Commission of the European Communities v Republic of Finland.
Date: 2009-10-29
34. It must be recalled that, although Article 4 of the Sixth Directive gives a very wide scope to VAT, only activities of an economic nature are covered by that tax (see, inter alia, Case C-306/94 Régie dauphinoise  [1996] ECR I-3695, paragraph 15; Case C‑305/01 MKG‑Kraftfahrzeuge-Factoring  [2003] ECR I‑6729, paragraph 39; and Case C‑369/04 Hutchison 3G and Others  [2007] ECR I‑5247, paragraph 28).
35. According to Article 2 of the Sixth Directive concerning taxable transactions, together with the importation of goods, the supply of goods or services effected for consideration within the country is subject to VAT. Furthermore, under Article 4(1) of the Sixth Directive, ‘taxable person’ means any person who independently carries out an economic activity, whatever the purpose or results of that activity (see, inter alia, Case 235/85 Commission  v Netherlands [1987] ECR 1471, paragraph 6; Case C‑260/98 Commission v Greece [2000] ECR I‑6537, paragraph 24; and Isle of Wight Council and Others , paragraphs 26 and 27).
36. ‘Economic activities’ are defined in Article 4(2) of the Sixth Directive as including all activities of producers, traders and persons supplying services, inter alia the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis (see, in particular, Case C‑465/03 Kretztechnik [2005] ECR I‑4357, paragraph 18; and Hutchison 3G and Others , paragraph 27).
37. An analysis of those definitions shows that the scope of the term economic activities is very wide and that the term is objective in character, in the sense that the activity is considered per se and without regard to its purpose or results (see, inter alia, Commission  v Greece , paragraph 26; and Case C-223/03 University of Huddersfield  [2006] ECR I-1751, paragraph 47 and the case-law cited). An activity is thus, as a general rule, categorised as economic where it is permanent and is carried out in return for remuneration which is received by the person carrying out the activity ( Commission v Netherlands , paragraphs 9 and 15; and Case C-408/06 Götz  [2007] ECR I-11295, paragraph 18).
38. However, it follows from the case-law that the receipt of a payment does not, per se, mean that a given activity is economic in nature (see Hutchison 3G and Others , paragraph 39 and the case-law cited; and Götz , paragraph 21).
40. It must first of all be stated that, in view of the objective character of the term ‘economic activities’, the fact that the activity of the public offices consists in the performance of duties which are conferred and regulated by law, in the public interest and without any business or commercial objective, is in that regard irrelevant. Indeed, Article 6 of the Sixth Directive expressly provides that certain activities carried on in pursuance of the law are to be subject to the system of VAT ( Commission  v Netherlands , paragraph 10, Commission  v Greece , paragraph 28).
43. In that connection, it is clear from the case-law of the Court that, within the framework of the VAT system, taxable transactions presuppose the existence of a transaction between the parties in which a price or consideration is stipulated. Thus, where a person’s activity consists exclusively in providing services for no direct consideration, there is no basis of assessment and the services are therefore not subject to VAT (see Case 89/81 Hong Kong Trade Development Council [1982] ECR 1277, paragraphs 9 and 10; and Case C‑16/93 Tolsma  [1994] ECR I‑743, paragraph 12).
44. It follows from that, according to the Court’s case-law, that a supply of services is effected ‘for consideration’ within the meaning of Article 2(1) of the Sixth Directive only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient (see, inter alia, Tolsma , paragraph 14; Case C‑2/95 SDC [1997] ECR I-3017, paragraph 45; and MKG-Kraftfahrzeuge-Factoring , paragraph 47).
45. Consequently, according to the case-law of the Court, a supply of services for consideration within the meaning of Article 2(1) of the Sixth Directive presupposes a direct link between the service provided and the consideration received (see, inter alia, Case 102/86 Apple and Pear Development Council [1988] ECR 1443, paragraphs 11 and 12; Case C-258/95 Fillibeck  [1997] ECR I‑5577, paragraph 12; and Commission  v Greece , paragraph 29).
50. As the Advocate General has observed in points 50 and 51 of his Opinion, that finding is borne out by the fact that, according to the data provided by the Finnish Government in the present proceedings, the part payments made in 2007 by recipients of legal aid services provided by the public offices (which relate to only one third of all the services provided by public offices) amounted to EUR 1.9 million, whilst the gross operating costs of those offices were EUR 24.5 million. Even if those data also include legal aid services provided other than in court proceedings, such a difference suggests that the part payment borne by recipients must be regarded more as a fee, receipt of which does not, per se, mean that a given activity is economic in nature, than as consideration in the strict sense.
51. Therefore, in light of the foregoing, it does not appear that the link between the legal aid services provided by public offices and the payment to be made by the recipients is sufficiently direct for that payment to be regarded as consideration for those services and, accordingly, for those services to be regarded as economic activities for the purposes of Article 2(1) and Article 4(1) and (2) of the Sixth Directive.
52. The Commission has put forward no other evidence showing that the services in question constitute such economic activities. In particular, although the Commission maintains in its action that there is a direct link between the part payment made by recipients of legal aid services and the services supplied by public offices, it has not developed, in support of that claim, any specific arguments and has not produced any evidence capable of establishing that such a direct link exists, particularly in view of the fact that, for the purpose of determining that contribution, account is taken of the amount of the recipient’s income and assets. According to settled case-law, in proceedings under Article 226 EC for failure to fulfil obligations it nonetheless falls to the Commission to prove the allegation that the obligation has not been fulfilled. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled and in so doing the Commission may not rely on any presumptions (see, in particular, Case C‑494/01 Commission  v Ireland  [2005] ECR I-3331, paragraph 41 and the case-law cited).
53. In those circumstances, since the public offices do not engage in an economic activity and since, for the first subparagraph of Article 4(5) of the Sixth Directive to apply, there must be a prior finding that the activity considered is of an economic nature (see, to that effect Hutchison 3G and Others , paragraph 42; and Götz , paragraph 15), it is not necessary to consider, in the second place, the Commission’s arguments concerning (i) the question whether those offices act as a public authority within the meaning of the first subparagraph of Article 4(5) when providing the legal aid services in question and (ii) whether the failure to levy VAT on that activity leads, in any event, to significant distortions of competition for the purposes of the second subparagraph of that provision.