Opinion of the Advocate General — ECLI:EU:C:2020:82
Date: 2020-02-06
Language of the case: Romanian
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Romania

Summary C-716/18 — 1 
Case C-716/18 
Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged:  
14 November 2018 
Referring court:  
Curtea de Apel Timișoara (Romania) 
Date of the decision to refer:  
1 November 2018 
Appellant:  
CT 
Respondents:  
Administrația Județeană a Finanțelor Publice Caraș-Severin — 
Serviciul inspecție persoane fizice 
Direcția Generală Regională a Finanțelor Publice Timișoara — 
Serviciul soluționare contestații 1 
  
Subject-matter of the main proceedings 
Appeal seeking the setting aside of the judgment of the Tribunalul Timiș 
(Regional Court, Timiș) of 26 March 2018 dismissing the administrative appeal 
brought by the appellant in which he sought, in substance: 
(a) the annulment of the decision adopted on 22 August 2017 by the 
Direcția Generală Regională a Finanțelor Publice Timișoara — 
Serviciul soluționare contestații 1 (Regional Directorate-General of 
Public Finances, Timișoara — Department for the settlement of 
complaints 1, ‘the DGRFP’) rejecting the appellant’s appeal against a 
tax assessment notice issued by the Administrația Județeană a 
Finanțelor Publice Caraș-Severin — Serviciul inspecție persoane fizice 
(Provincial Authority for Public Finances, Caraș-Severin — Personal 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-716/18 
 
2  
tax inspection department, ‘the AJFP’), imposing on the appellant an 
obligation to pay additional VAT in the sum of RON 95 184; 
(b) the annulment of the tax assessment notice issued by the AFJP. 
Subject-matter and legal basis of the request for a preliminary ruling 
Pursuant to Article 267 of the Treaty on the Functioning of the European Union, 
the referring court requests interpretation of point 4 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. 
Questions referred for a preliminary ruling 
1. In circumstances such as those here at issue, in which a natural person 
carries on an economic activity by practising several liberal professions and by 
letting out immovable property and thereby obtaining income of a continuous 
nature, do the provisions of Article 288 [first paragraph] point 4 of Council 
Directive 2006/112/EC of 28 November 2006 on the common system of value 
added tax require the identification of a particular professional activity as being 
the principal activity in order to verify whether the letting can be classified as an 
ancillary transaction thereto and, if so, on the basis of what criteria is that 
principal activity to be identified, or must those provisions be interpreted as 
meaning that all of the professional activities by which the economic activity of 
that natural person is carried on constitute the ‘principal activity’? 
2. In the event that the immovable property let by a natural person to a third 
party is not intended and used for the performance of the remainder of his 
economic activity, so that it is not possible to establish any connection between 
that letting and the practice of the various professions of that person, do the 
provisions of Article 288 [first paragraph] point (4) of Directive 2006/112 permit 
the classification of the letting as an ‘ancillary transaction’, with the consequence 
that it is excluded from the calculation of the turnover which serves as a reference 
for the purpose of applying the special exemption scheme for small undertakings? 
3. In the situation described in the second question, is it relevant to the 
classification of the letting transaction as ‘ancillary’ that it is for the benefit of a 
third party — a legal person of which the natural person is a shareholder and 
director — established in the property let and carrying on professional activities of 
the same kind as those of the natural person in question? 
Provisions of EU law and case-law of the Court of Justice cited 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax (OJ 2006 L 347, p. 1), as amended by Council Implementing 
AJFP CARAŞ-SEVERIN ȘI DGRFP TIMIŞOARA 
 
