CELEX: 62010CJ0444
Language: en
Date: 2011-11-10 00:00:00
Title: Judgment of the Court (Second Chamber) of 10 November 2011.#Finanzamt Lüdenscheid v Christel Schriever.#Reference for a preliminary ruling: Bundesfinanzhof - Germany.#VAT - Sixth Directive - Article 5(8) - Concept of a ‘transfer of a totality of assets or part thereof’ - Transfer of the stock and fittings concomitant with the conclusion of a contract of lease of the business premises.#Case C-444/10.

Case C-444/10
      Finanzamt Lüdenscheid
      v
      Christel Schriever
      (Reference for a preliminary ruling from the Bundesfinanzhof)
      (VAT – Sixth Directive – Article 5(8) – Concept of a ‘transfer of a totality of assets or part thereof’ – Transfer of the stock and fittings concomitant with the conclusion of a contract of lease of the business premises)
      Summary of the Judgment
      1.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable amount – Supply of goods
            – Option for Member States to exclude the transfer of a totality of assets or part thereof 
      (Council Directive 77/388, Art. 5(8))
      2.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable amount – Supply of goods
            – Transfer of a totality of assets or part thereof
      (Council Directive 77/388, Art. 5(8))
      1.        In order to find that there has been a transfer of a business, or of an independent part of an undertaking, for the purposes
         of Article 5(8) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes,
         all the elements transferred must, together, be sufficient to allow an independent economic activity to be carried on.
      
      Where an economic activity does not require the use of particular premises or of premises equipped with fixtures necessary
         for the pursuit of the economic activity, there may be a transfer of a totality of assets for the purposes of Article 5(8)
         of the Sixth Directive even without the transfer of property in an immovable asset. However, where the very nature of the
         economic activity entails the use of an indivisible bundle of movable and immovable property, such a transfer cannot be considered
         to have occurred if the transferee has not taken possession of the business premises. In particular, if the business premises
         are equipped with fixtures necessary for the pursuit of the economic activity, these immovable items must form part of the
         elements transferred in order for the transaction to qualify as the transfer of a totality of assets, or of a part thereof,
         for the purposes of the Sixth Directive. A transfer of assets may also take place if the business premises are made available
         to the transferee by means of a lease, or if the transferee itself has appropriate premises to which all of the goods transferred
         can be moved and where the transferee may continue to carry on the economic activity concerned.
      
      Furthermore, matters such as the duration of the lease granted and the procedure agreed for terminating it must be taken into
         account in an overall assessment of the transaction transferring the assets, again for the purposes of Article 5(8), given
         that they may have a bearing on that assessment if they could make it impossible to carry on the economic activity on a lasting
         basis. However, being able to terminate a lease of indefinite duration by giving short term notice does not of itself decisively
         support the inference that the transferee intended immediately to liquidate the business, or the part of the undertaking,
         transferred. Accordingly, application of Article 5(8) of the Sixth Directive cannot be refused on that ground alone.
      
      (see paras 25, 27-29, 42-43)
      2.        Article 5(8) of the Sixth Directive on the harmonisation of the laws of the Member States relating to turnover taxes must
         be interpreted as meaning that there is a transfer of a totality of assets, or a part thereof, for the purposes of that provision,
         where the stock and fittings of a retail outlet are transferred concomitantly with the conclusion of a lease, to the transferee,
         of the premises of that outlet for an indefinite period but terminable at short notice by either party, provided that the
         assets transferred are sufficient for the transferee to be able to carry on an independent economic activity on a lasting
         basis.
      
      (see para. 45, operative part)
JUDGMENT OF THE COURT (Second Chamber)
      10 November 2011 (*)
      
      (VAT – Sixth Directive – Article 5(8) – Concept of a ‘transfer of a totality of assets or part thereof’ – Transfer of the stock and fittings concomitant with the conclusion of a contract of lease of the business premises)
      In Case C‑444/10,
      REFERENCE for a preliminary ruling under 267 TFEU from the Bundesfinanzhof (Germany), made by decision of 14 July 2010, received
         at the Court on 15 September 2010, in the proceedings
      
      Finanzamt Lüdenscheid
      v
      Christel Schriever,
      THE COURT (Second Chamber),
      composed of J.N. Cunha Rodrigues, President of the Chamber, U. Lõhmus (Rapporteur), A. Rosas, A. Ó Caoimh and A. Arabadjiev,
         Judges,
      
