CELEX: 62001CC0442
Language: en
Date: 2003-02-06 00:00:00
Title: Opinion of Mr Advocate General Ruiz-Jarabo Colomer delivered on 6 February 2003. # KapHag Renditefonds 35 Spreecenter Berlin-Hellersdorf 3. Tranche GbR v Finanzamt Charlottenburg. # Reference for a preliminary ruling: Bundesfinanzhof - Germany. # Sixth VAT Directive - Scope - Supply of services for consideration - Admission of a member to a partnership in consideration of payment of a contribution in cash. # Case C-442/01.

OPINION OF ADVOCATE GENERALRUIZ-JARABO COLOMER delivered on 6 February 2003 (1)
         Case C-442/01 KapHag RenditefondsvFinanzamt Charlottenburg(Reference for a preliminary ruling from the Bundesfinanzhof (Germany))
            ((Sixth VAT Directive – Taxable transactions – Concept of  economic activity – Admission of a new partner to a partnership in consideration of payment of a contribution in case))
            
      
         
      1.  In these preliminary reference proceedings, the doubts harboured by the Bundesfinanzhof (the highest German court with jurisdiction
      in tax matters) relate to the interpretation of Articles 2(1) and 19(2) of the Sixth Directive on value added tax 
      
         			(2)
         		 (
      the Sixth Directive).
      
      2.  The German court is seeking to ascertain whether the concept of  
      consideration in the first of those provisions includes the admission of a new partner to a partnership in consideration for a contribution
      in cash. Should that first question be answered in the positive, the national court asks whether the transaction is one of
      the incidental transactions referred to in Article 19(2) of the Sixth Directive and may therefore be excluded from the deductible
      proportion of the tax.
       I ─ Facts, main proceedings and question referred to the Court
      
      3.  KapHag Renditefonds (
      KapHag) is a partnership whose partners are LOGOS Grundstücks-Treuhand GmbH, LOGOS Zweite Grundstücks-Treuhand GmbH (
      LOGOS 1 and  
      LOGOS 2 respectively) and three natural persons, Dr Moegelin, Dr Tiemann and Dr Mehnert.
      
      4.  KapHag's object was to acquire a development right in respect of a plot in Berlin and to construct thereon and maintain certain
      buildings forming a unit within a shopping centre. The partnership is managed as a closed real investment fund.
      
      5.  In order to be admitted as a partner, it was necessary to pay DEM 38 402 000, plus 5% premium.
      
      6.  Initially, KapHag consisted of only two members, LOGOS 1 and LOGOS 2, which acquired the right to develop the site. Dr Moegelin
      and Dr Tiemann became partners later, on 2 August 1991.
      
      7.  On 12 November of that year, Dr Mehnert announced his intention to join the company in consideration for making the necessary
      contribution.
      
      8.  On 19 December 1991 Dr Severin, a lawyer, presented a fee note for DEM 75 000, plus DEM 10 500 value added tax (
      VAT), for providing legal advice.
      
      9.  KapHag deducted that tax in its 1991 VAT return but by decision of 17 February 1998 the Finanzamt Charlottenburg disallowed
      the deduction, in reliance on Articles 15(2) and 4(8)(f) of the Umsatzsteuergesetz 1991 (Law on value added tax; hereinafter
       
      the UStG). 
      
         			(3)
         		 That decision was confirmed in administrative proceedings and then upheld by the Finanzgericht Berlin in judicial proceedings.
      
      10.  The Finanzgericht Berlin considered that, by means of an exchange of services, KapHag transferred to the new partner a share
      in the partnership, a transaction which, under Article 4(8)(f) of the UStG, was exempt from tax, and took into account the
      case-law of the Bundesfinanzhof, which has held that the admission of partners to a partnership open to the public is an exempt
      transaction. In its view, the partial deduction referred to in Article 15(4) of the UStG  
      
         			(4)
         		 is not applicable, since the services provided by the lawyer related solely to the acquisition of new partners.
      