3 
Decision 2012/181/EU of 26 March 2012 authorising Romania to introduce a 
special measure derogating from Article 287 of Directive 2006/112/EC on the 
common system of value added tax (OJ 2012 L 92, p. 26) (hereinafter, ‘Directive 
2006/112), Article 9(1), Article 135(1)(l), Article 287(18) and Article 288. 
Judgments of 11 July 1996, Régie dauphinoise (C-306/94, EU:C:1996:290), of 
29 October 2009, NCC Construction Danmark (C-174/08, EU:C:2009:669), of 
6 March 2008, Nordania Finans and BG Factoring (C-98/07, EU:C:2008:144), of 
29 April 2004, EDM (C-77/01, EU:C:2004:243) and of 13 June 2013, Kostov 
(C-62/12, EU:C:2013:391). 
Provisions of national law cited 
Legea nr. 571 din 22 decembrie 2003 privind Codul fiscal (Law No 571 of 
22 December 2003 on the Tax Code), as subsequently amended and supplemented 
(cu modificările și completările ulterioare (‘the Tax Code’): 
Article 126, entitled ‘Taxable transactions’, paragraph 9: 
‘Taxable transactions include: 
(a) taxable transactions for which the tax rates referred to in Article 140 apply; 
(b) tax-exempt transactions for which a right to deduct exists, in respect of which 
no VAT is due, but the deduction of VAT due or paid on purchases is permitted. 
In the present title such transactions are provided for in Articles 143 and 144; 
(c) tax-exempt transactions for which no right to deduct exists, in respect of which 
no VAT is due and the deduction of VAT due or paid on purchases is not 
permitted. In the present title such transactions are provided for in Article 141; 
… ’ 
Article 127, entitled ‘Taxable persons and economic activities’, paragraphs 1 and 
2: 
‘1. “Taxable person” shall mean any person who, independently, carries out in 
any place an economic activity as referred to in paragraph 2, whatever the purpose 
or results of that activity. 
2. For the purposes of this title, “economic activities” include the activities of 
producers, traders and service providers, including ... liberal profession activities 
and activities similar thereto. The exploitation of tangible or intangible property 
for the purpose of obtaining income therefrom on a continuing basis shall also be 
regarded as an economic activity.’ 
Article 141, entitled ‘Exemptions for domestic transactions’, paragraph 2(e): 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-716/18 
 
4  
‘The following transactions shall also be exempt from VAT: 
(e) … the letting … of immovable property … 
Article 152, entitled ‘Special exemption regime for small undertakings’, 
paragraphs 1 and 2: 
‘1 Taxable persons established in Romania in accordance with 
Article 125(2)(a), whose annual turnover, declared or achieved, is less than the 
upper limit of EUR 65 000, ... or RON 220 000, may apply the tax exemption ... in 
respect of the transactions referred to in Article 126(1) ... 
2. The turnover which serves as a reference for the application of paragraph 1 
shall consist of the total amount, net of tax — in the situation of taxable persons 
who request removal from the register of persons registered for VAT purposes — 
of supplies of goods and services rendered by the taxable person in the course of a 
calendar year that are taxable or, as appropriate, would be taxable if they were not 
carried out by a small undertaking and transactions resulting from economic 
activities for which the place of delivery or supply is deemed to be abroad, if the 
tax would be deductible if the transaction were carried out in Romania in 
accordance with Article 145(2)(b) and tax-exempt transactions for which a right to 
deduct exists and tax-exempt transactions for which no right to deduct exists, as 
referred to in Article 141(2)(a), (b), (e) and (f) where they are not ancillary to the 
principal activity ... ’ 
Article 153, entitled ‘Registration of taxable persons for VAT purposes’: 
‘1. A taxable person whose place of economic activity is in Romania and who 
carries on or intends to carry on an economic activity which entails taxable 
transactions, or transactions exempt from VAT but with a right to deduct, shall 
apply for registration for VAT purposes with the competent fiscal body, defined 
below as normal registration for tax purposes, in the following way: 
… 
(b) if, during a calendar year, a taxable person reaches or exceeds the exemption 
ceiling provided for in Article 152(1), within 10 days of the end of the month in 
which he reached or exceeded that ceiling; 
… ’ 
Hotărârea Guvernului României nr. 44 din 22 ianuarie 2004 pentru 
aprobarea Normelor metodologice de aplicare a Legii nr. 571/2003 privind 
Codul fiscal (Decree of the Romanian Government No 44 of 22 January 2004, 
approving the rules for implementing Law No 571 of 2003 on the Tax Code), 
modificată și completată prin Hotărârea nr. 670 din 4 iulie 2012 (as amended 
and supplemented by Government Decree No 670 of 4 July 2012) (hereinafter ‘the 
implementing rules’): 
AJFP CARAŞ-SEVERIN ȘI DGRFP TIMIŞOARA 
 