      Advocate General: P. Mengozzi,
      Registrar: A. Calot Escobar,
      having regard to the written procedure,
      after considering the observations submitted on behalf of:
      –        the Finanzamt Lüdenscheid, by H. Selle, acting as Agent,
      –        the European Commission, by L. Lozano Palacios and B.-R. Killmann, acting as Agents,
      having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
      gives the following
      Judgment
      1        This reference for a preliminary ruling concerns the interpretation of Article 5(8) 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 (OJ 1977 L 145, p. 1; ‘the Sixth Directive’).
      
      2        The reference has been made in appeal proceedings between the Finanzamt Lüdenscheid (Lüdenscheid Tax Office; ‘the Finanzamt’)
         and Ms Schriever regarding an adjusted tax assessment notice by which the Finanzamt categorised the transfer by Ms Schriever
         of the stock and fittings of a shop as a transaction subject to valued added tax (‘VAT’).
      
       Legal context
       The Sixth Directive
      3        Under Article 2(1) of the Sixth Directive, the supply of goods or services effected for consideration within the territory
         of the country by a taxable person acting as such is subject to VAT.
      
      4        Under Article 5(1) of that directive, ‘supply of goods’ means the transfer of the right to dispose of tangible property as
         owner.
      
      5        Under Article 5(8) of the Sixth Directive:
      
      ‘In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or
         part thereof, Member States may consider that no supply of goods has taken place and in that event the recipient shall be
         treated as the successor to the transferor. Where appropriate, Member States may take the necessary measures to prevent distortion
         of competition in cases where the recipient is not wholly liable to tax.’
      
      6        Under Article 6(5) of the Sixth Directive, Article 5(8) is to apply ‘in like manner to the supply of services’.
      
       National law
      7        Under the first sentence of point (1) of Paragraph 1(1) of the German Law on Turnover Tax 1993 (Umsatzsteuergesetz 1993, BGB1.
         1993 I, p. 565; ‘the UStG’), supplies of goods and services effected by a trader within German territory for consideration
         in the course of his business are subject to VAT.
      
      8        Paragraph 1(1a) UStG, designed to transpose Articles 5(8) and 6(5) of the Sixth Directive into national law, provides:
      
      ‘Transactions in the context of the transfer of a business to another trader for the purposes of his undertaking are not subject
         to [VAT]. A transfer of a business takes place where an undertaking or separately managed business unit forming part of an
         undertaking is, whether for consideration or not, in its entirety transferred or brought in as a contribution to a company.
         The recipient trader takes the place of the transferor.’
      
       The dispute in the main proceedings and the questions referred for a preliminary ruling
      9        Until 30 June 1996, Ms Schriever ran a retail business, selling sports equipment from premises belonging to her. With effect
         from that date, she transferred the stock and fittings of the shop to Sport S. GmbH (‘Sport S.’) for a total of DEM 455 000,
         with no mention of VAT on the related invoice.
      
      10      At the same time, Ms Schriever leased the premises where the business was carried on to Sport S. from 1 August 1996 for an
         indefinite period. However, under the terms of the lease contract, the lease could be terminated by either party at the latest
         on the third working day of any calendar quarter, to take effect at the end of the following calendar quarter.
      
      11      Sport S. ran the sports shop until 31 May 1998.
      
      12      Ms Schriever treated the transfer of the stock and fittings as a non-taxable transfer of a business in its entirety, in accordance
         with Paragraph 1(1a) UStG. Consequently, she did not declare the proceeds of that sale on her 1996 VAT return.
      
      13      The Finanzamt, however, took the view that the conditions for a transfer of a business in its entirety were not satisfied
         because the business premises, which constituted an essential component element of the business, were not among the items
         sold to Sport S. In the adjusted 1996 VAT assessment notice, the Finanzamt treated the transaction as taxable and determined
         the VAT due accordingly.
      
      14      The Finanzgericht, upholding the action brought by Ms Schriever contesting the decision of the Finzanzamt, found that, having
         regard to all the circumstances of the case, the transaction at issue was indeed a transfer of a business in its entirety
         for the purposes of Paragraph 1(1a) UStG, since Sport S. effectively continued Ms Schriever’s business activities, and the
         mere theoretical possibility that the lease contract could be terminated at any time had no bearing in that regard.
      
