Opinion of the Advocate General — ECLI:EU:C:2015:855
Date: 2015-12-23
Language of the case: Dutch
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Netherlands

summary, it may be said that, on the one hand, it is true that, where consideration within the meaning of the chargeable events defined in Article 2(1) of the VAT Directive is not sought, no economic activity is present, since no income is obtained from that activity as the second sentence of the second subparagraph of Article 9(1) of the VAT Directive requires. On the other hand, however, as the Court has consistently held, the fact that a taxable person seeks in connection with an activity consideration within the meaning of the definition of the events chargeable to VAT is not sufficient for a finding, required by Article 9(1) of the VAT Directive, that its activity is also carried out for the purposes of obtaining income or, therefore, to support the assumption that an economic activity is present. (31) b) The obtaining of income in the present case 51. It thus remains to be examined in the present case whether the municipality organises school transport for the purposes of obtaining income. i) ‘Consideration’ within the meaning of the definition of the event chargeable to VAT 52. First of all, that question cannot be answered in the negative just because the municipality did not seek any consideration within the meaning of Article 2(1)(c) of the VAT Directive for its activity. The opposite is the case. 53. After all, it is settled case-law that a supply for consideration within the meaning of the definition of the events chargeable to tax given in Article 2(1)(a) and (c) of the VAT Directive presupposes only that there is a direct link between the supply of goods or services and the consideration actually received by the taxable person. (32) The existence of that link is predicated only on the presence of a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, (33) as well as the reciprocal condition of performance and counter-performance. (34) 54. In so far as a third of parents had to pay a contribution towards school transport, those requirements are clearly satisfied. Moreover, as is clear from the aforementioned judgment in Hotel Scandic Gåsabäck, the fact that the municipality sought remuneration below the cost price it had incurred does not rule out the assumption as to the presence of consideration in those cases. (35) The municipality does not therefore organise school transport exclusively free of charge. ii) The obtaining of income in the narrower sense 55. As I have shown, the presence of consideration within the meaning of Article 2(1)(c) of the VAT Directive is not, however, sufficient to support the finding that an activity is carried out for the purposes of obtaining income within the meaning of the second sentence of the second subparagraph of Article 9(1) of the VAT Directive. 56. The presence of an activity engaged in for the purpose of obtaining income seems questionable in the present case because, in its judgment in Commission v Finland, the Court held that public bodies operating in the field of legal aid services were not carrying on an economic activity inasmuch as they sought in return for that activity only a part payment dependent on the income and assets of the recipients of the services. The situation in the present case would appear to be similar. 57. In that judgment, however, the Court had regard primarily to the fact that the payment received only ever represented part of the fees generally set by law for legal aid services. (36) In the present case, on the other hand, there does not appear to be a general price for transport set by law. 58. A further factor in the Court’s decision, however, appears to have been the fact that the amount of the payment was dependent on the income and assets of the recipient of the legal aid services. (37) Such dependence exists at least in part in the present case, in relation to the parents’ income. 59. Furthermore, in that judgment, the Court took the view that the non-economic character of the activity in question was confirmed by the fact that the income obtained covered only a fraction of the costs incurred in providing the legal aid services. (38) The situation is exactly the same in the present case. In total, the municipality receives from the parents a part payment amounting to only some 3% of the costs it incurs in providing school transport. 60. Although there are thus a number of unmistakeable parallels between the two cases, it none the less cannot immediately be ruled out in the present case that the purpose of the activity carried out by the municipality is — at least in part — to obtain income. For it is important in particular not to confuse the purpose of obtaining income with the intention to make a profit, which, according to case-law, is not a condition of assuming the presence of an economic activity. (39) 61. One consideration which the Court, in the judgment in Commission v Finland, did not make explicit but which ultimately informed its decision, however, was the absence of a specific, implicit condition that must be satisfied in order for an activity to be carried out for the purpose of obtaining income within the meaning of the second sentence of the second subparagraph of Article 9(1) of the VAT Directive: market participation. iii) Market participation 62. The