CELEX: 62009CJ0222
Sixth VAT Directive
Article 9(2)(c) and (e)
Research and development work carried out by engineers
Determination of the place where services are supplied

This reference for a preliminary ruling concerns the interpretation of Article 9(2)(c) and (e) 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’).
The reference has been made in proceedings between Kronospan Mielec sp. z o.o. (‘Kronospan’) and the Dyrektor Izby Skarbowej
w Rzeszowie (Director of the Rzeszów tax chamber) concerning the determination, for the purpose of the imposition of value
added tax (‘VAT’), of the place where supplies of services are deemed to have been effected.

Legal context

The Sixth Directive
The seventh recital in the preamble to the Sixth Directive reads:
‘… the determination of the place where taxable transactions are effected has been the subject of conflicts concerning jurisdiction
as between Member States, in particular as regards supplies of goods for assembly and the supply of services; … although the
place where a supply of services is effected should in principle be defined as the place where the person supplying the services
has his principal place of business, that place should be defined as being in the country of the person to whom the services
are supplied, in particular in the case of certain services supplied between taxable persons where the cost of the services
is included in the price of the goods’.
Article 9(1) of the Sixth Directive provides:
‘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.’
Article 9(2)(c) and (e) of the Sixth Directive is worded as follows:
‘However:
…
(c)      the place of the supply of services relating to:
–        cultural, artistic, sporting, scientific, educational, entertainment or similar activities, including the activities of the
organisers of such activities, and where appropriate, the supply of ancillary services,
…
shall be the place where those services are physically carried out;
…
(e)       the place where the following services are supplied, when performed for customers established outside the Community or for
taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer
has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place,
the place where he has his permanent address or usually resides:
…
–        services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data
processing and the supplying of information,
…’

National legislation
Article 27(2) No 3(a) of the Law of 11 March 2004 on the taxation of goods and services (Ustawa z dnia 11 marca 2004 r. o
podatku od towarów i usług, Dz. U. No 54, position 535), in the version applicable at the time of the facts in the main proceedings
(‘the VAT Law’), provided:
‘In the case of services relating to cultural, artistic, sporting, scientific, educational, entertainment or similar activities,
such as exhibitions and trade fairs and their connected services, the place where the services are supplied shall … be the
place where the services are physically carried out ...’
Article 27(3) of the VAT Law was worded as follows:
‘Where the services specified in Paragraph 4 are provided to:
(1)      natural persons, legal persons or organisational units without legal personality, which have their place of residence or establishment
within the territory of a non-member country, or to
(2)      taxable persons having their place of residence or establishment within the Community but not in the same country as the supplier,
the place where the services are supplied shall be the place where the recipient of the service has established its business,
has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where it has its
permanent address or normal residence.’
Article 27(4) No 3 of the VAT Law provided:
‘Paragraph 3 applies to consultancy services in the computer hardware sector …; in the software sector …; legal services,
accountancy services, market research and opinion services, economic activity and management consultancy services …; services
of architects and engineers … – subject to Paragraph 2 No 1; services in the field of technical investigations and analyses
…; data processing and the supplying of information; translating.’