5 
Point 61, paragraph 1, which refers to Article 152 of the Tax Code: 
‘In accordance with Article 152(2) of the Tax Code, a transaction is ancillary to 
the principal activity if the cumulative conditions laid down in point 47(3) are 
met.’ 
Point 47, paragraph 3, which refers to Article 147 of the Tax Code: 
‘A transaction is ancillary to the principal activity if the following cumulative 
conditions are met: 
(a)  performing the transaction requires limited technical resources in terms of 
equipment and staff; 
(b)  the transaction is not directly connected with the principal activity of the 
taxable person, and 
(c)  the value of the purchases made for the purposes of the transaction and the 
amount of the deductible tax relating to the transaction are insignificant.’ 
Codul civil, aprobat prin Legea nr. 287/2009 din 17 iulie 2009, republicată 
(the Tax Code, approved by Law No 287/2009 of 17 July 2009, as 
republished) 
Article 31, entitled ‘Assets — Asset pools and operating assets’: 
‘1. Any natural or legal person is the owner of the assets which include all the 
claims and liabilities that can be measured in money and belong to that person. 
2. [The assets] may be subject to division or assignment only in the cases and 
under the conditions laid down by law. 
3. Operating assets are assets that are assigned to the practice of an authorised 
profession, and such other assets as may be so designated by law.’ 
Article 33, entitled ‘Individual professional assets’, paragraph 1: 
‘The establishment of an asset pool assigned to the individual practice of an 
authorised profession shall be effected by act concluded by the owner, in 
compliance with the formal conditions and disclosure requirements laid down by 
law.’ 
  
Brief outline of the facts and the main proceedings 
1 In addition to being a university professor, the appellant practices a number of 
liberal professions, working as an accountant, tax consultant, insolvency 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-716/18 
 
6  
practitioner and lawyer. He also occasionally receives copyright royalties. In 
addition, the appellant jointly owns a property with another person. 
2 In accordance with Romanian legislation, the appellant obtained a single tax 
registration code, for ‘accounting and financial audit activities, tax consultancy’, 
corresponding to the professions of tax consultant and accountant. For the 
purposes of his pursuit of those professions, the appellant has declared various 
professional offices. Only the seat of the appellant’s individual insolvency 
practitioner’s office is registered at the address of the property in question in the 
main proceedings. 
3 Since 2007, the appellant has received income from the rental of that property. 
The property was let to a commercial company of which the appellant is a 
shareholder and director. This company has declared its registered office in the 
rented property and there carries out, inter alia, consultancy, accounting, financial 
audit and tax consultancy activities, having as its main declared area of activity 
‘business and management consultancy activities’. 
4 In 2016, the appellant was the subject of a VAT tax inspection covering the period 
from 1 January 2011 to 30 June 2016. Following that inspection, the AJFP found 
that, during 2012, the appellant had exceeded the turnover ceiling of RON 
220 000 (EUR 65 000) established for the application of the special exemption 
scheme for small undertakings (‘the exemption ceiling’), and, for that reason, 
should have registered as a taxable person subject to VAT. Consequently, the 
AJFP determined the VAT which the appellant ought to have paid in the sum of 
RON 95 184. 
5 In determining that turnover, the AJFP took into account both the income received 
from the appellant’s practice of the liberal professions of tax consultant, 
accountant and insolvency practitioner, as well as from copyright royalties, and 
rents from the jointly-owned property. It did not include in its calculation either 
the appellant’s teaching salary or his income from legal practice, which are 
subject to specific tax regimes. 
6 The AJFP found that, in 2012, 69% of the appellant’s total income had been 
obtained from his activity as insolvency practitioner, 17% from the rental of the 
property and 14% from his activity as accountant and tax consultant. The AJFP 
therefore considered that the appellant’s principal activity in that year had been 
that of insolvency practitioner, given the proportion of his income received from 
that activity by comparison with the total income from his overall economic 
activity. It also took the view that the rental of the property could not be classified 
as an ‘transaction ancillary’ to the activity of insolvency practitioner such as to 
exclude it from its calculation of the appellant’s turnover in that year. 
7 The preliminary administrative appeal against the tax assessment notice was 
dismissed by the DGRFP by decision of 22 August 2017. The administrative 
appeal against that decision was dismissed by the Tribunalul Timiș by judgment 
AJFP CARAŞ-SEVERIN ȘI DGRFP TIMIŞOARA 
 