      11.  KapHag did not agree with that decision and appealed to the Bundesfinanzhof on a point of law. In support of its claim, it
      submitted that it is not a partnership open to the public, so that the admission of Dr Mehnert as a partner is a taxable transaction,
      and that the services supplied by the lawyer were not intended exclusively to bring about the admission of that new member
      but were also used for the subsequent leasing activities, which are taxable.
      
      12.  The Bundesfinanzhof considers that when a partnership is formed or when it admits a new partner in consideration of payment
      of a contribution in cash or in kind, it makes a supply of services for consideration within the meaning of Article 2(1) of
      the Sixth Directive. However, it believes that in the circumstances of the case before it, that approach may be open to question
      if account is taken of the fact that the partner did not join the partnership under a bilateral agreement concluded with the
      partnership but under a partnership agreement concluded between the members. In order to dispel that doubt, the Bundesfinanzhof,
      by order of 27 September 2001, referred the following question to the Court:Where a partnership admits a partner on payment of a capital contribution in cash, does it effect a supply to him for consideration
      within the meaning of Article 2(1) of Directive 77/388/EEC?
      
      13.  If that question should be answered in the positive, the Bundesfinanzhof considers that the supply should be exempt, pursuant
      to Article 13(B)(d)(5) of the Sixth Directive, thus raising the question whether it constitutes an incidental transaction
      within the meaning of the second sentence of Article 19(2) of that directive. In order to resolve the uncertainty, the Bundesfinanzhof
      requests the Court to rule on the following question:Is [the transaction] an incidental transaction for the purposes of the second sentence of Article 19(2) of Directive 77/388/EEC,
      and is the taxable person entitled to rely on that provision, according to which such incidental transactions do not exclude
      deduction of input tax?
       II ─ Procedure before the Court
      
      14.  The Commission and KapHag presented written observations within the period prescribed for that purpose by Article 20 of the
      EC Statute of the Court of Justice.
      
      15.  None of the parties who participated in the written procedure sought to present oral observations, but the German Government,
      which did not participate in the written procedure, sought leave to present oral argument and the Court therefore decided
      to hold a hearing.
      
      16.  The hearing took place on 15 January 2003. The German Government and the Commission presented their observations.
       III ─ The relevant provisions of the Sixth Directive
      
      17.  Article 2 defines the taxable event: The following shall be subject to value added tax:1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting
      as such;2. ...
      
      18.  Article 4(1) defines  
      taxable person as follows:... any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose
      or results of that activity.
      
      19.  Those economic activities are, pursuant to Article 4(2):... all activities of producers, traders and persons supplying services including mining and agricultural activities and activities
      of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a
      continuing basis shall also be considered an economic activity.
      
      20.  Article 13 of the Sixth Directive regulates the exemptions relating to internal transactions. For the purposes of the present
      question, the relevant provision is Article 13(B)(d)(5), which provides that the following are exempt from tax: transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations,
      debentures and other securities, excluding:
      
      
      ─
         documents establishing title to goods, 
      
      
      
      ─
         the rights or securities referred to in Article 5(3)
      . 
      
      21.  Article 17 defines the circumstances in which the right to deduct VAT arises and the scope of that right: 
      1.  The right to deduct shall arise at the time when the deductible tax becomes chargeable.
      
      2.  In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled
      to deduct from the tax which he is liable to pay:(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person;(b) ...
      
      3.  Member States shall also grant to every taxable person the right to a deduction or refund of the value added tax referred
      to in paragraph 2 in so far as the goods and services are used for the purposes of: ...(c) any of the transactions exempted under Article 13B(a) and (d), paragraphs 1 to 5, when the customer is established outside
      the Community or when these transactions are directly linked with goods intended to be exported to a country outside the Community....5. As regards goods and services to be used by a taxable person both for transactions covered by paragraphs 2 and 3, in respect
      of which value added tax is deductible, and for transactions in respect of which value added tax is not deductible, only such
      proportion of the value added tax shall be deductible as is attributable to the former transactions.This proportion shall be determined, in accordance with Article 19, for all the transactions carried out by the taxable person....
      
