Opinion of the Advocate General — ECLI:EU:C:1996:494
Date: 1996-12-12
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Netherlands

Summary of the observations
22. The lessor, the Netherlands and Ger­
many, supported on this point by France,
submit that the primary point of reference
provided by Article 9(1) is the place where
the supplier has established his place of busi­
ness. It is only if the choice of this place
would not lead to a fiscally rational result, or
would create a conflict between Member
States, that it should be necessary to examine
whether the supplier can be regarded as hav­
ing 'a fixed establishment from which the
service is supplied' in another Member State.
The lessor, supported by the Netherlands
and Germany, refers to the incongruity of
relying upon the fixed-establishment crite­
rion in respect of hiring-out of forms of
transport, and draws attention to the final
recital in the preamble to the Tenth Direc­
tive, which proposes 'the place where the
supplier has established his business'. The
Netherlands contends that in Hamann the
Court expressly ruled that the place of use of
a form of transport cannot constitute a
sufficient standard for determining the place
of supply of a service comprising its hiring-
out.
23. France contends, however, that the pur­
chase, hiring-out and maintenance of the cars
in Belgium, coupled with the establishment
there of ARO's clients, result in its having a
fixed establishment in that Member State.
France — unlike the lessor, the Netherlands
and Germany — considers the requirements
laid down by the Court in Berkholz for the
application of criteria of fixed establishment,
in particular those regarding the existence of
the human and technical resources necessary
for the provision of the lessor's services, to
have been satisfied in this case by the pres­
ence in Belgium of agents who act for and on
its behalf. Reference has already been made
(in paragraphs 15 and 17 to 20 above) to the
principal observations of the Commission.
At the hearing, it submitted, in the alterna­
tive, that ARO could be regarded as having a
fixed establishment in Belgium from which
its car-leasing services were supplied.
24. The Netherlands regards the number of
operations which must be effected in order
to lease cars as minimal and, unlike France,
views the conclusion of the leasing contracts
in the Netherlands as the most important
operation. Moreover, in its view, the require­
ments of Berkholz are not met; ARO pos­
sesses neither personnel nor an establishment
in Belgium. Germany observes that the
wording of Article 9(1) regarding 'a fixed
establishment' refers to the place from which
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OPINION OF MR FENNELLY — CASE C-190/95
the service is supplied and not the place
where the acts preparatory to the provision
of that service, such as the acts of ARO's
Belgian agents, are effected. Neither France
nor the Commission, however, views the
Netherlands as being sufficiently connected
with the disputed agreements for it to consti­
tute a rational place of supply. Moreover,
France, supported by the Commission at the
hearing, refers to the Opinion of Advocate
General Mancini in Berkholz as illustrating
the usefulness of adopting the criterion of
the place of consumption of the services
(here Belgium) whenever reliance upon the
place of establishment would — as they sub­
mit to be the case in the main proceedings —
encourage artificial legalistic determinations
of the place of supply. 17
25. Belgium and Denmark reach the same
conclusion as France and the Commission
by slightly different routes. Belgium submits
that the scope of the notions of 'where the
supplier has established his business' or has
'a fixed establishment from which a service is
provided' should be interpreted having
regard both to the context in which they
appear and the general principles and objec­
tives underlying the VAT system. In the
instant case, it submits, these factors point to
the imposition of the VAT at the place where
the services are consumed. In the context of
car-leasing operations, the presence of a fleet
of cars in a Member State where those cars
are purchased, rented out and ultimately
resold suffices to constitute a fixed establish­
ment. In its view, that conclusion is sup­
ported by the human resources utilized in
Belgium by the lessor. Denmark, on the
other hand, submits that the notions of the
place 'where the supplier has established his
business' or 'has a fixed establishment' ought
not to be construed as only referring to the
place where, for legal purposes, the supplier
has established or incorporated his business.
It contends that the judgment in Berkholz
requires economic realities to be taken into
account when determining the Member State
in which VAT should be paid pursuant to
Article 9(1).
(ii) Opinion
26. The interpretation of Article 9(1) of the
Sixth Directive adopted by the Court in
Berkholz is, in my view, quite clear. The
Court, initially, stated that Article 9 must be
interpreted '... within the context of the gen­
eral scheme of the Sixth Directive', and, hav­
ing described the relationship between the
17 — The Advocate General stated that when the place where, the
supplier has established his business does not coincide with
the supplier's fixed establishment, he would 'rely on the
general principle that value-added tax should be charged at
the place of consumption', and that he would 'hence give
preference to the criterion which enables the supply of ser­
vices to be located more accurately. There is no doubt that
the more appropriate of the two for that purpose is the cri­
terion of the "fixed establishment" which is clearly more
precise'; [1985] ECR 2251, paragraph 2, at p. 2255.
