Judgment;Summary — ECLI:EU:C:2019:847
Date: 2019-10-09
Language of the case: German
Court formation: Tenth Chamber
Subject matter: Agriculture and Fisheries;Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Germany

Translation   C-573/18 — 1 
Case C-573/18 
Request for a preliminary ruling 
Date lodged: 
13 September 2018 
Referring court: 
Bundesfinanzhof (Federal Finance Court, Germany) 
Date of the decision to refer: 
13 June 2018 
Applicant and Appellant in the appeal on a point of law: 
C GmbH & Co. KG 
Defendant and Respondent in the appeal on a point of law: 
Z Tax Office 
  
[...] 
FEDERAL FINANCE COURT 
File ref. XI R 6/17 
ORDER 
in the case of 
C GmbH & Co. KG, 
Applicant and appellant in the appeal on a point of law, 
[...] 
v 
Z Tax Office, 
Defendant and respondent in the appeal on a point of law, 
EN 
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concerning turnover tax 2005 and 2006, 
the XIth Chamber 
[...] 
ordered as follows on 13 June 2018: 
I. That the following questions be referred to the Court of Justice of the European 
Union for a preliminary ruling: [Or. 2] 
1. Under circumstances such as those of the main proceedings, in which a 
producer organisation within the meaning of Article 11(1) and Article 15 of 
Council Regulation (EC) No 2200/96 of 28 October 1996 on the common 
organization of the market in fruit and vegetables (Regulation No 2200/96) 
supplies goods to the producers that are its members and receives for this from the 
producers a payment which does not cover the purchase price, 
a) is an exchange with an extra cash charge deemed to exist because the 
producers, in return for the supply, have contractually undertaken vis-a-vis the 
producer organisation to supply fruit and vegetables to the producer organisation 
for the duration of the earmarking period, with the consequence that the taxable 
amount of the supply is the purchase price for the capital goods paid by the 
producer organisation to the upstream suppliers? 
b) is the entirety of the amount which the operational fund actually pays to the 
producer organisation for the supply a ‘subsidy directly linked to the price of such 
supplies’ within the meaning of Article 11(A)(1)(a) of the Sixth Council Directive 
77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member 
States relating to turnover taxes (Directive 77/388/EEC), with the consequence 
that the taxable amount also encompasses the financial assistance within the 
meaning of Article 15 of Regulation No 2200/96 which has been granted to the 
operational fund on the basis of an operational programme? 
2. If, on the basis of the answer to question 1, only the payments made by the 
producers, but not the supply obligation and the financial assistance, are to be 
taken as the taxable amount: under the circumstances specified in question 1, does 
Article 11(A)(1)(a) of Directive 77/388/EEC preclude a national special measure 
based on Article 27(1) of Directive 77/388/EEC such as Paragraph 10(5)(1) of the 
Umsatzsteuergesetz (Law on turnover tax; ‘the UStG’), according to which the 
taxable amount of the supplies to the producers is the purchase price for the 
capital goods paid by the producer organisation to the upstream suppliers because 
the producers are related parties? 
3. If question 2 is answered in the negative: is this also the case if the 
producers have a full right of deduction because the capital goods are subject to 
adjustments of deductions (Article 20 of Directive 77/388/EEC)? [Or. 3] 
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II. The proceedings relating to the appeal on a point of law shall be stayed pending 
a final decision of the Court of Justice of the European Union. 
Reasons 
A. 
1 The applicant and appellant in the appeal on a point of law (applicant) is a limited 
partnership in which the general partner is a limited liability company (a ‘GmbH 
& Co. KG’). In the years to which the dispute relates (2005 and 2006), inter alia, 
C-eG, the applicant in Case XI R.5/17, or its legal predecessor, was a partner. 
2 In the years to which the dispute relates, the applicant was active as a wholesaler 
for fruit and vegetables, whereby it marketed the products produced and supplied 
to it by the producers that were its members. In addition, the applicant is a 
recognised producer organisation within the meaning of Regulation No 2200/96. 