      
      22.  Article 19, under the heading  
      Calculation of the deductible proportion, provides: 1. The proportion deductible under the first subparagraph of Article 17(5) shall be made up of a fraction having: 
      
      
      ─
         as numerator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions in respect
         of which value added tax is deductible under Article 17(2) and (3), 
      
      
      
      ─
         as denominator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions included
         in the numerator and to transactions in respect of which value added tax is not deductible. The Member States may also include
         in the denominator the amount of subsidies, other than those specified in Article 11A(1)(a). The proportion shall be determined on an annual basis, fixed as a percentage and rounded up to a figure not exceeding the
         next unit.2. By way of derogation from the provisions of paragraph 1, there shall be excluded from the calculation of the deductible
         proportion, amounts of turnover attributable to the supplies of capital goods used by the taxable person for the purposes
         of his business. Amounts of turnover attributable to transactions specified in Article 13B(d), in so far as these are incidental
         transactions, and to incidental real estate and financial transactions shall also be excluded. Where Member States exercise
         the option provided under Article 20(5) not to require adjustment in respect of capital goods, they may include disposals
         of capital goods in the calculation of the deductible proportion....
      .
       IV ─ Analysis of the questions
      
      A. First question
      
      23.  The Bundesfinanzhof wishes to know whether admission to a partnership in consideration of payment of a contribution in cash
      is a taxable transaction, since otherwise the tax charged by the lawyer, Dr Severin,  
      
         			(5)
         		 will not be deductible, under the provisions to the contrary set out in Article 17(1) of the Sixth Directive.
      
      24.  The Court's answer must proceed from a premiss which, although obvious, must not be forgotten: what the Community legislature
      intended was that all supplies of goods and all supplies of services effected for consideration within each Member State by
      persons exercising the economic activities referred to in Article 4(2) of the Sixth Directive should be subject to VAT, since
      the latter is a general tax on consumption. 
      
         			(6)
         		
      25.  In order to determine the transactions subject to VAT, it is necessary to define the concept of taxable person, a task which,
      given the philosophy of the Sixth Directive, requires a definition of the concept of  
      economic activity. 
      
         			(7)
         		
      26.  The concept is a very wide one.  
      
         			(8)
         		 It encompasses all stages of the production and distribution of goods and also the supply of services,  
      
         			(9)
         		 irrespective of who carries them out 
      
         			(10)
         		 and of their legal form. The decisive factor is that the purpose is to obtain income on an ongoing basis, irrespective of
      the results. The objective nature 
      
         			(11)
         		 of the concept is a requirement of the principle of the neutrality of the common system of VAT. 
      
         			(12)
         		 This double concept of the wide application and the objectivity of the definition has recently been reiterated by the Court
      in its judgments on the tolls charged for the use of toll roads. 
      
         			(13)
         		
      27.  The concept has also been defined negatively. Thus, the mere exercise of the right of ownership by its holder cannot, in itself,
      be regarded as constituting an economic activity.  
      
         			(14)
         		 For that reason, the Community case-law does not recognise that the mere acquisition and the mere holding of shares constitute
      an economic activity, since they do correspond to the exploitation of an asset for the purpose of obtaining a income therefrom
      on an ongoing basis, since any dividend yielded by that holding is merely the result of ownership of the property. 
      
         			(15)
         		 Exceptionally, where the holding is accompanied by direct or indirect involvement in the management of the company, without
      prejudice to the rights inherent in the capacity of shareholder or partner, the transaction may be taxable. 
      
         			(16)
         		
      28.  If the acquisition of shares does not constitute an economic activity, nor does the transfer of shares. 
      
         			(17)
         		
      29.  The concept of a reciprocal exchange of services is fundamental  
      
         			(18)
         		 and brings out the full meaning of the case-law of the Court which I have just cited. For example, the grant to a third party
      of a surface right by the owner of land is taxable provided that the right is transferred for consideration. 
      
