Ainārs Rēdlihs v Valsts ieņēmumu dienests.
Date: 2012-07-19
24. As regards the substance, it must first of all be pointed out that, under the VAT Directive, as under the Sixth Directive, the scope of VAT is very wide in that Article 2 of the former, which concerns taxable transactions, refers not only to the importation of goods but also to the supply of goods or services for consideration within the territory of the country by a taxable person acting as such (see Case C-86/09 Future Health Technologies  [2010] ECR I-5215, paragraph 25 and the case-law cited).
28. As regards, secondly, the concept of ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive, it is settled case-law that that term is objective in character, in the sense that the activity is considered per se  and without regard to its purpose or results (see, to that effect, Case C-223/03 University of Huddersfield  [2006] ECR I-1751, paragraphs 47 and 48 and the case-law cited).
32. It follows that transactions such as those at issue in the main proceedings must be regarded as ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive if they are effected for the purpose of obtaining income therefrom on a continuing basis (see, by analogy, Case C-230/94 Enkler  [1996] ECR I-4517, paragraph 22).
33. The issue of whether the activity at issue, namely the exploitation of a private forest, is designed to obtain income on a continuing basis is an issue of fact which must be assessed having regard to all the circumstances of the case, which include, inter alia, the nature of the property concerned (see, to that effect, Enkler , paragraphs 24 and 26).
34. That criterion must make it possible to determine whether an individual has used property in such a way that his activity is to be regarded as ‘economic activity’ within the meaning of the VAT Directive. The fact that property is suitable only for economic exploitation will normally be sufficient for a finding that its owner is exploiting it for the purposes of economic activities and, consequently, for the purpose of obtaining income on a continuing basis. On the other hand, if, by reason of its nature, property is capable of being used for both economic and private purposes, all the circumstances in which it is used will have to be examined in order to determine whether it is actually being used for the purpose of obtaining income on a continuing basis ( Enkler , paragraph 27).
35. In the latter case, comparing the circumstances in which the person concerned actually uses the property with the circumstances in which the corresponding economic activity is usually carried out may be one way of ascertaining whether the activity concerned is carried on for the purpose of obtaining income on a continuing basis ( Enkler , paragraph 28).
36. Thus, where the person concerned takes active steps in forestry management by mobilising resources similar to those deployed by a producer, a trader or a person supplying services within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, the activity at issue in the main proceedings must be regarded as an ‘economic activity’ within the meaning of that provision (see, to that effect, Joined Cases C-180/10 and C-181/10 Słaby and Others  [2011] ECR I-8461, paragraph 39).
38. Although criteria based on the results of the activity in question cannot in themselves make it possible to determine whether the activity is carried on for the purpose of obtaining income on a continuing basis, the actual length of the period over which the supplies at issue in the main proceedings took place, the number of customers and the amount of earnings are also factors which, forming part of the circumstances of the case as a whole, may be taken into account, with others, when that question is under consideration (see Enkler , paragraph 29).
39. It is, furthermore, necessary to state that the fact that the applicant in the main proceedings acquired the tangible property in issue to meet his own personal needs, as is suggested by the wording of the first question in the reference, does not preclude that property from being subsequently used for the purposes of the exercise of an ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive. The question as to whether an individual, in a given case, has acquired property for the needs of his economic activities or for his own needs arises when that individual requests the right to deduct the input VAT paid in respect of the acquisition of that property (see, by analogy, Case C-415/98 Bakcsi  [2001] ECR I-1831, paragraph 29). Such an issue does not, however, arise in the case in the main proceedings.
44. That directive does not expressly provide for a system of penalties in the event of infringement of the obligations in Article 213(1) thereof. It is settled case-law that, in the absence of harmonisation of European Union legislation in the field of penalties applicable in cases where conditions laid down by arrangements under that legislation are not complied with, Member States are empowered to choose the penalties which seem to them to be appropriate. They must, however, exercise that power in accordance with European Union law and its general principles, and consequently with the principle of proportionality (see Case 68/88 Commission  v Greece  [1989] ECR 2965, paragraph 23; Case C-210/91 Commission  v Greece  [1992] ECR I-6735, paragraph 19; and Case C-36/94 Siesse  [1995] ECR I-3573, paragraph 21).