7 
of 26 March 2018, which, in essence, confirmed the AJFP’s arguments. Against 
that judgment, the appellant brought an appeal before the referring court. 
The main arguments of the parties in the main proceedings 
8 The appellant emphasises, first of all, that the subject of the tax assessment in 
question was solely the activity which he carried on as a natural person, and not as 
a professional. The property in question has never been a part of his operating 
assets as a professional and was therefore not intended for the purpose of carrying 
on his professional activities as a natural person. Equally, he does not deduct 
expenses and VAT relating to the running of that property, since the seat of his 
individual insolvency office was declared at that address solely for the purpose of 
obtaining the professional attestations required by Romanian law. 
9 Accordingly, in the calculation of the turnover which he achieved as a natural 
person in 2012, the income from renting the property could not be included. If that 
revenue had been excluded from the calculation, his turnover would not have 
exceeded the exemption ceiling and he would not therefore have had to pay VAT. 
10 According to the appellant, although the letting of immovable property can be 
classified as an ‘economic activity’ for VAT purposes where it is carried out by a 
taxable person on a continuing basis, it nevertheless constitutes a transaction 
‘ancillary to the principal activity’, since it meets all of the cumulative conditions 
laid down in point 47(3) of the implementing rules, that is to say: 
– the letting has not required the appellant to allocate technical resources in terms 
of equipment and staff, since the tenant merely rents the space; 
– the letting is not directly connected with the principal activity carried out, 
which is in the liberal professions; 
– no purchases were made to carry out the letting, not even for utilities, inasmuch 
as the tenant has been required to meet all the expenses relating to the use of 
the space. 
11 In the appellant’s opinion, a taxable person may not have more than one principal 
activity, and so, for the purpose of determining turnover, it is necessary to define 
his main activity as that which he carries out on a regular and permanent basis as a 
taxable person. In the event that there are exempt transactions for which no right 
to deduct exists, such as the letting of immovable property, it is necessary to 
establish whether they constitute an extension of the principal economic activity. 
12 The appellant maintains, moreover, that his principal economic activity is 
accounting and financial auditing and tax consultancy, since this corresponds to 
his studies and his practical work, and he also uses the experience gained in this 
field in his professional work as insolvency practitioner and lawyer and for the 
publication of specialist works. Therefore, the proportions of income earned from 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-716/18 
 
8  
the various professions in the year of reference is irrelevant to determining his 
principal activity. 
13 In any event, this income must be analysed by reference to the entire period which 
was the subject of the tax inspection in order to determine whether the income 
from tax consultancy and accounting exceeds the income from the activity of 
insolvency practitioner. In fact, the latter was preponderant in 2012 only as a 
result of a fee received following the sale of a property belonging to a debtor in 
insolvency proceedings, and that transaction was therefore of a merely occasional 
nature. 
14 The appellant also asserts that, in order to determine whether the letting activity is 
ancillary, it is necessary to take account of his overall economic activity, in all the 
liberal professions, as the principal activity, and concludes that the letting activity 
must be classified as ancillary to that principal activity, since it meets all of the 
cumulative conditions laid down in point 47(3) of the implementing rules and 
identified in the case-law of the Court of Justice. In this connection, the appellant 
refers to the judgments of 29 October 2009, NCC Construction Danmark 
(C-174/08, EU:C:2009:669), of 6 March 2008, Nordania Finans and BG 
Factoring (C-98/07, EU:C:2008:144), and of 29 April 2004, EDM (C-77/01, 
EU:C:2004:243). 
15 The respondents maintain that, since the appellant exceeded the exemption 
ceiling in 2012, he was required to apply for registration as a taxable person for 
VAT purposes, in accordance with Article 153(1)(b) of the Tax Code, within 10 
days of the date on which he exceeded that ceiling, that is, by 10 August 2012, 
and thus become a taxable person for VAT purposes on 1 September 2012. 
16 The respondents contend that the appellant has the status of taxable person not 
only for his activities in the liberal professions, but also for the letting of the 
immovable property in question, since the letting is an activity exempt from VAT 
with no right to deduct, within the meaning of Article 141(2)(e) of the Tax Code. 
The letting activity cannot be considered as ancillary to any principal activity, in 
accordance with point 47(3) of the implementing rules, such as to exclude the 
revenue generated by it from the calculation of turnover. 
17 In view of the proportion of income resulting from the activity of accounting and 
tax consultancy in 2012 (14% of total income), that activity could not be 
considered to constitute the appellant’s principal activity. The respondents 
consider that the activity of insolvency practitioner was the appellant’s principal 
activity, given the proportion of income from that activity (69% of total income). 
However, in relation to that activity, the condition laid down in point 47(3)(b) of 
the implementing rules is not met, since that condition requires that the letting not 
be directly connected to the principal activity and the appellant’s place of business 
in that profession is in the building in question. 
AJFP CARAŞ-SEVERIN ȘI DGRFP TIMIŞOARA 
 