         			(19)
         		
      30.  For the same reason, a holding company which restricts its activity to acquiring shares in other undertakings is not entitled
      to deduct input VAT, since it is not a taxable person in the sense that, in the absence of consideration, it does not carry
      out an economic activity within the meaning of the Sixth Directive;  
      
         			(20)
         		 nor is it a taxable person when it receives dividends, which therefore fall outside the system of deductions provided for
      in the Community rules.  
      
         			(21)
         		 In such situations the only activity consists in the administration of an asset. The same applies to the acquisition and
      holding of obligations,  
      
         			(22)
         		 and also to the purchase and transfer of shares and other titles with the aim of maximising dividends and returns on capital,
      which are intended to encourage medical research. 
      
         			(23)
         		
      31.  Even where, in addition to participating in a company and being for that reason entitled to receive the dividends or benefits
      resulting from its exploitation, the person concerned is directly or indirectly involved in its management, there is not an
       
      economic activity within the meaning of Article 4(2) of the Sixth Directive if the return on the amounts invested in the undertaking is not
      consideration for the management, that is to say, if there is not a direct relationship between the activity and the sums
      received.  
      
         			(24)
         		 On the other hand, where there is such a link, where the placements which attract interest originate in funds provided by
      clients in the context of a supply of services for payment, which are therefore taxable (the management of immoveable property),
      the interest falls within the scope of VAT. 
      
         			(25)
         		 
      
      32.  Consequently, in order to dispel the mystery as requested by the referring court, the Court will have to examine the legal
      nature of the relationship which is established between a partnership and the new partner when, in order to acquire that capacity,
      the new partner makes an economic contribution to the partnership which he is joining.
      
      33.  I have not the slightest doubt that the future partner performs an act involving the disposal of his assets, of which becoming
      a member of the partnership is not the counterpart. Or, in other words, the fact of joining a partnership does not constitute
      a supply of services whereby the partnership confers an economic advantage on the new partner.
      
      34.  I do not agree with the case-law of the Bundesfinanzhof cited in the order for reference, according to which, since the founding
      member of a partnership obtains rights in consideration for his contribution, 
      
         			(26)
         		 the new partnership makes a supply for consideration, which would be subject to VAT.
      
      35.  The formation of a partnership (the partnership agreement being the founding act) or the incorporation within a partnership
      of new partners who subsequently join (variation of the agreement) constitute an agreement whereby various persons (natural
      or legal) form an organisation which the law recognises as having legal personality, and extend or amend its subjective basis.
      It is true that in the agreement the partners undertake to make contributions in common, which may consist of goods or services,
      in order to attain a shared objective, generally that of making a profit. No matter how widely it may be interpreted, however,
      that objective does not contain the notion of consumption in exchange for consideration, within the framework of a bilateral
      legal relationship, which is the basis of the Community rules on VAT. 
      
         			(27)
         		 At most, as the case-law of the Court which I have cited makes abundantly clear, there is an expectation of obtaining advantages,
      which are the consequence of the ownership of a share in the partnership acquired by means of the disposal of assets but do
      not constitute payment for that share.
      
      36.  In short, I propose that the Court, in answer to the first of the questions referred to it by the Bundesfinanzhof, should
      rule that when a partnership admits a partner in consideration for a contribution in cash, it is not making a supply for consideration
      within the meaning of Article 2(1) of the Sixth Directive. That is to say, it is not carrying out a taxable transaction. 
      
         			(28)
         		
      37.  Nor is that assertion undermined by the fact that Article 13(B)(d)(5) of the Sixth Directive states that, among other transactions,
      those in interests in companies are exempt from VAT, an exception which assumes that they were previously taxable transactions.
      It is not to be inferred from that provision that the acquisition of an interest in a company is always, and in every case,
      subject to VAT.
      
