraph 10 of the UStG, headed ‘Taxable amount as regards supplies of goods and services and intra-Community acquisitions’, provides:
‘In respect of supplies of goods and services (first sentence of Paragraph 1(1)(1)), turnover shall be calculated … on the basis of consideration. Consideration is everything which the recipient of the supply expends (net of turnover tax) for the purpose of obtaining the supply …’
Paragraph 19 of the UStG, headed ‘Taxation of small enterprises’, is worded as follows:
‘(1)   The turnover tax due in respect of transactions referred to in Paragraph 1(1)(1) shall not be collected from an enterprise … if the sum of the turnover referred to in the second sentence and the corresponding tax did not exceed EUR 17500 in the previous calendar year, and will probably not exceed EUR 50000 in the current calendar year. For the purposes of the first sentence, “turnover” refers to the overall turnover calculated on the basis of receipts, after deduction of any income on fixed assets included in those receipts. …
…
(3)   The overall turnover is the total of the taxable transactions referred to in Paragraph 1(1)(1) entered into by the trader, after deduction of the following transactions:
…’
Paragraph 25a of the UStG, headed ‘Margin scheme’, provides:
‘(1)   The supplies of movable goods referred to in Paragraph 1(1)(1) shall be taxed in accordance with the following provisions (margin scheme) if the following conditions are met:
…
(3)   Turnover shall be calculated on the basis of the amount by which the sale price exceeds the purchase price of the goods; …
…’
The dispute in the main proceedings and the question referred for a preliminary ruling
As a second-hand vehicle dealer, B entered into taxable transactions which were subject to the margin scheme under Paragraph 25a of the UStG. His turnover, calculated on the basis of receipts, amounted to EUR 27358 in 2009 and EUR 25115 in 2010.
In completing his VAT returns of 10 February 2010 (relating to the year 2009) and of 23 March 2011 (relating to the year 2010), B took the view that he was entitled to claim the status of ‘small enterprise’ within the meaning of Paragraph 19 of the UStG, on the basis that his turnover for the years 2009 and 2010 was EUR 17328 and EUR 17470 respectively. B had not calculated those turnover figures on the basis of the amount he received, but on the basis of his profit margin, in accordance with Paragraph 25a(3) of the UStG.
As regards the first of those VAT returns, the tax authorities accepted that the annual turnover serving as a reference for the purposes of applying the scheme for small enterprises could be calculated on the basis of the profit margin, and accordingly that B was entitled to the benefit of the special scheme for small enterprises.
However, as regards the second VAT return, Tax Office A refused, in a tax notice of 4 October 2012, to apply the scheme for small enterprises to B in respect of the 2010 tax year. A change had been made to the administrative practice by the Umsatzsteuer-Anwendungserlass (Ruling on the application of turnover tax) of 1 October 2010 (BStBl. 2010 I, p. 846), under which, for the purposes of determining whether the scheme for small enterprises applied, in cases, inter alia, concerning the applicability of the margin scheme to dealers, the turnover for the relevant year was required to be calculated on the basis of amounts received, and not by reference to the profit margin.
An objection to that tax notice having been rejected, B brought an action before the competent Finanzgericht (Finance Court, Germany), which annulled the tax notice on the ground that, for the purposes of determining whether the special scheme for small enterprises applied, amounts received in excess of the profit margin were not to be taken into account.
That court took the view that point 1 of the first paragraph of Article 288 of the VAT Directive was directly effective, and that it precluded the method of calculation which had been used by Tax Office A. It regarded that provision as stipulating that the turnover to be used for the purposes of applying the scheme for small enterprises was the value of supplies of goods and services ‘in so far as they are taxed’. It held, in that regard, that under the margin scheme which applied to supplies made by B pursuant to Article 315 of the VAT Directive — it is only the profit margin that is taxed.
In the appeal on a point of law (‘
Revision
’) which it has brought before the Bundesfinanzhof (Federal Finance Court, Germany), Tax Office A submits that point 1 of the first paragraph of Article 288 of the VAT Directive was misinterpreted.
The referring court appears to share the view of the Finanzgericht (Finance Court) that the turnover to be used as a reference for the purposes of applying the scheme for small enterprises provided for in Article 282 et seq. of the VAT Directive to a trader who, pursuant to Article 314 of that directive, is subject to that margin scheme, is required to be calculated on the basis of that profit margin, given that Article 313(1) of the directive lays down special rules applicable to such traders. It states that, under point 1 of the first paragraph of Article 288 of the VAT Directive, the turnover figure to be used consists of the value of the supplies of goods ‘in so far as they are taxed’. It regards that stipulation as referring to the taxable amount, and the taxable amount as being limited, under the scheme provided for by Article 315 of the directive, to the profit margin.
It observes, nevertheless, that the expression ‘in so far as they are taxed’, in point 1 of the first paragraph of Article 288 of the VAT Directive, could also be taken to mean that only exempt supplies are to be excluded from the turnover figure used for the purposes of applying the scheme for small enterprises. On that approach, supplies subject to the margin scheme which are not exempt, but are taxed as such, should be included in full, and not only to the extent of the taxable amount determined under the special rules in Article 315 of the directive.
The referring court does not rule out the possibility, moreover, that in point 1 of the first paragraph of Article 288 of the VAT Directive, the ‘value’ of the supplies of goods may correspond to the ‘total’ of the amounts received, and that that provision accordingly relates to the taxable amount as referred to in Article 73 of that directive.
Considering that it was necessary, in order to resolve the dispute before it, to interpret provisions of the VAT Directive, the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘In cases involving the margin scheme provided for in Article 311 et seq. of [the VAT Directive], must the provision contained in point 1 of the first paragraph of Article 288 of that directive be interpreted as meaning that, for the purposes of assessing the relevant turnover, where this arises from a supply of goods as referred to in Article 314 of [the VAT Directive], in accordance with Article 315 of that directive, it is necessary to base [that assessment] on the difference between the selling price charged and the purchase price (profit margin)?’