Court has thus previously held, in the judgment in SPÖ Landesorganisation Kärnten, that an activity was not carried out for the purpose of obtaining income within the meaning of the second sentence of the second subparagraph of Article 9(1) of the VAT Directive because the political party organisation at issue did not participate in any market in the course of its activities. (40) In other decisions, too, it has ultimately found that public bodies do not carry out an economic activity because there was no evidence of market participation. (41) 63. That requirement of market participation is confirmed and supplemented by the fact that, in order to find that an economic activity is being carried out, the Court occasionally examines whether an activity is carried out in the same way as a corresponding economic activity is usually carried out. In order to do so, it must, in particular, compare the activity at issue with the usual activities of the trades and professions referred to in the first sentence of the second subparagraph of Article 9(1) of the VAT Directive. (42) 64. There is no evidence of any such typical market participation by the municipality in the present case, however. In the course of its activity, the municipality does not offer any services on the general market in transport services. In fact, it has the appearance of itself being the final consumer of the services provided by transport undertakings, whose transport services it makes available to the parents of pupils exclusively in the public interest, even though it sometimes levies a financial contribution for so doing. 65. This is borne out in particular by the fact that the municipality recovers only a small percentage of the costs of the services it receives by levying a contribution for the services it provides. This is not the typical conduct of a market participant. 66. In this regard, the Court too made it clear at an early stage that there is a certain link between the level of remuneration and the existence of an economic activity. (43) It was that very link which the Court also later confirmed in the judgment in Commission v Finland. (44) After all, an activity which, under the normal system of VAT, can give rise only to tax refunds, on account of the structure of the unit costs and prices connected with that activity, does not lead to any taxation of ‘added value’ because, structurally, no such added value can be generated. 67. Moreover, taxation of the municipal organisation of school transport is not necessary on either of the two grounds given above for bringing public activities within the scope of VAT. (45) 68. First, notwithstanding that this, as a point of fact, must ultimately be determined by the referring court, there are no indications of any distortions of competition resulting from the non-collection of VAT. In so far as parents do not use the services of private transport undertakings to have their children taken to school because of the transport services provided by the municipality, they do so not because there is no VAT but because the municipality charges them a contribution which from the outset appears to be lower than the market prices for comparable transport services, if indeed it asks them for a contribution at all. Taxing that activity would, on the contrary, make the competitive position of private operators even worse because the permanent surplus of deductible input tax inherent in the cost/price structure would enable the municipality to reduce the parents’ contributions even further. 69. Secondly, the target of VAT taxation in the form of the taxation of final consumption can be adequately captured in the present case only if the activity of the municipality is not taxed. After all, if the organisation of school transport by the municipality, for which the latter uses external transport undertakings, were subject to VAT, the deduction of input tax would mean that VAT would ultimately be charged only on the basis of assessment formed by the contributions payable by the parents. These, however, represent only a small fraction of the market price for those transport services, since, in total, the contributions make up only 3% of the costs incurred in connection with the provision of transport services by external providers. The final consumption of those transport services would end up being largely exempt from VAT. In order to prevent this from happening and to ensure that the transport services are subject to VAT at their market price, final taxation must take place at the stage the municipality receives those services. This presupposes that the organisation of school transport by the municipality does not constitute an economic activity. iv) General or case-by-case analysis 70. The United Kingdom has proposed, however, that, if a case-by-case analysis is adopted, the transport services for which the municipality receives from the parents a contribution at least approximating to a market price must in any event be regarded as constituting an economic activity. 71. It is true that the requirement of market participation on the part of a public activity must in principle be assessed in relation to the activity as a whole and does not necessitate the analysis of each individual transaction. Where public activities are taxed on the ground of preventing distortions of competition, however, it may be necessary in particular cases to split an activity into its economic and non-economic components. 