CELEX: 62001CJ0155
Language: en
Date: 2003-09-11
Title: Judgment of the Court (First Chamber) of 11 September 2003.#Cookies World Vertriebsgesellschaft mbH iL v Finanzlandesdirektion für Tirol.#Reference for a preliminary ruling: Verwaltungsgerichtshof - Austria.#Sixth VAT Directive - Motor vehicle made available under a leasing contract - Taxable transactions - Own consumption - Article 17(6) and (7) - Exclusions provided for under national law at the date of entry into force of the directive.#Case C-155/01.

Case C-155/01 Cookies World Vertriebsgesellschaft mbH iLvFinanzlandesdirektion für Tirol(Reference for a preliminary ruling from the Verwaltungsgerichtshof (Austria))
         
            «(Sixth VAT Directive – Motor vehicle made available under a leasing contract – Taxable transactions – Own consumption – Article 17(6) and (7) – Exclusions provided for under national law at the date of entry into force of the directive)»
            
               
                  Opinion of Advocate General Geelhoed delivered on 10 October 2002 
                     
                
               
            
                   
               
               
            
               
                  Judgment of the Court (First Chamber), 11 September 2003  
                     
                
               
            
                   
               
               
            
            Summary of the Judgment
         
         
                  
                  Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Liability to tax on services supplied in other Member States in circumstances where entitlement to deduction is excluded if
                     services are supplied within the territory of the country – Not permissible
                  (Council Directive 77/388) The provisions of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes
         preclude a measure of a Member State which provides that payment for services supplied in other Member States to a person
         in the first Member State is subject to VAT whereas, had the services in question been supplied within the territory of the
         country, the person to whom they were supplied would not have been entitled to deduction of input tax.see para. 68, operative part
      

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (First Chamber)11 September 2003  (1)
         
         
            
         
               ((Sixth VAT Directive – Motor vehicle made available under a leasing contract – Taxable transactions – Own consumption – Article 17(6) and (7) – Exclusions provided for under national law at the date of entry into force of the directive))
               
             In Case C-155/01, 
             REFERENCE to the Court under Article 234 EC by the Verwaltungsgerichtshof (Austria) for a preliminary ruling in the proceedings
            pending before that court between
            
            
            
            Cookies World Vertriebsgesellschaft mbH iL
            
            and
            
            Finanzlandesdirektion für Tirol,
            
             on the interpretation, in particular, of Articles 5 and 6 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 (OJ 1977 L 145, p. 1),
            
            THE COURT (First Chamber),,
            
             composed of: M. Wathelet, President of the Chamber, P. Jann and A. Rosas (Rapporteur), Judges, 
            
             Advocate General: L.A. Geelhoed, Registrar: H.A. Rühl, Principal Administrator, 
            
            
            after considering the written observations submitted on behalf of:
               
               
               ─
                Cookies World Vertriebsgesellschaft mbH iL, by R. Kapferer, Wirtschaftsprüfer and Steuerberater, 
               
               
               ─
                the Austrian Government, by H. Dossi, acting as Agent, 
               
               
               ─
                the Commission of the European Communities, by K. Gross and E. Traversa, acting as Agents, 
               
               
            
            
            having regard to the report of the Judge-Rapporteur,
            
            after hearing the Opinion of the Advocate General at the sitting on 10 October 2002,
         gives the following
         
         
         Judgment
         1
            
          By order of 29 March 2001, received at the Court on 11 April 2001, the Verwaltungsgerichtshof (Administrative Court) referred
         to the Court for a preliminary ruling under Article 234 EC a question on the interpretation, in particular, of Articles 5
         and 6 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 (OJ 1977 L 145, p. 1,  
         the Sixth Directive). 
         
         
         2
            
          The question was raised in proceedings between Cookies World Vertriebgesellschaft mbH iL (
         Cookies World) and Finanzlandesdirektion für Tirol (Regional Tax Authority for the Tyrol) regarding Cookies World's liability to value
         added tax (
         VAT) for the use of a motor vehicle which it had leased from a German undertaking and used in Austria for the purposes of its
         business. 
         
