CELEX: 62002CC0321
Language: en
Date: 2004-03-11
Title: Opinion of Mr Advocate General Léger delivered on 11 March 2004. # Finanzamt Rendsbug v Detlev Harbs. # Reference for a preliminary ruling: Bundesfinanzhof - Germany. # Sixth VAT Directive - Article 25 - Common flat-rate scheme for farmers - Leasing of part of a farm. # Case C-321/02.

OPINION OF ADVOCATE GENERALLÉGERdelivered on 11 March 2004(1)
         Case C-321/02Finanzamt RendsburgvDetlev Harbs(Reference for a preliminary ruling from the Bundesfinanzhof (Germany))
            (Sixth VAT Directive  –  Article 25  –  Common flat-rate scheme for farmers  –  Leasing out by a farmer of some of the assets of his farm  –  Application of the general scheme to the income from the leasing arrangement)
            
      
         
        1.        In the present case the Bundefinanzhof (Federal Finance Court) (Germany) is seeking a ruling from the Court on the scope of
      Article 25 of the Sixth Directive 77/388/EEC, 
         			(2)
         		 which concerns the common flat-rate scheme for farmers. The reference was made in the course of proceedings between a national
      tax authority and a farmer who has leased out the assets of his farm used for milk production. What is being sought is a ruling
      on whether the income from that leasing arrangement should be subject to the common flat-rate scheme provided for in Article
      25 of the Sixth Directive or to the general scheme of value added tax, 
         			(3)
         		 or whether it should be totally exempt.
      
      
      I –  Law
        2.        In the Sixth Directive the Community legislature sought to harmonise the scope of VAT throughout the Member States by laying
      down a uniform basis of assessment of VAT for the entire European Community. In addition, it provided a very broad definition
      of the scope of that tax. The tax must therefore apply to the supply of any goods or services effected for consideration as
      part of an economic activity by a trader operating independently. 
         			(4)
         		 Those economic activities include agricultural activities. 
         			(5)
         		
      
        3.        VAT is designed as a tax on final private consumption. It must therefore have a neutral effect on traders. However, it is
      applied by each of the traders involved in the chain of production, distribution or provision of services. In practice, this
      means that each trader applies VAT to the price of his goods and services and pays the Treasury, at regular intervals, the
      tax which he recovers by so doing, having first deducted the VAT that he has himself paid on the purchase of the goods and
      services required for his own economic activity. The operation of such a scheme therefore requires every taxable person to
      keep accounts in sufficient detail to permit application of the value added tax and inspection by the tax authority. 
         			(6)
         		
      
        4.        Keeping such accounts proved very difficult for some traders, such as small undertakings and the majority of farmers. In the
      Sixth Directive the Community legislature therefore sought to harmonise the special schemes which had been introduced by Member
      States for those occupational categories. 
         			(7)
         		 Article 24 of the Sixth Directive states that Member States may apply in respect of small undertakings a simplified scheme
      based on exemptions.
      
      
        5.        In Article 25 of the Sixth Directive the Community legislature also made provision that where the application to farmers of
      the normal VAT scheme, or the simplified scheme provided for in Article 24, would give rise to difficulties, Member States
      may apply to farmers a flat-rate scheme tending to offset the VAT charge on inputs they have paid on their purchases of goods
      and services. Those farmers are called ‘flat-rate farmers.’ 
         			(8)
         		
      
        6.        Article 25 of the Sixth Directive provides that that common flat-rate scheme is subject to the following rules. Member States
      are to fix the flat-rate compensation percentages according to the calculation procedure laid down in that directive. Those
      percentages must not be used to obtain for flat-rate farmers refunds greater than the VAT charge on inputs. 
         			(9)
         		
      
        7.        Under Article 25(5) of the Sixth Directive those flat-rate percentages are to be applied to the price, exclusive of tax, of
      the agricultural products and agricultural services that flat-rate farmers have sold to taxable persons other than flat-rate
      farmers. This compensation excludes all other forms of deduction.
      
      
        8.        The flat-rate compensation is to be paid to flat-rate farmers either by the taxable person to whom the goods or services
      are supplied or by the public authorities. In the first case the flat-rate farmer invoices the taxable person to whom the
      goods or services are supplied for the flat-rate compensation percentage set by the State and retains for himself the VAT
      that he has received thereby. In the second case, the public authorities pay the flat-rate farmer the amount of flat-rate
      compensation which results from applying that percentage to his receipts.
      