9 
18 The respondents also submit that the transaction in question does not satisfy the 
condition laid down in point 47(3)(c) of the implementing rules, since the property 
was acquired in exchange for a considerable sum only for the purpose of letting, 
and so the purchase made for the transaction was not insignificant. 
19 The respondents refer, in support of their arguments, to the judgment of 13 June 
2013, Kostov (C-62/12, EU:C:2013:391). 
Brief outline of the reasons for the request for a preliminary ruling 
20 In the opinion of the referring court, the question of law at issue in the present 
case is whether the appellant’s letting of property constitutes a transaction 
‘ancillary to the principal activity’, for the purposes of Directive 2006/112, and, 
consequently, whether the income from that transaction must be taken into 
consideration in calculating the turnover by reference to which it must be 
established whether the taxable person is required to register for VAT purposes, in 
the circumstances of the case. 
21 Determining the meaning of EU law concepts will assist in the resolution of the 
dispute, making it possible to ascertain whether or not the AJFP calculated the 
turnover governed by Article 152(1) of the Tax Code correctly by including in its 
calculation the rental income earned by the appellant, CT, a natural person, which 
will then make it possible to determine whether or not he exceeded the exemption 
ceiling, and thus whether or not he was required to register as a taxable person for 
VAT purposes. 
22 The referring court considers that the question of that law at issue cannot be 
settled on the basis of the case-law of the Court resulting from the judgment of 
13 June 2013, Kostov (C-62/12, EU: C: 2013: 391), to which the respondents 
refer, since it is not necessary in the present case to clarify whether revenue from 
an occasional economic transaction must be taken into account in the calculation 
of turnover, but whether or not the letting transaction is ancillary to the activity 
pursued professionally by the appellant. 
23 The referring court is also of the view that the judgments of the Court of Justice 
relied on by the appellant are not relevant in that case, since in them the Court 
ruled on the concept of ‘ancillary transaction’ solely with reference to the 
calculation of the pro rata deduction, and there is no judgment in which the Court 
ruled on the meaning of the concept of ‘ancillary transaction’ with reference to the 
calculation of turnover by reference to which taxable persons may apply the 
special exemption scheme for small undertakings. 
24 In the particular circumstances of the case at hand, noting that Directive 2006/112 
uses different terms to designate, on the one hand, ‘economic activities’ and, on 
the other, the ‘transactions’ carried out in the course of those economic activities, 
and given that the appellant denies that the rented property was ever intended for 
the pursuit of any of his professional activities as a natural person, the referring 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING — CASE C-716/18 
 
10  
court considers it necessary to obtain interpretation of the concept of ‘transaction 
ancillary to the principal activity’ in order to determine whether the letting from 
which the appellant received income may be classified as an ancillary transaction 
to be excluded from the calculation of his turnover, even in the absence of a 
connection with any of his professional activities. 
25 Similarly, the referring court raises the question whether it is relevant to the 
classification of the letting transaction as ‘ancillary’ to a ‘principal activity’ that 
that transaction was for the benefit of a third party, a legal person in which the 
appellant is a shareholder and director and for which he pursues professional 
activities of the same nature as those from which he receives income as a natural 
person.