3 Pursuant to Article 15 of Regulation No 2200/96, such producer organisations can 
set up what is known as an operational fund. This fund is a special-purpose fund 
governed by private law within the meaning of Paragraph 1(1)(5) of the 
Körperschaftsteuergesetz (Law on Corporation Tax; ‘the KStG’), and it is funded 
half by contributions from the producer members of the producer organisation and 
half by financial assistance within the meaning of Article 15(1) of Regulation 
No 2200/96 (financial assistance). 
4 So-called operational programmes, which have to be submitted to and approved 
by the competent national authorities (Article 15(2)(b) and Article 16(1) of 
Regulation No 2200/96), can be financed by the resources of the operational fund. 
Operational programmes may involve, inter alia, investments in individual 
holdings of members [Or. 4] of the producer organisation (cf. Article 8(2) in 
conjunction with Annex I(17) of Commission Regulation (EC) No 1433/2003 of 
11 August 2003 laying down detailed rules for the application of Council 
Regulation (EC) No 2200/96 as regards operational funds, operational 
programmes and financial assistance — Regulation No 1433/2003). 
5 Corresponding investments in individual holdings were implemented in the years 
to which the dispute relates. To that end, the applicant entered into so-called 
project agreements (agreement) with various producers. Extracts from these read 
as follows (cf., for example, project agreement with Mr X of 4 February 2005): 
6 ‘1. Project 
The subject of the agreement is the project [...] as part of the operational 
programme ... [of the applicant] within the meaning of Article 15 of Regulation 
(EC) No 2200/96 in conjunction with Regulation (EC) No 1433/2003. 
7 2. Implementation 
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[...] 
8 3. Joint ownership and management 
3.1 [...] 
3.2 The contracting partners agree that the two contracting partners shall jointly 
own the subjects of the project in equal parts [...]. … 
9 4. Funding 
4.1 The provisional amount of the investment shall be … [Or. 5] 
4.2 The funds required for the implementation of the measure shall be 
contributed 
a) in respect of 50% thereof, by an additional payment from the producer in 
accordance with its 50% share of joint ownership 
b) in respect of 50% thereof, by the operational fund of the producer 
organisation, of which 
aa) half arises from financial assistance and 
bb) the other half arises from a special financial contribution to the operational 
fund by the producer. … 
4.4 Financial assistance promised by the funding agency within the meaning of 
clause 4.2.b) aa) shall be pre-financed by the operational fund. 
4.5 The funds to be contributed by the producer under clause 4.2.b) bb) shall be 
raised as special financial contributions to the operational fund in the amount of 
1.75% of the net marketing proceeds. … 
10 6. Earmarking, right of sale and surrender obligation 
6.1 The following shall apply in respect of the earmarking and the period 
thereof: Buildings and structural installations shall be used for the supported 
purpose for 12 years. [...] ... Technical equipment and apparatus shall be used for 
the supported purpose for 5 years [...]. [...] 
6.2 For the duration of the earmarking period, the subject of the project may be 
used only for the supported purpose and for the common benefit of the contracting 
partners. … 
6.3 For the duration of the earmarking period, the producer shall be obliged ... to 
offer for sale to the [applicant], for the purposes of marketing, the whole of its 
production on the basis of the existing supply agreement. 
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6.4 Upon the request ... [of the applicant], the proportion of the production 
which is supported by way of this agreement shall be made available at any time 
for the purpose of being delivered to the producer organisation. [...] ... 
11 9. Transfer of ownership 
9.1 After the expiry of the earmarking period, [the applicant] shall transfer its 
share of joint ownership to the producer without any further consideration being 
provided. In this connection, [the applicant] proceeds on the basis that the 
producer will, even after the expiry of the earmarking period, continue to assist 
with the implementation of the pursuit of the objectives of the organisation of the 
market for fruit and vegetables by [the applicant]. ...’. 
12 [...] [Or. 6] 
13 The respective goods covered by the agreement were ordered by the applicant; the 
suppliers of the goods covered by the agreement (upstream suppliers) submitted 
their invoices to it. 
14 In the vast majority of cases, the applicant invoiced the relevant producer for 75% 
of its net acquisition costs plus turnover tax. The remaining 25% was financed by 
way of the financial assistance. 
15 In 2006, however, in some cases the financing was also undertaken exclusively by 
the operational fund. In those cases, the applicant invoiced the relevant producer 
for only 50% of its net acquisition costs plus turnover tax. The remaining 50% of 
the acquisition costs were financed by way of the financial assistance. 