      
        9.        Article 25(8) of the Sixth Directive provides that where a flat-rate farmer sells his products or provides his services to
      persons who are not liable for VAT or to other flat-rate farmers, the VAT charge on inputs is deemed to be offset by the purchaser
      or customer. 
      
      
        10.      Article 25(2), fifth indent, of the Sixth Directive defines an ‘agricultural service’ as being a service as set out in Annex
      B supplied by a farmer using his labour force and/or by means of the equipment normally available on his farm. 
      
      
        11.      Annex B to the Sixth Directive, which contains the list of agricultural services, states that ‘supplies of agricultural services
      which normally play a part in agricultural production shall be considered the supply of agricultural services, and … in particular
      hiring out, for agricultural purposes, of equipment normally used in agricultural … undertakings’.
      
      
        12.      Under German law, the flat-rate compensation mechanism provided for in Article 25 of the Sixth Directive is implemented by
      Paragraph 24 of the Umsatzsteuergesetz 1991. 
         			(10)
         		 Under that article the tax applied by farmers to their products and services, set at 8%, offsets the VAT that they have had
      to pay on inputs, so that they do not have to pay the excess.
      
      
      II –  Facts
        13.      Detlev Harbs is a farmer who has leased to his son, from 15 November 1992 to 30 June 2005, all the assets on his farm used
      for milk production, that is to say, 31.2 ha of land, a cowshed, 65 dairy cows and a milk quota of over 300 000 kg. The lease
      was agreed at annual amounts of DEM 9 360 and DEM 10 200 respectively for the land and the cowshed and DEM 6 000 and DEM 32 136.70
      respectively for the dairy cows and the milk quota. Since concluding that contract Mr Harbs has continued his activity on
      the remaining part of his farm, comprising 61.4 ha of land, buildings, a herd of approximately 60 bulls for fattening and
      a stock of 120 cattle.
      
      
        14.      Mr Harbs considered that the leasing arrangement was covered in full by the flat-rate scheme provided for in Paragraph 24
      of the UStG. The Finanzamt (Tax Office) Rendsburg (Germany), however, considered that although leasing the land and the cowshed
      is tax exempt under German law, payments received as a result of making available the dairy cattle and the milk quota are
      taxable under the normal VAT scheme. It issued a tax notice to Mr Harbs for DEM 361 for the VAT owing in respect of 1992.
      
      
        15.      The Finanzgericht (Finance Court) (Germany) granted Mr Harbs’s appeal, considering that the income he receives from the leasing
      arrangement in question falls within Paragraph 24 of the UStG. The Finanzamt Rendsburg appealed to the Bundesfinanzhof for
      revision of the judgment.
      
      
      III –  The question referred for a preliminary ruling
        16.      The Bundesfinanzhof, according to the arguments contained in its order for reference, considers that Mr Harbs, despite the
      contested leasing arrangement, has retained his status as a farmer within the meaning of Article 25 of the Sixth Directive
      since he has continued to farm the part of his property that has not been leased, which is a relatively large part.
      
      
        17.      As regards the appropriate VAT scheme, the Bundesfinanzhof considers, on the one hand, that application to the farmer concerned
      of two different schemes, namely the common flat-rate scheme in respect of his own farming and the normal scheme in respect
      of the leasing arrangement at issue, might appear to conflict with the objective of simplification underlying Article 25 of
      the Sixth Directive.
      
      
        18.      The Bundesfinanzhof states, on the other hand, that it doubts whether that leasing arrangement can be regarded as ‘an agricultural
      service’ within the meaning of Article 25 of the Sixth Directive. In addition, if the said leasing arrangement does not come
      under the common flat-rate scheme, it wonders whether, in view of the spirit and purpose of Article 25 of the Sixth Directive,
      the income from such an arrangement should not be entirely exempt so that, in the same way as the proceeds from the sale of
      a piece of used agricultural machinery, it is not taxable under either the flat-rate scheme or the general scheme.
      