      38.  A transaction is  
      exempt where it satisfies the conditions laid down to be subject to tax but it is not taxable by decision of the legislature. If
      those requirements are not satisfied a transaction is not exempt; it is simply not a taxable transaction. That is to say,
      the exemption provided for in Article 13(B)(d)(5) of the Sixth Directive does not assume that all the classes of transactions
      in respect of securities to which it refers will be taxable, since transactions in those securities, which are taxable because
      they satisfy the conditions laid down in Article 2(1) in conjunction with Article 4(2) of the Sixth Directive, are exempt
      from tax. 
      
      39.  There is no inconsistency, therefore, between the solution which I propose and the terms of Article 13(B)(d)(5) of the Sixth
      Directive. That has been decided by the Court, which considers that there are transactions in shares, interests in companies
      or associations, debentures and other securities which may fall within the scope of VAT, 
      
         			(29)
         		 but nothing more, just as, I would add, there are other transactions, such as the transaction in the main proceedings, which
      remain outside its scope.
      
      40.  I am unable to understand the argument based on Article 5(8) of the Sixth Directive which the representative of the German
      Government put forward at the hearing. In his submission, that provision supports the theory that transactions relating to
      companies such as that in the main proceedings are taxable, since it allows the Member States to take the view that transfers
      in the form of a contribution to a company are not supplies of goods. What I have said in respect of Article 13(B)(d)(5) of
      the Sixth Directive applies to Article 5(8) too. The fact that Member States may exclude the transactions concerned from that
      concept does not mean that every contribution to a company is in every case and inevitably a  
      supply of goods within the meaning of Article 2(1) of the Sixth Directive.
      
      41.  Nor is the German Government's position supported by the judgment in  
       Heerma , 
      
         			(30)
         		 where the Court held that a partner who leases immovable property to the partnership of which he is a member carries out
      an independent activity for the purposes of Article 4(1) of the Sixth Directive. It does not follow from that assertion that
      the incorporation of a new partner in a partnership in exchange for a contribution in cash is a taxable transaction. There
      are two distinct activities with nothing in common; one is accession to the partnership and the other is an act for the administration
      of the immovable asset, the only singular feature of which is that the person transferring the use and enjoyment of the asset
      is not a third party but a member of the partnership who, in such a case, acts for that purpose as a stranger.
      
      B. Second question
      
      42.  Should the Court follow my suggestion in regard to the first question referred by the Bundesfinanzhof, there will be no need
      to examine the second question.
      
      43.  However, even if it considers that admission to a partnership in consideration for a contribution in cash is subject to VAT,
      there will still be no need to examine the second question, since, as the Bundesfinanzhof itself states in the order for reference,
      the transaction will be exempt under Article 13(B)(d)(5) of the Sixth Directive.
      
      44.  Consequently, the question whether the transactions in the main proceedings constitute incidental transactions referred to
      in the second sentence of Article 19(2) of the Sixth Directive has no bearing on the outcome of the dispute and the question
      referred by the German court is devoid of purpose.
      
      45.  The principle of neutrality which governs the Community rules on VAT requires that the taxable person deduct the amounts of
      VAT paid in respect of the acquisition of goods and services which are used for the purposes of the taxable transactions. 
      
         			(31)
         		 It requires that when paying the tax the taxable person is allowed to deduct the VAT already charged on those goods or services. 
      
         			(32)
         		 The first consequence of the application of that principle to the deductions is that its objective content must be  
      coextensive with that of the activity of the taxable person. In other words, the  
      deduction system must be applied in such a way that  
      its scope corresponds ... to the sphere of the taxable person's business activity. 
      
         			(33)
         		
      46.  Consequently, where a taxable person acts as a final consumer and acquires goods or uses services for private purposes he
      is not entitled to deduct 
      
         			(34)
         		 and where he uses them for the purposes of his taxable transactions the right to deduct arises only to the extent to which
      they are used for those purposes. 
      
