Kingscrest Associates Ltd and Montecello Ltd v Commissioners of Customs & Excise.
Date: 2005-05-26
22. In that regard, it should be observed that according to settled case-law the exemptions provided for in Article 13 of the Sixth Directive have their own independent meaning in Community law and they must therefore be given a Community definition (see Case C-358/97 Commission v Ireland [2000] ECR I‑6301, paragraph 51; Case C‑275/01 Sinclair Collis [2003] ECR I‑5965, paragraph 22; and Case C-284/03 Temco Europe [2004] ECR I-0000, paragraph 16).
23. That must also be true of the specific conditions laid down for those exemptions to apply and in particular of those concerning the status or identity of the economic agent performing the services covered by the exemption (Case C-453/93 Bulthuis-Griffioen [1995] ECR I-2341, paragraph 18).
24. As the Court has already held, although the introductory sentence of Article 13A(1) of the Sixth Directive states that Member States are to lay down the conditions for exemptions in order to ensure the correct and straightforward application of the exemptions and to prevent any possible evasion, avoidance or abuse, those conditions cannot affect the definition of the subject-matter of the exemptions envisaged (Case C‑287/00 Commission  v Germany  [2002] ECR I‑5811, paragraph 50).
25. From that point of view, whether a specific transaction is subject to or exempt from VAT cannot depend on its classification in national law (see Case C-76/99 Commission v France [2001] ECR I-249, paragraph 26, and Case C-315/00 Maierhofer [2003] ECR I-563, paragraph 26).
26. In addition, it follows from settled case-law that the need for a uniform interpretation of Community directives makes it impossible for the text of a provision to be considered, in case of doubt, in isolation; on the contrary, it requires that it be interpreted and applied in the light of the versions existing in the other official languages (Case C-296/95 EMU Tabac and Others [1998] ECR I‑1605, paragraph 36, and Case C‑321/96 Mecklenburg [1998] ECR I-3809, paragraph 29).
29. According to the Court’s case-law, the exemptions envisaged in 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 supplies of services for consideration by a taxable person (see, in particular, Commission v Germany , cited above, paragraph 43; Case C-8/01 Taksatorringen [2003] ECR I-13711, paragraph 36; and Temco Europe , cited above, paragraph 17). However, the interpretation of the terms used in that provision must be consistent with the objectives pursued by those exemptions and comply with the requirements of the principle of fiscal neutrality inherent in the common system of VAT (Case C‑45/01 Dornier [2003] ECR I-12911, paragraph 42).
30. In that regard, so far as concerns, first, the objectives pursued by the exemptions under Article 13A(1)(g) and (h) of the Sixth Directive, it is clear from that provision that those exemptions, by treating certain supplies of services in the general interest in the social sector more favourably for the purposes of VAT, are intended to reduce the cost of those services and to make them more accessible to the individuals who may benefit from them.
31. In the light of that objective, it must be observed, first, that the commercial nature of an activity does not preclude it from being, in the context of Article 13A of the Sixth Directive, an activity in the general interest (Case C-144/00 Hoffmann [2003] ECR I-2921, paragraph 38).
32. Secondly, the expression ‘organisations recognised as charitable’ in Article 13A(1)(g) and (h) of the Sixth Directive does not call for a particularly narrow construction (see, to that effect, Dornier , cited above, paragraph 48).
34. According to a literal interpretation of the wording of those other versions of Article 13A(1)(g) and (h) of the Sixth Directive, to be eligible for the exemption it is sufficient if two requirements are satisfied: first, that the supplies are connected either to welfare or social security work or to the protection of children or young persons, and secondly that such supplies are made by bodies governed by public law or other organisations recognised by the Member State concerned as essentially charitable.
35. The term ‘organisation’ is in principle sufficiently broad to include private profit-making entities (see, to that effect, Case C-216/97 Gregg [1999] ECR I-4947, paragraph 17, and Hoffmann , cited above, paragraph 24).
36. Thus the Court has already held, in respect of a private entity aiming to make a profit, that the expression ‘other organisations recognised as charitable by the Member State concerned’ in Article 13A(1)(g) of the Sixth Directive does not exclude from that exemption natural persons running a ‘business’ (see Gregg , cited above, paragraph 21).
37. Furthermore, as the Commission of the European Communities and the United Kingdom correctly argued, when the Community legislature intended to restrict the grant of the exemptions under Article 13A(1) of the Sixth Directive to certain non-profit-making or non-commercial entities, it said so expressly, as is clear from subparagraphs (l), (m) and (q) thereof.