      
        19.      That is why the Bundesfinanzhof decided to stay proceedings and to refer the following question to the Court of Justice:
      ‘Where the owner of a farm:
      
        
      –
         gives up part of his farm (the entire dairy cow operation) and leases the property necessary for that operation to another
            farmer;
         
      
      
        
      –
         and continues to farm on a not insignificant scale after granting the lease,
      
      
       may he treat the turnover from the lease – like the rest of his turnover – under the flat-rate scheme for farmers (Article
      25 of [the Sixth Directive]), or is the turnover from the lease taxable under the general rules?’
      
      
      IV –  Assessment
        20.      In the question it has referred for a preliminary ruling, the Bundesfinanzhof is asking in essence whether Article 25 of the
      Sixth Directive should be interpreted as meaning that a farmer who has leased out some of the assets of his farm and who continues
      his agricultural activities on the rest of the farm, activities in respect of which he pays tax under the common flat-rate
      scheme provided for in that article, may treat the income from that leasing arrangement as being taxable under that flat-rate
      scheme, or whether the income from the leasing arrangement must be taxed under the general VAT scheme.
      
      
        21.      It is clear from the statement of reasons for the order for reference that by that question the Bundesfinanzhof intended to
      refer to the Court two separate questions. The first is whether or not the income from the contested leasing arrangement may
      be taxed under the common flat-rate scheme for farmers. The second seeks to ascertain whether, if the answer to the first
      question is negative, the income from the leasing arrangement should be taxed under the general VAT scheme or whether it may
      be completely exempt. I shall consider each of these questions in turn.
      
      
       A – Application of the common flat-rate scheme
        22.      Like the German Government and the Commission of the European Communities, and unlike the defendant in the main proceedings,
      I consider that the income from the contested leasing arrangement does not fall within the scope of the common flat-rate scheme
      provided for in Article 25 of the Sixth Directive. That conclusion stems quite logically, in my view, from an analysis of
      the criteria the Court usually takes into account when interpreting a provision of Community law, which are: the wording of
      the relevant provisions, the structure of the common flat-rate scheme and, lastly, the reasons why that scheme was introduced. 
         			(11)
         		
      
       1. The wording of the relevant provisions
      
        23.      As we have seen, Article 25 of the Sixth Directive provides that the common flat-rate scheme for farmers applies only to farmers
      who are engaged in agricultural production and the provision of agricultural services.
      
      
        24.      In order to ensure a uniform application of that scheme throughout the Community, the Community legislature took care to define
      what is covered by the term ‘agricultural service’. Under Article 25(2), fifth indent, this is ‘any service as set out in
      Annex B supplied by a farmer using his labour force and/or by means of the equipment normally available on the agricultural
      undertaking operated by him’.
      
      
        25.      It is therefore quite clear from that definition that the service referred to is one which a flat-rate farmer is in a position
      to provide with the labour and equipment with which he normally farms his own agricultural property. It follows that the reference
      in Annex B, fifth indent, to the ‘hiring out, for agricultural purposes, of equipment normally used in agricultural … undertakings’
      must be interpreted, in the light of the definition contained in Article 25(2), fifth indent, as meaning the hiring out by
      a flat-rate farmer of the equipment he normally uses to farm his own agricultural property.
      
      
        26.      That means that the equipment hired out can, despite the contract for hire, still be considered to form part of the equipment
      normally used by the flat-rate farmer to farm his own agricultural property. Whether or not that condition is met therefore
      depends, in my view, on two criteria, which must be taken into account jointly, one relating to the length of the hire, the
      other to its purpose. Thus, first of all, the length of the contract for hire must be sufficiently short for the person or
      persons hiring the equipment concerned not to be the sole users of the equipment concerned. That condition would not be met
      if, for example, a flat-rate farmer hired out his combine harvester for the entire harvest and did not use it at all for his
      own purposes. Another requirement is that the equipment hired out should not be in addition to what the flat-rate farmer needs
      for his own farming purposes. That condition would not be met if a flat-rate farmer were to hire out several combine harvesters
      and used them in turn for his own purposes, although he needed only one in order to farm his own property.
      
