Leo-Libera GmbH v Finanzamt Buchholz in der Nordheide.
Date: 2010-06-10
9. In accordance with the combined application of the UStG and the Law on horse-race betting and lotteries (Rennwett- und Lotteriegesetz (the ‘RennwLottG’)), the following are exempt from VAT: betting on public horse racing (‘horse-race betting’), fixed-odds bets, lotteries and draws.
The dispute in the main proceedings and the question referred for a preliminary ruling
10. Leo-Libera operates a gaming hall equipped with gaming machines. In its VAT return for January 2007, it declared the operations in connection therewith. Following determination of its provisional payment on account by the Finanzamt, it lodged a complaint against that determination, claiming that those transactions were exempt from VAT. It expressed the view that the amendment made to Paragraph 4(9)(b) of the Umsatzsteuergesetz 2005 by the StEindämmG was contrary to Community law.
18. In that regard, it should be recalled that the Court may order that the oral procedure be reopened, in accordance with Article 61 of its Rules of Procedure, if it forms the view that it lacks sufficient information, or that the case must be dealt with on the basis of an argument which has not been debated between the parties (see Joined Cases C-270/97 and C‑271/97 Deutsche Post  [2000] ECR I‑929, paragraph 30, and Case C‑299/99 Philips  [2002] ECR I-5475, paragraph 20).
22. In order to reply to that question, it should be noted at the outset that the Court’s case-law provides that the terms used to specify exemptions such as those provided for in Article 135(1) of Directive 2006/112 must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, by analogy, with regard to the Sixth Directive, Case C-89/05 United Utilities  [2006] ECR I‑6813, paragraph 21).
23. Moreover, the interpretation of the terms used in that provision must be consistent with the objectives pursued by those exemptions and must comply with the requirements of the principle of fiscal neutrality inherent in the common system of VAT (see, by analogy, United Utilities , paragraph 22).
24. With more specific regard to betting, lotteries and other forms of gambling, the exemption from which they benefit is based on practical considerations, in that gambling transactions do not lend themselves easily to the application of VAT, and not, as is the case with certain public interest services supplied in the social sector, on a desire to afford those activities more advantageous VAT treatment ( United Utilities , paragraph 23).
26. In this regard, first, it stems from the actual wording of Article 135(1)(i) of Directive 2006/112 that that provision leaves a broad discretion to the Member States as regards the exemption or the taxation of the transactions concerned since it allows those States to fix the conditions and the limitations to which entitlement to that exemption may be made subject.
28. In this context, the fact that the Court has repeatedly held that the organisation and operation of gambling and gambling machines is in principle to be exempted from VAT (see, inter alia, Case C-283/95 Fischer  [1998] ECR I-3369, paragraph 25, and Linneweber and Akritidis , paragraph 23) cannot, regard being had to the objective pursued by Article 135(1)(i) of Directive 2006/112 and the general scheme on which that directive is based, be construed as calling into question that finding.
29. As regards, first, the purpose of the exemption at issue, it must be recalled that, so far as gambling is concerned, the Member States are not only free to lay down the conditions and limitations of the exemption provided for in Article 135(1)(i) of Directive 2006/112 ( Fischer , paragraph 25, and Linneweber and Akritidis , paragraph 23), but also have a discretion which allows them to prohibit activities of that kind, totally or partially, or to restrict them and to lay down more or less rigorous procedures for controlling them (Case C-275/92 Schindler  [1994] ECR I‑1039, paragraph 61, and Case C-124/97 Läärä and Others  [1999] ECR I‑6067, paragraph 35).
33. Such an interpretation would thus not only be such as to create significant legal uncertainty but would also be contrary to the spirit of Article 131 of that directive, which requires the correct and straightforward application of exemptions from VAT (see, to that effect, Case C-246/04 Turn- und Sportunion Waldburg  [2006] ECR I‑589, paragraph 31).
34. Finally, it must be added that, contrary to what Leo-Libera submits, the principle of fiscal neutrality, which provides that supplies of similar services, which are therefore in competition with each other, must not be treated differently for VAT purposes, also does not preclude legislation such as that at issue in the main proceedings.
35. That principle cannot, if it is not to deprive Article 135(1)(i) of Directive 2006/112 and the broad discretion which that provision grants to Member States of all effectiveness, be interpreted as precluding one form of gambling from being exempt from the payment of VAT while another form of gambling is not, in so far, however, as the two forms of gambling are not in competition with one another.
36. As is apparent from the file before the Court, the national legislation at issue in the main proceedings does not treat differently, for VAT purposes, similar forms of gambling which may be regarded as being in competition with one another.
38. Likewise, and contrary to what Leo-Libera submits, the fact that the amount of an unharmonised tax on gambling, payable by certain organisers and operators of forms of gambling subject to VAT, may be adjusted according to the VAT owed in respect of that activity, is irrelevant in the light of that principle, since the principle of fiscal neutrality is not designed to apply to such a tax (see, to that effect, Fischer , paragraph 30).
39. In the light of the foregoing considerations, the answer to the question referred is that Article 135(1)(i) of Directive 2006/112 must be interpreted as meaning that the exercise of the discretionary power of the Member States to fix conditions and limitations on the VAT exemption provided for by that provision allows those States to exempt from that tax only certain forms of gambling.
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