Régie dauphinoise - Cabinet A. Forest SARL v Ministre du Budget.
Date: 1996-07-11
3 Article 17 of the Sixth Directive governs the right to deduct. Article 17(2) provides that the taxable person is entitled to deduct only "in so far as the goods and services are used for the purposes of his taxable transactions". As regards goods and services to be used by a taxable person both for transactions in respect of which value added tax is deductible and transactions in respect of which value added tax is not deductible, Article 17(5) provides that only such proportion of the tax shall be deductible as is attributable to the taxable transactions.
4 Article 19 lays down the following rules for calculating that proportion. Paragraph 2 of that article provides:
"By way of derogation from the provisions of paragraph 1, there shall be excluded from the calculation of the deductible proportion, amounts of turnover attributable to the supplies of capital goods used by the taxable person for the purposes of his business. Amounts of turnover attributable to transactions specified in Article 13B(d), in so far as these are incidental transactions, ... shall also be excluded."
15 It follows from Article 2 of the Sixth Directive, which defines the scope of VAT, that only activities of an economic nature are subject to that tax. Under Article 4(1) a taxable person is any person who independently carries out one of those economic activities. The concept of "economic activities" is defined in Article 4(2) as comprising all activities of producers, traders and persons supplying services, and in particular the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis. Finally, it follows from Article 2(1) that a taxable person must be acting "as such" if a transaction is to be subject to value added tax.
16 In the present case, as has already been observed in paragraph 6 of this judgment, Régie becomes owner of the sums entrusted to it by the co-owners and lessees for whom it manages the properties, even though it remains under obligation to repay. Moreover, the constant renewal of treasury placements ensures that the balance in the bank accounts held by Régie is relatively stable. Its placements with financial institutions may therefore be regarded as services supplied to those institutions, consisting in the loan of money for a fixed period, duly remunerated by the payment of interest.
17 Unlike the receipt of dividends by a holding company, in respect of which, in Case C-333/91 Sofitam [1993] I-3513, paragraph 13, the Court held that, not being consideration for an economic activity, it did not fall within the scope of VAT, interest received by a property management company on placements made for its own account of sums paid by co-owners or lessees cannot be excluded from the scope of VAT, since the interest does not arise simply from ownership of the asset, but is the consideration for placing capital at the disposition of a third party.
18 It is true that services such as placements made with banks by the manager of a condominium would not be subject to value added tax if supplied by a person not acting as a taxable person. However, in the case at issue in the main proceedings, the receipt, by such a manager, of interest resulting from the placements of monies received from clients in the course of managing their properties constitutes the direct, permanent and necessary extension of the taxable activity, so that the manager is acting as a taxable person in making such an investment.
19 To the extent that Régie' s placements with financial institutions are to be regarded as services falling within the scope of VAT, those placements are exempt by virtue of Article 13B(d)(1) and (3) of the Sixth Directive.
21 The purpose of excluding incidental financial transactions from the denominator of the fraction used to calculate the deductible proportion in accordance with Article 19 of the Sixth Directive is to comply with the objective of complete neutrality guaranteed by the common system of VAT. As the Advocate General has observed at point 39 of his Opinion, if all receipts from a taxable person' s financial transactions linked to a taxable activity were to be included in that denominator, even where the creation of such receipts did not entail the use of goods or services subject to VAT or, at least, entailed only their very limited use, calculation of the deduction would be distorted.
22 However, placements by property management companies are the consequence of advances to them by co-owners and lessees for whom they manage their properties. With the consent of their clients, those companies are able to place these monies for their own account with financial institutions. That is why, as the Court has pointed out at paragraph 18 of this judgment, the receipt of interest from those placements constitutes the direct, permanent and necessary extension of the taxable activity of property management companies. Such placements cannot therefore be characterized as incidental financial transactions within the meaning of Article 19(2) of the Sixth Directive. To take them into account in order to calculate the deductible proportion would not be such as to affect the neutrality of the system of value added tax.