      
        27.      It follows, in my opinion, that the term ‘agricultural service’, within the meaning of Article 25 of the Sixth Directive,
      does not cover a contract such as the lease entered into in the present case, that is to say, an arrangement whereby one flat-rate
      farmer gives another farmer the right to use for several years some of the assets of his own farm so that the latter may enjoy
      the gains produced thereby. In leasing to another farmer for a term of twelve and a half years all the assets of his farm
      used for milk production, that is to say, the buildings, meadows, his herd of dairy cows and his milk quota, the defendant
      in the main proceedings transferred to that other farmer throughout the term of the lease exclusive use of each of those assets
      and the opportunity to enjoy the gains produced thereby. Such an agreement cannot therefore be treated as a service provided
      by a flat-rate farmer using the equipment that he normally uses on his farm since, of necessity, he will not be able to use
      any of those assets for his own farming purposes for twelve and a half years. In other words, all those assets, from the entry
      into force of the lease, have ceased to form part of the assets normally used for farming his own agricultural property.
      
      
        28.      This analysis of the wording of the provisions of Article 25 of, and Annex B to, the Sixth Directive is supported by the fact
      that in some of the language versions, 
         			(12)
         		 the Sixth Directive refers expressly to the concepts of ‘leasing’ and ‘letting’ in the context of the provisions relating
      to cases of exemption from VAT, in Article 13B(b) and Article 13C(a). 
         			(13)
         		 As Advocate General Jacobs stated in point 76 of his Opinion in Goed Wonen, 
         			(14)
         		 in the Danish, Dutch, French, German, Italian and Swedish language versions those two terms refer in domestic law to agreements
      whose contents differ, in that ‘letting’ consists of granting the tenant the right to use the property of another, whereas
      ‘leasing’ consists of allowing the tenant also to enjoy the gains produced by the property. Of course, as the Court has held,
      the terms ‘leasing’ and ‘letting’ used in Article 13 of the Sixth Directive should not be interpreted on the basis of their
      meaning in national law. They must constitute independent concepts of Community law so that the basis for assessing VAT is
      determined uniformly. 
         			(15)
         		 However, the fact that in those same language versions the list of agricultural services that may be provided by a flat-rate
      farmer mentions only ‘hiring out, for agricultural purposes, of equipment normally used in agricultural … undertakings’ and
      does not include any reference to leasing, implies that the Community legislature did not want to include among the services
      falling within the common flat-rate scheme agreements by which one flat-rate farmer transfers to another person, as in the
      present case, part of his activity or of his farming assets.
      
      
        29.      Consideration of the common flat-rate scheme for farmers involves a similar analysis.
      
      
       2. The common flat-rate scheme for farmers
      
        30.      As is clear from Article 25(1) of the Sixth Directive, Member States may apply a flat-rate scheme to farmers where the application
      of the normal VAT scheme, or the simplified scheme, would give rise to difficulties. Therefore, in principle, farmers are
      liable for tax under the normal VAT scheme or the simplified scheme and the flat-rate scheme is an exception which Member
      States may or may not decide to apply.
      
      
        31.      The exceptional nature of the common flat-rate scheme is also confirmed by the provisions of Article 25(9) and (10) of the
      Sixth Directive, which provide, respectively, that Member States may exclude from that scheme certain categories of farmers
      and the flat-rate farmers themselves may opt for application of the normal scheme or the simplified scheme under conditions
      to be laid down by each Member State.
      
      
        32.      As it is an exception to the principle that farmers are liable for tax under the normal scheme or the simplified scheme, the
      scope of the common flat-rate scheme is to be interpreted strictly. 
         			(16)
         		 A strict interpretation is required in order to comply with the principle that VAT must be neutral, which is one of its guiding
      principles. That principle means that persons engaged in the same and similar operations are to be treated respectively in
      the same way. 
         			(17)
         		 As the fourth recital in the preamble to the Sixth Directive reaffirmed, the neutrality of VAT as regards the origin of goods
      and services is a precondition for the achievement of a common market based on fair competition. The definition of the agricultural
      services to which the common flat-rate scheme for farmers applies, and which are consequently not taxable under the general
      VAT scheme, must therefore be interpreted strictly. Consequently, the common flat-rate scheme must not be applied to services
      to which the legislature did not expressly intend it to be applied because that might undermine the abovementioned principle.
      