         			(35)
         		
      47.  The foregoing considerations explain Article 17(5) of the Sixth Directive. As regards goods and services used by the taxable
      person in order to effect both transactions giving rise to the right to deduct and transactions not giving rise to that right,
      the VAT borne may be deducted only in proportion to the amount of the former transactions. The allocation is calculated by
      means of a fraction whose numerator is the total turnover for the fiscal year, excluding VAT, in respect of transactions giving
      rise to the right to deduct and the denominator is the total amount for the same period, also excluding VAT, of all transactions
      carried out by the taxable person, including those not giving rise to the right to deduct. However, according to Article 19(2),
      incidental transactions are not taken into account in either of the parts of the fraction. That provision is also designed
      to ensure the neutrality of the common system of VAT. 
      
         			(36)
         		
      48.  In short, the provision to which the second question relates forms part of the system of deductions provided for in the Sixth
      Directive. In order for it to apply, the right to deduct must have arisen and, in accordance with Article 17(1) and (2), that
      event comes about only when the tax is payable in respect of the acquisition of goods and services used for the purposes of
      the taxable transactions. 
      
         			(37)
         		 If, on the other hand, they are connected with transactions which are not taxable or are taxable but exempt, there is no
      payment and the right to deduct does not arise. 
      
         			(38)
         		 The right to deduct arises only where there is a tax obligation to which it can be applied. 
      
         			(39)
         		 The proof is to be found in Article 17(3)(b) and (c), which, exceptionally, permit deduction of the VAT charged in respect
      of the acquisition of goods and services used for the purposes of certain exempt transactions, including that in Article 13(B)(d)(5)
      when they are directly connected with goods to be exported to a country outside the Community or when the recipient is established
      outside the Community.
      
      49.  In its judgment in  
       BLP Group , 
      
         			(40)
         		 the Court held that, except in the cases expressly provided for by the First and Sixth Directives, where a taxable person
      supplies services to another taxable person who uses them for an exempt transaction, the latter person is not entitled to
      deduct the input VAT paid, even if the ultimate purpose of the transaction is the carrying out of a taxable transaction.
      
      50.  On the basis of the foregoing reasoning, I can assert that the admission of a partner into a partnership in consideration
      for a contribution in cash falls in any event outside the scope of VAT, so that in the main proceedings there is no need to
      deduct the VAT paid in respect of the supply of services placed at the disposal of the partnership. Consequently, the pro
      rata rule and the rule in the second sentence of Article 19 of the Sixth Directive are not applicable to the dispute and the
      second question referred by the Bundesfinanzhof is thus devoid of purpose.
        V ─ Conclusion
      
      51.  In the light of the foregoing considerations, I propose that the Court should:
      (1) Answer the first question as follows:  
      Where a partnership admits a partner in exchange for a contribution in cash, it is not making a supply for consideration within
      the meaning of Article 2(1) of 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 and, accordingly, it is
      not carrying out a taxable transaction.
      
      (2) Not answer the second question, as it is devoid of purpose. 
      
      
      
       1 –
         
           Original language: Spanish.
      
      2 –
         
         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).
         
      
      3 –
         
         BGBl. 1991 I, p. 351. Article 4(8)(f) provides that  
            transactions, including the negotiation of transactions, in interests in companies and other associations are to be exempt from tax. Article 15(2) provides that  
            [t]here is no deduction of tax in respect of supplies of goods and the import of goods, and in respect of supplies of services,
            which the business uses for effecting ... exempt transactions.
         
      
      4 –
         
         According to that provision,  
            If a business uses any goods supplied or imported for the purposes of its business, or a service supplied to it, only in part
            for effecting transactions which exclude the right to deduct, then there shall not be deducted such part of the input tax
            as is to be attributed economically to transactions which result in the exclusion of the right to deduct. The business is
            entitled to make a fair estimate of the non-deductible parts.
         
      
      5 –
         
         The discussion as to whether the fees charged by Dr Severin were in respect of his services relating to the admission of the
            new partner or whether, more widely, they also included other services in respect of the formation and operation of the partnership
            must remain outside the limits of the question. The German court seeks to know whether the tax charged by Dr Severin is deductible
            and, for that purpose, it seeks to ascertain whether the admission of a new partner to a partnership is a supply subject to
            VAT. When the Court has provided an answer, the national court will have to determine the dispute in the light of the answer
            it receives and of the factual background to the case, in respect of which the Community Court has nothing to say.
         