72. For that reason, the referring court will also have to examine to what extent, in the situation at issue here, the aforementioned non-collection of VAT is capable of giving rise to a distortion of competition in relation to private transport providers which affects particular transport services. When carrying out such an examination, it is always important to take account also of the impact of the deduction of input tax. 73. There would, however, be no need to differentiate between the economic and non-economic components of the municipality’s activity if it were to be found in the present case that there is only a negligible number of particular cases in which the non-taxation of the school transport organised by the municipality would distort competition. This, after all, is consistent with the criteria arising from the special rules for public activities laid down in the second and third subparagraphs of Article 13(1) of the VAT Directive. (46) v) Interim conclusion 74. First, however, it must be concluded, subject to the referring court’s examination of the competitive position, that the purpose of the organisation of school transport by the municipality is not to obtain income within the meaning of the second subparagraph of Article 9(1) of the VAT Directive. C – Conclusion 75. It must be concluded, subject once again to the referring court’s examination of the competitive position, that, in organising school transport in the present case, the municipality does not therefore carry out an economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive. Consequently, so far as concerns that activity, the municipality is not to be regarded as a taxable person within the meaning of the first subparagraph of Article 9(1) of the VAT Directive. VI – Conclusion 76. I therefore propose that the questions referred by the Hoge Raad der Nederlanden be answered as follows: A municipality such as that in the dispute in the main proceedings which organises transport for school pupils by calling on the services of external transport undertakings and receives from the pupils’ parents contributions amounting to only 3% of the costs of providing the transport does not act as a taxable person within the meaning of Article 9(1) of Directive 2006/112/EC. If the referring court finds that there are distortions of competition affecting a not negligible number of particular transport services, the municipality acts as a taxable person to that extent. 1 – Original language: German. 2 – See, with regard to the deduction of input tax, the judgments in Gemeente Leusden and Holin Groep (C‑487/01 and C‑7/02, EU:C:2004:263), concerning the letting of playing fields, Gemeente ‘s-Hertogenbosch (C‑92/13, EU:C:2014:2188), concerning the construction of an office building, and Gemeente Woerden (C‑267/15), still pending, which also concerns the construction of a building; see also the judgments in Gemeente Emmen (C‑468/93, EU:C:1996:139), concerning the tax exemption applicable to the supply of building land, and Gemeente Vlaardingen (C‑299/11, EU:C:2012:698), concerning the taxation of the application of a sports pitch. 3 – See in this regard the judgments in Hong-Kong Trade Development Council (89/81, EU:C:1982:121); Commission v Netherlands (235/85, EU:C:1987:161); University of Huddersfield (C‑223/03, EU:C:2006:124); T-Mobile Austria and Others (C‑284/04, EU:C:2007:381); Hutchison 3G and Others (C‑369/04, EU:C:2007:382); Götz (C‑408/06, EU:C:2007:789); SPÖ Landesorganisation Kärnten (C‑267/08, EU:C:2009:619); Commission v Finland (C‑246/08, EU:C:2009:671); and Saudaçor (C‑174/14, EU:C:2015:733). 4 – OJ 2006 L 347, p. 1. 5 – 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). 6 – See recital 3 of the VAT Directive. 7 – The second sentence of the second subparagraph of Article 9(1) of the VAT Directive refers in particular to the ‘exploitation of tangible or intangible property’ as an economic activity. However, the organisation of school transport at issue here cannot under any circumstances be regarded as falling under this category. 8 – See, inter alia, the judgments in Commission v Netherlands (235/85, EU:C:1987:161, paragraph 8); Commission v Greece (C‑260/98, EU:C:2000:429, paragraph 26); University of Huddersfield (C‑223/03, EU:C:2006:124, paragraph 47); Commission v Finland (C‑246/08, EU:C:2009:671, paragraphs 34 and 37); and Saudaçor (C‑174/14, EU:C:2015:733, paragraph 31). 9 – See the judgments in T-Mobile Austria and Others (C‑284/04, EU:C:2007:381, paragraph 48); Hutchison 3G and Others (C‑369/04, EU:C:2007:382, paragraph 42); Götz (C‑408/06, EU:C:2007:789, paragraph 15); Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 53); and Commission v Spain (C‑154/08, EU:C:2009:695, paragraph 99). 10 – See the Opinion of Advocate General Jacobs in Landboden-Agrardienste (C‑384/95, EU:C:1997:433, point 12). 11 – See Article 1(2) of the VAT Directive. 12 – Judgments in Lebara (C‑520/10, EU:C:2012:264, paragraph 25) and Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 34); see also the judgment in Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21 and the case-law cited), concerning the taxable person’s role as mere ‘tax collector for the State’, and the judgment in Profaktor Kulesza, Frankowski Jóźwiak, Orłowski (C‑188/09, EU:C:2010:454, paragraph 47 and the case-law cited), concerning the main characteristics of VAT. 13 – See Article 2(1)(b) of Council Decision 2007/436/EC, Euratom of 7 June 2007 on the system of the European Communities’ own resources (OJ 2007 L 163, p. 17). 