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ARO LEASE v INSPECTEUR DER BELASTINGDIENST
first two subparagraphs, 18 defined the
Object of those provisions' as being, first,
the avoidance of 'conflicts of jurisdiction,
which may result in double taxation' and,
secondly, 'non-taxation, as Article 9(3) indi­
cates, albeit only as regards specific situa­
tions'. 19 In so far as Article 9(1) is con­
cerned, the Court stated that 'the place
where the supplier has established his busi­
ness is a primary point of reference inasmuch
as regard is to be had to another establish­
ment from which the services are supplied
only if the reference to the place where the
supplier has established his business does not
lead to a rational result for tax purposes or
creates a conflict with another Member
State'. 20 First, the notion of the 'place where
the supplier has established his business'
must be regarded as a Community concept
which should be interpreted uniformly so as
to avoid such conflicts. 21 Secondly, the
requirements of 'certainty and foreseeability'
which must be observed whenever 'rules
liable to entail financial consequences' are at
issue argue against permitting divergent
national practices — such as that which cur­
rently exists between Belgium and the Neth­
erlands — to influence the determination of
the place of supply of services for VAT pur­
poses. 22 Besides, this analysis is confirmed
by the description in Berkholz of the
circumstances when recourse to the second
point of reference enumerated in Article 9(1)
might be acceptable: 23
'It appears from the context of the concepts
employed in Article 9 and from its aim ...
that services cannot be deemed to be sup­
plied at an establishment other than the place
where the supplier has established his busi­
ness unless that establishment is of a certain
minimum size and both the human and tech­
nical resources necessary for the provision of
the services are permanently present.'
27. There is no irrationality in adopting the
place of establishment of the supplier as the
place of supply of the services of leasing
motor cars for VAT purposes. The rationale
is explained in Hamann. The mere fact that a
Member State may suffer financially as a
consequence of its application is not relevant.
On the contrary, the alternative and — as the
18 — The Court stated that 'Article 9(2) sets out a number of
specific instances of places where certain services are
deemed to be supplied, whilst Article 9(1) lays down the
general rule on the matter'; loc. cit., footnote 6 above, para­
graph 14 of the judgment In Case C-327/94 Jürgen Oudda
v Finanzamt Bergach Gladbach [1996] ECR I-4595, the
Court further clarified the relationship by stating that:
'when Article 9 is interpreted, Article 9(1) in no way takes
precedence over Article 9(2). In every situation, the ques­
tion which arises is whether it is covered by one of the
instances mentioned in Article 9(2); if not, it falls within the
scope of Article 9(1)'; paragraph 21 of the judgment.
19 — Berkholz, paragraph 14 of the judgment.
20 — Ibid., paragraph 17 of the judgment.
21 — See, for example, as concerns the reference to 'advertising
services' in Article 9(2)(e), Case C-73/92 Commission v
Spain [1993] ECR I-5997, paragraph 12 of the judgment.
22 — Sec, inter alia, Case C-30/89 Commission v France [1990]
ECR I-691, paragraph 23 of the judgment, and the Opinion
of Advocate General Cosmas in Case C-231/94 Faaborg-
Gelting Linien A/S v Finanzamt Flensburg [1996]
ECR I-2395, paragraph 12. 23 — Paragraph 18 of the judgment.
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OPINION OF MR FENNELLY — CASE C-190/95
Court has clearly stated in Berkholz —
exceptional fixed-establishment point of ref­
erence may only be applied if the conditions
prescribed by the Court are satisfied and if,
in that eventuality, the application of the
place of establishment would be unreason­
able. This is illustrated by the approach of
the Court to the factual circumstances of
Berkholz. The first question referred con­
cerned whether the expression 'fixed estab­
lishment' could be construed as covering the
operation of gaming machines on board a
German-registered ship sailing on the high
seas. Despite the fact that the supplier 'regu­
larly employ[ed] two workers on the ferries
(a) to keep in good order, repair and replace
the machines and (b) to empty them and,
together with the staff of the [ferry opera­
tor], to count the takings', 24 the Court ruled
that '[i]t does not appear that the installation
on board a sea-going ship of gaming
machines, which are maintained intermit­
tently, is capable of constituting such an
establishment, especially if tax may appropri­
ately be charged at the place where the
operator of the machines has his permanent
business establishment'. 25
28. The Commission seeks to establish a dis­
tinction based on the special circumstances
of Berkholz, namely that, since the ship was
registered in Germany and operated by the
Bundesbahn (German federal railway com­
pany), the place of supply in international
waters would in any case have been Ger­
many. I do not think that the Court intended
to limit the scope of the Berkholz principle
to the peculiar circumstances of that case.