16 In its turnover tax declarations for 2005 of 8 March 2007 and for 2006 of 
9 November 2007, the applicant claimed the full deduction on the basis of the 
upstream suppliers’ invoices and subjected (only) the amounts invoiced by the 
producers to turnover tax. It did not consider the amounts paid out by the 
operational fund to be consideration for the supplies insofar as they originated 
from the financial assistance. 
17 After an on-the-spot audit had been carried out upon the applicant, the defendant 
and respondent in the appeal on a point of law (the Tax Office — TO) took the 
view, in [Or. 7] the turnover-tax amendment notices for the years in dispute of 
4 February 2013, that the applicant had from the outset provided the relevant 
producers with the power of disposal over the entirety of the goods covered by the 
agreement — and not just with regard to the 50% share — and consequently made 
a supply; this was because the supply and commissioning of the goods covered by 
the agreement were undertaken directly to or by the producer. In addition, 
according to the TO, although the financial assistance to the operational fund was 
not a taxable (‘genuine’) subsidy, because the producers were members of the 
cooperative C-eG, the minimum basis of assessment of Paragraph 10(5)(1) in 
conjunction with Paragraph 10(4) of the UStG was to be applied to the applicant’s 
outputs to the relevant producers. According to the TO, the applicant’s purchase 
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prices were the (net) amounts paid to the upstream suppliers. An objection was 
unsuccessful (objection decision of 14 May 2013). 
18 The Finance Court (FC) dismissed the action. It concluded that the TO had 
ultimately been right to assume that the basis of assessment for the supplies to the 
producers that were undertaken in the context of the operational programmes 
comprised not only the consideration paid by the producers. However, this 
resulted not from Paragraph 10(5)(1) in conjunction with Paragraph 10(4) of the 
UStG (minimum basis of assessment), but rather from Paragraph 10(1)(3) of the 
UStG; the payment from the operational fund was a payment from a third party. 
19 By way of its appeal on a point of law, the applicant claims that there has been an 
infringement of substantive law. It argues that the financial assistance paid to the 
applicant by the European Union (EU) served structural and environmental 
purposes pursuant to Regulation No 2200/96 and Regulation No 1433/2003. 
Investments in individual holdings were also part [Or. 8] of the ‘national strategy 
for sustainable operational programmes of the producer organisation for fruit and 
vegetables’. 
20 The applicant requests that the initial decision and the objection decision of 
14 May 2013 be set aside and that the turnover tax notices for the years 2005 and 
2006 of 4 February 2013 be amended to the effect that the turnover tax for the 
year 2005 is reduced by €10,745.37 and the turnover tax for the year 2006 is 
reduced by €140,737.40. 
21 The TO requests that the appeal on a point of law be dismissed as unfounded. 
22 It defends the contested initial decision. 
B. 
23 The Chamber stays the proceedings pursuant to Paragraphs 74 and 121 of the 
Finanzgerichtsordnung (Finance Court Rules; ‘the FGO’) and refers the questions 
set out in the operative part to the Court of Justice of the European Union (‘Court 
of Justice’) for a preliminary ruling in accordance with Article 267(3) of the 
Treaty on the Functioning of the European Union (TFEU). 
24 I. The relevant legal provisions 
25 1. National law 
The relevant provisions of national law are as follows: 
26 ‘Paragraph 1 of the UStG — Taxable transactions 
(1) The following transactions shall be subject to turnover tax: 
1.  supplies of goods and services effected for consideration within the territory 
of the country by a trader in the course of his business. … 
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27 Paragraph 3 of the UStG — Supplies of goods and services 
(1) Supplies of goods by a trader are supplies by which he or a third party 
authorised by him entitles the recipient or [Or. 9] a third party on his behalf the 
right to dispose of goods in his own name (transfer of the power of disposal). 
… 
(12)  There is an exchange where the consideration for a supply consists in a 
supply. There is a transaction akin to an exchange where the consideration for a 
service consists in a supply or a service. 
28 Paragraph 10 of the UStG — Basis of assessment in the case of supplies of 
goods and services and intra-Community acquisitions 
(1) In respect of supplies of goods and services (Paragraph 1(1)(1), sentence 1) 
..., the transaction shall be assessed to tax in accordance with the consideration. 