            
               Legal background
             Community rules
         
         
         3
            
          Article 2(1) of the Sixth Directive makes the supply of goods or services effected for consideration within the territory
         of the country by a taxable person acting as such subject to VAT. 
         
         
         4
            
          Under Article 5(1) of the Sixth Directive  
         [s]upply of goods shall mean the transfer of the right to dispose of tangible property as owner. 
         
         
         5
            
          Article 5(6) of the Sixth Directive provides: The application by a taxable person of goods forming part of his business assets for his private use ... or more generally
         their application for purposes other than those of his business, where the value added tax on the goods in question or the
         component parts thereof was wholly or partly deductible, shall be treated as supplies made for consideration. ...
         
         
         6
            
          Article 5(7) of the Sixth Directive provides: Member States may treat as supplies made for consideration:
         
         (a)
          the application by a taxable person for the purposes of his business of goods produced, constructed, extracted, processed,
         purchased or imported in the course of such business, where the value added tax on such goods, had they been acquired from
         another taxable person, would not be wholly deductible; 
         
         
         (b)
          the application of goods by a taxable person for the purposes of a non-taxable transaction, where the value added tax on such
         goods became wholly or partly deductible upon their acquisition or upon their application in accordance with subparagraph
         (a); 
         ...
         
         
         7
            
          According to Article 6(1) of the Directive,  
         [s]upply of services shall mean any transaction which does not constitute a supply of goods within the meaning of Article 5. 
         
         
         8
            
          The first subparagraph of Article 6(2) of the Sixth Directive is worded as follows: The following shall be treated as supplies of services for consideration:
         
         (a)
          the use of goods forming part of the assets of a business for the private use of the taxable person ... or more generally
         for purposes other than those of his business where the value added tax on such goods is wholly or partly deductible
         . 
         
         
         9
            
          The second paragraph of Article 6(2) provides that the Member States may derogate from the provisions of that paragraph provided
         that such derogation does not lead to distortion of competition. 
         
         
         10
            
          Article 9(1) of the Sixth Directive states: The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has
         a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment,
         the place where he has his permanent address or usually resides.
         
         
         11
            
          Article 9(2) of the Sixth Directive sets out a number of exceptions to that principle. 
         
         
         12
            
          Article 17(3) of the Sixth Directive sets out the principles governing the right to a deduction or refund of VAT paid on inputs.
         
         
         
         13
            
          Article 17(6) and (7) of the Sixth Directive state: 
         
         6.
          Before a period of four years at the latest has elapsed from the date of entry into force of this Directive, the Council,
         acting unanimously on a proposal from the Commission, shall decide what expenditure shall not be eligible for a deduction
         of value added tax. Value added tax shall in no circumstances be deductible on expenditure which is not strictly business
         expenditure, such as that on luxuries, amusements or entertainment.
          Until the above rules come into force, Member States may retain all the exclusions provided for under their national laws
         when this Directive comes into force.
         
         7.
          Subject to the consultation provided for in Article 29, each Member State may, for cyclical economic reasons, totally or partly
         exclude all or some capital goods or other goods from the system of deductions. To maintain identical conditions of competition,
         Member States may, instead of refusing deduction, tax the goods manufactured by the taxable person himself or which he has
         purchased in the country or imported, in such a way that the tax does not exceed the value added tax which would have been
         charged on the acquisition of similar goods.
         
         
         
         14
            
          Article 2 of the Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States
         relating to turnover taxes ─ Arrangements for the refund of value added tax to taxable persons not established in the territory
         of the country (OJ 1979 L 331 p. 11,  
         the Eighth Directive) provides: Each Member State shall refund to any taxable person who is not established in the territory of the country but who is established
         in another Member State, subject to the conditions laid down below, any value added tax charged in respect of services or
         movable property supplied to him by other taxable persons in the territory of the country or charged in respect of the importation
         of goods into the country, in so far as such goods and services are used for the purposes of the transactions referred to
         in Article 17(3)(a) and (b) of Directive 77/388/EEC and of the provision of services referred to in Article 1(b).
         