Indeed, that principle has subsequently been
confirmed by the Court.
29. First, in Hamann, although no question
arose regarding the place of a possible fixed
establishment, the Court stipulated the place
of establishment of the supplier as the appro­
priate approach in cases concerning the
hiring-out of forms of transport . Secondly, in
Faaborg-Gelting, as in Berkholz, the Court
was concerned with the taxation of transac­
tions on board ferries, viz. the supply of
meals for consumption. Having determined
that such supplies, at least whenever they
took the form of restaurant transactions,
constituted the supply of services, the Court,
referring with approbation to Berkholz,
ruled that the place of permanent establish­
ment of the operator of the ship affords an
appropriate point of reference for VAT pur­
poses. Advocate General Cosmas, in his
Opinion in Faaborg-Gelting, said that any
supposed inappropriateness affecting the
place of establishment of the supplier as a
point of reference should be based on more
24 — Sec the Opinion of Advocate General Mancini [1985]
ECR 2251, paragraph 1, at p. 2253.
25 — Ibid., paragraph 18 of the judgment.
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ARO LEASE v INSPECTEUR DER BELASTINGDIENST
than a mere difference of approach between
national fiscal administrations. 26
30. However, in the light of the observations
submitted, particularly by France and the
Commission, I think that it is necessary to
examine whether, in the particular circum­
stances of this case, the application of the
fixed-establishment approach might be appo­
site. Reference has been made to various fac­
tual elements which purportedly suffice to
link the services provided by ARO with Bel­
gium. However, in my opinion, none of
these supposed connections is convincing.
Whilst ARO might have canvassed potential
Belgian customers through Belgian car deal­
ers, who were also responsible for the physi­
cal procurement and supply of the cars to
actual customers, I am not convinced that
the presence of such intermediaries amounts
to 'the permanent presence of ... human
resources'. 27 There is nothing in Berkholz to
indicate that such a broad construction of
the notion of 'human resources' was
intended or is justified. On the contrary, pri­
mary emphasis was placed on 'the place
where the supplier has established his busi­
ness'. Moreover, unlike the activities of
Berkholz's employees, the Belgian activities
of ARO's intermediaries all constitute sepa­
rate legal transactions; their services are tax­
able in Belgium if that is where they have
established their business. By the same
token, the fact that these dealers provide
repair and maintenance services for the cars
in Belgium cannot be equated with 'the per­
manent presence of ... technical resources'
belonging to ARO in Belgium. 28 The origi­
nal sale of the motor cars takes place in Bel­
gium from the place of business of the motor
car suppliers.
31. Even if, contrary to the view which I
have just expressed, the notion of 'human
and technical resources' employed in the
Court's case-law may be interpreted expan­
sively to include resources provided by third
parties and subject to separate VAT treat­
ment under the Sixth Directive, I would not
be convinced that the service of leasing cars
at issue in this case could realistically be
regarded as having been provided from a
fixed establishment in Belgium, since such an
establishment would have to be composed of
the various Belgian places of business of the
numerous agents who provided pre-and
post-leasing services on behalf of ARO. The
essence of the services provided by ARO
comprises the conclusion of the leasing
agreements, which clearly occurred in the
Netherlands and which undoubtedly
involved the use there by ARO of both
human and technical resources; contracts
cannot be concluded and financial arrange­
ments put in place without the use of consid­
erable resources. Consequently, the Nether­
lands is the rational place of supply in
accordance with the broad scope to be
attributed to the notion of 'the place where
the supplier has established his business'.
26 — Sec especially paragraph 20 of the Opinion.
27 — See Berkholz, paragraph 19 of the judgment.
28 — Such services are taxable where they are physically carried
out (namely Belgium in the present case) in accordance
with the fourth indent of Article 9(2)(c); see, generally, with
reference to this indent, paragraphs 13 to 18 of my Opinion
of 28 November 1996 in Case C-167/95 Linthorst, Pouwela
en Scheres v Inspecteur der Belastingdienst/Ondernemingen,
Roermond [1997] ECR I-1195.
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OPINION OF MR FENNELLY — CASE C-190/95
IV — Conclusion
32. Accordingly, I recommend that the question referred by the Gerechtshof,
Amsterdam be answered as follows:
Article 9(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the har­
monization of the laws of the Member States relating to turnover taxes — Common
system of value added tax: uniform basis of assessment, should be interpreted as
meaning that the place where a taxable person established in one Member State,
who makes available to customers resident in another Member State passenger cars
pursuant to operational leasing contracts concluded in the first Member State, and
who disposes of no personal human or technical resources in the second Member
State, should be deemed to supply his services is the place where he has established
his business in the first Member State.
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