Flashback on ECJ cases C-124/96 (Commission vs. Spain) – Exemption for services closely related sport education can not be limited to membership fees not exceeding a specified amount

On May 7, 1998, the ECJ issued its decision in the case C-124/96 (Commission vs. Spain).

Context: Failure of a Member State to fulfil its obligations – Sixth Council Directive77/388/EEC – Exemption of certain supplies of services closely linked to sport or physical education – Unjustified restrictions

Article in the EU VAT Directive

Article 13(A)(1)(m) in the Sixth VAT Directive (Article 132(1)(m) of the EU VAT Directive 2006/112/EC)

Article 132 (Exemption)
1. Member States shall exempt the following transactions:

(m) the supply of certain services closely linked to sport or physical education by nonprofit-making organisations to persons taking part in sport or physical education;

Facts

In support of its action, the Commission maintains that the restriction of VAT exemption by Article 20(1), point 13, of Law No 37/92 to private sports establishments charging membership fees not exceeding the amounts specified inthat article is contrary to Article 13(A) of the Sixth Directive. It submits that the additional requirement imposed by the Spanish legislation is not authorised eitherby the introductory sentence of Article 13(A)(1), or by the wording of Article 13(A)(1)(m), or by the third indent of Article 13(A)(2)(a) of the Sixth Directive.
The Spanish Government, supported by the United Kingdom Government, beginsby arguing that the introductory sentence of Article 13(A)(1) of the Sixth Directiveshows that Member States have a wide discretion in implementing the exemptions provided for.
It should be observed in that regard that the conditions which may be laid downpursuant to Article 13(A)(1) of the Sixth Directive to do not in any way affect the definition of the subject-matter of the exemptions envisaged by that provision (Case 8/81 Becker v Finanzamt Münster-Innenstadt [1982] ECR 53, paragraph 32).
Those conditions are intended to ensure the correct and straight forward applicationof the exemptions and refer to measures intended to prevent any possible evasion,avoidance or abuse (Becker, cited above, paragraphs 33 and 34).
The argument based on the introductory sentence of Article 13(A)(1) must therefore be rejected.
The Spanish Government then argues, concerning the exemption of supplies ofservices referred to in Article 13(A)(1)(m), that, unlike other exemptions envisaged by that provision, letter (m) provides for the exemption of certain supplies of services. In its submission, that permits Member States to limit the scope of Article13(A)(1)(m), not only by expressly excluding certain services provided by sportsestablishments from the exemption, but also by applying ‘other criteria’, such asthe amount of the consideration for the services in question.
On that point, it is clear from Article 13(A)(1)(m) of the Sixth Directive that the exemption in question concerns supplies of services closely linked to sport or physical education provided by non-profit-making bodies.
It is undisputed that, under the Spanish legislation, the exemption envisaged underArticle 13(A)(1)(m) of the Sixth Directive is granted only to private sports bodiesor establishments of a social nature which charge membership fees not exceedingcertain amounts.
To apply the criterion of the amount of membership fees may lead to results contrary to Article 13(A)(1)(m). As the Advocate General has pointed out atparagraph 5 of his Opinion, to apply such a criterion may result, first, in a non-profit-making body being excluded from the benefit of the exemption provided forby the provision and, secondly, in a profit-making body being able to benefit fromit.
Moreover, there is nothing in that provision to the effect that a Member State,when granting an exemption for a certain supply of services closely linked to sportor physical education provided by non-profit-making bodies, may make thatexemption subject to any conditions other than those laid down in Article 13(A)(2).
It follows that the limitation of the exemption for supplies of services closely linkedto sport or physical education to private sports bodies or establishments of a social nature whose membership fees do not exceed a certain amount is contrary toArticle 13(A)(1)(m) of the Sixth Directive.
Finally, the Spanish Government argues that the fixing of a ceiling on the amount of fees in respect of the exemption of the supply of services envisaged in Article13(A)(1)(m) falls within the concept of prices approved by the public authorities within the meaning of the third indent of Article 13(A)(2)(a), and is therefore justified by virtue of that latter provision.
On that point, it is sufficient to note that that provision does not imply that a Member State, by making the exemption envisaged in Article 13(A)(1)(m) subjectto one or more conditions laid down in paragraph 2(a) of that provision, may alterthe scope of the latter.
Moreover, as the Commission has rightly pointed out, Article 13(A)(2)(a) of the Sixth Directive provides that Member States may make the grant of the exemptions envisaged subject to compliance with one or more of the conditions mentioned by that provision. The latter therefore excludes a restriction of the exemption ofsupplies of services closely linked to sport or physical education to private sportsbodies or establishments of a social nature which charge membership fees notexceeding a certain amount without taking into account the nature and particular circumstances of each sporting activity.

Questions

By letter of 22 December 1992, the Commission informed the Kingdom of Spain that it regarded the provisions of Article 8, point 13, of the Spanish Law on Value Added Tax (Law No 30/85 of 2 August 1985, amended by Law No 10/90 of 15October 1990) as incompatible with Article 13(A)(1)(m) of the Sixth Directive.
By letter of 28 May 1993, the Spanish authorities replied that the Spanish legislation applicable was Article 20(1), point 13, of Law No 37/92, and that the latter did not infringe the Sixth Directive.
Taking account of that reaction and the arguments put forward by the Kingdom of Spain, the Commission addressed a reasoned opinion to the Kingdom of Spain on10 October 1994, in which it maintained that the Spanish provisions were incompatible with the Sixth Directive.
By letter of 10 April 1995, the Kingdom of Spain essentially reiterated the arguments already put forward in its reply to the letter of 22 December 1992.
Subsequently, by Law No 42/94, the Kingdom of Spain partially amended Article20(1), point 13, of Law No 37/92. The Commission took the view that that amendment removed only part of the failure to fulfil obligations and did nothingto alter the quantitative restrictions imposed on private sports bodies or establishments.

AG Opinion

In the light of the foregoing considerations, I therefore suggest that the Court grant the Commission’s appeal and order the Kingdom of Spain to pay the costs.

Decision

Declares that, by providing that the exemption from value added tax inrespect of supplies closely linked to sport or physical education applies onlyto private establishments whose membership fees do not exceed a certainamount, the Kingdom of Spain has failed to fulfil its obligations underArticle 13(A)(1)(m) of the Sixth Council Directive 77/388/EEC of 17 May1977 on the harmonisation of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment.
Orders the Kingdom of Spain to pay the costs.
Orders the United Kingdom of Great Britain and Northern Ireland to bearits own costs.

Summary

By stipulating that the exemption from VAT on services closely related to the practice of sport or physical education applies only to private establishments whose membership fees or regular subscriptions do not exceed a specified amount, the Kingdom of Spain has failed to fulfill its obligations vested in him under Article 13A(1)(m) of the Sixth Directive.

Source