Case C‑432/15

Odvolací finanční ředitelství

v

Pavlína Baštová

(Request for a preliminary ruling from the Nejvyšší správní soud)

Reference for a preliminary ruling — Taxation — Value added tax — Directive 2006/112/EC — Article 2(1)(c) — Concept of ‘supply of services for consideration’ — Supply of a horse by a taxable person to the organiser of horse races — Assessment of the consideration — Right to deduct expenses linked to the preparation of the taxable person’s horses for the races — General costs linked to the overall economic activity — Annex III, point 14 — Reduced rate of VAT applicable to the use of sporting facilities — Applicability to the operation of racing stables — Transaction consisting of a single supply or several independent supplies)

Summary — Judgment of the Court (Fourth Chamber), 10 November 2016

Article 2(1)(c) of Directive 2006/112/EC on the common system of value added tax must be interpreted to the effect that the supply of a horse by its owner, who is a taxable person for value added tax purposes, to the organiser of a horse race for the purpose of the horse’s participation in that race does not constitute a supply of services for consideration within the meaning of that provision where it does not give rise to a payment awarded for participation or any other direct remuneration and where only the owners of horses which are placed in the race receive a prize, even if that prize is determined in advance. On the other hand, such a supply of a horse for the purposes of its participation in the race constitutes a supply of services for consideration where it gives rise to the payment, by the organiser, of remuneration irrespective of whether or not the horse in question is placed in the race. The possibility of classifying a supply of services as a ‘transaction for consideration’ requires only that there be a direct link between that supply and the consideration actually received by the taxable person. Such a direct link is established if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the payment received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. In this connection, first, the service provided by the horse race organiser, consisting in enabling the owner of a horse to have his horse participate in the horse race, cannot be regarded as effective consideration for the supply of a horse by the owner to the race organiser. That service is remunerated by the payment, by the horse owner, of entrance and declaration fees reflecting the value actually given in return for the horse’s participation in the race. Furthermore, although the horse owner could possibly derive a benefit from that participation as a result of the increase in the value of the horse in the event that it is placed or the publicity gained by the horse from its participation, that benefit is difficult to quantify and uncertain, since it essentially depends on the result of the race. That benefit cannot therefore be taken into consideration for the purposes of determining the value actually given in return for the supply of the horse. Secondly, where the supply of a horse for the purposes of its participation in a race does not give rise to any payment awarded for participation or any other direct remuneration, and where only the owners of horses which are placed in the race receive a prize, the supply of a horse cannot be regarded as giving rise to effective consideration. Thirdly, however, in a situation where the mere participation of the horse in a race nevertheless gives rise to direct consideration by virtue of a payment awarded by the race organiser for participation in the race, irrespective of whether or not the horse in question is placed in the race, the supply of that horse by its owner may be qualified as a ‘supply of services’ for consideration within the meaning of Article 2(1)(c) of Directive 2006/112. In that situation, the payment made by the race organiser to the horse owner constitutes direct consideration for the service rendered by the latter to the former in agreeing to let his horse participate in the event. (see paras 28, 35, 36, 39, 40, operative part 1)

Directive 2006/112 on the common system of value added tax must be interpreted to the effect that a taxable person, who breeds and trains his own race horses and those of other owners, has the right to deduct input value added tax on the transactions relating to the preparation for horse races of his own horses and the participation of his own horses in races, on the ground that the costs pertaining to those transactions are part of the general costs linked to his economic activity, provided that the costs incurred in each of those transactions have a direct and immediate link with that overall activity. That may be the case if the costs thus incurred pertain to race horses actually intended for sale or if the participation of those horses in races is, from an objective point of view, a means of promoting the economic activity, this being a matter for the national court to determine. In a situation where such a right to deduct exists, any prize won by the taxable person on account of the placing of one of his horses in a race is not to be included in the taxable amount for value added tax purposes. In order to assess whether there is a direct and immediate link between the costs incurred on account of each of the transactions linked to the preparation of the horses and their participation in the races, on one hand, and that overall economic activity, on the other hand, it is for the national court to ascertain, in particular, whether the horses belonging to the person operating the racing stables are actually intended for sale or whether their participation in races is, from an objective point of view, a means of promoting the economic activity of operating those stables. If that is the case, the costs incurred in the preparation of the horses for the races, and the horses’ participation in those races, have a direct and immediate link with the overall economic activity consisting in the operation of such stables. First, it is common ground that the sale price of a race horse depends on the state of its preparation for races and its experience, or any reputation it may have obtained by participating in races. Secondly, the success of his horses in races may enable the operator of stables to build a reputation, or gain publicity or added visibility such as to influence the price of his services for training the horses of other owners, this being a matter for the national court to determine. On the other hand, the fact that the transactions linked to the preparation of the horses belonging to the operator of the stables for races and their participation in those races would enable him to improve and develop the training methods, feed and care given to the horses, and thus the services provided to other owners, is irrelevant for the purposes of that assessment. Such a fact merely reflects an indirect link between those transactions and the economic activity at issue. Furthermore, if the transactions linked to the preparation for races of the horses belonging to the operator of the stables and the participation of those horses in races are intended to promote the private interests of that operator, those transactions cannot be regarded as having a direct and immediate link with the overall economic activity consisting in the operation of such stables. (see paras 48-51, 55, operative part 2)

The concept of the ‘use of sporting facilities’ referred to in point 14 of Annex III to Directive 2006/112 on the common system of value added tax is connected with services linked to the practice of sport or physical education, which must, so far as is possible, be considered as a whole. The possibility of applying a reduced rate of VAT to the use of sporting facilities is essentially intended to promote the practice of sports activities and to render them more accessible to individuals. Consequently, the concept of the ‘use of sporting facilities’ must be understood as covering the right to use facilities for the practice of sport or physical education, and their use for those purposes. It follows that, while supplies of services linked to the use of facilities necessary for practising equestrian sports may fall within the scope of point 14 of Annex III to Directive 2006/112, that cannot be the case for supplies linked to the use of facilities for the passive stay of horses in stables, their feeding or the care provided to them, or the rest areas or storage. (see paras 63-66)