Skatteverket v AB SKF.
Date: 2009-10-29
27. It must be recalled, at the outset, that it is clear from Article 2 of the Sixth Directive and from Article 2(1) of Directive 2006/112, in which the scope of VAT is defined, that, within a Member State, only activities of an economic nature are subject to VAT. Under Article 4(1) of the Sixth Directive and Article 9 of Directive 2006/112, ‘taxable person’ means any person who independently carries out such an economic activity. Economic activities are defined in Article 4(2) of the Sixth Directive as encompassing all activities of producers, traders and persons supplying services, including the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis.
28. According to settled case-law, the mere acquisition, holding and sale of shares do not, in themselves, constitute economic activities within the meaning of the Sixth Directive (see, inter alia, Case C‑77/01 EDM  [2004] ECR I‑4295, paragraph 59, and Case C‑435/05 Investrand  [2007] ECR I‑1315, paragraph 25 and the case-law there cited). Those transactions cannot amount to exploitation of an asset intended to produce revenue on a continuing basis, as the only consideration for those transactions consists of a possible profit on the sale of those shares (see, to that effect, EDM , paragraph 58).
29. The Court has stated that only payments which are the consideration for a transaction or an economic activity come within the scope of VAT and that such is not the case in respect of payments which arise simply from ownership of the asset, as in the case of dividends or other yields from a shareholding (see, to that effect, Case C‑333/91 Sofitam  [1993] ECR I‑3513, paragraph 13; Case C‑80/95 Harnas & Helm  [1997] ECR I‑745, paragraph 15; and EDM , paragraph 49).
30. However, the Court has held that the position is otherwise where a financial holding in another company is accompanied by direct or indirect involvement in the management of the company in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder (see Case C‑60/90 Polysar Investments Netherlands  [1991] ECR I‑3111, paragraph 14; Case C‑142/99 Floridienne and Berginvest  [2000] ECR I‑9567, paragraph 18; the order in Case C‑102/00 Welthgrove  [2001] ECR I‑5679, paragraph 15; and Case C‑16/00 Cibo Participations  [2001] ECR I‑6663, paragraph 20), in so far as involvement of that kind entails carrying out transactions which are subject to VAT by virtue of Article 2 of the Sixth Directive, such as the supply of administrative, accounting and information-technology services ( Floridienne and Berginvest , paragraph 19; order in Welthgrove , paragraph 16; Cibo Participations , paragraph 21; and Case C‑305/01 MKG-Kraftfahrzeuge-Factoring  [2003] ECR I‑6729, paragraph 46).
31. Moreover, it is clear from the Court’s case-law that transactions relating to shares or holdings in a company are subject to VAT when they are carried out as part of a commercial share-dealing activity or in order to secure a direct or indirect involvement in the management of the companies in which the holding has been acquired, or where they constitute the direct, permanent and necessary extension of the taxable activity (see, inter alia, Case C‑155/94 Wellcome Trust  [1996] ECR I‑3013, paragraph 35, and Harnas & Helm , paragraph 16 and the case-law there cited).
32. In the present case, it is clear from the order for reference that SKF, as the parent company of an industrial group, was involved in the management of the subsidiary and the controlled company by supplying to them, for consideration, a variety of administrative, accounting and marketing services, in respect of which it was liable to pay VAT.
33. By the disposal of all its shares in the subsidiary and in the controlled company, SKF brought to an end its holdings in those companies. That disposal, carried out in order to enable the parent company to restructure a group of companies, can be regarded as a transaction that consists in obtaining income on a continuing basis from activities which go beyond the compass of the simple sale of shares (see, to that effect, Case C‑465/03 Kretztechnik  [2005] ECR I‑4357, paragraph 20, and the case-law there cited). That transaction has a direct link with the organisation of the activity carried out by the group and constitutes accordingly the direct, permanent and necessary extension of the taxable activity of the taxable person within the terms of the case-law cited in paragraph 31 of this judgment. Such a transaction consequently comes within the scope of VAT.
34. As stated by the Advocate General in point 34 of his Opinion, that finding is also consistent with the principles of equal treatment and tax neutrality, which require that the Court’s recognition of the economic nature of the acquisition of holdings accompanied by an involvement by the parent company in the management of its subsidiaries and of companies controlled by it should be extended to the disposals of holdings which bring about the end of such involvement (see, by way of analogy, Wellcome Trust , paragraph 33, and Kretztechnik , paragraph 19).
36. In that regard, it must be observed that the first sentence of Article 5(8) of the Sixth Directive and of the first paragraph of Article 19 of Directive 2006/112 provide 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, when 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. Under Article 2 of that directive, such a transfer is therefore not subject to VAT (see Case C‑408/98 Abbey National  [2001] ECR I‑1361, paragraph 30, and Case C‑497/01 Zita Modes  [2003] ECR I‑14393, paragraph 29).