45. It is therefore legitimate for the Member States, in order to ensure the correct levying and collection of the tax and to prevent fraud, to provide in their respective provisions of national law for appropriate penalties to sanction the failure to observe the obligation to register in the register of taxable persons for VAT purposes.
46. Such penalties must not, however, go further than is necessary to attain those objectives (see, to that effect, Joined Cases C-95/07 and C-96/07 Ecotrade  [2008] ECR I-3457, paragraphs 65 to 67, and Case C-284/11 EMS-Bulgaria Transport  [2012] ECR, paragraph 67).
47. In order to assess whether the penalty here at issue is consistent with the principle of proportionality, the nature and the degree of seriousness of the infringement which that penalty seeks to sanction must, inter alia, be taken into account, as must also the means of establishing the amount of that penalty.
48. As regards, first, the nature and seriousness of the infringement which the penalty at issue seeks to sanction, it is important to point out that that penalty is intended to sanction solely the failure to comply with the obligation to register in the register of taxable persons for VAT purposes. The Court has had the opportunity to state, in this regard, that the obligations set out in Article 213 of the VAT Directive, of which the obligation for the taxable person to declare the commencement of his activity as a taxable person is one, constitute only a formal requirement for the purposes of verification (see, to that effect, Case C-385/09 Nidera Handelscompagnie  [2010] ECR I-10385, paragraph 50).
50. With regard, secondly, to the means of establishing the amount of the penalty at issue, it is important to note that this constitutes a fixed percentage, set at a level equal to that of the tax payable on the supplies effected, even if the object of that penalty is not the recovery of the tax, as stated in the previous paragraph.
52. In the present case, it is possible that the procedure for establishing the amount of the penalty may go further than is necessary to attain the objectives set out in paragraph 45 of this judgment.
54. It is for the national court to determine whether the amount of the penalty does not go further than is necessary to attain the objectives of ensuring the correct levying and collection of the tax and the prevention of fraud, having regard to the facts of the case and, inter alia, the sum actually imposed and the possible existence of fraud or circumvention of the applicable legislation attributable to the taxable person whose failure to register is being penalised.
59. It must be pointed out, in this regard, that it is only quite exceptionally that the Court may, in application of the general principle of legal certainty inherent in the European Union legal order, be moved to restrict for any person concerned the opportunity of relying on a provision or a principle which it has interpreted with a view to calling into question legal relationships established in good faith. Two essential criteria must be fulfilled before such a limitation can be imposed, namely that those concerned should have acted in good faith and that there should be a risk of serious difficulties (see, inter alia, Case C-402/03 Skov and Bilka  [2006] ECR I-199, paragraph 51; Case C-313/05 Brzeziński  [2007] ECR I-513, paragraph 56 and the case-law cited; and Case C-2/09 Kalinchev  [2010] ECR I-4939, paragraph 50).
60. More specifically, the Court has taken that step only in quite specific circumstances, where there was a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force and where it appeared that individuals and national authorities had been led to adopt practices which did not comply with European Union legislation by reason of objective, significant uncertainty regarding the implications of European Union provisions or principles, to which the conduct of other Member States or the European Commission may even have contributed (see, inter alia, Case C-423/04 Richards  [2006] ECR I-3585, paragraph 42; Brzeziński , paragraph 57; and Kalinchev , paragraph 51).
61. It is also settled case-law that the financial consequences which might ensue for a Member State from a preliminary ruling do not in themselves justify limiting the temporal effects of the ruling (Case C-184/99 Grzelczyk  [2001] ECR I-6193, paragraph 52; Case C-209/03 Bidar  [2005] ECR I-2119, paragraph 68; Brzeziński , paragraph 58; and Kalinchev , paragraph 52).