Consideration is everything which the recipient of the supply expends (net of 
turnover tax) for the purpose of obtaining the supply. The consideration also 
includes anything that a person other than the recipient of the supply pays to the 
trader for the supply. … 
(2) ... In the case of exchanges (Paragraph 3(12), sentence 1), transactions akin 
to exchanges (Paragraph 3(12), sentence 2) and [...], the value of each supply 
constitutes the consideration for the other supply. The turnover tax shall not form 
part of the consideration. 
… 
(4) The transaction shall be assessed to tax: 
1. in the case of the forwarding of goods within the meaning of Paragraph Ia(2) 
and Paragraph 3(Ia) and in the case of supplies within the meaning of 
Paragraph 3(1b), on the basis of the purchase price plus the ancillary costs for the 
goods or for identical goods, or, in the absence of a purchase price, on the basis of 
the cost price, in each case as of the time of the transaction; 
2. … 
3. … 
The turnover tax shall not be included in the basis of assessment. 
(5) Sub-paragraph (4) shall apply mutatis mutandis to: 
1. supplies of goods and services which corporations and associations of 
persons within the meaning of Paragraph I(1)(1) to (5) of the KStG, associations 
of persons without legal personality and communities provide in the context of 
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their business to their equity holders, shareholders, members, partners or parties 
related to them, or which sole traders provide to parties related to them; 
2. …, 
if the basis of assessment under Sub-paragraph (4) exceeds the consideration 
under Sub-paragraph (1). …’ [Or. 10] 
29 ‘Paragraph 1 of the KStG — Unlimited liability to tax 
(1) The following corporations, associations of persons and pools of assets 
which have their management or their registered office in Germany shall have 
unlimited liability to corporation tax: 
… 
5.  associations without legal personality, institutions, foundations and other 
special-purpose funds governed by private law; ...’ 
30 2. EU law 
In the case in dispute, the relevant provisions of EU law are Articles 2, 11 and 
27(1) of Directive 77/388/EEC (which was still applicable in the years to which 
the dispute relates), for transactions after 13 August 2006 in the version of 
Council Directive 2006/69/EC of 24 July 2006 amending Directive 77/388/EEC 
as regards certain measures to simplify the procedure for charging value added tax 
and to assist in countering tax evasion or avoidance, and repealing certain 
Decisions granting derogations (Directive 2006/69/EC), as well as Regulation 
No 2200/96 and Regulation No 1433/2003. 
31 II. Assessment on the basis of national law 
When considered exclusively on the basis of national law, the action must be 
dismissed on a number of grounds (which are independent of one another). 
32 1.  The parties and the FC are right to agree that the applicant did already 
supply the goods covered by the agreement to the relevant producers in the years 
to which the dispute relates (and did not merely transfer a half share of joint 
ownership to them) (cf. in this regard [...] Court of Justice judgment Mercedes-
Benz Financial Services UK of 4 October 2017 C-164/16, EU:C:2017:734, [...] 
paragraphs 33 and 34). [Or. 11] These supplies were made — and this is not in 
dispute between the parties — in return for consideration ([...]). 
33 2.  However, the parties and the FC overlooked the fact that, for the supply, 
the producers, in addition to entering into an obligation to pay their share, in 
point 6.3 of the agreement also entered into an obligation to supply the Applicant 
with fruit and vegetables during the period of the investment. For the avoidance of 
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repetition, the Chamber refers in this regard to its order for reference of the same 
date XI R 5/17. 
34 3.  If, nevertheless, no exchange with an extra cash charge exists, the FC 
correctly assumed that pursuant to Paragraph 10(1), sentence 3 of the UStG ([...]), 
the consideration for these supplies consists not only of the amounts invoiced to 
the producers but also of the payments from the operational fund. For the 
avoidance of repetition, the Chamber refers in this regard to its order for reference 
of the same date XI R 5/17. 