      
        33.      More specifically, we have seen that the common flat-rate scheme operates on the basis of ‘flat-rate compensation percentages’
      that must be determined by each Member State in accordance with the method of calculation provided for that purpose in Article
      25(3) of the Sixth Directive. That method of calculation is designed to prevent those percentages, which must be notified
      to the Commission before they are applied, having the effect of obtaining for flat-rate farmers refunds greater than the VAT
      charge on inputs. The common flat-rate scheme must not therefore have the effect of over-compensating flat-rate farmers for
      the VAT charge they incur on purchases of the goods and services needed for their farming activities. In other words, the
      common flat-rate scheme should be neither an advantage nor a disadvantage to flat-rate farmers because that would be contrary
      to the objectives of the Sixth Directive, which seek to ensure that VAT is collected fairly and to avoid distortion of competition
      between the different Member States applying the flat-rate scheme. I consider that those requirements, and hence the common
      flat-rate scheme, would be jeopardised if flat-rate farmers were able to lease out part of their farm and include the income
      from such an arrangement in the flat-rate scheme which continues to apply to them in respect of farming the part of their
      property that is not leased out.
      
      
        34.      We are aware that under the common flat-rate scheme a flat-rate farmer receives compensation of the VAT charge on inputs that
      he has paid on purchases of goods and services he has made in order to engage in his farming activities, by applying to the
      prices, exclusive of tax, of his own goods and services the percentage determined by the national competent authorities. By
      transferring some of his activities to another person the farmer is also freed of the costs he would incur in order to engage
      in those activities. Thus, by leasing out all the assets used in milk production for a period of twelve and a half years,
      as in the present case, the defendant in the main proceedings has also freed himself from all the costs he would have incurred
      for such production. For example, he no longer has to provide fodder to feed the dairy herd, or to maintain it. The VAT charge
      on inputs is therefore reduced commensurately. However, if the income from the contested leasing arrangement falls within
      the scope of the common flat-rate scheme, the amount of flat-rate compensation due to the flat-rate farmer concerned will
      increase to reflect the application to that income of the percentage determined by the competent national authorities. That
      means that a flat-rate farmer will receive compensation although he is no longer paying the VAT charge on inputs for engaging
      in activities in connection with the part of the farm he has leased out.
      
      
        35.      That analysis is borne out also where, as in the present case, the leasing arrangement is entered into with a farmer who is
      himself liable for tax under the flat-rate scheme. As the Court held in Commission v Italy, 
         			(18)
         		 and as the defendant himself states in his written observations, 
         			(19)
         		 when a flat-rate farmer sells his goods or supplies his services to a non-taxable person or another flat-rate farmer compensation
      for the VAT charge on inputs is obtained by the payment of an ‘all-in price’ for those goods or services which is deemed to
      include that charge. Even in a case like that, a flat-rate farmer may therefore obtain compensation for the VAT charge on
      inputs by increasing the price of his goods and services if the market conditions so permit.
      
      
        36.      That is why I consider that if Article 25 of the Sixth Directive were to be interpreted as meaning that flat-rate farmers
      can lease out part of their farm and include the income from that leasing arrangement under the flat-rate scheme, there would
      be a serious risk of over-compensating for the VAT charge on inputs.
      
      
        37.      Moreover, the common flat-rate scheme is not in my view intended to cover cases in which a farmer leases out part of his farm.
      
      
       3. The objectives
      
        38.      As the Bundesfinanzhof states, Article 25 of the Sixth Directive responds to the need for simplification. However, it is appropriate
      to point out why that objective of simplification led the Community legislature to introduce the opportunity for Member States
      to apply a common flat-rate scheme.
      
      
        39.      As the wording of Article 25(1) of the Sixth Directive expressly states, that scheme was introduced for the benefit of farmers
      for whom the normal VAT scheme, or the simplified scheme, would give rise to difficulties. As is clear from the statement
      of reasons for the proposal for the Sixth Directive, submitted by the Commission to the Council on 29 June 1973, 
         			(20)
         		 that scheme, designed to be an exceptional scheme, was intended essentially to apply to small farmers who were unable to
      meet the requirements connected with the normal or simplified schemes. 
         			(21)
         		 It was designed as a transitional scheme to exempt those small farmers from the requirements in respect of accounts, invoices,
      returns and payment incumbent on other taxpayers which they were considered to be incapable of meeting at the time the Sixth
      Directive entered into force. 
         			(22)
         		
