Keywords

Summary



Keywords

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Disposal free of charge of goods forming part of business assets – Exclusion of the making of gifts of small value and the giving of samples

(Council Directive 77/388, Art. 5(6), second sentence)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Disposal free of charge of goods forming part of business assets – Exclusion of the making of gifts of small value and the giving of samples

(Council Directive 77/388, Art. 5(6), second sentence)

3. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Disposal free of charge of goods forming part of business assets – Exclusion of the making of gifts of small value and the giving of samples

(Council Directive 77/388, Art. 5(6), second sentence)

Summary

1. A ‘sample’, within the meaning of the second sentence of Article 5(6) of Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, is a specimen of a product which is intended to promote the sales of that product and which allows the characteristics and qualities of that product to be assessed without resulting in final consumption, other than where final consumption is inherent in such promotional transactions. That term cannot be limited, in a general way, by national legislation to specimens presented in a form not available for sale or to the first of a series of identical specimens given by a taxable person to the same recipient, unless that legislation allows account to be taken of the nature of the product represented and of the specific business context of each transaction in which those specimens are distributed. The tax status of the recipient of samples has no bearing in that regard.

In particular, recorded music distributed free of charge for promotional purposes may constitute goods supplied as samples even if they are identical to the final product to be placed on the market. In the case where such a recording is distributed to an individual in order that, within the course of his work, that individual will ensure public exposure for the recording, that person will be in a position fully to assess the value of the recording only if he is able to listen to the entire content of the recording as it will be distributed on the market. It is not, moreover, contrary to the objective of the second sentence of Article 5(6) of the Sixth Directive that goods be distributed, as ‘samples’, to an individual other than a potential or actual buyer of the product which they represent, provided that such distribution is consistent with the objectives pursued in distributing samples. In that regard, in the artistic goods sector, the distribution of free copies of new works to an intermediary, whose role is to assess critically the quality of those new works, and who is therefore capable of influencing the market coverage of the product – such as a journalist or a radio programme presenter – is a result of a method of promotion in which use of the sample is inherent in the process of promotion and assessment.

Furthermore, so far as concerns the specific practice – connected to the artistic sector – of promoting recorded music by distributing a very large number of copies of a recording to a ‘plugger’, it may be necessary, for the purposes of critical assessment and the promotion of a recording, to give many copies of that recording to intermediaries so that they can subsequently forward those copies to targeted individuals on the basis of their ability to promote sales of recorded music. The mere fact that the number of copies distributed might amount to several hundred, in the case where a company engaged in the production and sale of recorded music uses ‘pluggers’ to distribute copies of new recordings, cannot be considered, in itself, to be contrary to the objective pursued by the exemption in respect of samples, in so far as that number of copies is consistent with the nature of the product represented and with the use which the ‘plugger’, as an intermediary, must make of those copies, these being matters which the referring tribunal must determine.

Likewise, the possibility that a ‘plugger’, instead of distributing, in the manner agreed, the free copies of recorded music made available to him, makes improper use of them, for example by introducing them into the normal sales chain, cannot, in itself, affect the classification of those free copies as ‘samples’. However, in order to ensure full respect of the limits to the exemption set out in the second sentence of Article 5(6) of the Sixth Directive, Member States may require taxable persons distributing samples for the purposes of their business to take precautions in order to avoid the risk that those samples may be used improperly. When the distribution of samples nevertheless leads to final consumption which is not inherent in the assessment of the product represented by those samples, that consumption will constitute an abuse.

(see paras 29-31, 35-40, 53, operative part 1, 4)

2. The concept of ‘gifts of small value’, within the meaning of the second sentence of Article 5(6) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, must be interpreted as not precluding national legislation which fixes a monetary ceiling of GBP 50 for gifts made to the same person in the course of a 12 month period or forming part of a series or succession of gifts.

The Member States therefore have a certain discretion as regards the interpretation of the second sentence of Article 5(6), provided that they do not fail to have regard to the objective and role of that provision within the scheme of the Sixth Directive. In that regard, the setting, in national legislation, of such a monetary ceiling does not go beyond that discretion. The same holds true with regard to a rule under which such a ceiling applies cumulatively to gifts made to the same person in the course of a 12 month period or, alternatively, forming part of a series or succession of gifts. Such ceilings are compatible with the objectives of Article 5(6) of the Sixth Directive, while not rendering ineffective the exemption for which it provides in respect of gifts of small value.

(see paras 42, 44-45, operative part 2)

3. The second sentence of Article 5(6) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, precludes national legislation which establishes a presumption that goods constituting ‘gifts of small value’ within the meaning of that provision, distributed by a taxable person to different individuals having the same employer, are to be treated as having been made to the same person.

Classifying the distribution of a product as a ‘gift of small value’ depends on the fact of knowing who was the distributor’s intended final recipient, and the working relationship between the recipient and his employer or the fact that a number of recipients have the same employer has no effect on that classification.

(see paras 49-50, operative part 3)