On January 18, 2001, the ECJ issued its decision in the case C-150/99 (Stockholm Lindöpark AB).
Context: Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Sixth Directive – Exemptions – Letting of immovable property – Practice of sport or physical education
Article in the EU VAT Directive
Articles 13(A)(1)(m), 13(B)(b), 17(1), 17(2) of the Sixth Directive (Articles 132(1)(m), 135(1)(l), 167, 168 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;
Article 135 (Exemption)
1. Member States shall exempt the following transactions:
(l) the leasing or letting of immovable property.
Article 167 (Origin and Scope of Right of Deduction)
A right of deduction shall arise at the time the deductible tax becomes chargeable.
Article 168 (Origin and Scope of Right of Deduction)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
Facts
- Lindöpark is a development company which runs a golf course for the exclusive use of businesses, which are thus able to offer both their staff and their clients an opportunity to play golf on the course.
- Under the second paragraph of Article 2 of Chapter 3 of the VAT Law, which was in force until 1 January 1997, the ‘company golf activity run by Lindöpark was exempt from VAT. Lindöpark was therefore not entitled to deduct input VAT incurred ongoods and services used for the purposes of that activity. Since the amendment of that provision entered into force on 1 January 1997, Lindöpark’s activities have been subject to VAT and it is therefore entitled to deduct input VAT.
- Lindöpark contends that the legislation in force until 1 January 1997 constituted a breach of its rights, at least from the time of the Kingdom of Sweden’s accession to the European Union, that is, from 1 January 1995. It therefore brought proceedings against the Swedish State before the Solna Tingsrätt (Solna District Court), seeking damages of SEK 500 000. This sum purportedly represents the input tax paid between 1 January 1995 and 31 December 1996, which Lindöpark was not entitled to deduct during that period, with interest amounting to SEK 41 632 from the date when the deductions could theoretically have been made. Lindöpark claims that the Swedish State had failed to implement the Sixth Directive correctly so far as Article 13 was concerned.
- By judgment of 29 September 1997, the Solna Tingsrätt upheld Lindöpark’s claims and ordered the Swedish State to pay it damages of SEK 500 000, together with interest to run from the date on which the action was commenced.
- The Swedish State appealed against that judgment to the Svea Hovrätt. Lindöpark also appealed in so far as its claim had not been fully upheld.
Questions
1. Do the provisions of Article 13A(1)(m) and 13B(b) of the Sixth VAT Directive preclude national legislation providing for a general exemption from VAT for the supply of sports facilities, as laid down in the second paragraph of Article 2 of Chapter 3 of the Mervärdesskattelagen (1994:200), in the version in force before 1 January 1997?
2. Does Article 13, in combination with Articles 2, 6 and 17 of the Sixth VAT Directive, confer on individuals rights on which they can rely as against Member States before a national court?
In the event that the first two questions are answered in the affirmative:
3. Does the implementation and application of the exemption provided for in the second paragraph of Article 2 of Chapter 3 of the Mervärdesskattelagen (1994:200) entail a sufficiently serious (clear) infringement of Community law such as to render a Member State liable in damages?
AG Opinion
(1) A national provision laying down a general exemption from VAT for all transactions making premises and other facilities available for the practice of sport or physical education is contrary to the provisions of the Sixth Council Directive 77/388/EEC of 17 May 1977.
The commercial provision of premises or other facilities for the purpose of practising sport or physical education may not in principle be exempted from VAT. In order to qualify for exemption under Article 13(B)(b) of the Sixth Directive, a transaction must be distinguished from normal instances of the provision of sports facilities by having the essential characteristics of a lease or let, which include the grant of a right to occupy a defined piece or area of immovable property as one’s own and to exclude or admit others, and an agreement between the parties taking account of the duration of that occupation, in particular as a criterion for determining the price; such characteristics must, moreover, predominate in the contract.
(2) The provisions of Article 17(2), read in conjunction with those of Articles 2, 6 and 13 of the Sixth Directive, are sufficiently clear, precise and unconditional to be pleaded by an individual against a Member State before a national court.
The right to deduct VAT conferred by Article 17(2) is, moreover, a right conferred on individuals, which may form the basis of a claim for reparation against a Member State in the event of its breach.
(3) Where an exemption from VAT is applied to a transaction which clearly should not have been exempted under the terms of the Sixth Directive, in a situation where Member States had no discretion to extend the scope of the exemptions prescribed, there is a sufficiently serious breach of Community law to found a claim for reparation against the State by an individual who has suffered loss as a result.
Decision
1. The provisions of Article 13A(1)(m) and 13B(b) 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, preclude national legislation from providing for a general exemption from value added tax for the supply of premises and other facilities and the related supply of accessoriesor other arrangements for the practice of sport or physical education, including services supplied by profit-making organisations.
2. The provisions of Article 17(1) and (2) of Directive 77/388, read together with those of Articles 2, 6(1) and 13B(b), are sufficiently clear, precise and unconditional for an individual to rely on them as against a Member State before a national court.
3. The implementation of a general exemption from value added tax for the supply of premises and other facilities and for the related supply of accessories or other arrangements for the purposes of the practice of sport or physical education, where no such exemption is to be found in Article 13 of Directive 77/388, constitutes a serious breach of Community law that can render a Member State liable in damages.
Summary
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