      15      The Finanzamt brought an appeal on a point of law against that judgment before the Bundezfinanzhof, submitting that, since
         it is not possible to operate a retail business without shop premises, a lease contract which operates on the basis of a statutory
         termination period cannot ensure the continuation of the business.
      
      16      In the order for reference, the Bundezfinanzhof recalls that, according to its settled case-law, a transfer can be categorised
         as a transfer of a business notwithstanding the fact that some essential individual component elements of the business are
         not transferred together with the business, provided, however, that the transferee is able to make long-term use of those
         elements, in order to carry on the business on a lasting basis. The Bundezfinanzhof observes that it has found a 10-year lease
         to be sufficient for a long-term transfer of use of such important component elements, while the Finanzgericht Baden-Württemburg
         has held, in a judgment which has become final, that a lease of premises owned by a transferor for a five-year period was
         insufficient to support a finding that the business activity was being continued.
      
      17      According to the Bundezfinanzhof, however, the circumstances of the case before it are special, in that the lease for an indefinite
         period could be terminated by either party at short notice.
      
      18      In those circumstances, the Bundesfinanzhof decided to stay the proceedings and to refer the following questions to the Court
         for a preliminary ruling:
      
      ‘(1)       Is there a “transfer” of a totality of assets within the meaning of the Sixth Directive in the case where a trader transfers
         the stock and fittings of his retail outlet to a purchaser and merely leases the premises which he owns to the purchaser?
         
      
      (2)      Is it relevant in that regard whether the premises were leased on the basis of a long-term contract of lease for use or whether
         the lease contract is concluded for an indefinite period and may be terminated by either party at short notice?’
      
       Consideration of the questions referred
      19      By its questions, which should be examined together, the referring court essentially asks whether Article 5(8) of the Sixth
         Directive must be interpreted as meaning that there is a ‘transfer of a totality of assets or a part thereof’ where the stock
         and fittings of a retail outlet are transferred concomitantly with the conclusion of a contract of lease, to the transferee,
         of the business premises for an indefinite period but terminable at short notice by either party.
      
      20      First of all, it should be observed that the first sentence of Article 5(8) of the Sixth Directive provides that Member States
         may, in the event of a transfer of a totality of assets or part thereof, consider that no supply of goods has taken place
         and that the recipient is the successor to the transferor. It follows that, where a Member State has exercised that option,
         the transfer of a totality of assets or part thereof is not regarded as a supply of goods for the purposes of the Sixth Directive
         and, accordingly, is not subject to VAT under Article 2 of that directive (see, to that effect, Case C‑408/98 Abbey National [2001] ECR I‑1361, paragraph 30; Case C‑497/01 Zita Modes [2003] ECR I‑14393, paragraph 29; and Case C‑29/08 SFK [2009] ECR I‑10413, paragraph 36).
      
      21      Under the second sentence of Article 5(8) of the Sixth Directive, Member States may exclude from the application of the no-supply
         rule transfers of a totality of assets in favour of a recipient who is not a taxable person within the meaning of that directive
         or who acts as a taxable person only in relation to some of his activities, if this is necessary to prevent distortion of
         competition. That provision must be regarded as exhaustive in relation to the conditions under which a Member State which
         makes use of the option provided for in the first sentence of Article 5(8) may limit the application of the no-supply rule
         (Zita Modes, paragraph 30).
      
      22      Next, regarding the concept of a ‘transfer, whether for consideration or not or as a contribution to a company, of a totality
         of assets or part thereof’, referred to in the first sentence of Article 5(8) of the Sixth Directive, the Court has observed
         that this constitutes an independent concept of EU law which must be given a uniform interpretation throughout the European
         Union. There being no definition of that concept in the Sixth Directive, and no express reference to the law of the Member
         States, its meaning and scope must be identified in the light of the context of the provision and the purpose of the legislation
         in question (see, to that effect, Zita Modes, paragraphs 32 to 35).
      
      23      It is precisely in the light of the context of Article 5(8) of the Sixth Directive and the purpose of that directive that
         the Court has held that that provision is intended to enable the Member States to facilitate transfers of undertakings or
         of parts of undertakings by making such transfers simpler and by preventing the resources of the recipient from being overburdened
         by a disproportionate charge to tax which, in any event, would ultimately be recovered through deduction of the input VAT
         paid (Zita Modes, paragraph 39).
      
