CELEX: 62005CJ0335
Language: en
Date: 2007-06-07 00:00:00
Title: Judgment of the Court (First Chamber) of 7 June 2007. # Řízení Letového Provozu ČR, s. p. v Bundesamt für Finanzen. # Reference for a preliminary ruling: Finanzgericht Köln - Germany. # Thirteenth VAT Directive - Article 2(2) - GATS - Most-favoured-nation clause - Interpretation of secondary Community law in the light of international agreements concluded by the Community. # Case C-335/05.

Case C-335/05
      Řízení Letového Provozu ČR, s. p.
      v
      Bundesamt für Finanzen
      (Reference for a preliminary ruling from the Finanzgericht Köln)
      (Thirteenth VAT Directive – Article 2(2) – GATS – Most-favoured-nation clause – Interpretation of secondary Community law in the light of international agreements concluded by the Community)
      Opinion of Advocate General Mengozzi delivered on 15 February 2007 
      Judgment of the Court (First Chamber), 7 June 2007 
      Summary of the Judgment
      Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Refund of the tax to taxable
            persons not established in the territory of the Community 
      (Council Directive 86/560, Art. 2(2))
      Article 2(2) of the Thirteenth Council Directive 86/560 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 Community territory,
         pursuant to which Member States may make refund of the tax conditional upon the granting by third States of comparable advantages
         regarding turnover taxes, must be interpreted as meaning that the ‘third States’ referred to in that provision include all
         third States and that that provision is without prejudice to the ability and the responsibility of the Member States to comply
         with their obligations under international agreements such as the General Agreement on Trade in Services.
      
      Article 2(2) of the Thirteenth Directive, in common with all the other provisions of that directive, clearly refers to all
         third States without any distinction.
      
      Moreover, in so far as that provision leaves each Member State free to decide in respect of each third State whether or not
         it would be appropriate to impose a condition of reciprocity, it enables Member States, to the extent to which they enter
         into agreements with certain third States which limit that discretion, to adapt their legislation so as to reflect those agreements.
         In those circumstances, the obligation to interpret secondary Community law, in so far as is possible, in conformity with
         international agreements concluded by the Community, does not require the expression ‘third States’ appearing in that provision
         to be interpreted restrictively so as to apply only to third States which cannot invoke the most-favoured-nation clause contained
         in Article II(1) of the General Agreement on Trade in Services.
      
      (see paras 15, 18-21, operative part)
JUDGMENT OF THE COURT (First Chamber)
      7 June 2007 (*)
      
      (Thirteenth VAT Directive – Article 2(2) – GATS – Most-favoured-nation clause – Interpretation of secondary Community law in the light of international agreements concluded by the Community)
      In Case C-335/05,
      REFERENCE for a preliminary ruling under Article 234 EC, from the Finanzgericht Köln (Germany), made by decision of 24 August
         2005, received at the Court on 15 September 2005, in the proceedings
      
      Řízení Letového Provozu ČR, s.p.
      v
      Bundesamt für Finanzen,
      THE COURT (First Chamber),
      composed of P. Jann, President of Chamber, R. Schintgen (Rapporteur), A. Tizzano, M. Ilešič and E. Levits, Judges,
      Advocate General: P. Mengozzi,
      Registrar: R. Grass,
      having regard to the written procedure,
      after considering the written observations submitted on behalf of:
      –       the Cypriot Government, by E. Simeonidou, acting as Agent,
      –       the Polish Government, by J. Pietras, acting as Agent,
      –       the Commission of the European Communities, by D. Triantafyllou, acting as Agent,
      after hearing the Opinion of the Advocate General at the sitting on 15 February 2007,
      gives the following
      Judgment
      1       This reference for a preliminary ruling concerns the interpretation of Article 2(2) of Thirteenth Council Directive 86/560/EEC
         of 17 November 1986 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 Community territory (OJ 1986 L 326, p. 40; ‘the thirteenth
         directive’). 
      