         
         15
            
          Under Article 5 of the Eighth Directive: For the purposes of this Directive, goods and services in respect of which tax may be refundable shall satisfy the conditions
         laid down in Article 17 of Directive 77/388/EEC as applicable in the Member State of refund.
          National law
         ─ Legal position prior to the accession of the Republic of Austria to the European Union, that is until 31 December 1994
         
         
         16
            
          Paragraph 3(11) of the Umsatzsteuergesetz 1972 (Austrian Law on Turnover Taxes,  
         UStG 1972), in the version published in the BGBl. No 636/1975, on  
         other services, was worded as follows: A service is supplied within the national territory where the trader operates exclusively or for the most part within the
         national territory or where the trader permits an act within the national territory or a state of affairs within the national
         territory or omits an act within the national territory ...
         
         
         17
            
          It is clear from the considerations set out by the national court that, under that provision, leasing transactions relating
         to a car were deemed to have been effected in Austria if the vehicle was predominantly used there. 
         
         
         18
            
          Paragraph 12(2)(2)(c) of the UStG 1972, in the version published in the BGBl. No 410/1988, which governed the supply of goods
         and the provision of services on national territory for business purposes, provided: Supplies of goods or supplies of services are not made for business purposes ... if they are connected with the acquisition
         (manufacture), lease or use of cars, dual-purpose vehicles or motor-bicycles ...
         ─ Legal position after the accession of the Republic of Austria to the European Union, that is from 1 January 1995
         
         
         19
            
          Paragraph 3a(12) of the Umsatzsteuergesetz 1994, in the version published in the BGBl. No 21/1995 (
         the UStG 1994), is worded as follows: In any other case, a service is supplied at the place from which the trader operates his business. If the service is supplied
         from business premises, the place of the business premises shall constitute the place where the service is supplied.
         
         
         20
            
          It is clear from the file that, under that provision, leasing transactions relating to a car, even if the vehicle has been
         used mainly in Austria, are deemed to be effected in the Member State from which the supplier of the vehicle runs his undertaking.
         
         
         
         21
            
          According to Paragraph 12(2)(2)(b) of the UStG 1994, supplies of goods, supplies of services or imports are not for business
         purposes if they are connected with the lease or use of cars, dual-purpose vehicles or motor-bicycles. 
         
         
         22
            
          Paragraph 1(1)(2)(d) of the UStG 1994, which was added to the UStG 1994 and came into force on 6 January 1995, establishes
         the criteria for own consumption and provides that it is subject to VAT in Austria. Own consumption is deemed to occur to
         the extent that a trader incurs expenditure (expenses) relating to supplies abroad which, if they had been effected to the
         trader within the national territory would not, under Paragraph 12(2)(2), have entitled the trader to deduction of input tax.
         That applies only, however, to the extent that the trader is entitled abroad to refund of the foreign input tax. 
         
         
         23
            
          It is clear from the file that the fiscal criteria laid down in Paragraph 1(1)(2)(d) of the UStG of 1994 are designed so that
         the exclusion of deduction of VAT in connection with the leasing of certain vehicles is applied in Austria in the same way,
         from the economic point of view, as it was until the end of 1994, that is, the date of Austria's accession to the European
         Union. As is apparent from paragraphs 16 to 18 of the present judgment, the leasing of vehicles gave rise, under the tax system
         laid down by the UStG 1972, to transactions subject to turnover tax in Austria, and the taxable person has not been able to
         deduct that tax. The legal position has been changed as a result of the accession of the Republic of Austria to the European
         Union and the transposition of the Sixth Directive. Leasing transactions are accordingly deemed to be effected in the Member
         State where the lessor of the vehicle has his business. That means that, in the absence of a provision such as that laid down
         in Paragraph 1(1)(2)(d) of the UStG 1994, such transactions are no longer taxable in Austria. 
          Main proceedings and the question referred for a preliminary ruling
         
         
         24
            
          Cookies World is a limited company established in Austria which operates a commercial undertaking. It leased a car from a
         German undertaking which it used in Austria for the purposes of its business. 
         