35 4.  If no exchange with an extra cash charge can be found to exist and the 
FC’s opinion that the payment from the operational fund was a payment from a 
third party cannot be followed, then the TO would have been right to assume that, 
under national law, in the case in dispute [Or. 12]the applicant’s purchase prices 
from the upstream suppliers constitute the basis of assessment for the applicant’s 
supplies to the producers. As the TO correctly assumed, this follows from 
Paragraph 10(5)(1) in conjunction with Paragraph 10(4), sentence 1(1) of the 
UStG. For the avoidance of repetition, the Chamber refers in this regard to its 
order for reference of the same date XI R 5/17. 
36 III. Assessment on the basis of EU law 
However, it is doubtful whether the assessment set out in B.II. and based on 
national law is compatible with EU law in a number of respects as laid down in 
Article 267(3) TFEU. 
37 1. If the Court of Justice, on the basis of the obligation assumed in point 6.3 
of the agreement, which obligation extends in temporal terms beyond the 
obligation contained in Article 11(1)(c)(3) of Regulation No 2200/96, were to 
reach the conclusion that under circumstances such as those of the main 
proceedings an exchange with an extra cash charge exists under EU law, the basis 
of assessment would have to be determined in accordance with 
Article 11(A)(1)(a) of Directive 77/388/EEC because EU law does not contain 
any special provision relating to the basis of assessment in the case of an exchange 
which is comparable to Paragraph 10(2), sentence 2 of the UStG (cf. Court of 
Justice judgments Bertelsmann of 3 July 2001.C-380/99, EU:C:2001:372, [...] 
paragraph 17; Serebryannay vek of 26 September 2013 C-283/12, 
EU:C:2013:599, [...] paragraph 38). On that basis, the taxable amount is 
everything which constitutes the consideration which has been or is to be obtained 
by the supplier from the purchaser, the customer or a third party for the supply 
including subsidies directly linked to the price of such supplies. [Or. 13] 
38 a) The supply obligation entered into by the producers would have to be taken 
into account in that context, because the producers only entered into this on the 
basis of the supply, and the basis for taxation of a supply of goods is everything 
which the supplier receives as consideration that is directly linked with the supply 
if it is capable of being expressed in monetary terms and constitutes a subjective 
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value (cf. Court of Justice judgment Naturally Yours Cosmetics of 23 November 
1988 C-230/87, EU:C:1988:508, [...] paragraphs 12 and 16). 
39 b)  This is the case here in relation to the discounted supply by the applicant 
and the producers’ obligation to supply the fruit and vegetables produced to the 
applicant. In the case in dispute, the applicant received from the relevant producer 
the extra cash charge and a supply obligation in return for the supply of the goods; 
the basis of assessment for the further service would be the difference from the 
applicant’s purchase price (cf. Court of Justice judgment Empire Stores of 2 June 
1994 C-33/93, EU:C;1994:225, [...] paragraph 19); this is because in the 
aforementioned agreement the producers entered into an obligation to undertake 
supplies in the future (cf. in that regard Court of Justice judgments RCI Europe of 
3 September 2009 C-37/08, EU:C:2009:507, [...] paragraphs 31 and 33; 
Serebryannay vek, EU:C:2013:599, [...] paragraph 41). 
40 c) However, from an EU law perspective the very existence of an exchange 
with an extra cash charge is doubtful because a (shorter) supply obligation for the 
producers exists in any event on the basis of the rules of association, which are 
based on EU law (cf. Article 11(1)(c)(3) of Regulation No 2200/96). 
41 d) In addition, this assessment could be precluded by the fact that the [Or. 14] 
future supplies of fruit and vegetables can only become taxable once all of the 
relevant elements of the taxable event, that is to say of the future supply, are 
known. For the avoidance of repetition, the Chamber refers to its order for 
reference of the same date XI R 5/17. 
42 2.  Irrespective of this, it is necessary to clarify, as per letter (b) of the first 
question referred, whether, under circumstances such as those of the main 
proceedings, financial assistance within the meaning of Article 15 of Regulation 
No 2200/96 that is paid out to the producer organisation by the operational fund 
on the basis of the supply is a ‘subsidy linked to the price of the supply’ from a 
‘third party’. For the avoidance of repetition, the Chamber refers to its order for 
reference of the same date XI R 5/17. 
