On July 28, 2017, the ECJ issued its decision in the case C-543/14 (Ordre des barreaux francophones and germanophone and Others)
Context: VAT — Directive 2006/112/EC — Validity and interpretation of the directive — Services provided by lawyers — Liability to VAT — Right to an effective remedy — Equality of arms — Legal aid
Article in the EU VAT Directive
Article 1(2), 2(1)(c), 132(1)(g)
Article 1
Article 1 (Subject matter and scope)
1. This Directive establishes the common system of value added tax (VAT).
2. The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services,
however many transactions take place in the production and distribution process before the stage at which the tax is charged.
On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components.
The common system of VAT shall be applied up to and including the retail trade stage.
Article 2 (Subject matter and scope)
1. The following transactions shall be subject to VAT:
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
Article 132 (Exemption)
1. Member States shall exempt the following transactions:
(g) the supply of services and of goods closely linked to welfare and social security work, including those supplied by old people’s homes, by bodies governed by public law or by other bodies recognised by the Member State concerned as being devoted to social wellbeing;
Facts
- In the main proceedings, a number of actions were brought before the Cour constitutionnelle (Constitutional Court, Belgium) seeking annulment of Article 60 of the Law of 30 July 2013. That provision ended, with effect from 1 January 2014, the VAT exemption on services supplied by lawyers, which Belgium had maintained on the basis of the transitional provision of Article 371 of Directive 2006/112.
- The statutory rate of VAT on services supplied by lawyers is 21% in Belgium.
- The referring court asks whether imposing VAT on services supplied by lawyers and the increase in costs for those services which results from the charging of VAT are compatible with the right to an effective remedy and in particular the right to the assistance of a lawyer. In addition, it asks whether the legislation at issue in the main proceedings complies with the principle of equality of arms, since that cost increase impacts only clients who are not taxable persons and who do not qualify for legal aid, while taxable clients have the possibility of deducting input VAT for those services.
Questions
(a) By making services supplied by lawyers subject to VAT without taking account, having regard to the right to the assistance of a lawyer and the principle of equality of arms, of whether or not a client who does not qualify for legal aid is subject to VAT, is Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 compatible with Article 47 of the Charter of Fundamental Rights of the European Union in conjunction with Article 14 of the International Covenant on Civil and Political Rights and with Article 6 of the European Convention on Human Rights, in so far as that article recognises that everyone is entitled to a fair hearing and has the possibility of being advised, defended and represented and that there is a right to legal aid for those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice?
(b) For the same reasons, is Council Directive 2006/112/EC of 28 November 2006 compatible with Article 9(4) and (5) of the Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, signed in Aarhus on 25 June 1998, in so far as those provisions establish a right of access to justice without the cost of those procedures being prohibitively expensive through ‘the establishment of appropriate assistance mechanisms to remove or reduce financial and other barriers to access to justice’?
(c) May services provided by lawyers under a national legal aid scheme be included in the services referred to in Article 132(1)(g) of Directive 2006/112/EC which are closely linked to welfare and social security work, or may they be exempted under another provision of the directive? If that question is answered in the negative, is Directive 2006/112/EC, interpreted as not permitting a VAT exemption for services supplied by lawyers for clients who qualify for legal aid under a national legal aid scheme, compatible with Article 47 of the Charter of Fundamental Rights of the European Union in conjunction with Article 14 of the International Covenant on Civil and Political Rights and with Article 6 of the European Convention on Human Rights?
If the questions mentioned in paragraph 1 are answered in the negative, is Article 98 of Directive 2006/112/EC, in so far as it does not provide for the possibility of applying a reduced rate of VAT to services supplied by lawyers, as the case may be depending on whether or not a client who does not qualify for legal aid is subject to VAT, compatible with Article 47 of the Charter of Fundamental Rights of the European Union in conjunction with Article 14 of the International Covenant on Civil and Political Rights and with Article 6 of the European Convention on Human Rights, in so far as that article recognises that everyone is entitled to a fair hearing and has the possibility of being advised, defended and represented and that there is a right to legal aid for those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice?