         
         25
            
          By decision of 15 June 1999 the Finanzamt Schwaz (Tax Office, Schwaz) (Austria) assessed the turnover tax for Cookies World
         for 1997. On that occasion it included in the taxable turnover the car leasing charge, applying Paragraph 1(1)(2)(d) of the
         UStG 1994. 
         
         
         26
            
          Cookies World appealed against that decision, requesting that the turnover tax be assessed without including the leasing of
         the vehicle in question, that is by disregarding Paragraph 1(1)(2)(d) of the UStG 1994. The supply of the vehicle constituted
         a transaction which, for VAT purposes, was deemed to be effected in the place from which the trader carried on his business.
         As regards the leasing of vehicles under a contract, the place where that service is effected is generally the State in which
         the supplier of the vehicle has his place of business, in this case Germany, and is subject to tax there. Paragraph 1(1)(2)(d)
         of the UStG 1994 has the effect, however, of creating a second chargeable event for one and the same transaction. Such double
         taxation cannot be justified on the basis of the  
         standstill clause laid down in Article 17(6) of the Sixth Directive. That provision simply concerns the exclusion of the right to a
         deduction of VAT and not the introduction of events giving rise to VAT. Moreover, it permits only the retention of existing
         national measures. The event giving rise to VAT, referred to in Paragraph 1(1)(2)(d) of the UStG 1994, was first introduced
         into Austrian law on 6 January 1995 and cannot be reconciled with the conditions laid down by Community law. 
         
         
         27
            
          By decision of 20 July 2000 the Finanzlandesdirektion für Tirol dismissed the appeal by Cookies World. It considered that,
         until the Sixth Directive was amended, the Member States were entitled to retain national measures excluding deduction of
         VAT. That included taxation for personal use defined in Paragraph 1(1)(2)(d) of the UStG 1994. It served principally, for
         reasons of competition neutrality, to cancel out the effects of the refund of VAT that the trader was able to claim abroad.
         
         
         
         28
            
          Cookies World appealed against that decision to the Verwaltungsgerichtshof. It argued that its turnover tax for 1997 had been
         assessed by applying a national measure contrary to Community law. 
         
         
         29
            
          Taking the view that the dispute before it required an interpretation of the Sixth Directive, the Verwaltungsgerichtshof decided
         to stay proceedings and to refer the following question to the Court for a preliminary ruling: Is it compatible with 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, in particular Articles
         5 and 6 thereof, for a Member State to treat the following event as a taxable transaction: the incurring of expenditure relating
         to services supplied abroad that, if they had been supplied within the national territory to the trader, would not entitle
         the trader to a deduction of input tax?
         The question referred for a preliminary ruling Observations submitted to the Court
         
         
         30
            
          It is not disputed by the parties who have submitted observations that the hire of a vehicle under a leasing contract is a
         supply of services within the meaning of Article 6(1) of the Sixth Directive. 
         
         
         31
            
          Cookies World and the Commission submit that the place where that supply of services is taxed must be defined, in accordance
         with Article 9(1) of the Directive, on the basis of the place of business of the supplier of the vehicle subject to the leasing
         contract, in this case Germany. 
         
         
         32
            
          The Austrian Government admits that, in accordance with the Sixth Directive and Paragraph 3a(12) of the UStG 1994, services
         concerning the leasing of vehicles are deemed to be supplied in the Member State where the supplier has established his place
         of business. However, by virtue of Paragraph 12(2)(2) of the UStG 1994, such supplies are not deemed to be for business purposes.
         What is taxed in Austria is own consumption as defined in Paragraph 1(1)(2)(d) of the UStG 1994. Such personal use requires
         a link with Austrian territory. That link exists, since the expenditure of the lessee of the vehicle reduces his assets and,
         moreover, the service is used in Austria. The application of Paragraph 1(1)(2)(d) in conjunction with Paragraph 12(2)(2) of
         the UStG 1994 leads to the exclusion of the deduction of VAT being applied, from the economic point of view, in the same way
         as it was until the end of 1994, that is until the accession of the Republic of Austria to the European Union. 
         
         
         33
            
          Cookies World and the Commission take the view that the provisions of the Sixth Directive do not justify the fiscal criterion
         set out in Paragraph 1(1)(2)(d) of the UStG 1994. 
         
