1.

In these proceedings the Finanzgericht [Finance Court] Düsseldorf has referred to the Court for a preliminary ruling two questions concerning the interpretation of the Sixth Council Directive (No 77/388/EEC of 17 May 1977) on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal 1977, L 145, p. 1; hereinafter referred to as ‘the Sixth Directive’) and the relationship between value-added tax and real property transfer tax. Without reciting all the facts and the procedure, which are set out in the Report for the Hearing, it may be recalled that the dispute in the main proceedings, which is between the Kerrutts, a married couple, and their tax office, concerned initially the application of Grunderwerbsteuer [real property transfer tax] to a property transaction involving a complex legal fiction, known as the ‘Bauherrenmodell’, which is, it seems, common in the Federal Republic of Germany. It appears from the order requesting a preliminary ruling and the information provided in the course of the proceedings that that fiction operates as follows. Through the intermediary of an agent, in this instance a trustee, building land is acquired, then divided up between different mandators who thus become co-proprietors. The latter join together to form a ‘Bauherrengemeinschaft’ (an association governed by the Civil Code, represented by the same trustee), which concludes a contract with a building contractor for the construction of a block of apartments on the land and the supply of the various dwellings. Other contracts may, as in this case, be concluded individually by each co-proprietor, represented by the trustee, with other companies. Such contracts may include contracts for the supervision of building works, contracts for the management of let accommodation, contracts of guarantee and contracts for the procurement of finance. Delivery may be taken of the building and the supply of the various dwellings effected by the association or by each co-proprietor dealing directly with the building contractor. There is therefore a series of essentially separate transactions, effected by a single agent. The advantage of such a scheme for the co-proprietors is that although they must pay the fees of the agent and the various intermediaries, they save a considerable amount of time and effort and obtain the benefit of the experience of a specialized agent. There is also a tax advantage. The co-proprietors may deduct their costs from income tax. The dispute arose when the competent local tax authorities issued to the Kerrutts, the plaintiffs in the main proceedings, demands for transfer tax, assessed on the basis of the various transactions, which, in accordance with decisions of the Bundesfinanzhof [Federal Finance Court], were treated as a single transaction. According to those decisions, the successive contracts, in particular those for the purchase of land and for construction work, are regarded as contingent on each other, since each contract is devoid of purpose without the other. There is therefore an ‘inherent connection’, to quote the expression used by the Bundesfinanzhof and cited by the Finanzgericht. Before that court the Kerrutts claimed that the transactions were separate and that under national law only the acquisition of the building land was liable to transfer tax. The national court, however, took the view that although on the face of it the case concerned only the application of national law, it also raised questions as to the application of the Community rules on value-added tax contained in the Sixth Directive. The connection was found in a provision of the Umsatzsteuergesetz [Law on turnover tax], namely paragraph 4 (9) (a), which exempts from VAT transactions subject to transfer tax. The national court concluded that, on the basis of the decisions of the Bundesfinanzhof according to which the entire ‘Bauherren’ scheme is subject to transfer tax, the goods and services supplied by building contractors, skilled workers of the building trade (hereinafter referred to as ‘building workers’), trustees and other parties intervening in the scheme should be exempted from VAT. The national court took care to point out that the Federal Minister for Finance did not share the view that the scheme in question was an ‘integrated but divisible service’. It is clear from the observations submitted to the Court by the German Government that in practice such supplies are not exempted, although that exemption is provided for by law. In order to determine to what extent those national provisions may be regarded as compatible with Community law, the national court submitted two questions, which are reproduced in the Report for the Hearing, and the substance of which is as follows : (1) Can the ‘Bauherren’ scheme be regarded as a single ‘supply of buildings or parts thereof, and of the land on which they stand’ for the purposes of Article 13 B (g) and Article 28 (3) (b), in conjunction with point 16 of Annex F, of the Sixth Directive, which authorize exemptions from VAT, or do the transactions other than the acquisition of the land come within the scope of Article 2 (1) of the Sixth Directive, according to which ‘the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such’ is subject to VAT? In other words, do the transactions in question constitute a single transaction exempt from VAT under the directive or are they, with the exception of the transaction concerning the land, subject to it by virtue of Article 2 of the directive? (2) If the reply to the first question is that the transactions other than the transfer of the land are subject to VAT, is it contrary to the objective of harmonization pursued by the directive to levy on them a second tax, such as transfer tax?