      
      6 –
         
         See Case C-384/95  
             Landboden-Agrardienste  [1997] ECR I-7387, paragraph 13.
         
      
      7 –
         
         Advocate General Léger has recently performed that task in his Opinion of 12 September 2002 in Case C-77/01  
             EDM , in which judgment has not thus far been delivered.
         
      
      8 –
         
         See Case C-186/89  
             Van Tiem  [1990] ECR I-4363, paragraph 17.
         
      
      9 –
         
         See the judgment cited in the previous footnote (same paragraph); see also the judgment in Case C-80/95  
             Harnas & Helm  [1997] ECR I-745, paragraph 13.
         
      
      10 –
         
         It will be remembered that the Court regarded the exercise of public functions by notaries as an  
            economic activity for the purposes of the Sixth Directive, since they supply services to individuals on a permanent basis and in consideration
            for remuneration (see Case C-235/85  
             Commission  v  
             Netherlands  [1987] ECR 1471, paragraph 9).
         
      
      11 –
         
         See paragraph 8 of the judgment in  
             Commission  v  
             Netherlands , cited above.
         
      
      12 –
         
         See  
             Van Tiem , cited above, paragraph 18, and  
             Harnas & Helm , also cited above, paragraph 14. Reference may also be made to Case C-60/90  
             Polysar Investments Netherlands  [1991] ECR I-3111, paragraph 12.
         
      
      13 –
         
         Case C-276/97  
             Commission  v  
             France  [2000] ECR I-6251, paragraph 31; Case C-358/97  
             Commission  v  
             Ireland  [2000] ECR I-6301, paragraph 29; Case C-359/97  
             Commission  v  
             United Kingdom  [2000] ECR I-6355, paragraph 41; Case C-408/97  
             Commission  v  
             Netherlands  [2000] ECR I-6417, paragraph 25; and Case C-260/98  
             Commission  v  
             Greece  [2000] ECR I-6537, paragraph 26.
         
      
      14 –
         
         See Case C-155/94  
             Wellcome Trust  [1996] ECR I-3013, paragraph 32.
         
      
      15 –
         
         See  
             Polysar Investments Netherlands , cited above, paragraph 13. Reference may likewise be made to the judgments in Case C-333/91  
             Sofitam  [1993] ECR I-3513, paragraph 12;  
             Harnas & Helm , cited above, paragraph 15; Case C-142/99  
             Floridienne and Berginvest  [2000] ECR I-9567, paragraph 17; and Case C-16/00  
             Cibo Participations  [2001] ECR I-6663, paragraph 19. See also, on this point, order of 12 July 2001 in Case C-102/00  
             Welthgrove  [2001] ECR I-5679, paragraph 14.
         
      
      16 –
         
         See  
             Polysar Investments Netherlands , paragraph 14;  
             Floridienne and Berginvest , paragraph 18; and  
             Cibo Participations , paragraph 20. See also the order in  
             Welthgrove , paragraph 15.
         
      
      17 –
         
         See  
             Wellcome Trust , paragraph 33.
         
      
      18 –
         
         See Case C-16/93  
             Tolsma  [1994] ECR I-743, paragraph 14.
         
      
      19 –
         
         Judgment in  
             Van Tiem .
         
      
      20 –
         
         Judgment in  
             Polysar Investments Netherlands .
         
      
      21 –
         
         Judgment in  
             Sofitam .
         
      
      22 –
         
         Judgment in  
             Harnas & Helm .
         
      
      23 –
         
         Judgment in  
             Wellcome Trust .
         
      
      24 –
         
         Judgment in  
             Floridienne and Berginvest ; judgment in  
             Cibo Participations .
         
      
      25 –
         
         Case C-306/94  
             Régie Dauphinoise  [1996] ECR I-3695.
         
      
      26 –
         
         To my mind, it is irrelevant whether payment is in cash or in kind.
      