         
         34
            
          The Austrian Government submits, to the contrary, that it is consistent with the Sixth Directive for a Member State to subject
         to VAT expenditure in relation to supplies effected abroad in the circumstances laid down in Paragraph 1(1)(2)(d) of the UStG
         1994. In order to determine the legal basis of such taxation, Articles 5(7), 6(2) and 17(6) of the Sixth Directive must be
         read together. Article 17(7) must also be taken into consideration. 
         
         
         35
            
          The Austrian Government points out that the first subparagraph of Article 6(2) of the Sixth Directive sets out the transactions
         which are treated as supplies of services for consideration. That provision is applicable generally, namely to all chargeable
         events of own consumption, where total or partial deduction is indeed due in one Member State as the place where the service
         is supplied but where the own consumption takes place in another Member State. 
         
         
         36
            
          The Austrian Government also relies, in support of its position, on the second subparagraph of Article 6(2) of the Sixth Directive,
         which provides that the Member States may derogate from the provisions of that article, provided that such derogations do
         not lead to distortion of competition. Paragraph 1(1)(2)(d) of the UStG 1994 is designed to eliminate such distortions. In
         the absence of the constituent elements of own consumption within the meaning of that provision, services relating to cars,
         assuming that the transaction has given rise ─ in a Member State where the concept of business has a wider scope ─ to the
         refund of input tax, would be more favourable than services effected in Austria. 
         
         
         37
            
          Cookies World and the Commission point out that Article 6(2) of the Sixth Directive presupposes that the service was used
         for purposes other than those of the business. That is not the position in this case, since Cookies World used the vehicle
         for the purposes of its business. The Commission also observes that Paragraph 1(1)(2)(d) of the UStG 1994 assumes that the
         taxable person is entitled abroad to a refund of the foreign input tax. Such entitlement properly arises only where the relevant
         supply is used for purposes of business. Consequently, use of the vehicle cannot be regarded as use of part of the assets
         of the business for purposes other than those of the business within the meaning of Article 6(2), first subparagraph, (a),
         of the Sixth Directive. Moreover, the Commission considers that the second subparagraph of Article 6(2) in no way authorises
         the Member States to introduce chargeable events not provided for by the Sixth Directive. 
         
         
         38
            
          As regards the standstill clause provided for in Article 17(6) of the Sixth Directive, the Austrian Government argues that
         it merely maintained in force the rule referred to in Paragraph 12(2)(2) of the UStG 1972, which provides for the exclusion
         of VAT deduction for the lease of certain vehicles. Since Article 17(6) of the Sixth Directive authorises, in the cases mentioned,
         the exclusion of the right to deduct VAT, without stating the actual procedure, Member States are free to determine those
         procedures. The Austrian Government concedes that Paragraph 1(1)(2)(d) of the UStG 1994 was first inserted into the UStG 1994
         on 6 January 1995. The interval between 1 January 1995 and 6 January 1995 was due, however, to logistical considerations.
         
         
         
         39
            
          Cookies World and the Commission submit that Article 17(6) of the Sixth Directive concerns only the exclusion of the right
         to deduct VAT. No support can be found in that paragraph for the double taxation of one and the same economic transaction.
         Moreover, Paragraph 1(1)(2)(d) of the UStG 1994 was not part of national law at the time of the Republic of Austria's accession
         to the European Union, on 1 January 1995, although that is a prerequisite for applying the standstill clause provided for
         in Article 17(6) of the Sixth Directive. 
         
         
         40
            
          The Austrian Government submits that support for Paragraph 1(1)(2)(d) of the UStG 1994 can also be found in Article 17(7)
         of the Sixth Directive. Even if that paragraph can be relied on only indirectly as the basis for the disputed provision, it
         nevertheless reveals the purpose of the directive, which is to thwart distortions of competition by providing special systems
         as regards the right to deduct VAT. Therefore, special systems in that area are lawful provided that they serve to restore
         fair competition. If it is accepted that special systems within the meaning of the last sentence of Article 17(7) of the Directive
         are not contrary to the Directive, it should be considered that that is also the case as far as a system such as that provided
         for in Paragraph 1(1)(2)(d) of the UStG 1994 is concerned. 
         