If the questions mentioned in paragraph 1 are answered in the negative, is Article 132 of Directive 2006/112/EC compatible with the principle of equality and non-discrimination enshrined in Articles 20 and 21 of the Charter of Fundamental Rights of the European Union and Article 9 of the Treaty on European Union, in conjunction with Article 47 of the Charter, in so far as it does not provide, among activities in the public interest, for VAT exemption for services of lawyers, when other supplies of services are exempted as activities in the public interest, such as the supply of services by the public postal services, various medical services or services connected with education, sport or culture, and when that difference in treatment between services of lawyers and services exempted by Article 132 of the directive raises sufficient doubts because services of lawyers contribute to respect for certain fundamental rights?
(a) If the questions mentioned in paragraphs 1 and 3 are answered in the negative, can Article 371 of Directive 2006/112/EC be interpreted, in accordance with Article 47 of the Charter of Fundamental Rights of the European Union, as authorising a Member State of the European Union partially to maintain the exemption for services supplied by lawyers where those services are performed for clients who are not subject to VAT?
(b) Can Article 371 of Directive 2006/112/EC also be interpreted, in accordance with Article 47 of the Charter of Fundamental Rights of the European Union, as authorising a Member State of the European Union partially to maintain the exemption for services supplied by lawyers where those services are performed for clients who qualify for legal aid under a national legal aid scheme?
AG Opinion
(1) On a proper construction of Article 371 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, a Member State which, in accordance with that provision, has continued to exempt the supply of services by lawyers from VAT, may limit the scope of that exemption without abolishing it in its entirety. However, having once abolished the exemption in its entirety, such a Member State may not reintroduce the same exemption with a more limited scope.
(2) Neither Article 132(1)(g) nor any other provision of Directive 2006/112 authorises Member States to exempt from VAT the supply of services by lawyers under a national legal aid scheme as services which are closely linked to welfare and social security work.
(3) Examination of the questions referred has disclosed nothing capable of affecting the validity of Directive 2006/112.
Decision
1. The examination of Article 1(2) and Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, in the light of the right to an effective remedy and the principle of equality of arms under Article 47 of the Charter of Fundamental Rights of the European Union has not revealed anything which might affect their validity in so far as those provisions impose VAT on services supplied by lawyers to clients who do not qualify for legal aid under a national legal aid scheme.
2. Article 9(4) and (5) of the Convention on access to information, public participation in decision-making and access to justice in environmental matters, signed at Aarhus on 25 June 1998, cannot be relied on for the purposes of assessing the validity of Article 1(2) and Article 2(1)(c) of Directive 2006/112.
3. Article 132(1)(g) of Directive 2006/112 must be interpreted as meaning that the services supplied by lawyers for clients who qualify for legal aid under a national legal aid scheme, such as that at issue in the main proceedings, are not exempt from VAT.
Summary
Services of lawyers
The assessment of Articles 1(2 ) and 2(1)(c) of the VAT Directive against the right to an effective remedy and the principle of equality of arms guaranteed by Article 47 of the Charter of Fundamental Rights of the European Union , no elements have been found to affect the validity of the provisions of this Directive, in so far as services provided by lawyers to litigants who do not benefit from legal aid under a national legal aid system are subject thereto to the VAT.
Article 9(4) and (5) of the Convention on Access to Information, Public Participation in Decision-Making and Access to Justice in Environmental Matters, signed in Aarhus on 25 June 1998, cannot be taken into account when assessing the validity of Articles 1 paragraphs 2 and 2(1)(c) of the VAT Directive.
Article 132(1)(g) of the VAT Directive must be interpreted as meaning that services provided by lawyers to litigants who benefit from legal aid under a national legal aid scheme such as that at issue in the main proceedings are not exempt from VAT.
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