      2       The reference was submitted in the context of proceedings brought by Řízení Letového Provozu ČR, s.p. (‘ŘLP’), a company incorporated
         under Czech law, against the Bundesamt für Finanzen (Federal Finance Office), which is responsible in Germany for the collection
         of value added tax (‘VAT’), regarding the refund of VAT paid by ŘLP in Germany.
      
       Legal framework
       International agreements
      3       By Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters
         within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994) (OJ 1994 L 336,
         p. 1), the Council of the European Union approved the Agreement establishing the World Trade Organisation as well as the agreements
         contained in Annexes 1, 2 and 3 to that Agreement, one of which is the General Agreement on Trade in Services (‘the GATS’).
      
      4       Article II(1) of the GATS provides:
      ‘With respect to any measure covered by this Agreement, each Member shall accord immediately and unconditionally to services
         and service suppliers of any other Member treatment no less favourable than that it accords to like services and service suppliers
         of any other country.’
      
       Community legislation
      5       The second recital in the preamble to the thirteenth directive reads as follows:
      ‘Whereas there is a need to ensure the harmonious development of trade relations between the Community and third countries
         based on the provisions of Directive 79/1072/EEC, while taking account of the varying situations encountered in third countries’.
      
      6       Article 2 of the thirteenth directive provides:
      ‘1. Without prejudice to Articles 3 and 4, each Member State shall refund to any taxable person not established in the territory
         of the Community, subject to the conditions set out below, any [VAT] charged in respect of services rendered or moveable property
         supplied to him in the territory [of] the country by other taxable persons 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 or of the provision of services referred to in point 1(b) of Article 1 of this Directive.
         
      
      2. Member States may make the refunds referred to in paragraph 1 conditional upon the granting by third States of comparable
         advantages regarding turnover taxes. 
      
      3. Member States may require the appointment of a tax representative.’ 
       National legislation
      7       The sixth sentence of Paragraph 18(9) of the Umsatzsteuergesetz 1999 (German Law of 1999 on turnover tax; ‘the UStG’) reads
         as follows:
      
      ‘A trader not established in the territory of the Community shall be credited with input tax only if in the country in which
         the trader has his place of business no turnover tax or similar tax is levied or, if levied, only if it is credited to undertakings
         established in [German territory].’
      
       The main proceedings and the question for preliminary ruling
      8       ŘLP, which is established in the Czech Republic, is an undertaking providing services which is active in the flight security
         sector. Even though its activities are restricted to the territory of the Czech Republic, it is not only Czech citizens who
         are the recipients but equally also German citizens. Furthermore, ŘLP offers flying instruction sessions in the Czech Republic.
         For those purposes, however, it had recourse to flight simulator training and to other training courses provided in Germany.
         Following the imposition of VAT on the supply of those services in Germany, ŘLP applied for a refund of this tax in respect
         of the year 2002.
      
      9       The Bundesamt für Finanzen rejected that application on the ground that the conditions for application of the sixth sentence
         of Paragraph 18(9) of the UStG – and more particularly the reciprocity requirement – were not met in this case.
      
      10     Since the objection raised against that decision was also rejected, ŘLP brought an action before the Finanzgericht Köln.
      11     The national court notes that, during the relevant period, the Czech Republic levied a turnover tax but provided neither for
         the deduction of input tax paid nor for the refund of such tax to foreign traders. The national court therefore asks itself
         whether the applicant in the main proceedings should not have been exempted from that tax in the light of Article II(1) of
         the GATS. In this regard, it observes that the GATS is an agreement governed by international law which creates rights and
         obligations only as between its members. If an obligation deriving from the GATS is infringed, the agreement governing the
         settlement of disputes concluded in the framework of the World Trade Organisation is exclusively applicable.
      
      12     However, an agreement such as the GATS is binding on the institutions of the Community and on the Member States, in accordance
         with Article 300(7) EC, and forms an integral part of the Community legal order. Secondary Community law must therefore be
         interpreted in the light of that agreement and in particular of the most-favoured-nation clause contained in Article II(1).
      
