Staatssecretaris van Financiën v Gemeente Vlaardingen.
Date: 2012-11-08
25. Article 5(7)(a) of the Sixth Directive concerned situations in which the mechanism for deduction provided for, by way of a general rule, under the Sixth Directive could not apply. In so far as goods are used for the purposes of an economic activity which is subject to output tax, it is necessary to deduct the input tax on those goods in order to avoid double taxation. On the other hand, where goods acquired by a taxable person are used for the purposes of transactions which are exempt, no input tax can be deducted (see, inter alia, Case C‑184/04 Uudenkaupungin kaupunki  [2006] ECR I‑3039, paragraph 24; Case C‑515/07 Vereniging Noordelijke Land- en Tuinbouw Organisatie  [2009] ECR I‑839, paragraph 28; and Case C‑118/11 Eon Aset Menidjmunt  [2012] ECR, paragraph 44). As the Netherlands Government and the Commission pointed out, one of the situations concerned by Article 5(7)(a) of the Sixth Directive was that in which no deduction can be made, from the output VAT charged, of an amount paid by way of input VAT, since the output economic activity was exempt from VAT.
26. In particular, as the Advocate General pointed out in point 45 of his Opinion, Article 5(7)(a) of the Sixth Directive allowed Member States to develop their tax law in such a way that businesses which, owing to the fact that they are engaged in an activity which is exempt from VAT, cannot deduct the VAT that they have paid on acquiring their business goods are not placed at a disadvantage as compared with competitors engaged in the same activity who use goods which they have obtained without paying VAT, by producing the goods themselves or, more generally, by obtaining them ‘in the course of [their] business’. In order to make those competitors subject to the same tax burden as businesses which have acquired their goods from a third party, Article 5(7)(a) of the Sixth Directive gave Member States the option of treating the application, for the purposes of the exempt activities of the business, of goods obtained in the course of business as a supply of goods made for consideration within the meaning of Article 2(1) and Article 5(1) of the Sixth Directive, and of making that application subject to VAT.
27. In order for it to be possible for that option, which was reproduced in Article 18 of Directive 2006/112, to be used in a way which truly eliminates all inequalities, in relation to VAT, between taxable persons who have acquired their goods from another taxable person and those who have acquired them in the course of their business, the terms ‘goods produced, constructed, extracted, processed, … in the course of such business’ must be construed – as the Netherlands Government and the Commission argue – as covering not only goods entirely produced, constructed, extracted or processed by the business concerned itself, but also goods constructed, extracted or processed by a third party with materials provided by that business.
28. A taxable person who, for the purposes of an activity exempt from VAT, applies goods which he owns and which he has had completed or improved by a third party could – but for the treatment option provided for under Article 5(7)(a) of the Sixth Directive – find himself in a situation in which only the work carried out by that third party would be subject to VAT. In order for such a taxable person to be subject, consistently with the aim of Article 5(7)(a), to the same tax burden as competitors who carry out the same exempt activity using goods which they have acquired in their entirety from a third party, it must be possible for the treatment option available under that provision to be extended to all goods completed or improved by the third party and, accordingly, to cause VAT to be levied on the basis of the overall value of those goods.
29. Consequently, it is open to the authorities of a Member State which makes use of the option available under Article 5(7)(a) of treating certain applications of goods as supplies made for consideration to hold that the tax burden, in terms of VAT, on a taxable person who rents out to sports associations pitches which it has had covered with an artificial surface must be at the same level as it would be for a competitor who rents out to sports associations pitches covered with artificial surfaces which have been purchased in their entirety from a third party.
30. In that case, those authorities must, in accordance with the rule laid down in Article 11(A)(1)(b) of the Sixth Directive, which has been reproduced in Article 74 of Directive 2006/112, calculate the VAT payable by that taxable person on the basis of a value which is determined at the time when the transformed sports pitches are applied – that is to say, at the time when they are put to use for the purposes of the exempt activity – and which corresponds to the market price for sports pitches of similar location, size and surface to the pitches at issue. In the light of those criteria, the aggregate of the value of the ground on which the pitches concerned lie and the cost of transforming those pitches may constitute an appropriate basis of assessment.
31. That being so, a taxation mechanism of that design cannot give rise to breach of the principles laid down in relation to VAT, which must at all times – including, therefore, when use is made of the treatment option referred to above – be respected by the Member State concerned.
32. In that regard, it should be noted that it is one of the essential characteristics of VAT that it is imposed on the added value of the goods or services concerned, since the tax payable on a transaction is calculated after the tax paid on the preceding transaction has been deducted (see, inter alia, Case C‑208/91 Beaulande [1992] ECR I‑6709, paragraph 14; Case C‑347/95 UCAL [1997] ECR I‑4911, paragraph 34; and Case C‑308/01 GIL Insurance and Others  [2004] ECR I‑4777, paragraph 33). Consequently, the option of treating certain applications as supplies made for consideration, as interpreted above, cannot be used in order to charge VAT on the value of goods which the taxable person concerned has made available to the third party who completed or improved them, to the extent that the taxable person has already, in the context of an earlier tax period, paid VAT on that value. As the Commission stated, such repeated taxation would be incompatible both with the essential characteristic of VAT, referred to above, and with the aim of the above option, which is intended to enable Member States to make subject to VAT the application of goods for the purposes of activities exempt from VAT, but in no way authorises Member States to levy VAT several times on the same element of the value of those goods.
33. In the present case, it is for the referring court to ascertain whether, prior to the assessment at issue in the main proceedings, Vlaardingen had paid VAT on the value of the ground on which the sports pitches lie. If it transpires that this is indeed the position, it would have to be found that an assessment such as that made in Vlaardingen’s case, in so far as it is based on the overall value of that land, goes beyond the option provided for in Article 5(7)(a) of the Sixth Directive and conflicts with the broad logic of that directive.