      24      The Court has also held that, in view of that purpose, the concept of a ‘transfer … of a totality of assets or part thereof’
         must be interpreted as covering the transfer of a business or of an independent part of an undertaking, including tangible
         elements and, as the case may be, intangible elements, which, together, constitute an undertaking or a part of an undertaking
         which is capable of carrying on an independent economic activity, but that it does not cover the simple transfer of assets,
         such as the sale of a stock of goods (see Zita Modes, paragraph 40, and SKF, paragraph 37).
      
      25      It follows that, in order to find that there has been a transfer of a business, or of an independent part of an undertaking,
         for the purposes of Article 5(8) of the Sixth Directive, all of the elements transferred must, together, be sufficient to
         allow an independent economic activity to be carried on.
      
      26      The question whether there must be both movable and immovable assets among those elements must be assessed in the light of
         the nature of the economic activity at issue.
      
      27      Where an economic activity does not require the use of particular premises or of premises equipped with fixtures necessary
         for the pursuit of the economic activity, there may be a transfer of a totality of assets for the purposes of Article 5(8)
         of the Sixth Directive even without the transfer of property in an immovable asset.
      
      28      However, where the very nature of the economic activity entails the use of an inseparable bundle of movable and immovable
         property, such a transfer cannot be considered to have occurred if the transferee has not taken possession of the business
         premises. In particular, if the business premises are equipped with fixtures necessary for the pursuit of the economic activity,
         these immovable items must form part of the elements transferred in order for the transaction to qualify as the transfer of
         a totality of assets, or of a part thereof, for the purposes of the Sixth Directive.
      
      29      Equally, a transfer of assets may also take place if the business premises are made available to the transferee by means of
         a lease contract, or if the transferee itself has appropriate premises to which all of the goods transferred can be moved
         and where the transferee may continue to carry on the economic activity concerned.
      
      30      Any other interpretation would lead to an arbitrary distinction between, on the one hand, transfers made by transferors who
         also own the premises accommodating the business, or the part of the undertaking, which they intend to transfer and, on the
         other, those made by transferors who hold those premises under a lease. Neither the wording nor the purpose of Article 5(8)
         of the Sixth Directive suggests that transferors in the latter class are unable to transfer a totality of assets for the purposes
         of that provision.
      
      31      Moreover, the amount of VAT to be paid on the transfer of a business or a part thereof is likely to constitute a particularly
         heavy burden on the transferee in relation to the resources of the business concerned, even where the totality of assets transferred
         includes no immovable property. It is therefore consistent with the purpose of Article 5(8) of the Sixth Directive, as described
         in paragraph 23 above, also to accord special treatment to transfers of a totality of assets concomitant with the conclusion
         of a contract for lease of the business premises (see, to that effect, Zita Modes, paragraph 41).
      
      32      It follows from the foregoing considerations that an overall assessment must be made of the factual circumstances of the transaction
         at issue in order to determine whether it is covered by the concept of the transfer of a totality of assets for the purposes
         of the Sixth Directive. In that context, particular importance must be attached to the nature of the economic activity which
         it is sought to continue.
      
      33      As regards, in particular, the transfer of the stock and fittings of a retail outlet, this is generally effected in order
         to enable the transferee to continue running that outlet.
      
      34      Even if the economic activity at issue is one which cannot be carried out without business premises, it is not necessary,
         as a general rule, in order to ensure the continuation of the retail business transferred, for the owner of that business
         also to be the owner of the building within which it is operated.
      
      35      To the extent that the transfer of the stock and fittings of the outlet is sufficient to allow the continuation of an independent
         economic activity, the question whether the transaction is to be categorised as a transfer of a totality of assets does not
         turn on whether or not immovable property has been transferred.
      
      36      Furthermore, where the continuation of the economic activity in question requires that the transferee use the same premises
         as were used by the transferor, there is no reason in principle why possession of those premises may not be transferred by
         means of a lease contract.
      
      37      It is also necessary, in order for Article 5(8) of the Sixth Directive to apply, for the transferee to intend to operate the
         business, or the part of the undertaking, transferred and not simply to liquidate the activity concerned immediately and sell
         the stock, if any (see, to that effect, Zita Modes, paragraph 44).
      