         
         41
            
          Cookies World and the Commission submit that the provision in question cannot be based on Article 17(7) of the Sixth Directive.
         That provision applies expressly subject to the consultation provided for in Article 29 of the Directive, which in this case
         did not take place. Moreover, Article 17(7) can justify only short-term exclusions and not permanent exclusion measures from
         the scheme of VAT deductions. 
         
         
         42
            
          Moreover, Cookies World wonders whether Paragraph 1(1)(2)(d) of the UStG 1994 is designed to protect Austrian car leasing
         businesses and whether it might infringe fundamental freedoms, in particular, the free movement of services laid down in Article
         49 EC et seq. The Austrian Government contests that argument. 
          The Court's reply
         
         
         43
            
          It is established that the dispute in the main proceedings concerns a transaction with cross-border aspects. An undertaking
         established in one Member State, Austria, leases a vehicle from an undertaking established in another Member State, Germany,
         with a view to using that vehicle mainly in Austria. 
         
         
         44
            
          In order to answer the question it is appropriate, at the outset, to consider whether the original taxation in Germany of
         the hire of a vehicle under a leasing contract and the subsequent refund of input tax were in accordance with the rules laid
         down by the Sixth and Eighth Directives. 
         
         
         45
            
          In that regard, it must be observed that the leasing of vehicles is a supply of services within the meaning of Article 6(1)
         of the Sixth Directive, in respect of which the place of taxation is determined in Article 9. 
         
         
         46
            
          As the Court has stated,  
         inter alia, in Case 168/84  
         Berkholz [1985] ECR 2251, paragraph 14, Article 9 of the Sixth Directive is designed to secure the rational delimitation of the respective
         areas covered by national VAT rules by determining in a uniform manner the place where services are deemed to be provided
         for tax purposes. That provision is deemed definitively to determine the Member State with exclusive competence to tax a supply
         of services. 
         
         
         47
            
          It is clear from the case-law of the Court that, in respect of the leasing of all forms of transport, the place of taxation
         laid down by the Sixth Directive is generally, for the sake of simplification, deemed to be the place where the supplier of
         the form of transport has established his business or has a fixed establishment and not the place where the goods hired out
         are used (see, to that effect, Case 51/88  
         Hamann [1989] ECR 767, paragraphs 17 and 18). 
         
         
         48
            
          It should be remembered that the Court has held that the term  
         fixed establishment in Article 9(1) of the Sixth Directive must be interpreted in such a way that an undertaking established in one Member State
         which hires out or leases a number of vehicles to clients established in another Member State, does not possess a fixed establishment
         in that other Member State by engaging in that hiring out or leasing (Case C-190/95  
         ARO Lease [1997] ECR I-4383). 
         
         
         49
            
          The fact remains that, in the circumstances of this case, the place where the supplier of the leased vehicle has established
         his business or has a fixed place of business is in Germany and the place of supply of the vehicle-leasing services is deemed
         to be in that State. Therefore, the VAT on the leasing of the vehicle had to be paid in Germany by the lessor of the vehicle
         who passes it on in the leasing charge for that vehicle. 
         
         
         50
            
          It is clear from the order for reference that Cookies World used the leased vehicle outside Germany for the purposes of its
         business. Under Article 17(3)(a) of the Sixth Directive, in conjunction with Articles 2 and 5 of the Eighth Directive, it
         was entitled to a refund of the VAT which had been passed on in Germany in the leasing charge for the vehicle in question.
         
         
         
         51
            
          Accordingly, the taxation by the German authorities of the leasing of the vehicle in question and the subsequent refund to
         Cookies World of the input tax paid which was passed on in the leasing charge complied with the rules laid down in the Sixth
         and Eighth Directives. 
         