37. Furthermore, the concept of a ‘transfer … of a totality of assets or part thereof’ has been interpreted by the Court as covering the transfer of a business or 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 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 products (see Zita Modes , paragraph 40).
39. In such circumstances, the Court must take account, under the division of jurisdiction between the Community Courts and the national courts, of the factual and legislative context in which the questions put to it are set, as described in the order for reference (see, inter alia, Joined Cases C‑482/01 and C‑493/01 Orfanopoulos and Oliveri  [2004] ECR I‑5257, paragraph 42; Case C‑341/05 Laval un Partneri  [2007] ECR I‑11767, paragraph 47; and Case C‑244/06 Dynamic Medien  [2008] ECR I‑505, paragraph 19).
46. While, admittedly, it is true that the terms used to specify the exemptions provided for by Article 13 of the Sixth Directive are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, inter alia, MKG-Kraftfahrzeuge-Factoring , paragraph 63, and Case C‑455/05 Velvet & Steel Immobilien  [2007] ECR I‑3225, paragraph 14), the interpretation proposed by the Commission would nevertheless restrict the exemption in question in a manner which is not justified by the relevant wording. The term ‘transactions … in shares’ referred to in Article 13B(d)(5) of the Sixth Directive and Article 135(1)(f) of Directive 2006/112 is broad enough not to be restricted to the business of trading in shares.
47. If the interpretation advocated by the Commission were to be accepted, transactions which were substantively identical would be treated differently for the purposes of levying VAT depending on whether or not they were part of the taxable person’s normal and usual business. Such a practice would be contrary to the VAT system’s objectives of ensuring legal certainty and facilitating application of the tax by having regard, save in exceptional cases, to the objective character of the transaction in question (see, to that effect, Case C‑4/94 BLP Group  [1995] ECR I‑983, paragraph 24).
48. With regard to the scope of that exemption, the Court has held that transactions in shares and other securities are transactions on the market in marketable securities and that trade in securities involves acts which alter the legal and financial situation as between the parties (see, to that effect, Case C‑2/95 SDC  [1997] ECR I‑3017, paragraphs 72 and 73). The words ‘transactions … in securities’ within the meaning of Article 13B(d)(5) of the Sixth Directive refer, therefore, to transactions which are liable to create, alter or extinguish parties’ rights and obligations in respect of securities (Case C‑235/00 CSC Financial Services  [2001] ECR I‑10237, paragraph 33).
49. It follows that administrative, material or technical services and activities involving the supply of financial information which do not alter the legal and financial position of the parties are not covered by the exemption laid down in Article 13B(d)(5) of the Sixth Directive (see SDC , paragraph 66, and CSC Financial Services , paragraphs 28 and 30).
51. That interpretation is supported by the Court’s settled case-law, which states that among the transactions which do come within the scope of the Sixth Directive, but are exempted from VAT under Article 13B(d)(5) of that directive, are transactions in shares, interests in companies or associations, debentures and other securities that consist in obtaining income on a continuing basis from activities which go beyond the compass of the simple acquisition and sale of securities (see, inter alia, Kretztechnik , paragraph 20). As has been stated in paragraph 31 of this judgment, that also applies to transactions carried out as part of a commercial share-dealing activity or in order to secure a direct or indirect involvement in the management of the companies in which the holding has been acquired, or where they constitute the direct, permanent and necessary extension of the taxable activity (see, inter alia, Harnas & Helm , paragraph 16 and the case-law there cited, and EDM , paragraph 59).
55. First, it should be recalled that the right of deduction provided for in Articles 17 to 20 of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. The right to deduct is exercisable immediately in respect of all the taxes charged on input transactions (see, inter alia, Kretztechnik , paragraph 33; Case C‑437/06 Securenta  [2008] ECR I‑1597, paragraph 24; and Case C‑102/08 SALIX Grundstücks-Vermietungsgesellschaft  [2009] ECR I‑0000, paragraph 70).
56. The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see, inter alia, Case C‑137/02 Faxworld  [2004] ECR I‑5547, paragraph 37; Investrand , paragraph 22; Securenta , paragraph 25; and SALIX Grundstücks-Vermietungsgesellschaft , paragraph 71).
57. According to settled case-law, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to entitlement to deduct is, in principle, necessary before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement (see Case C‑98/98 Midland Bank  [2000] ECR I‑4177, paragraph 24; Abbey National , paragraph 26; and Investrand , paragraph 23). The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see Cibo Participations , paragraph 31; Kretztechnik , paragraph 35; Investrand , paragraph 23; and Securenta , paragraph 27).
58. It is, however, also accepted that a taxable person has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct, where the costs of the services in question are part of his general costs and are, as such, components of the price of the goods or services which he supplies. Such costs do have a direct and immediate link with the taxable person’s economic activity as a whole (see, inter alia, Midland Bank , paragraphs 23 and 31; Abbey National , paragraph 35; Kretztechnik , paragraph 36; and Investrand , paragraph 24).