Consideration of the question referred
By its question, the referring court asks, in essence, whether point 1 of the first paragraph of Article 288 of the VAT Directive is to be interpreted as precluding national legislation or a national administrative practice under which the turnover used as a reference for the purposes of determining whether the special scheme for small enterprises applies to a taxable person who is subject to the special margin scheme for taxable dealers is calculated, in accordance with Article 315 of that directive, solely by reference to the profit margin achieved.
Under point 1 of the first paragraph of Article 288 of the VAT Directive, the turnover used as a reference for the purposes of applying the special scheme for small enterprises consists of the value, exclusive of VAT, of supplies of goods and services, in so far as they are taxed.
According to settled case-law, it follows from the requirements of both the uniform application of Union law and the principle of equality that the terms of a provision of that Union law, which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope, must normally be given an autonomous and uniform interpretation throughout the European Union, having regard not only to the wording of that provision but also to its context and the objective pursued by the legislation in question (judgment of 23 May 2019, WB,
C‑658/17
,
EU:C:2019:444
, paragraph
and the case-law cited).
To begin with the literal interpretation of point 1 of the first paragraph of Article 288 of the VAT Directive, it must be noted, first, that the very wording of the provision indicates that the turnover of the taxable person consists of the total value, exclusive of VAT, of the taxed supplies of goods and services, but, secondly, that the word ‘taxed’ does not refer to the word ‘value’, but to the word ‘supplies’.
The provision, according to its wording, thus imposes a requirement that, in order for their value to be included in the turnover of the taxable person, the supplies must be taxed as such, without specifying how they are to be taxed, that is to say, without specifying the arrangements under which they are taxed.
Equally, the wording of that provision does not indicate that, in every case, the supplies must be taxed in full.
It is common ground that the supplies made by the taxable dealer are taxed, albeit under a special scheme.
Accordingly, on a literal interpretation of point 1 of the first paragraph of Article 288 of the VAT Directive, it is the total value of the supplies made by a taxable dealer, and not the profit margin, that constitutes the turnover which serves as a reference for the purposes of applying the special scheme for small enterprises.
The general scheme, origins and purpose of the VAT Directive confirm that interpretation.
As regards the general scheme of that directive, it must be borne in mind that the present case concerns the relationship between two specific schemes for which it provides, namely the special scheme for small enterprises and the special arrangements for taxable dealers.
As the German Government has rightly pointed out, the special scheme for small undertakings and the special arrangements for taxable dealers are two autonomous special schemes, independent of one another. In the absence of any reference, in one of those special schemes, to elements and concepts of the other, its content must, in principle, be approached without reference to the content of the other.
As regards the origins of the VAT legislation, it should be noted that the historical development of that legislation also confirms that the concept of ‘the profit margin made by the taxable dealer’ has no bearing on the correct interpretation of the concept of ‘turnover’ in the context of the special scheme for small enterprises.
It must be remembered that the special scheme for small enterprises was established by 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
), and that it was only later that special arrangements were introduced for taxable dealers, through the adoption of Council Directive 94/5/EC of 14 February 1994 supplementing the common system of value added tax and amending Directive 77/388/EEC — Special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques (
OJ 1994 L 60, p. 16
).
Accordingly, the rules relating to the determination of turnover for the purposes of applying the special scheme for small enterprises, established by Sixth Directive 77/388, cannot — in the absence of an express provision to this effect — be regarded as aligned with those relating to the special arrangements for taxable dealers established by Directive 94/5.
As regards the purpose of the special scheme for small enterprises, the Court has held that that scheme was intended by the EU legislature to simplify the accounting requirements entailed by the normal VAT scheme (judgment of 6 October 2005, MyTravel,
C‑291/03
,
EU:C:2005:591
, paragraph
), the administrative simplifications it makes being intended, amongst other things, to support the creation, activities and competitiveness of small enterprises (judgments of 26 October 2010, Schmelz,
C‑97/09
,
EU:C:2010:632
, paragraph
, and of 2 May 2019, Jarmuškienė,
C‑265/18
,
EU:C:2019:348
, paragraph
).
In that regard, it should be noted that — as the German Government has pointed out — the objective pursued by the special scheme for small enterprises is not to support the competitiveness of large undertakings dealing in second-hand goods. If amounts received in excess of the profit margin were not taken into account in calculating the turnover for the purposes of applying that special scheme, such undertakings, which have high turnovers and low profit margins, might be brought within the scheme, and thus gain an unjustified competitive advantage.
In the light of all of the foregoing considerations, the answer to the question referred is that point 1 of the first paragraph of Article 288 of the VAT Directive must be interpreted as precluding national legislation or a national administrative practice under which the turnover used as a reference to determine whether the special scheme for small enterprises is applicable to a taxable person falling under the special margin scheme envisaged for taxable dealers is calculated, in accordance with Article 315 of that directive, using only the profit margin made. That turnover must be calculated on the basis of all amounts (exclusive of VAT) received or to be received by that taxable dealer, regardless of how those amounts will actually be taxed.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Tenth Chamber) hereby rules:

Point 1 of the first paragraph of Article 288 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding national legislation or a national administrative practice under which the turnover used as a reference to determine whether the special scheme for small enterprises is applicable to a taxable person falling under the special margin scheme envisaged for taxable dealers is calculated, in accordance with Article 315 of that directive, using only the profit margin made. The turnover must be calculated on the basis of all amounts (exclusive of value added tax) received or to be received by that taxable dealer, regardless of how those amounts will actually be taxed.

[Signatures]
(
*1
)	Language of the case: German.