38. Finally, it must be noted that the first indent of Article 13A(2)(a) of the Sixth Directive, which is an optional condition which Member States may also impose for the grant of certain exemptions mentioned in Article 13A(1) of that directive (see, to that effect, Case C-267/00 Zoological Society [2002] ECR I‑3353, paragraph 16), authorises, but does not oblige, the Member States to restrict entitlement to the exemptions under, inter alia, Article 13A(1)(g) and (h) to bodies other than public-law bodies which do not systematically seek to make profit ( Hoffmann , cited above, paragraph 38).
39. As the Court has already held, the condition set out in the first indent of Article 13A(2)(a) of the Sixth Directive concerning the absence of systematic profit-seeking essentially replicates the criterion of non-profit-making organisation as contained, particularly, in Article 13A(1)(m) thereof (Case C-174/00 Kennemer Golf  [2002] ECR I‑3293, paragraph 33).
40. In those circumstances, in order not to deprive the first indent of Article 13A(2)(a) of the Sixth Directive of all purpose, it must necessarily be accepted that, where the Community legislature, as in Article 13A(1)(g) and (h), has not expressly made entitlement to the exemptions in question subject to the absence of a profit-making aim, the pursuit of such an aim cannot preclude entitlement to those exemptions (see, to that effect, Kennemer Golf , paragraph 34, and Hoffmann , paragraph 38).
41. As regards, secondly, the principle of fiscal neutrality, it must be remembered that that principle precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, to that effect, Case C-141/00 Kügler [2002] ECR I‑6833, paragraph 30, and Case C‑109/02 Commission v Germany [2003] ECR I‑12691, paragraph 20).
46. In that regard, it must be pointed out that, at the hearing, the appellants in the main proceedings themselves accepted that the pursuit of a profit-making aim, whilst it may be a relevant criterion to be taken into account in determining whether an organisation is charitable within the meaning of that provision, by no means precludes it altogether from being charitable.
47. The answer to the second question must therefore be that the meaning of ‘organisations recognised as charitable by the Member State concerned’ in Article 13A(1)(g) and (h) of the Sixth Directive does not exclude private profit-making entities.
The third question
48. By its third question, the national court asks, in essence, whether the Member States have a discretion to recognise a private profit-making entity which does not have charitable status under domestic law as ‘charitable’ within the meaning of Article 13A(1)(g) and (h) of the Sixth Directive.
49. In that regard, it must be stated at the outset that Article 13A(1)(g) and (h) of the Sixth Directive do not specify the conditions and procedures for recognising organisations other than those governed by public law as charitable. It is thus in principle for the national law of each Member State to lay down the rules according to which such recognition may be granted to such organisations (see, to that effect, Dornier , cited above, paragraph 64).
50. The adoption of national rules in this area is, moreover, provided for in Article 13A(2)(a) of the Sixth Directive, under which ‘the Member States may make the granting to bodies other than those governed by public law of each exemption provided for in (1) … (g), (h), … subject in each individual case to one … of the conditions’ referred to later therein (see, to that effect, Dornier , cited above, paragraph 65).
51. It follows therefore that Article 13A(1)(g) and (h) of the Sixth Directive grant the Member States, as the Court has already held as regards the first of those provisions (see Kügler , cited above, paragraph 54), a discretion to recognise as charitable certain organisations not governed by public law.
52. However, it is also clear from the case-law that where a taxable person challenges the recognition of an organisation as charitable it is for the national courts to examine whether the competent authorities have observed the limits of the discretion granted by Article 13A(1)(g) and (h) of the Sixth Directive in applying Community principles, in particular the principle of equal treatment (see, to that effect, Kügler , paragraph 56, and Dornier , paragraph 69).
53. In that regard, it follows from the case-law that it is for the national authorities, in accordance with Community law and subject to review by the national courts, to take into account, in particular, the existence of specific provisions, be they national or regional, legislative or administrative, or tax or social security provisions, the general interest of the activities of the taxable person concerned, the fact that other taxable persons carrying on the same activities already have similar recognition, and the fact that the costs of the supplies in question may be largely met by health insurance schemes or other social security bodies (see Kügler , paragraphs 57 and 58, and Dornier , paragraph 72).
54. In addition, it must be recalled that the principle of fiscal neutrality precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, to that effect, Kügler , paragraph 30, and Commission v Germany , paragraph 20).