59. On the other hand, where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (see, to that effect, Case C‑184/04 Uudenkaupungin kaupunki  [2006] ECR I‑3039, paragraph 24; Case C‑72/05 Wollny  [2006] ECR I‑8297, paragraph 20; and Case C‑515/07 Vereniging Noordelijke Land- en Tuinbouw Organisatie  [2009] ECR I‑0000, paragraph 28).
60. It follows that whether there is a right to deduct is determined by the nature of the output transactions to which the input transactions are assigned. Accordingly, there is a right to deduct when the input transaction subject to VAT has a direct and immediate link with one or more output transactions giving rise to the right to deduct. If that is not the case, it is necessary to examine whether the costs incurred to acquire the input goods or services are part of the general costs linked to the taxable person’s overall economic activity. In either case, whether there is a direct and immediate link will depend on whether the cost of the input services is incorpo rated either in the cost of particular output transactions or in the cost of goods or services supplied by the taxable person as part of his economic activities.
63. However, in proceedings brought under Article 234 EC, since the Court has no jurisdiction to assess or characterise the factual circumstances which gave rise to the questions referred for a preliminary ruling, it is for the referring court to apply the direct and immediate-link test to the facts of the case in the main proceedings and to take account of all the circumstances surrounding the transactions at issue (see, to that effect, Midland Bank , paragraph 25).
64. In order to give a useful answer to the referring court, it must be recalled that the Court has held, on numerous occasions, that there is a right to deduct VAT paid on consultancy services used for the purposes of various financial transactions, on the ground that those services were directly attributable to the economic activities of the taxable persons (see, inter alia, Midland Bank , paragraph 31; Abbey National , paragraphs 35 and 36; Cibo Participations , paragraphs 33 and 35; Kretztechnik , paragraph 36; and Securenta , paragraphs 29 and 31).
67. In that regard, the Court has ruled that the principle of fiscal neutrality, which is a fundamental principle of the common system of VAT, precludes treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, inter alia, Case C‑498/03 Kingscrest Associates and Montecello  [2005] ECR I‑4427, paragraph 41; Case C‑246/04 Turn- und Sportunion Waldburg  [2006] ECR I‑589, paragraph 33; and Case C‑409/04 Teleos and Others  [2007] ECR I‑7797, paragraph 59) and, further, precludes economic operators who carry out the same activities from being treated differently as far as the levying of VAT is concerned (see, inter alia, Case C‑216/97 Gregg  [1999] ECR I‑4947, paragraph 20, and Case C‑288/07 Isle of Wight Council and Others  [2008] ECR I‑7203, paragraph 42).
69. That interpretation is borne out by the purpose of the common system introduced by the Sixth Directive, which is, in particular, to secure equal treatment for taxable persons (see, inter alia, Case C‑281/91 Muys’ en De Winter’s Bouw- en Aannemingsbedrijf  [1993] ECR I‑5405, paragraph 14). That principle would be disregarded if the costs incurred by a parent company managing a group of companies in connection with a sale of shares which is part of its economic activity were to be taxable, while a holding company which carries out the same transaction outside the scope of VAT would be entitled to deduct VAT paid on the same costs by reason of the fact that those costs form part of the general costs of its overall economic activity.
70. Any other interpretation would burden the trader with the cost of VAT in the course of his economic activity without giving him the possibility of deducting it (see, to that effect, Joined Cases C‑110/98 to C‑147/98 Gabalfrisa and Others  [2000] ECR I‑1577, paragraph 45, and Abbey National , paragraph 35).
72. It must, lastly, be stated that there is a right to deduct input VAT in respect of services carried out in connection with financial transactions if the capital acquired by means of those transactions is used in connection with the economic activities of the person concerned. Furthermore, the costs associated with input services have a direct and immediate link to the taxable person’s economic activities in circumstances where they are solely attributable to downstream economic activities and consequently are among only the cost components of transactions within the scope of those activities (see Securenta , paragraphs 28 and 29).
75. In that regard, it is clear from the Court’s case-law that an economic activity within the meaning of the Sixth Directive need not consist of a single act but may consist of a series of consecutive acts (see Case 268/83 Rompelman  [1985] ECR 655, paragraph 22, and Case C‑32/03 Fini H  [2005] ECR I‑1599, paragraph 21).
77. As regards the principle of legal certainty, the Court has stated on numerous occasions that Community legislation must be certain and its application foreseeable by those subject to it (see, inter alia, Case C‑301/97 Netherlands  v Council  [2001] ECR I‑8853, paragraph 43, and Case C‑255/02 Halifax and Others  [2006] ECR I‑1609, paragraph 72). That requirement of legal certainty must be observed all the more strictly in the case of rules which are liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which those rules impose on them (see Teleos and Others , paragraph 48, and Isle of Wight Council and Others , paragraph 47).