Ufficio distrettuale delle imposte dirette di Fiorenzuola d'Arda and others v Comune di Carpaneto Piacentino and others.
Date: 1989-10-17
8 The questions raised by the national courts may conveniently be rearranged under four headings concerning the interpretation of the first, second and third subparagraphs of Article 4(5 ) and the direct effect of that provision, respectively .
The interpretation of the first subparagraph of Article 4(5 ) of the Sixth Directive
10 It should be pointed out that it follows from Article 2 of the Sixth Directive, which defines the scope of VAT, that within the territory of the Member States only activities of an economic nature are subject thereto . The concept of economic activities is defined in Article 4(2 ) as comprising all activities of producers, traders and persons supplying services .
11 According to Article 4(1 ), "taxable person" is to mean any person who independently carries out any of those economic activities . It is thus by way of exception to that rule that the first subparagraph of Article 4(5 ), of which the first question seeks an interpretation, excludes from the category of taxable persons States, regional and local government authorities and other bodies governed by public law in respect of some of the activities or transactions in which they engage, "even where they collect dues, fees, contributions or payments in connection with these activities or transactions ".
12 As the Court held in its judgments of 11 July 1985 in Case 107/84 Commission v Federal Republic of Germany (( 1985 )) ECR 2663 and of 26 March 1987 in Case 235/85 Commission v Kingdom of the Netherlands (( 1987 )) ECR 1485, it is clear from that provision, when examined in the light of the aims of the directive, that two conditions must be fulfilled in order for the rule of treatment as a non-taxable person to apply : the activities must be carried out by a body governed by public law and they must be carried out by that body acting as a public authority .
13 A definition of the latter condition cannot be based, as has been argued, on the subject-matter or purpose of the activity engaged in by the public body since those factors have been taken into account by other provisions of the directive for other purposes .
15 An analysis of the first subparagraph of Article 4(5 ) in the light of the scheme of the directive shows that it is the way in which the activities are carried out that determines the scope of the treatment of public bodies as non-taxable persons . In so far as that provision makes such treatment of bodies governed by public law conditional upon their acting "as public authorities", it excludes therefrom activities engaged in by them not as bodies governed by public law but as persons subject to private law . Consequently, the only criterion making it possible to distinguish with certainty between those two categories of activity is the legal regime applicable under national law .
16 It follows that the bodies governed by public law referred to in the first subparagraph of Article 4(5 ) of the Sixth Directive engage in activities "as public authorities" within the meaning of that provision when they do so under the special legal regime applicable to them . On the other hand, when they act under the same legal conditions as those that apply to private traders, they cannot be regarded as acting "as public authorities ". It is for the national court to classify the activity at issue in the light of that criterion .
18 It follows that although the Member States are required to ensure that the activities or transactions engaged in by bodies governed by public law as public authorities are not subject to VAT in so far as they do not come within one of the exceptions specified in the second and third subparagraphs, they may choose for that purpose the legislative technique which they regard as the most appropriate . Thus they may, for example, merely incorporate into national law the form of words used in the Sixth Directive or an equivalent expression or they may draw up a list of activities in respect of which bodies governed by public law are not to be regarded as taxable persons .
22 It should next be noted that the second subparagraph of that provision contains a derogation from the rule of treatment of bodies governed by public law as non-taxable persons in respect of activities or transactions engaged in by them as public authorities where that treatment would lead to significant distortions of competition . Thus, with a view to ensuring the neutrality of the tax, which is the major objective of the Sixth Directive, that provision envisages the situation in which bodies governed by public law engage, under the special legal regime applicable to them, in activities which may also be engaged in, in competition with them, by private individuals under a regime governed by private law or on the basis of administrative concessions .
23 In that situation, the Member States are required by the third paragraph of Article 189 of the Treaty to ensure that bodies governed by public law are treated as taxable persons where the contrary would lead to significant distortions of competition . On the other hand, they are not obliged to transpose that criterion literally into their national law or to lay down precise quantitative limits for treatment as non-taxable persons .
26 It should be noted that by providing that bodies governed by public law are in any case to be regarded as taxable persons in respect of the activities listed in Annex D provided they are not on such a small scale as to be negligible, the provision in question makes the rule that such bodies are not to be regarded as taxable persons subject to a limitation which must be added to those resulting from the condition laid down in the first subparagraph, namely that the activities must be engaged in as public authorities, and from the derogation laid down in the second subparagraph in cases where treatment as non-taxable persons would lead to significant distortions of competition . The third subparagraph of Article 4(5 ) thus seeks to ensure that certain categories of economic activity the importance of which derives from their subject-matter are not subject to VAT on the ground that they are carried out by bodies governed by public law as public authorities .
27 However, the obligation to treat bodies governed by public law as taxable persons in respect of the activities listed in Annex D to the directive is imposed on the Member States only in so far as the activities in question are not negligible in scale . Having regard to the structure of the provision in question, it must be interpreted as meaning that the Member States are free to exclude from the scope of such compulsory treatment the activities listed in Annex D in so far as they are carried out on a negligible scale, but are not required to do so . Consequently, they are also not required to fix a ceiling for treatment as non-taxable persons in respect of the activities at issue .
31 Article 4(5 ) of the Sixth Directive fulfils those criteria, since the bodies and activities in regard to which the rule of treatment as non-taxable persons applies are clearly defined in that provision . Bodies governed by public law, which, in this context must be assimilated to individuals, are therefore entitled to rely on that rule in respect of activities engaged in as public authorities but not listed in Annex D to the directive .
32 That conclusion is not invalidated by the fact that the second subparagraph of Article 4(5 ) of the Sixth Directive requires activities to be treated as taxable if their treatment as non-taxable would lead to significant distortions of competition . That limitation placed on the rule of treatment as non-taxable persons is thus only a conditional limitation, and whilst it is true that its application involves an assessment of economic circumstances, that assessment is not exempt from judicial review .
33 The answer to the fourth question should therefore be that a body governed by public law may rely on Article 4(5 ) of the Sixth Directive for the purpose of opposing the application of a national provision making it subject to VAT in respect of an activity in which it engages as a public authority, which is not listed in Annex D and whose treatment as non-taxable is not liable to give rise to significant distortions of competition .