      27 –
         
         It will be recalled that, according to the first paragraph of Article 2 of First Council Directive 67/227/EEC of 11 April
            1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967 (I),
            p. 14),  
            [t]he principle of the common system of value added tax involves the application to goods and services of a general tax on
            consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place
            in the production and distribution process before the stage at which tax is charged.
         
      
      28 –
         
         I must confess that I am unable to understand the Bundesfinanzhof's reference in the order for reference to Council Directive
            69/335/EEC of 17 July 1969 concerning indirect taxes on the raising of capital (OJ, English Special Edition 1969 (II), p. 412),
            since it is irrelevant to the outcome of the dispute whether the transaction in issue may be subject to tax of this kind,
            since the fact that it is subject to that tax does not determine that it is subject to VAT, as that directive merely does
            not preclude the charging of VAT (see Article 12(1)(f)).
         
      
      29 –
         
         See  
             Wellcome Trust , paragraph 35, and  
             Harnas & Helm , paragraph 16.
         
      
      30 –
         
         Case C-23/98 [2000] ECR I-419.
      
      31 –
         
         As stated in paragraph 2 of Article 17 of the Sixth Directive. On the system of deductions as a means of ensuring the neutrality
            of the tax, see Case 268/83  
             Rompelman  [1985] ECR 655, paragraph 19; Case 50/87  
             Commission  v  
             France  [1988] ECR 4797, paragraph 15; Case C-37/95  
             Ghent Coal Terminal  [1998] ECR I-1, paragraph 15; Joined Cases C-110/98 to C-147/98  
             Gabalfrisa and Others  [2000] ECR I-1577, paragraph 44; and Case C-78/00  
             Commission  v  
             Italy  [2001] ECR I-8195, paragraph 30.
         
      
      32 –
         
         See Case C-318/96  
             Spar  [1998] ECR I-785, paragraph 23.
         
      
      33 –
         
         See Case 165/86  
             Intiem  [1988] ECR 1471, paragraph 14. See also, to the same effect,  
             Sofitam , cited above, paragraph 11.
         
      
      34 –
         
         See Case C-97/90  
             Lennartz  [1991] ECR I-3795, paragraph 9.
         
      
      35 –
         
         See Case C-291/92  
             Ambrecht  [1995] ECR I-2775, paragraph 27.
         
      
      36 –
         
         See  
             Régie Dauphinoise , cited above, paragraph 21.
         
      
      37 –
         
         In reality, the right to deduct arises as a consequence of two factors: the amount of the deductible tax and the use of the
            goods or services for the purposes of the taxable transactions (see P. Alguacil Marí and G. Orón Moratal,  
            La deducción en el IVA español y su adecuación a la Sexta Directiva, in  
             Noticia/C.E.E. , Nos 67 and 68, August/September 1990, p. 96.
         
      
      38 –
         
         As I have already stated in footnote 3, Article 15(2) of the UStG precludes the right to deduction of tax in respect of supplies
            of goods and services used for effecting exempt transactions. The Spanish Law on Value Added Tax (Law 37/1992 of 28 December
            1992;  
             Boletín Oficial del Estado , 29 December 1992, p. 44247, is quite clear on that point; Article 94(1)(1)(a) of that law provides that the taxable person
            may deduct the amounts of VAT paid on the acquisition or import of goods and services used for transactions which are  
             taxable and not exempt  from VAT (emphasis added).
         
      
      39 –
         
         See P. Alguacil Marí and G. Orón Moratal,  
             op. cit. , p. 101. S. Colmenar Valdés, in  
            El derecho a la deducción en el IVA, in  
             Revista de Derecho Financiero y Hacienda Pública , No 157, 1982, p. 327, states that,  
            as the deduction of the input tax is linked to the output tax, it appears that where there is no tax obligation there can
            be no right to deduct the input tax, since the ultimate reason on which the right to deduct was based no longer exists.
         
      
      40 –
         
         Case C-4/94 [1995] ECR I-983.