43 3.  If the Court of Justice takes the view that, under circumstances such as 
those of the main proceedings, in the case of financial assistance being granted 
only the amounts paid by the producer are included in the taxable amount, the 
question remains of whether EU law precludes the application of the minimum 
basis of assessment of Paragraph 10(5) of the UStG. 
44 a)  This provision is — including insofar as transactions after 12 August 2006 
are concerned in the present proceedings — a national special measure for 
derogation within the meaning of Article 27(1) of Directive 77/388/EEC ([...]). 
For that reason it is also still listed by the Commission as an exception to 
Article 11(A)(1)(a) of Directive 77/388/EEC in its overview of the applicable 
derogations as of 1 January 2018 
(http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/tax
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ation/vat/key_documents/table_derogations/vat__index_derogations_en.pdf). 
Consequently, it [Or. 15] can still be applied only insofar as this is strictly 
necessary for the avoidance of abuses and tax evasion (cf. Court of Justice 
judgment Skripalle of 29 May 1997 C-63/95, EU:C:1997:263, [..] paragraphs 22f., 
25f.; [...]). 
45 b) In general, with legal transactions between related parties there is a certain 
degree of risk of tax evasion or avoidance, which permits the application of the 
minimum basis of assessment. In the present case, the consideration to be paid by 
the producers is not at a normal market rate, with the consequence that the value 
added tax receipts (and thus also the EU’s own resources arising from value added 
tax) would be reduced if the subsidy were not part of the taxable amount, and the 
latter was instead only the sale price reduced by the amount of the subsidy. 
46 c)  However, there is no risk of an abuse of the law or of tax evasion where 
the objective facts show that the taxable person has acted properly (cf. Court of 
Justice judgment Skripalle, EU:C:1997:263, [...] paragraph 26). 
47 d) The application of the minimum basis of assessment of Paragraph 10(5)(1) 
of the UStG could therefore be impermissible if the circumstance that the supply 
is made at a discount is based on the fact that the supplier receives financial 
assistance in return. This gives rise to the second question referred. 
48 4.  The third question referred is intended to clarify whether it is permissible 
to apply the minimum basis of assessment, even though the recipient of the supply 
has a full right of deduction as regards the discounted supply of [Or. 16] capital 
goods which are subject to adjustments of deductions (Article 20 of Directive 
77/388/EEC). 
49 a)  In this regard, it is true that the Federal Finance Court in principle also 
applies — including for transactions up to 12 August 2006 — the case-law laid 
down in relation to Article 80 of Council Directive 2006/112/EC of 28 November 
2006 on the common system of value added tax, according to which the minimum 
basis of assessment is not applicable to services provided to a trader which has a 
full right of deduction (cf. Court of Justice judgment Balkan and Sea Properties 
and Provadinvest of 26 April 2012 C-621/10 and C-129/11, EU:C:2012:248, [...]), 
to the national special measure of Paragraph 10(5) of the UStG ([...]) — which is 
also based on Article 27(1) of Directive 77/388/EEC for transactions from 
13 August 2006 onwards. 
50 b)  However, the Federal Finance Court has assumed hitherto that it is 
permissible also to apply the minimum basis of assessment of Paragraph 10(5) of 
the UStG to supplies to a recipient of supplies which has a full right of deduction 
if the deduction claimed by the recipient of supplies is subject to input tax 
adjustments within the meaning of Paragraph 15a of the UStG ([...]). It assumes 
that there could be a risk of abuses and tax evasion in this regard ([...]). For 
example, if a farmer who was subject to standard taxation treatment were to 
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switch from standard taxation treatment to average-rate taxation after acquiring 
the capital goods, this would result in an input tax adjustment pursuant to 
Paragraph 15a(7) of the UStG ([...]) [Or. 17] which would then be undertaken on 
the basis of an input tax amount based on a discounted basis of assessment. The 
Federal Finance Court inferred from this that a risk of tax evasion exists. 
51 c) It is doubtful from an EU law perspective whether this approach is 
consistent with the Court of Justice judgment Balkan and Sea Properties and 
Provadinvest (EU:C:2012:248, [...]), which does not contain such a restriction. 
52 5. All of the questions referred are relevant to the decision because they are 
all based on autonomous lines of reasoning. 
53 6.  The legal basis for the reference to the Court of Justice is Article 267(3) of 
the TFEU. 
[...]