On July 6, 2006, the ECJ issued its decision in the case C-251/05 (Talacre Beach Caravan Sales Ltd). This is a case dealing with the issue of a single vs. composite supplies. The fact that a single supply has been made for certain goods, comprising on the one hand a main good subject to zero rating and on the other hand excluded goods does not preclude the Member State concerned from levying VAT at the standard rate on the supply of these excluded goods.
Context: Article 28 – Reduced rate taxation (zero-rate) – Supply of caravans – Contents supplied with them being excluded from the zero‑rate)
Article in the EU VAT Directive
Article 12(3) and 28(2) (a) the Sixth Council Directive (77/388/EEC)
Article 12(3) of the Sixth Directive governs the standard rate of VAT, which may not be lower than 15%, and the reduced tax rates which may be applied to certain supplies listed in Annex H thereto.
Article 28(2) of the Sixth Directive permits derogations therefrom on a transitional basis:
‘… Notwithstanding Article 12(3), the following provisions shall apply during the transitional period referred to in Article 28l.
a) Exemptions with refund of the tax paid at the preceding stage and reduced rates lower than the minimum rate laid down in Article 12(3) in respect of the reduced rates, which were in force on 1 January 1991 and which are in accordance with Community law, and satisfy the conditions stated in the last indent of Article 17 of the second Council Directive of 11 April 1967, (7) may be maintained.
Facts
- Talacre operates holiday home parks in the United Kingdom. Its income is derived, inter alia, from the sale of fitted caravans, the rental of pitches and the provision of associated facilities to caravan owners.
- The fitted caravans sold by Talacre typically include bathroom suites, floor coverings, curtain rails, curtains, cupboards, fitted kitchens, seating units with fitted banquettes, dining tables, chairs, stools, coffee tables, mirrors, wardrobes, beds and mattresses to fit them.
- In the caravan manufacturer’s invoices to Talacre the price of the caravan without VAT and the price of the contents with VAT at the standard rate are shown separately.
- Talacre however considers that the sale of a caravan and its contents is a single indivisible supply which should thus be subject to a single rate of tax, namely that appropriate to the principal element, the caravan itself. The zero‑rate is the single rate of tax to be applied in the circumstances, since caravans of the kind supplied by Talacre are entitled to that rate in accordance with the law applicable in the United Kingdom.
Questions
Where a member state has, pursuant to Article 28(2) (a) the Sixth Council Directive (77/388/EEC), by its domestic legislation exercised its right of derogation so as tozero-rate a supply of specified goods but in the same legislation has identified itemsthat should not be included in the scope of the zero-rating (“excluded items”), doesthe fact that there is a single supply of goods (together with the excluded items)preclude the member state from charging VAT at the standard rate on the supply ofthe excluded items?
AG Opinion
The rules on determining the scope of a transaction do not preclude an exemption of a Member State, under Article 28(2)(a) of Sixth Directive 77/388/EC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, which zero-rates the supply of specified goods and excludes other items from the scope of the zero-rating, even if the excluded items and the included items are delivered together.
Decision
The fact that specific goods are counted as a single supply, including both a principal item which is by virtue of a Member State’s legislation subject to an exemption with refund of the tax paid within the meaning of Article 28(2)(a) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388/EEC (approximation of VAT rates), and items which that legislation excludes from the scope of that exemption, does not prevent the Member State concerned from levying VAT at the standard rate on the supply of those excluded items.
Source
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Implementation in the Member States
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