         
         52
            
          Next, it must be considered whether the Sixth Directive precludes a provision such as that in Paragraph 1(1)(2)(d) of the
         UStG 1994, by which a Member State subjects to VAT the payment for services supplied in another Member State, by regarding
         as own consumption the fact that a trader incurs expenditure (expenses) relating to supplies of services abroad which, if
         they had been made to the trader within national territory, would not have enabled him to benefit from deduction of VAT. However,
         that is the case only if the trader is entitled abroad to a refund of the foreign input tax. 
         
         
         53
            
          The Austrian Government submits that the provision in question complies with the Sixth Directive. In support of its position
         it relies in particular on Articles 5(7) and 6(2) in conjunction with Article 17(6) of that Directive. It also relies, but
         more indirectly, on Article 17(7). 
         
         
         54
            
          The arguments put forward by the Austrian Government that the taxation provided for in Paragraph 1(1)(2)(d) of the UStG 1994
         complies with Articles 5(7) and 6(2) of the Sixth Directive cannot be accepted. 
         
         
         55
            
          As regards Article 5(7) of the Sixth Directive it is sufficient to observe, as it is stated in paragraph 45 of the present
         judgment, that the leasing of vehicles is a supply of services within the meaning of Article 6(1) of the Sixth Directive rather
         than a supply of goods within the meaning of Article 5(1). Accordingly, there is no need to consider whether Paragraph 1(1)(2)(d)
         of the UStG 1994 correctly applies Article 5(7) of the Sixth Directive which concerns goods. 
         
         
         56
            
          As regards Article 6(2), first subparagraph, (a), of the Sixth Directive, it must be recalled that under that provision the
         use of goods forming part of the assets of a business for purposes other than those of its business is to be treated as supplies
         of services for consideration where the VAT on such goods is wholly or partly deductible. As is apparent from the Court's
         case-law, that provision is designed to prevent the non-taxation of business goods used for private purposes (see,  
         inter alia Case 50/88  
         Kühne [1989] ECR 1925, paragraph 8). 
         
         
         57
            
          It is clear from the order for reference that the vehicle leased by Cookies World was used in Austria for the purposes of
         its business. Moreover, it must be recalled that Paragraph 1(1)(2)(d) of the UStG 1994 assumes that the lessee was entitled
         abroad to a refund of foreign input tax. Such entitlement properly arises only in a case where the service is used for the
         purposes of the business in the State where the VAT was paid. Accordingly, since the use of the vehicle gave rise to entitlement
         to a refund, it cannot be considered at the same time as use for purposes other than those of the business within the meaning
         of Article 6(2), first subparagraph, (a), of the Sixth Directive. 
         
         
         58
            
          As to the second subparagraph of Article 6(2) of the Sixth Directive, it must be recalled that that provision authorises the
         Member States to derogate from the provisions of that article, provided that such derogation does not lead to distortion of
         competition. 
         
         
         59
            
          As the Advocate General pointed out in point 29 of his Opinion, the exceptions to harmonisation must be interpreted strictly.
         Any recourse to derogating systems entails divergence between the levels of the tax burden in the Member States. As the Commission
         rightly argues in paragraph 46 of its observations, the second subparagraph of Article 6(2) of the Sixth Directive must generally
         be interpreted as meaning that the Member States may refrain from treating certain supplies or uses as services supplied for
         consideration. On the other hand, that provision in no way authorises the Member States to provide for chargeable events not
         referred to in the first subparagraph of Article 6(2) of the Sixth Directive. 
         
         
         60
            
          Finally, the taxation in Austria by the Finanzamt Schwaz was based on the charge for the vehicle leased in Germany by Cookies
         World, that is the consideration for the use of the vehicle under a leasing contract. As it is clear from paragraph 51 of
         the present judgment, the leasing of the vehicle in question had already lawfully been subject to VAT in Germany. To tax a
         supply of services in another Member State when it has already lawfully been subject to VAT in the State of the supplier of
         the services gives rise to double taxation contrary to the principle of fiscal neutrality inherent in the common system of
         VAT. The fact that VAT had to be paid by the lessor of the vehicle in Germany while, in Austria, that obligation fell on Cookies
         World does nothing to change the fact that in reality one and the same economic transaction, that is, the hire of a vehicle
         under a leasing contract, was taxed twice. 
         
