CELEX: C1997/387/12
Language: en
Date: 1997-12-20 00:00:00
Title: Action brought on 21 October 1997 by the Commission of the European Communities against the United Kingdom of Great Britain and Northern Ireland (Case C-359/97)

20 . 12 . 97         EN                 Official Journal of the European Communities                                           C 387/7
VAT \vhatever the purpose or results of that activity' as          should have been taken into account as part of Ireland's
stated in Article 4 paragraph 1 of the Directive .                 contribution to the own resources of the Communities .
                                                                   (') Council Directive 77/388/EEC of 17 May 1977 on the
In particular, the Commission submits that operating                   harmonization of the laws of the Member States relating to
motorways, inland waterways and port facilities is an                  turnover taxes — Common system of value added tax :
economic activity.                                                     uniform basis of assessment ( OJ L 145, 13 . 6 . 1977, p. 1 ).
The case-law of the Court makes it clear that a supply of
services is subject to VAT when the service in question is
provided in return for payment, the taxable base being
everything which makes up the consideration given in
return for that service . As the Court has pointed out there       Action brought on 21 October 1997 by the Commission
must be 'a direct link between the service rendered and            of the European Communities against the United
the consideration received '.                                              Kingdom of Great Britain and Northern Ireland
                                                                                            Case C-359/97 )
With regard to tolls paid for the use of a road there is                                     ( 97/C 387/ 12 )
incontestably a direct link between the service rendered
and the consideration received in exchange, if payment is
levied each time a vehicle is allowed to use the road .            An action against the United Kingdom of Great Britain
                                                                   and Northern Ireland was brought before the Court of
                                                                   Justice of the European Communities on 21 October 1997
The fact that a private operator carries out activities            by the Commission of the European Communities,
which contribute to the general good does not prevent              represented by Helene Michard and Barry Doherty,
those activities being subject to VAT.                             members of its Legal Service, acting as Agents, with an
                                                                   address for service in Luxembourg at the office of Carlos
                                                                   Gomez de la Cruz, also a member of its Legal Service,
Community definition                                               Centre Wagner.
                                                                   The Applicant claims that the Court should :
The Sixth VAT Directive imposes VAT on any 'economic
activity' of which 'supplying services' is one category. In
this context the concepts of 'supplying services' and              — declare that in not subjecting tolls for the use of
'economic activity' for the purposes of the Sixth VAT                   existing toll-roads and toll-bridges in the United
Directive must be interpreted objectively on the basis of               Kingdom to value-added tax contrary to the provisions
the economic reality of the transaction and irrespective of             of Articles 2, 4 ( 1 ), ( 2 ) and ( 5 ) of the Sixth VAT
the manner in which the transaction may be classified                   Directive (') and by failing to make available to the
under the various national legal systems . Any other                    Commission      the    amounts   of   own      resources      and
interpretation would encroach upon the uniform                          interest on late payment as a consequence of this
application of Community law.                                           infringement the United Kingdom has failed to fulfil
                                                                        its obligations under the EC Treaty,
Interpreted objectively, the concept of ' supplying services'
encompasses services supplied to users by the operators of         — order the United Kingdom to bear the costs of these
a road or other element of infrastructure used for the                  proceedings.
transport of goods or persons. This interpretation has
always been accepted by a number of Member States
notably Spain and Italy which levy VAT on all tolls paid           Pleas in law and main arguments adduced in support:
for the use of motorways and other elements of road
infrastructure . The exemption from VAT granted by
                                                                   Value Added Tax
certain Member States including Ireland therefore throws
out of balance not only the operation of the common
system of value added tax but also the contributions to            Taxable transactions
the Communities' own resources by the Member States .