      13     Since it considers that the decision in the main proceedings depends upon the compatibility of the UStG with Article 2(2)
         of the thirteenth directive, and given its doubts concerning the precise interpretation of that provision in the light of
         the GATS, the Finanzgericht Köln decided to stay the proceedings and to refer the following question to the Court for a preliminary
         ruling:
      
      ‘Is Article 2(2) of the thirteenth directive … to be interpreted restrictively as meaning that the possibility thereby afforded
         the Member States of making refunds of value added tax conditional on the granting by third States of comparable advantages
         regarding turnover taxes does not apply in the case of States which, as contracting parties [to the GATS] (BGBl. II 1994,
         p. 1473, …), may invoke the most-favoured-nation clause contained in that agreement (Art. II(1) GATS)?’
      
       The question referred for a preliminary ruling
      14     By its question, the national court seeks essentially to ascertain whether Article 2(2) of the thirteenth directive must be
         interpreted as meaning that the ‘third States’ referred to therein include the third States which may invoke the most-favoured-nation
         clause contained in Article II(1) of the GATS.
      
      15     In this respect, it must be admitted that, as observed by the Advocate General in point 59 of his Opinion, Article 2(2) of
         the thirteenth directive – in common with all the other provisions of that directive – clearly refers to all third States
         without any distinction. 
      
      16     As regards the influence which an international agreement to which the Community is party, such as the GATS, is capable of
         having on a provision of secondary law, it is settled case-law that the primacy of international agreements concluded by the
         Community over secondary Community legislation requires that the latter be interpreted, in so far as is possible, in conformity
         with those agreements (Case C-61/94 Commission v Germany [1996] ECR I-3989, paragraph 52; Case C‑286/02 Bellio F.lli [2004] ECR I-3465, paragraph 33; Case C-311/04 Algemene Scheeps Agentuur Dordrecht [2006] ECR I-609, paragraph 25; and Joined Cases C-447/05 and C-448/05 Thomson and Vestel France [2007] ECR I‑0000, paragraph 30).
      
      17     In the present case, however, it is sufficient to note that Article 2(2) of the thirteenth directive, in so far as it provides
         that Member States may make the refunds referred to in Article 2(1) conditional upon the granting by third States of comparable
         advantages, does not impose any obligation on Member States but merely allows them an option, without preventing them in any
         respect from complying with the obligations into which they may have entered under an international agreement such as the
         GATS.
      
      18     In fact, in so far as it leaves each Member State free to decide in respect of each third State whether it would be appropriate
         or not to impose a condition of reciprocity, Article 2(2) of the thirteenth directive enables Member States, to the extent
         to which they enter into agreements with certain third States which limit that discretion, to adapt their legislation so as
         to reflect those agreements.
      
      19     In those circumstances, the obligation to interpret secondary Community law, in so far as is possible, in conformity with
         international agreements concluded by the Community, does not require the expression ‘third States’ in Article 2(2) of the
         thirteenth directive to be interpreted restrictively so as to apply only to third States which cannot invoke the most-favoured-nation
         clause contained in Article II(1) of the GATS.
      
      20     At the same time, however, Article 2(2) of the thirteenth directive is without prejudice to the ability and the responsibility
         of the Member States to comply with their obligations under international agreements such as the GATS.
      
      21     Regard being had to all of the foregoing, it should be stated in reply to the question referred that Article 2(2) of the thirteenth
         directive must be interpreted as meaning that the ‘third States’ referred to in that provision include all third States and
         that that provision is without prejudice to the ability and the responsibility of the Member States to comply with their obligations
         under international agreements such as the GATS.
      
       Costs
      22     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 (First Chamber) hereby rules:
      Article 2(2) of Thirteenth Council Directive 86/560/EEC of 17 November 1986 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 Community
            territory must be interpreted as meaning that the ‘third States’ referred to in that provision include all third States and
            that that provision is without prejudice to the ability and the responsibility of the Member States to comply with their obligations
            under international agreements such as the General Agreement on Trade in Services.
      [Signatures]
      * Language of the case: German.