The dispute in the main proceedings and the question referred for a preliminary ruling
Kronospan, which has its registered office in Poland, provided, for a customer established in Cyprus, services in the field
of technical investigations and analyses and carried out research and development work in the fields of natural sciences and
technology.
Those supplies of services relate more specifically to work that encompasses the investigation and measurement of emissions,
including the conduct of investigations relating to emissions of carbon dioxide (CO
) and trading in CO
emissions, the preparation and checking of documentation in relation to such work and the analysis of potential sources of
pollution linked to the manufacture of goods consisting mainly of wood. That work is carried out with the objective of acquiring
new knowledge and new technological know-how aimed at the production of new substances, products and systems and the application
of new technological procedures to production processes.
By letter of 8 December 2006, Kronospan requested from the tax authorities in Rzeszów a written interpretation concerning
the application of certain provisions of Polish tax legislation in order to determine to what extent the services in question
were to be regarded as having been carried out in Poland and not in the Member State in which the taxable person to which
the services were supplied had its registered office, namely the Republic of Cyprus.
Kronospan took the view that those services had, in their entirety, to be classified as engineering work, with the result
that the place of the supply of the services, as provided by Article 9(2)(e) of the Sixth Directive, had to be the place where
the recipient of those services was established, namely Cyprus. By a ruling of 9 March 2007, however, the tax authorities
in Rzeszów expressed the view that some of the transactions at issue in the main proceedings were scientific activities and
that, consequently, the place of the supply of services was, pursuant to Article 9(2)(c) of the Sixth Directive, situated
in Poland.
As the administrative appeal lodged by Kronospan against that ruling was dismissed by the Dyrektor Izby Skarbowej w Rzeszowie,
Kronospan brought an action before the Wojewódzki Sąd Administracyjny w Rzeszowie (Provincial Administrative Court, Rzeszów).
That court dismissed the action on the ground that the services at issue were scientific activities and were not services
of engineers.
The Naczelny Sąd Administracyjny (Polish Supreme Administrative Court), before which the case has been brought, is unsure
whether Article 9(2)(e) of the Sixth Directive is to be interpreted as meaning that the services of engineers referred to
in that provision include research and development work carried out by those engineers. In so far as it is apparent from the
case-law of the Court, and in particular from the judgment in Case C‑41/04
Levob Verzekeringen and OV Bank
[2005] ECR I-9433, that the provisions of Article 9(2) do not refer to the professions mentioned in that article in themselves,
but to the services normally supplied by those professionals, it could, in the view of the Naczelny Sąd Administracyjny, be
argued that all types of service regularly carried out by engineers are covered by Article 9(2)(e) of the Sixth Directive.
However, it points out, some of the services at issue in the main proceedings are ‘creative’ and ‘innovative’ in nature and
have elements of scientific work which may be covered by Article 9(2)(c) of the Sixth Directive, notwithstanding the fact
that those services are effected in the course of business and for a single recipient. The commercial nature of the scientific
research cannot affect either the general nature of the results of those activities or their general future application. The
services in question could therefore be regarded as being provided to a number of different recipients, with the result that
one of the conditions for the application of that provision laid down by the Court, inter alia in Case C-114/05
Gillan Beach
[2006] ECR I-2427, is satisfied in the present case.
Furthermore, the national court states that the costs of the services at issue in the present case are not included directly
in the ‘price of the goods’, contrary to what is set out in the seventh recital in the preamble to the Sixth Directive. The
price of acquiring those services is an element of the indirect costs incorporated in the selling price of all the goods and
services offered by the recipient of those services.
In those circumstances, the Naczelny Sąd Administracyjny decided to stay the proceedings and to refer the following question
to the Court of Justice for a preliminary ruling:
‘(a)      Is the third indent of Article 9(2)(e) of [the] Sixth Council Directive … – now corresponding to Article 56(1)(c) of Council
Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1 …) – to be interpreted
as meaning that the services of engineers referred to therein, when provided to a person subject to VAT who is carrying out
commissioned work encompassing those services for a recipient of services established in another Member State of the Community,
are to be taxed at the place where the recipient of the services (the customer) has established its business or has a fixed
establishment;
(b)      or should it be concluded that such services, being services relating to scientific activities pursuant to the first indent
of Article 9(2)(c) of the Sixth Directive (now corresponding to Article 52(a) of Directive 2006/112), must be taxed at the
place where they are physically carried out,
on the basis that those services take the form of work that encompasses the investigation and measurement of emissions under
legislation on environmental protection, including the conduct of investigations in connection with carbon dioxide (CO
) emissions and trading in CO
emissions, the preparation and checking of documentation relating to that work and the analysis of potential sources of pollution,
and that is carried out with the objective of acquiring new knowledge and new technological know-how directed at the production
of new substances, products and systems and the application of new technological procedures within the production process?’

