European Commission v United Kingdom of Great Britain and Northern Ireland.
Date: 2013-04-25
31. It should be borne in mind at the outset that, in determining the scope of a provision of European Union law, its wording, context and objectives must all be taken into account (Case C‑174/08 NCC Construction Danmark  [2009] ECR I‑10567, paragraph 23 and the case-law cited).
32. In the present case, it is apparent from the wording of the first paragraph of Article 11 of the VAT Directive that that directive permits each Member State to regard a number of persons as a single taxable person if those persons are established in the territory of that Member State and if, although they are legally independent, they are closely bound to one another by financial, economic and organisational links. The application of that article is not, according to its wording, made subject to other conditions, in particular to the condition that those persons could themselves, individually, have had the status of a taxable person within the meaning of Article 9(1) of the VAT Directive. As it uses the word ‘persons’ and not the words ‘taxable persons’, the first paragraph of Article 11 of the VAT Directive does not make a distinction between taxable persons and non-taxable persons (judgment of 9 April 2013 in Case C‑85/11 Commission  v Ireland  [2013] ECR I-0000, paragraph 36).
33. It must be pointed out that Article 11 of the VAT Directive derives from the second subparagraph of Article 4(4) of the Sixth Directive. Whereas point 2 of Annex A to Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes – Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967, p. 16), which introduced the concept of a VAT group into European Union law, permitted Member States ‘not to consider as separate taxable persons, but as one single taxable person’, persons who are organically linked to one another by economic, financial or organisational relationships, the words ‘as separate taxable persons’ were abandoned in the drafting of the second subparagraph of Article 4(4) of the Sixth Directive ( Commission  v Ireland , paragraph 37).
34. Furthermore, although the wording of the second subparagraph of Article 4(4) of the Sixth Directive was repeated in similar terms in the majority of the language versions of Article 11 of the VAT Directive, in the English-language version of that article the word ‘any’ was added, with the result that the relevant passage of that provision reads as follows: ‘each Member State may regard as a single taxable person any persons established in the territory of that Member State’ ( Commission  v Ireland , paragraph 38).
35. It is not apparent from those successive drafting amendments that the European Union legislature intended, when adopting the Sixth Directive and, subsequently, the VAT Directive, to preclude non-taxable persons from being capable of inclusion in a VAT group and that the word ‘persons’ was used instead of the words ‘taxable persons’ in order to avoid repetition. The fact that other provisions of the VAT Directive, which do not come under Title III thereof dealing with the concept of a ‘taxable person’, use the term ‘persons’ to designate taxable persons cannot result in any different finding, as that term is used in a different context to that of Article 11 of the VAT Directive ( Commission  v Ireland , paragraph 39).
36. Furthermore, it must be pointed out that, contrary to what the Commission argues, it cannot be inferred from the words ‘as a single taxable person’ that Article 11 of the VAT Directive seeks solely to permit a number of taxable persons to be dealt with as a single entity, as those words relate, not to a condition for the application of that article, but to its outcome, which is that a number of persons are regarded as a single taxable person. In addition, there is no basis in the wording of that article for the Commission’s argument that it represents an exception to the general rule that each taxable person must be treated as a separate entity, with the result that that article is to be interpreted restrictively, or for the argument that the concept of grouping implies that all of the persons concerned belong to the same category, as the word ‘grouping’ does not appear in that article ( Commission  v Ireland , paragraph 40).
37. Consequently, it is not apparent from the wording of Article 11 of the VAT Directive that non-taxable persons cannot be included in a VAT group ( Commission  v Ireland , paragraph 41).
40. As regards, secondly, the context of Article 11 of the VAT Directive, it is necessary to point out that Article 9(1) of that directive contains a general definition of the concept of a ‘taxable person’. Article 9(2) and Articles 10, 12 and 13 of that directive provide details in respect of that concept, either by including in it, or by permitting Member States to include in it, persons who do not satisfy that general definition, such as persons who carry out certain transactions on an occasional basis, or by excluding other persons from it, such as employed persons or public authorities. Consequently, it cannot be inferred from the scheme of Title III of the VAT Directive that a person who does not satisfy that general definition is necessarily excluded from being one of the persons referred to in Article 11 thereof ( Commission  v Ireland , paragraph 44).
41. As regards the relationship, within Title III of the VAT Directive, between Articles 9(1) and 11 of that directive, it must be stated that a combined reading of those articles does not support the conclusion, drawn by the Commission, that the persons referred to in Article 11 must individually satisfy the general definition of a taxable person set out in Article 9(1) of that directive. A comparison of those two provisions does not preclude the interpretation that, as submitted by the United Kingdom and the interveners, it is those persons, taken together and closely bound to one another by financial, economic and organisational links, who must collectively satisfy that definition ( Commission  v Ireland , paragraph 45).
42. Consequently, it is not possible to uphold the Commission’s arguments that, having regard to the context of Article 11 of the VAT Directive, that article must be interpreted as meaning that non-taxable persons cannot be included in a VAT group ( Commission  v Ireland , paragraph 46).
43. As regards, thirdly, the objectives pursued by Article 11 of the VAT Directive, it is apparent from the Commission’s Explanatory Memorandum to the proposal which resulted in the adoption of the Sixth Directive that, by adopting the second subparagraph of Article 4(4) of the Sixth Directive, which was replaced by Article 11 of the VAT Directive, the European Union legislature intended, in the interests of simplifying administration or with a view to combating abuses such as, for example, the splitting-up of one undertaking among several taxable persons so that each might benefit from a special scheme, to ensure that Member States would not be obliged to treat as taxable persons those whose ‘independence’ is purely a legal technicality ( Commission  v Ireland , paragraph 47).
44. It is not evident that the possibility for Member States to regard as a single taxable person a group of persons including one or more persons who may not individually have the status of a taxable person runs counter to those objectives. It is, on the contrary, conceivable that, as the United Kingdom and the interveners have submitted, the presence, within a VAT group, of such persons contributes to administrative simplification both for the group and for the tax authorities and makes it possible to avoid certain abuses, and that that presence may even be indispensable to those ends if it alone establishes the close financial, economic and organisational links which must exist between the persons constituting that group in order for it to be regarded as a single taxable person ( Commission  v Ireland , paragraph 48).
45. In addition, it must be pointed out that, if such a possibility might itself give rise to abuse, the second paragraph of Article 11 of the VAT Directive permits Member States to adopt any measures needed to prevent tax evasion or avoidance through the use of the first paragraph of Article 11 ( Commission  v Ireland , paragraph 49).