Link to the European VAT legislation
Article 9(1) of Sixth Council Directive 77/388/EEC of 17 May 1977. Art. 43 and 44 of the EU VAT Directive 2006/112/EU
Facts
- ARO Lease BV (the lessor) was a private company incorporated in the Netherlands. It was engaged in the business of concluding, as lessor, leasing agreements with third parties in respect of passenger motor cars. The majority of these agreements were for cars that had been leased to persons established in the Netherlands.
- However, approximately 800 of them concerned clients based in Belgium. All of these agreements were drawn up at the lessor’s office in the Netherlands. These agreements were the dispute of this ECJ case.
- Belgian customers were introduced to the lessor by self-employed Belgian intermediaries who received a commission for their services. Generally, the customer arranged for himself the purchase of the vehicle of his choice from a car dealer in Belgium. The car was subsequently sold by that dealer to ARO.
- By a separate leasing agreement the lessor made the vehicle available to the client. The intermediaries in Belgium were thus not involved directly either in the drawing up or the performance of the agreements.
- Prior to the dispute, the lessor had always paid VAT in the Netherlands in respect of the leasing of cars in Belgium.
- The competent Belgian authorities had notified the lessor that, with effect from 1 January 1993, it was liable to pay VAT in Belgium in respect of such
agreements. - ARO argued that, since it had both purchased and leased the cars in Belgium, it should, in agreement with the view taken by the Belgian authorities, be regarded as having a fixed establishment in Belgium.
- The Netherlands authorities, on the other hand, submitted that the lessor had no business establishment in Belgium from which services were supplied with a sufficient degree of permanency, and that the lessor did not have at its disposal there either the personnel or technical means required for concluding leasing agreements. Consequently, ARO had rightly declared and paid the disputed VAT in the Netherlands.
- Considerations ECJ:
- Account must be taken of economic reality when applying Article 9(1) of the Sixth Directive to forms of transport, and the place where the services are provided must be held to be the place where the business in question is actually carried on.
- By way of derogation from the general rule in Article 9(1), the place in which certain types of service are provided is the place where they are physically carried out.
- That concept also had a bearing on the current formulation of the general rule in Article 9(1), and the specific provisions relating expressly to forms of transport.
- Consequently, the interpretation would run counter to the intention of the legislature, which, taking economic reality into account, as regards forms of transport, has decided to introduce a clear, simple and practical criterion, namely the main place of business or that of a fixed establishment.
Decision
On a proper construction of Article 9(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment, a leasing company established in one Member State does not supply services from a fixed establishment in another Member State if it makes passenger cars available in the second State under leasing agreements to customers established there, if its customers have entered into contact with it through self-employed intermediaries established in the second State, if they have chosen their cars from dealers established in the second State, if the leasing company has acquired the cars in the second State, in which they are registered, and has made them available to its customers under leasing agreements drawn up and signed at its main place of business, and if the customers bear maintenance costs and pay road tax in the second State, but the leasing company does not have an office or any premises on which to store the cars there.
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