Zita Modes Sàrl v Administration de l'enregistrement et des domaines.
Date: 2003-11-27
29. The first sentence of Article 5(8) of the Sixth Directive provides 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 made use of 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 thus not subject to VAT (see  Abbey National , cited above, paragraph 30).
30. Under the second sentence of Article 5(8) of the Sixth Directive the Member States may exclude from the application of the no-supply rule transfers of a totality of assets in favour of a transferee who is not a taxable person within the meaning of that directive or who acts as a taxable person only in relation to part of his activities, if this is necessary to prevent distortion of competition. This provision should be regarded as exhaustive in relation to the conditions under which a Member State which makes use of the option laid down in the first sentence of this paragraph may limit the application of the no-supply rule.
32. This interpretation is consistent with the purpose of the Sixth Directive, which is to determine the basis of VAT in a uniform manner according to Community rules (see Case C-400/98  Breitsohl  [2000] ECR I-4321, paragraph 48). Like all the exemptions provided for in Article 13 of the Sixth Directive, the no-supply rule laid down in Article 5(8) constitutes an independent concept of Community law whose purpose is to prevent divergences in the application of the VAT system from one Member State to another (see, in relation to exemptions, Case 348/87  Stichting Uitvoering Financiële Acties  [1989] ECR 1737, paragraph 11, and Case C-287/00  Commission  v  Germany  [2002] ECR I-5811, paragraph 44).
33. As to the assets transferred and the use made of those assets by the transferee after the transfer, firstly, the Sixth Directive does not include any definition of   " a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof" .
34. However, according to settled case-law, the need for uniform application of Community law and the principle of equality require that the terms of a provision of Community law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Community; that interpretation must take into account the context of the provision and the purpose of the legislation in question (see, in particular, Case 327/82  Ekro  [1984] ECR 107, paragraph 11, Case C-287/98  Linster  [2000] ECR I-6917, paragraph 43, Case C-357/98  Yiadom  [2000] ECR I-9265, paragraph 26, and Case C-373/00  Adolf Truley  [2003] ECR I-1931, paragraph 35).
35. It is undisputed that Article 5(8) of the Sixth Directive makes no express reference to the law of the Member States for the purpose of determining the meaning and scope of the concept of a transfer of a totality of assets or part thereof.
37. As for the purpose of the Sixth Directive, it should be borne in mind that, on the one hand, according to the fundamental principle which underlies the common VAT system and which follows from Article 2 of First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967, p. 14), and from the Sixth Directive, VAT applies to each transaction by way of production or distribution after deduction of the VAT directly borne by the various cost components (Case C-98/98  Midland Bank  [2000] ECR I-4177, paragraph 29, and  Abbey National , cited above, paragraph 27).
38. On the other hand, the deduction system is meant 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, to that effect, Case 268/83  Rompelman   [1985] ECR 655, paragraph 19; Case C-37/95  Belgian State  v  Ghent Coal Terminal  [1998] ECR I-1, paragraph 15; Joined Cases C-110/98 to C-147/98  Gabalfrisa and Others  [2000] ECR I-1577, paragraph 44;  Midland Bank , cited above, paragraph 19, and  Abbey National,  cited above, paragraph 24).
39. The context of Article 5(8) and the purpose of the Sixth Directive, as set out in paragraphs 36 to 38 of this judgment, make it clear that that provision is intended to enable the Member States to facilitate transfers of undertakings or parts of undertakings by simplifying them and preventing overburdening the resources of the transferee with a disproportionate charge to tax which would in any event ultimately be recovered by deduction of the input VAT paid.
40. Having regard to this purpose, the concept of   " a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof"  must be interpreted as meaning that it covers 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.
41. As the Advocate General correctly noted at paragraph 39 of his Opinion, special treatment is justified in these circumstances in particular because the amount of VAT to be advanced on the transfer is likely to be particularly large in relation to the resources of the business concerned.
43. As regards the fact that Article 5(8) provides that the transferee is to be treated as the successor to the transferor, it follows from the wording of that paragraph, as the Commission correctly point s out, that the succession does not constitute a condition for the application of the paragraph, but is merely a result of the fact that no supply is considered to have taken place.
44. However, it is apparent from the purpose of Article 5(8) of the Sixth Directive and from the interpretation of the concept of   " a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof"  which flows from it, as set out in paragraph 40 of this judgment, that the transfers referred to in that provision are those in which the transferee intends to operate the business or the part of the undertaking transferred and not simply to immediately liquidate the activity concerned and sell the stock, if any.
50. Moreover, as the Court has held in relation to exemption for insurance transactions (see  CPP , cited above, paragraphs 35 and 36), a Member State may not restrict the scope of the no-supply rule laid down in Article 5(8) of the Sixth Directive to transactions carried out by traders who are authorised by national law to pursue the activity in question.