      38      In that regard, it follows from the Court’s case-law that the intentions of the purchaser can – or, in certain cases, must
         – be taken into account in the course of an overall assessment of the circumstances of a transaction, provided that they are
         supported by objective evidence (see, to that effect, Case 268/83 Rompelman [1985] ECR 655, paragraph 24; Case C‑230/94 Enkler [1996] ECR I‑4517, paragraph 24; Joined Cases C‑110/98 to C‑147/98 Gabalfrisa and Others [2000] ECR I‑1577, paragraph 47; and Case C‑84/09 X [2010] ECR I‑0000, paragraphs 47 and 51).
      
      39      It emerges from the file submitted to the Court that, in the case before the referring court, the transfer of the stock and
         fittings of the sports equipment retailer concomitant with the conclusion of a contract of lease of the business premises
         did indeed allow the purchaser to continue the independent economic activity previously carried on by the seller. In that
         connection, it is common ground that the transfer cannot be regarded as a mere sale of stock: both the stock and the fittings
         of the business formed part of the assets transferred. Furthermore, the fact that the transferee continued to operate the
         sports shop for nearly two years confirms that its intention was not to liquidate the activity concerned immediately.
      
      40      Accordingly, in the case before the referring court, the fact that the business premises were only leased, and not sold, to
         the purchaser, did not constitute an obstacle to the continuation of the seller’s activity by that purchaser.
      
      41      Finally, the referring court asks whether the duration of the lease and the procedure for terminating it are to be taken into
         account when assessing whether the transfer of a business or a part of an undertaking can be categorised as a transfer of
         a totality of assets for the purposes of Article 5(8) of the Sixth Directive.
      
      42      In that regard, it should be observed that matters such as the duration of the lease granted and the procedure agreed for
         terminating it must be taken into account in an overall assessment of the transaction transferring the assets, for the purposes
         of Article 5(8) of the Sixth Directive, given that they may have a bearing on that assessment if they might make it impossible
         to carry on the economic activity on a lasting basis.
      
      43      However, the possibility of terminating a lease contract of indefinite duration by giving short term notice does not of itself
         decisively support the inference that the transferee intended immediately to liquidate the business, or the part of the undertaking,
         transferred. Accordingly, application of Article 5(8) of the Sixth Directive cannot be refused on that ground alone.
      
      44      That interpretation is consistent with the principle of fiscal neutrality inherent in the common system of VAT. That principle
         precludes, inter alia, economic operators carrying out the same transactions from being treated differently in relation to
         the levying of that tax (see, inter alia, Case C‑216/97 Gregg [1999] ECR I‑4947, paragraph 20, and Case C‑540/09 Skandinavska Enskilda Banken [2011] ECR I‑0000, paragraph 36). It follows that that principle would not be respected if the possibility of applying Article
         5(8) of the Sixth Directive to the transfer of a totality of assets, such as that at issue in the main proceedings, depended
         on the terms of the lease contract, and in particular on its duration and the procedure for terminating it. 
      
      45      In the light of all the foregoing, the answer to the questions referred is that Article 5(8) of the Sixth Directive must be
         interpreted as meaning that there is a transfer of a totality of assets, or a part thereof, for the purposes of that provision,
         where the stock and fittings of a retail outlet are transferred concomitantly with the conclusion of a contract of lease,
         to the transferee, of the premises of that outlet for an indefinite period but terminable at short notice by either party,
         provided that the assets transferred are sufficient for the transferee to be able to carry on an independent economic activity
         on a lasting basis.
      
       Costs
      46      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
         the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
         of those parties, are not recoverable.
      
      On those grounds, the Court (Second Chamber) hereby rules:
      Article 5(8) 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 must be interpreted as meaning that there
            is a transfer of a totality of assets, or a part thereof, for the purposes of that provision, where the stock and fittings
            of a retail outlet are transferred concomitantly with the conclusion of a contract of lease, to the transferee, of the premises
            of that outlet for an indefinite period but terminable at short notice by either party, provided that the assets transferred
            are sufficient for the transferee to be able to carry on an independent economic activity on a lasting basis. 
      [Signatures]
      * Language of the case: German.