Aktiebolaget NN v Skatteverket.
Date: 2007-03-29
17. Aktiebolaget NN appealed against the interim decision to the Regeringsrätten (Supreme Administrative Court). It claims that the laying of the undersea cable at issue in the main proceedings constitutes a service relating to property in accordance with Chapter 5, Paragraph 4, of the ML and that, consequently, VAT is due only on services carried out on the Swedish mainland and in Swedish internal waters and territorial waters.
21. According to the Court’s case-law, where a transaction comprises a bundle of features and acts, regard must be had to all the circumstances in which the transaction in question takes place in order to determine, firstly, if there were two or more distinct supplies or one single supply and, secondly, whether, in the latter case, that single supply is to be regarded as a supply of services (see, to that effect, Case C‑231/94 Faaborg‑Gelting Linien  [1996] ECR I‑2395, paragraphs 12 to 14; Case C‑349/96 CPP  [1999] ECR I‑973, paragraph 28; and Case C‑41/04 Levob Verzekeringen and OV Bank  [2005] ECR I‑9433, paragraph 19).
22. Taking into account the two facts that, firstly, it follows from Article 2(1) of the Sixth Directive that every transaction must normally be regarded as distinct and independent and, secondly, a transaction which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system, the essential features of the transaction must in the first place be ascertained in order to determine whether the taxable person is making to the customer several distinct principal supplies or a single supply (see, to that effect, CPP , paragraph 29, and Levob Verzekeringen and OV Bank , paragraph 20).
23. In that regard, the Court has held that it is a single supply where two or more elements or acts supplied by the taxable person to the customer, being a typical consumer, are so closely linked that they form, objecti vely, a single, indivisible economic supply, which it would be artificial to split ( Levob Verzekeringen and OV Bank , paragraph 22).
25. It follows therefrom, firstly, that all the elements of the transaction at issue in the main proceedings appear to be necessary to its completion and, secondly, they are all closely linked. In those circumstances, it is not possible, without undue contrivance, to take the view that such a consumer will acquire, firstly, the fibre-optic cable and, subsequently, from the same supplier, the supply of services relating to the laying thereof (see, by analogy, Levob Verzekeringen and OV Bank , paragraph 24).
27. Next, in order to determine whether a single complex supply, such as that in the main proceedings, is to be classified as a supply of services, it is vital to identify the predominant elements of that supply (see, inter alia, Faaborg-Gelting Linien , paragraphs 12 and 14, and Levob Verzekeringen and OV Bank , paragraph 27).
28. It is clear from the case-law of the Court that, assuming that there is a single complex supply, a service must be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied (see, to that effect, Joined Cases C-308/96 and C-94/97 Madgett and Baldwin  [1998] ECR I-6229, paragraph 24, and CPP , paragraph 30).
31. In that regard, it must be recalled that, pursuant to Article 5(1) of the Sixth Directive, ‘“supply of goods” shall mean the transfer of the right to dispose of tangible property as owner’.
32. According to the case-law of the Court, it follows from the wording of that provision that the notion of supply of goods does not refer to the transfer of ownership in accordance with the procedures prescribed by the applicable national law but covers any transfer of tangible property by one party which empowers the other party actually to dispose of it as if he were the owner of the property. The purpose of the Sixth Directive might be jeopardised if the requirements for there to be a supply of goods, which is one of the three taxable transactions, were to differ according to the civil law of the Member State concerned (see, to that effect, Case C‑320/88 Shipping and Forwarding Enterprise Safe  [1990] ECR I‑285, paragraphs 7 and 8; Case C‑291/92 Armbrecht  [1995] ECR I‑2775, paragraphs 13 and 14; Case C‑185/01 Auto Lease Holland  [2003] ECR I‑1317, paragraphs 32 and 33; and Case C‑25/03 HE  [2005] ECR I‑3123, paragraph 64).
39. In that regard, even if it is essential that the cable be installed in order to be usable and even if, by reason in particular of the distance and difficulty of the terrain, the installation of the cable in the ground is, as is apparent from paragraph 29 of this judgment, a very complex operation requiring extensive equipment, it still does not follow that the supply of services predominates over the supply of the goods. It follows from the description of the clauses of the contract set out in the decision for reference that the work to be carried out by the supplier is limited to installation of the cable at issue in the main proceedings and neither its purpose nor its effect is to alter the nature of that cable or to adapt it to the specific requirements of the client (see, by analogy, Levob Verzekeringen and OV Bank , paragraphs 28 and 29).
43. As a preliminary point, it should be pointed out that Title VI of the Sixth Directive contains specific provisions for determination of the place of taxable transactions, namely Article 8 for supplies of goods and Article 9 for supplies of services. The objective pursued by those provisions within the context of the general scheme of the Sixth Directive, as the seventh recital in the preamble implies, is designed to secure the rational delimitation of the respective areas covered by national VAT rules by determining in a uniform manner the place where supplies of goods and supplies of services are deemed to be provided for tax purposes. The object of those provisions is also to avoid conflicts of jurisdiction which may result in double taxation or non-taxation (see, by analogy, Case 168/84 Berkholz  [1985] ECR 2251, paragraph 14; Case C‑452/03 RAL (Channel Islands) and Others  [2005] ECR I‑3947, paragraph 23; and Case C‑58/04 Köhler  [2005] ECR I‑8219, paragraph 22).
55. With regard to the scope of the Sixth Directive, the Court has held that the rules laid down in the Directive have binding and mandatory force throughout the national territory of the Member States (see, to that effect, Case 283/84 Trans Tirreno Express  [1986] ECR 231, paragraph 20).
58. Accordingly, a Member State is required to subject to VAT a supply of goods which takes place in its territorial sea, on the bed thereof and in its subsoil (see also, with regard to the supply of transport services, Case C‑331/94 Commission  v Greece  [1996] ECR I‑2675, paragraph 10).
59. However, the sovereignty of the coastal State over the exclusive economic zone and the continental shelf is merely functional and, as such, is limited to the right to exercise the activities of exploration and exploitation laid down in Articles 56 and 77 of the Convention on the Law of the Sea. To the extent that the supply and laying of an undersea cable is not included in the activities listed in those articles, that part of the operation carried out in those two zones is not within the sovereignty of the coastal State. That finding is confirmed by Articles 58(1) and 79(1) of the Convention, which permit, subject to certain conditions, any State to lay undersea cables in those zones.
60. It follows that that part of the transaction cannot be regarded as having been carried out in the territory of the country within the meaning of Article 2(1) of the Sixth Directive. The same is true, a fortiori, of that part of the transaction which is carried out at sea, a zone which, pursuant to Article 89 of the Convention on the Law of the Sea, is outside the sovereignty of any State (see also, in the area of supply of transport services, Case C‑30/89 Commission  v France  [1990] ECR I‑691, paragraph 17).