On October 10, 2017, the ECJ issued its Order in the case C-549/16 (Palais Kaiserkron).
Context: Reference for a preliminary ruling — Taxation — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 401 — Concept of ‘turnover tax’ — Leasing of immovable property used for the purposes of trade — Liability to pay registration duty and VAT
Article in the EU VAT Directive
Article 401 in the EU VAT Directive 2006/112/EC
Article 401 (Miscellaneous – Other Taxes, Duties and Charges)
Without prejudice to other provisions of Community law, this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties or, more generally, any taxes, duties or charges which cannot be characterised as turnover taxes, provided that the collecting of those
taxes, duties or charges does not give rise, in trade between Member States, to formalities connected with the crossing of frontiers.
Facts
- According to the file available to the Court, Palais Kaiserkron operates in the real estate sector. When registering several lease contracts for commercial premises, this company has paid registration fees in an amount corresponding to 1% of the annual rent, as provided for in the relevant provisions of the single text. As such, the said company paid a total amount of 19,747.97 euros.
- On 22 January 2013, Palais Kaiserkron submitted to the tax authorities a request for reimbursement of the total amount of registration fees paid, on the grounds that the imposition of rents already subject to VAT would be incompatible with the Article 401 of the VAT Directive.
- Palais Kaiserkron challenged, before the Commissione Tributaria di Primo Grado di Bolzano (Tax Commission of First Instance of Bolzano, Italy), the tacit refusal resulting from the lack of response from the tax administration to its request for reimbursement at the end of within 90 days. By a judgment of April 27, 2015, that court upheld this appeal, considering that the registration fee concerned was in the nature of a turnover tax, given that it had the same proportional nature and had the same basis, namely the amount of the rent, as the VAT, from which it differed only by the fact that, in the absence of a deduction mechanism, it did not have the character of a neutral tax. However, this difference would allow, a fortiori,
- On December 22, 2015, the tax administration lodged an appeal against this judgment before the Commissione tributaria di Secondo Grado di Bolzano (Tax Appeal Commission of Bolzano, Italy). It maintains that the registration duty concerned, in its capacity as tax relating to an act, is imposed on certain legal acts in so far as they reveal a capacity to pay which has no connection with the concept of ‘turnover’. On the other hand, VAT, which is an indirect tax, does not relate directly to the ability to pay of a taxable person, but to consumption.
- Palais Kaiserkron argues that making the rents derived from the rental of a commercial premises subject to the registration duty at issue in the main proceedings infringes the prohibition provided for in Article 401 of the VAT Directive, since it cannot be disputed that the letting of the building concerned has an impact on turnover, relevant for VAT purposes, and inherent in the activity carried on by the taxable company. Consequently, the application of this registration fee to the same taxable base, namely the rents, would result in double taxation. The only circumstance that these levies are subject to different recovery methods and that the said registration duty, in particular, does not implement, unlike VAT, a deduction mechanism, cannot be sufficient to refute this argument. The Court held, in its judgment of 31 March 1992, Dansk Denkavit and Poulsen Trading (C ‑ 200/90, EU: C: 1992: 152), that for a tax to have the character of a “Turnover tax”, it is not required that its characteristics be in all points similar to those of VAT.
- According to the referring court, it is clear that the registration duty at issue, imposed on commercial leases, infringes Article 401 of the VAT Directive, in that the taxable person, for the same transaction and on the same basis taxable, is subject to double taxation, namely VAT and this registration fee. However, in the light of the reasons given by the tax authorities, that court has doubts as to whether the Union rules actually prevent the levying of such a registration fee.
Questions
Must Article 401 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax be interpreted as meaning that the value added tax and registration duty (payable on lease agreements for commercial property under Articles 40 and 5(1)(a-bis) of the first part of the schedule of charges of Presidential Decree No 131 of 26 April 1986) may be levied cumulatively, or rather as meaning that registration duty is in the nature of a turnover tax?
AG Opinion
None
Decision
Article 401 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude the levying of a proportional registration fee imposed on commercial leases, such as that provided for by the national regulations at issue in the main proceedings, even when these leases are also subject to value added tax.
Personal comments/VATupdate
Source:
Similar ECJ cases
Newsletters