      
        40.      That is why the scope of the common flat-rate scheme as regards the provision of services was defined restrictively, in such
      a way as to exclude all services provided regularly, or using equipment that could be regarded as being additional to the
      needs, size and characteristics of the farm in question. In that connection, the Commission had even proposed that the Sixth
      Directive should state expressly that for that type of operation a flat-rate farmer, since he is in competition with traders,
      industry or other service providers, should be liable for tax under the normal VAT scheme or the simplified scheme, according
      to a procedure to be determined by each Member State. 
         			(23)
         		 Accordingly, the Commission included only ‘hiring out of agricultural machinery’ in the list of agricultural services given
      in the fifth indent of Annex B to its proposal for a directive.
      
      
        41.      It follows that the objective of simplification which underlies Article 25 of the Sixth Directive should not, in my opinion,
      lead to the concept of ‘agricultural service’ defined in that article being extended to include a contract under which a flat-rate
      farmer transfers part of his farm to another farmer.
      
      
        42.      Nor can it be seriously argued that a farmer who, as in the present case, leases out 31.2 ha of land, a cowshed, 65 dairy
      cows and a milk quota of over 300 000 kg, and continues to farm the remaining part of his property, comprising 61.4 ha of
      land, buildings, a herd of approximately 60 bulls for fattening and a stock of 120 cattle, is incapable of applying the general
      VAT scheme in respect of the income from the leasing arrangement at the same time as the common flat-rate VAT scheme in respect
      of his own farming activities, given the accounting and administrative procedures which the farming of such agricultural property
      involves in a Member State nowadays.
      
      
        43.      I therefore consider that Article 25 of the Sixth Directive must be interpreted as meaning that a farmer who has leased out
      some of the assets of his farm and who continues his farming activities using the rest of that farm, activities in respect
      of which he pays tax under the common flat-rate scheme provided for in that article, cannot treat the income from that leasing
      arrangement as being covered by that flat-rate scheme.
      
      
       B – Application of the general scheme
        44.      The answer to the second question from the Bundesfinanzhof can be inferred already in part from the information I have set
      out above. We have seen that, under Article 2 of the Sixth Directive, VAT applies to the supply of all goods or services effected
      by a taxable person acting as such.  Under Article 4 of the Sixth Directive ‘taxable person’ means any person who carries
      out any economic activity independently and, under Article 4(2), the exploitation of tangible or intangible property for the
      purpose of obtaining income therefrom on a continuing basis is considered in particular to be an economic activity. 
      
      
        45.      An arrangement by which a flat-rate farmer gives another person, for consideration, the exclusive use of some of the assets
      of his farm, under a rental agreement or lease designed to confer on that person additionally the right to enjoy the gains
      thereof, constitutes a priori an economic activity within the meaning of that definition. In the present case, the leasing
      out by a flat-rate farmer for a term of twelve and a half years of all the assets of his farm used for milk production can
      indeed be regarded as an economic activity carried out independently and the exploitation of tangible or intangible property
      for the purpose of obtaining income therefrom on a continuing basis. To take the example given by the Bundesfinanzhof in its
      order for reference, such a service cannot be considered to be a purely occasional or isolated operation in the same way as
      the sale of used agricultural equipment.
      
      
        46.      It is also clear from established case-law that there can be no exceptions to the general principle that VAT is to be levied
      on all supplies of goods or services made for consideration by a taxable person, except in those cases expressly provided
      for in the Sixth Directive and that such exemptions must be interpreted strictly. 
         			(24)
         		 Although, under Article 13B(b) of the Sixth Directive, the leasing and letting of immovable property are in principle exempt
      from VAT, no provision is made for an exception in respect of making available for consideration movable tangible and intangible
      property such as a herd of dairy cows and a milk quota. In that regard, it should be pointed out that the Court of Justice
      has ruled that a national provision extending to the letting of certain forms of movable property the exemption from VAT which,
      pursuant to Article 13B(b) of the Sixth Directive, is restricted to the letting of immovable property, conflicted with the
      provisions of that directive. 
         			(25)
         		
      
        47.      Therefore, if the agricultural services provided by a flat-rate farmer for consideration are not covered by the definition
      contained in Article 25 of the Sixth Directive they must fall within the scope of the general scheme. The fact that the lessor
      is liable for tax, in respect of the part of his farm he continues to farm himself, under the common flat-rate scheme cannot
      constitute grounds for exempting the income from that leasing arrangement from tax. It follows that the income from hiring
      out the herd of dairy cows and the milk quota should therefore be taxable under the general VAT scheme, that is to say, the
      normal scheme or the simplified scheme.
      