                                                                   The heart of the present case is whether certain
The absence of VAT on road tolls is incompatible with              transactions are subject to VAT. As a result, it is necessary
Community rules on the collection of the Communities'              to establish the exact scope of the tax. Article 2
own resources .                                                    paragraph 1 of the Sixth VAT Directive provides that
                                                                   value added tax shall be levied on 'the supply of goods or
                                                                   services effected for consideration within the territory of
The Commission submits that if road tolls are subject to           the country by a taxable person acting as such'. Article 4
VAT, it follows that a proportion of the VAT concerned             of the same Directive provides some definitions:
 ---pagebreak--- C 387/8               fENl                Official Journal of the European Communities                                         20 . 12 . 97
' 1 . 'Taxable    person'    shall mean   any    person   who        under the various national legal systems . Any other
      independently carries out in any place any economic            interpretation would encroach upon the uniform
      activity specified in paragraph 2 whatever the purpose         application of Community law.
      or results of that activity.
                                                                     Interpreted objectively, the concept of ' supplying services'
  2 . The economic activities referred to in paragraph 1             encompasses services supplied to users by the operators of
      shall comprise all activities of producers traders and         a road or other element of infrastructure used for the
      persons supplying services      .). The exploitation of        transport of goods or persons. This interpretation has
      tangible or intangible property for the purpose of             always been accepted by a number of Member States
      obtaining income therefrom on a continuing basis               notably Spain and Italy which levy VAT on all tolls paid
      shall also be considered an economic activity '.               for the use of motorways and other elements of road
      ( Emphasis added )                                             infrastructure . The exemption from VAT granted by
                                                                     certain Member States including the United Kingdom
                                                                     therefore throws out of balance not only the operation of
The Commission submits that one example of 'the                      the common system of value added tax but also the
exploitation of tangible or intangible property for the              contributions to the Communities' own resources by the
purpose of obtaining income therefrom on a continuing                Member States .
 basis' is operating a road and charging a toll for its use .
As a result, such operations are an economic activity and
 hence the person carrying them out is a taxable person for          The absence of VAT on road tolls is incompatible with
the purposes of the Sixth VAT Directive .                            Community rules on the collection of the Communities'
                                                                     own resources .
The Commission submits that a transaction which falls
 under the scope of the Sixth VAT Directive is subject to            The Commission submits that if road tolls are subject to
 VAT Svhatever the purpose or results of that activity' as           VAT, it follows that a proportion of the VAT concerned
 stated in Article 4 paragraph 1 of the Directive .
                                                                     should have been taken into account as part of the United
                                                                     Kingdom's contribution to the own resources of the
                                                                     Communities .
 In particular, the Commission submits that operating
 motorways, inland waterways and port facilities is an
 economic activity.                                                  (') Council Directive 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 ( OJ L 145 , 13 . 6 . 1977, p. 1 ).
 The case-law of the Court makes it clear that a supply of
 services is subject to VAT when the service in question is
 provided in return for payment, the taxable base being
 everything which makes up the consideration given in
 return for that service . As the Court has pointed out there
 must be 'a direct link between the service rendered and
 the consideration received '.
                                                                     Action brought on 22 October 1997 by the Commission
                                                                      of the European Communities against the Italian Republic
 With regard to tolls paid for the use of a road there is                                     ( Case C-365/97)
 incontestably a direct link between the service rendered
 and the consideration received in exchange, if payment is                                      ( 97/C 387/13 )
 levied each time a vehicle is allowed to use the road .
 The fact that a private operator carries out activities             An action against the Italian Republic was brought before
 which contribute to the general good does not prevent               the Court of Justice on 22 October 1997 by the
 those activities being subject to VAT.                               Commission of the European Communities, represented
                                                                      by Paolo Stancanelli, of its Legal Service, acting as Agent,
                                                                      assisted by Massimo Merola, of the Rome Bar, with an
 Community definition
                                                                      address for service in Luxembourg at the office of Carlos
                                                                      Gomez de la Cruz, Wagner Centre , Kirchberg.
 The Sixth VAT Directive imposes VAT on any 'economic
 activity' of which 'supplying services' is one category. In          The applicant claims that the Court should:
 this context the concepts of ' supplying services' and
 'economic activity' for the purposes of the Sixth VAT
 Directive must be interpreted objectively on the basis of            — Declare that the Italian Republic has failed to fulfil its
 the economic reality of the transaction and irrespective of              obligations under the EC Treaty in that, with regard to
 the manner in which the transaction may be classified                    the S. Rocco riverbed,