Consideration of the question referred
By its question the national court asks, in essence, whether services, such as those at issue in the main proceedings, consisting
of research and development work relating to the environment and technology, carried out by engineers established in one Member
State on a contract basis for the benefit of a recipient of those services established in another Member State, are to be
classified as ‘services of engineers’ within the meaning of the third indent of Article 9(2)(e) of the Sixth Directive or
as ‘scientific activities’ within the meaning of the first indent of Article 9(2)(c) of the Sixth Directive.
In order to answer that question, it must first of all be noted that the third indent of Article 9(2)(e) of the Sixth Directive
does not refer to professions, such as those of lawyers, consultants, accountants or engineers, but to services. The European
Union legislature has used the professions mentioned in that provision as a means of defining the categories of services to
which it refers (Case C‑145/96
von Hoffmann
[1997] ECR I‑4857, paragraph 15).
Consequently, it is necessary to establish whether research and development work, such as that at issue in the main proceedings,
constitutes services which are principally and habitually carried out as part of the profession of engineer listed in the
third indent of Article 9(2)(e) of the Sixth Directive (see, to that effect,
von Hoffmann
, paragraph 16).
In that regard, it must be stated that the exercise of the profession of engineer covers services which are characterised
by the fact that they involve not only the application of existing knowledge and procedures to specific problems, but also
the acquisition of new knowledge and the development of new procedures designed to resolve those problems or new problems.
It cannot therefore reasonably be disputed that research and development activities constitute services which may principally
and habitually be carried out by engineers.
While it is true that, as the national court has stated, the scientific activities covered by Article 9(2)(c) of the Sixth
Directive are normally characterised by an innovative and creative aspect, the fact none the less remains that that circumstance
alone is not such as to preclude a taxable person who carries out an activity or exercises a profession covered by another
provision of that directive from, in turn, also finding it necessary to perform, principally and habitually, services which
have such characteristics.
It is important to add that, as is apparent from the case-law of the Court, the services referred to in Article 9(2)(c) of
the Sixth Directive are characterised, inter alia, by the fact that they are provided for a number of different recipients,
that is to say, all the people taking part, in a variety of capacities, in cultural, artistic, sporting, scientific, educational
or entertainment activities (see
Gillan Beach
, paragraph 23).
In the present case, however, it is clear from the order for reference that the services performed by Kronospan were not provided
for a number of different recipients, but were carried out for one single Cypriot recipient which commissioned the research
and development work at issue in the main proceedings. The fact that that sole recipient of services might find it necessary
to sell, to third parties or to undertakings belonging to the same group as that of which it is part, the results of the work
which it has commissioned is irrelevant in that regard. The dissemination, by the recipient of those services in the course
of its business, of those results to a wider public does not allow the conclusion to be drawn that those services have been
provided to a person other than that recipient.
It follows that services such as those at issue in the main proceedings must be regarded as being covered by Article 9(2)(e)
of the Sixth Directive.
That finding is not called into question by the argument alluded to in paragraph 16 of the present judgment, according to
which, in the main proceedings, the recipient of the services does not directly include the costs of those services in the
price of the goods and services which it offers, with the result that those services come within the scope of Article 9(1)
of the Sixth Directive.
First, as is apparent from the use of the words ‘in particular’ in the seventh recital in the preamble to the Sixth Directive,
the scope of Article 9(2) of that directive is not restricted to services between taxable persons where the cost of the services
is included in the price of the goods.
Secondly, the Sixth Directive does not contain anything which allows the conclusion to be drawn that the fact that the recipient
includes the costs of the services not directly, but indirectly, in the price of the goods and services which it offers is
relevant for the purposes of establishing whether a service is covered by Article 9(1) or (2) of the Sixth Directive.
In the light of the foregoing, the answer to the question referred is that services, such as those at issue in the main proceedings,
consisting of research and development work relating to the environment and technology, carried out by engineers established
in one Member State on a contract basis for the benefit of a recipient established in another Member State, must be classified
as ‘services of engineers’ within the meaning of Article 9(2)(e) of the Sixth Directive.

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 (First Chamber) hereby rules:
Services consisting of research and development work relating to the environment and technology, carried out by engineers
established in one Member State on a contract basis for the benefit of a recipient established in another Member State, must
be classified as ‘services of engineers’ within the meaning of Article 9(2)(e) 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.
[Signatures]
*
Language of the case: Polish.