      
        48.      I therefore propose that the Court should rule that the income from an arrangement whereby a flat-rate farmer leases some
      of the assets of his farm should be taxable under the general VAT scheme.
      
       
      V –  Conclusion 
        49.      In the light of the above considerations, I propose that the Court give the following answer to the question referred by the
      Bundesfinanzhof:
       Article 25 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation 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 a farmer who has leased out some of the assets of his farm and who continues his agricultural activities on the rest
      of the farm, activities in respect of which he pays tax under the common flat-rate scheme provided for in that article, may
      not treat the income from that leasing arrangement as being taxable under that flat-rate scheme. The income from the leasing
      arrangement must be taxable under the general VAT scheme.
      
      
       1 –
         
         Language of the case: French.
      
      2 –
         
         Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common
            system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, ‘the Sixth Directive’).
            
         
      
      3 –
         
         Hereinafter ‘VAT’.
            
         
      
      4 –
         
         Articles 2 and 4.
            
         
      
      5 –
         
         Article 4(2).
            
         
      
      6 –
         
         Article 22 of the Sixth Directive.
            
         
      
      7 –
         
         Fifteenth recital.
            
         
      
      8 –
         
         Article 25(2), third indent.
            
         
      
      9 –
         
         Article 25(3).
            
         
      
      10 –
         
         	Law on Turnover Tax, ‘UStG’.
            
         
      
      11 –
         
         See, for an application of that method of interpretation in VAT matters, Case C-315/00 Maierhofer [2003] ECR I-563, paragraph 27.
            
         
      
      12 –
         
         The Danish, German, Spanish, French, Italian, Dutch, Swedish and English versions. The Greek, Portuguese and Finnish versions
            use a single word.
            
         
      
      13 –
         
         Article 13B(b) provides that, without prejudice to other Community provisions, Member States are to exempt ‘the leasing or
            letting of immovable property’, and Article 13C(a) provides that Member States may allow their taxpayers a right of option
            in respect of taxation in cases of ‘letting and leasing of immovable property’.
            
         
      
      14 –
         
         Case C-326/99 [2001] ECR I-6831.
            
         
      
      15 –
         
         Ibid. (paragraph 47).
            
         
      
      16 –
         
         See in particular Case C-453/93 Bulthuis-Griffioen [1995] ECR I-2341, paragraph 19 and Case C-150/99 Stockholm Lindöpark [2001] ECR I-493, paragraph 25.
            
         
      
      17 –
         
         See, to that effect, Case C-216/97 Gregg [1999] ECR I-4947, paragraph 20.
            
         
      
      18 –
         
         Case 3/86 [1988] ECR 3369, paragraph 21.
            
         
      
      19 –
         
         Page 3.
            
         
      
      20 –
         
         Proposal for a Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes –
            Common system of value added tax: uniform basis of assessment (Bulletin of the European Communities, Supplement 11/73).
            
         
      
      21 –
         
         See also the First Report by the Commission to the Council on the operation of the common system of value added tax submitted
            under Article 34 of the Sixth Directive (COM/83/426 final).
            
         
      
      22 –
         
         In the 1960s Community agriculture comprised a large number of farms, mostly small in size. On 1 January 1967 there were some
            6.2 million farms of one hectare or more; 85% of these had an area of less than 20 ha; only 170 600 farms had an area of more
            than 50 ha. In addition, the majority of those farms engaged in mixed farming and a significant share of their products were
            consumed on the farm, as food for people or feed for animals (Ries, A., ‘Application of VAT to EEC agriculture’, Revue du marché commun, 1968, p. 560).
            
         
      
      23 –
         
         Proposal for a directive, Article 27(12)(b).
            
         
      
      24 –
         
         See in particular Goed Wonen, cited above (paragraph 46) and Case C-8/01 Taksatorringen [2003] ECR I-0000, paragraph 36.
            
         
      
      25 –
         
         Case C-60/96 Commission v France [1997] ECR I-3827, paragraph 16.