14 – See the judgments in T-Mobile Austria and Others (C‑284/04, EU:C:2007:381); Hutchison 3G and Others (C‑369/04, EU:C:2007:382); SPÖ Landesorganisation Kärnten (C‑267/08, EU:C:2009:619); and Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 53); see also the judgments in Mohr (C‑215/94, EU:C:1996:72) and Landboden-Agrardienste (C‑384/95, EU:C:1997:627), in relation to the taxation of State-subsidised services. 15 – See, for example, the judgment in Saudaçor (C‑174/14, EU:C:2015:733, paragraph 31 and the case-law cited). 16 – Judgments in Commission v Netherlands (235/85, EU:C:1987:161, paragraph 10) and Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 40). 17 – See, inter alia, the judgment in Mecsek-Gabona (C‑273/11, EU:C:2012:547, paragraph 53). 18 – See, inter alia, the judgment in Târşia (C‑69/14, EU:C:2015:662, paragraph 13 and the case-law cited). 19 – See the judgment in Finanzamt Freistadt Rohrbach Urfahr (C‑219/12, EU:C:2013:413, paragraph 18). 20 – Judgments in Götz (C‑408/06, EU:C:2007:789, paragraph 18) and Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 37); see also the judgment in Hong-Kong Trade Development Council (89/81, EU:C:1982:121) concerning Article 4 of Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax (Official Journal, English Special Edition 1967, p. 16). 21 – See the judgment in Götz (C‑408/06, EU:C:2007:789, paragraph 18); see also the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 37), which refers, in this regard, to the aforementioned judgment. 22 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraphs 47 to 51). 23 – See the judgment in Hotel Scandic Gåsabäck (C‑412/03, EU:C:2005:47, paragraph 22). 24 – See the judgment in Hotel Scandic Gåsabäck (C‑412/03, EU:C:2005:47, paragraphs 22 to 24). 25 – See, inter alia, the judgments in Coöperatieve Aardappelenbewaarplaats (154/80, EU:C:1981:38, paragraph 13); Hotel Scandic Gåsabäck (C‑412/03, EU:C:2005:47, paragraph 21); and Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 33). 26 – The ‘open market value’, which is defined in Article 72 of the VAT Directive. 27 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraphs 42 to 51); see also the judgment in Commission v France (C‑276/97, EU:C:2000:424, paragraphs 32 to 36). 28 – See the French-language version of the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 37), which, in the context of determining the existence of an economic activity, refers to an activity ‘effectuée contre une rémuneration’ (carried out in return for remuneration), which is not the same as the expression ‘à titre onéreux’ (‘for consideration’) used in Article 2(1)(a) to (c) of the VAT Directive; see also the judgment in Götz (C‑408/06, EU:C:2007:789, paragraph 18). 29 – See to that effect, inter alia, the judgment in Hong-Kong Trade Development Council (89/81, EU:C:1982:121, paragraph 12). 30 – See points 41 and 42 above. 31 – See to that effect the judgments in Götz (C‑408/06, EU:C:2007:789, paragraph 21) and Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 38). 32 – See, inter alia, the judgment in Serebryannay vek (C‑283/12, EU:C:2013:599, paragraph 37 and the case-law cited). 33 – See, inter alia, the judgments in Tolsa (C‑16/93, EU:C:1994:80, paragraph 14); MKG-Kraftfahrzeuge-Factoring (C‑305/01, EU:C:2003:377, paragraph 47); and Le Rayon d’Or (C‑151/13, EU:C:2014:185, paragraph 29). 34 – See, inter alia, the judgments in Tolsa (C‑16/93, EU:C:1994:80, paragraphs 13 to 20) and Fillibeck (C‑258/95, EU:C:1997:491, paragraphs 12 to 17); see also the Opinion of Advocate General Stix-Hackl in Bertelsmann (C‑380/99, EU:C:2001:129, point 32). 35 – See the judgment in Hotel Scandic Gåsabäck (C‑412/03, EU:C:2005:47, paragraphs 22 to 24). 36 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 47). 37 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 48). 38 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 50). 39 – See to that effect the judgment in Finanzamt Freistadt Rohrbach Urfahr (C‑219/12, EU:C:2013:413, paragraph 25); this is also apparent from the provisions of Article 132(1)(l) and (m) and of Article 133(a) of the VAT Directive, which are specifically directed at non-profit-making bodies. 40 – Judgment in SPÖ Landesorganisation Kärnten (C‑267/08, EU:C:2009:619, paragraphs 21 and 24). 41 – Judgments in T-Mobile Austria and Others (C‑284/04, EU:C:2007:381, paragraph 42) and Hutchison 3G and Others (C‑369/04, EU:C:2007:382, paragraph 36); see also to that effect the judgment in Götz (C‑408/06, EU:C:2007:789, paragraph 19). 42 – See the judgments in Enkler (C‑230/94, EU:C:1996:352, paragraph 28); Słaby and Others (C‑180/10 and C‑181/10, EU:C:2011:589, paragraphs 39 to 41); Finanzamt Freistadt Rohrbach Urfahr (C‑219/12, EU:C:2013:413, paragraph 21); and Trgovina Prizma (C‑331/14, EU:C:2015:456, paragraph 24). 43 – See the judgment in Commission v France (50/87, EU:C:1988:429, paragraph 21). 44 – See the judgment in Commission v Finland (C‑246/08, EU:C:2009:671, paragraph 50). 45 – See points 25 and 26 above. 46 – With regard to these criteria, see in particular the judgment in Isle of Wight Council and Others (C‑288/07, EU:C:2008:505).