         
         61
            
          The Austrian Government's argument that justification for taxation such as that laid down in Paragraph 1(1)(2)(d) of the UStG
         1994 results from the application of Article 17(6) and (7) of the Sixth Directive must also be dismissed. 
         
         
         62
            
          Under Article 17(6) of the Sixth Directive, and in particular the second subparagraph, the Member States are authorised to
         retain their existing legislation as at the date of entry into force of the Sixth Directive in regard to exclusion from the
         right of deduction until such time as the Council has adopted the provisions envisaged by that article (see Case C-345/99
          
         Commission v  
         France [2001] ECR I-4493, paragraph 19). 
         
         
         63
            
          It appears from the file that Paragraph 1(1)(2)(d) of the UStG 1994 is designed so that the exclusion of the deduction of
         VAT in connection with the leasing of certain vehicles is applied in Austria in the same way, from the economic point of view,
         as it was until the end of 1994, that is, at the time of Austria's accession to the European Union. It seems that the Austrian
         Government has achieved the objective of retaining the existing legislation on the subject only indirectly. A new chargeable
         event for VAT purposes has been introduced in the taxation scheme by way of a new provision, which is not the situation referred
         to by Article 17(6) of the Sixth Directive. 
         
         
         64
            
          In any case, even supposing that Article 17(6) of the Sixth Directive was generally applicable to the facts in the main proceedings,
         it must be observed that the procedural requirements laid down by that provision for the retention of the national scheme
         for deduction of VAT are not satisfied. 
         
         
         65
            
          The Sixth Directive entered into force in the Republic of Austria on the date of its accession to the European Union, 1 January
         1995. It is therefore that date which is relevant for the purpose of the application of the second subparagraph of Article
         17(6) of the Sixth Directive in so far as concerns that Member State. 
         
         
         66
            
          It is apparent from the order for reference that Paragraph 1(1)(2)(d) of the UStG 1994 first entered into force on 6 January
         1995. As the Court has already held in Case C-40/00  
         Commission v  
         France [2001] ECR I-4539, paragraph 17, national legislation does not constitute a derogation permitted by the second subparagraph
         of Article 17(6) of the Sixth Directive if its effect is to increase, after the entry into force of the Sixth Directive, the
         extent of existing exclusions, thus diverging from the objective of that directive. 
         
         
         67
            
          As far as concerns Article 17(7) of the Sixth Directive, which is relied on indirectly by the Austrian Government, it is not
         necessary to rule on the question whether the national measures in question in the main proceedings are of a temporary nature
         and designed to deal with a cyclical economic situation; it is nevertheless common ground that the Austrian authorities did
         not consult the VAT Committee before adopting Paragraph 1(1)(2)(d) of the UStG 1994. The Austrian Government cannot therefore
         rely on Article 17(7) of the Sixth Directive to the detriment of taxable persons (see, by way of analogy, concerning Article
         27(1) and (5) of the Sixth Directive, Case C-97/90  
         Lennartz [1991] ECR I-3795, paragraph 34). 
         
         
         68
            
          In the light of the foregoing, the answer to the question referred by the national court must be that the provisions of the
         Sixth Directive preclude a measure of a Member State which provides that payment for services supplied in other Member States
         to a person in the first Member State is subject to VAT whereas, had the services in question been supplied within the territory
         of the country, the person to whom they were supplied would not have been entitled to deduction of input tax. 
         
         Costs
         69
            
          The costs incurred by the Austrian Government and by the Commission, which have submitted observations to the Court, are not
         recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before
         the national court, the decision on costs is a matter for that court. 
         
         On those grounds, 
         
         
         
            
            THE COURT (First Chamber),
         
         
          in answer to the question referred to it by the Verwaltungsgerichtshof by order of 29 March 2001, hereby rules: 
         
                  Wathelet
               
               
                  Jann 
               
               
                  Rosas 
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
          Delivered in open court in Luxembourg on 11 September 2003. 
         
         
         
         
                  R. Grass 
               
               
                  M. Wathelet  
               
            
         
         
         
                  Registrar
               
               
                  President of the First Chamber
               
            
      
      
          1 –
            
             Language of the case: German.