Flashback on ECJ Cases – C-62/12 (Kostov) – A natural person who is already a taxable person is also a ‘taxable person’ in respect of any other economic activity carried out occasionally

On June 13, 2013, the ECJ issued its decision in the case C-62/12 (Kostov).

Context: Common system of value added tax – Directive 2006/112/EC – Article 9(1) – Concept of ‘taxable person’ – Natural person – Taxable supply of a service – Occasional supply – Unconnected with a registered professional activity subject to VAT – Self-employed bailiff

Article in the EU VAT Directive

Article 9(1) of the EU VAT Directive 2006/112/EC.

Article 9
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.

Facts

Mr Kostov is a self-employed private bailiff in Bulgaria. He is registered for the purposes of VAT pursuant to Article 96(1) of the ZDDS.
On 13 November 2008, Mr Kostov concluded a contract of agency (‘the contract’) with Bon Marin AD (‘Bon Marin’). Under that contract, Mr Kostov undertook, as agent for Bon Marin, to make bids in the context of three auctions of three plots of partially built-upon land which were owned by the State under private law, were managed by the Ministry of Defence and covered an area of approximately 40 000 m². He also undertook to transfer ownership in those properties to Bon Marin in the event of a successful bid.
The principal, Bon Marin, undertook to provide the financial resources required for the purchases envisaged by the contract, to acquire ownership of the properties obtained by Mr Kostov in performing the contract of agency and to pay him the agreed remuneration in the amount of BGN 50 000 (approximately EUR 25 500).
That remuneration was paid on the same day as that of signature of the contract, which provided, moreover, that Mr Kostov would retain the remuneration in the event that the bids were unsuccessful.
In May 2009, Mr Kostov acquired from the State ownership of the properties referred to in the contract.
On 30 June 2009, with the agreement of the agent, Bon Marin assigned to Bleyk Siy Kepital EOOD all of its rights and obligations under the contract.
The VAT dispute arose from a tax adjustment notice drawn up by the tax inspectorate with responsibility for the city of Varna. According to that notice, Mr Kostov had received his remuneration of BGN 50 000 in consideration for a taxable supply of services within the meaning of Article 12 of the ZDDS, had made the supply as a taxable person for VAT purposes and was therefore required to pay VAT on that amount.
Following an administrative appeal, the tax adjustment notice was upheld by the Direktor.
Mr Kostov brought an action against the Direktor’s notice, claiming that he had provided the service on an occasional basis and not in connection with his economic activity as a self-employed private bailiff, the only activity for which he was registered for VAT.

Questions

Is a natural person who is registered for VAT by reason of his activity as a private bailiff to be regarded as a taxable person within the meaning of Article 9(1) of [the VAT] Directive … and required, pursuant to Article 193 of [the VAT] Directive …, to pay VAT in respect of a service which he has provided on an occasional basis and not in connection with his activity as a private bailiff?

AG Opinion

– Primarily

A natural person who is registered for value added tax by reason of his activity as a private bailiff must be regarded as a taxable person within the meaning of Article 9(1) of Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and therefore required to pay value added tax on a service which he has provided on an occasional basis and not in connection with his activity as a private bailiff.

– In the alternative

In order to decide whether a natural person who is registered for value added tax by reason of his activity as a private bailiff may be excluded from the requirement to pay value added tax on a service which he has provided, since it was provided on an occasional basis and not in connection with his usual activity, the referring court must assess all the circumstances of the case, and, in particular, the following elements, though none of them is in itself decisive:

– the nature and the intended use of the property to which the transactions relate;

– the connection of the transactions with the profession of the person concerned and, in the event that they do not form part of that person’s specific activities, any connection with the professional training and qualifications of the person concerned which are capable of being decisive in creating a relationship of trust required successfully to complete the transactions at issue;

– the number and type of customers;

– the scale of the transactions; and

– the conditions to which the remuneration is subject and the amount thereof.

Decision

Article 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax is to be interpreted as meaning that a natural person who is already a taxable person for value added tax purposes in respect of his activities as a self-employed bailiff must be regarded as a ‘taxable person’ in respect of any other economic activity carried out occasionally, provided that that activity constitutes an activity within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112.

Personal comments/VATupdate

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