Flashback on ECJ Cases – C-451/06 (Walderdorff) – A right to fish, under a ten-year lease, does not constitute a lease or rental of immovable property

On December 6, 2007, the ECJ issued its decision in the case C-451/06 (Walderdorff).

Context: (Sixth VAT Directive – Article 13B(b) – Exemption – Leasing and letting of immovable property – Letting of fishing rights

Article in the EU VAT Directive

Article 13(B)(b) of the Sixth VAT Directive. Articles 135(1)(l), 135(2) of the EU VAT Directove 2006/112/EC.

Article 135
1. Member States shall exempt the following transactions:
(l) the leasing or letting of immovable property.

2. The following shall be excluded from the exemption provided for in point (l) of paragraph 1:
(a) the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;
(b) the letting of premises and sites for the parking of vehicles;
(c) the letting of permanently installed equipment and machinery;
(d) the hire of safes.
Member States may apply further exclusions to the scope of the exemption referred to in point (l) of paragraph 1.

Facts

Gabriele Walderdorff manages an agricultural and forestry holding in Austria. The transactions which she carries out in the course of her business are subject to the general provisions of the VAT system.
On 21 November 1995, Ms Walderdorff and the Sportfischereiverein Zwettl (an angling club in Zwettl, ‘the angling club’) entered into a contract for a period of 10 years. Under this contract the angling club had the right, on payment of a consideration, to fish, first, in two ponds located within Ms Walderdorff’s holding, where she has the fishing rights in her capacity as the land owner, and secondly, in publicly owned fishing waters where Ms Walderdorff has fishing rights registered in the Fisheries register (area ‘Zwettl I/3’). The letting contract was concluded for the period from 1 January 1996 until 31 December 2005. Ms Walderdorff did not pay VAT in respect of those lettings. The tenants were not invoiced for VAT either.
Following a tax inspection for the years 1998 to 2000, the Finanzamt (tax authority) determined that those lettings should be subject to VAT at the normal rate, since the income obtained from the lettings in question was not received on the basis of a letting, exempted under the UStG, of a right in rem to immovable property. The opinion of the Finanzamt was that the right to fish was a right which was independent of the land.
Accordingly, on 24 March 2003 the Finanzamt issued notices of assessment of Ms Walderdorff for those years, whereby the letting of the fishing rights was included within transactions subject to the normal rate of 20%. By letter of 24 April 2003, Ms Walderdorff appealed against those notices, and applied, on the basis of Article 6(1)(16) of the UStG, for exemption in respect of the lettings of fishing rights.
The Finanzamt rejected that appeal and then, at the request of Ms Walderdorff, brought the case before the Unabhängiger Finanzsenat, Außenstelle Wien (the Vienna Division of the Independent Tax Tribunal).
The issue in the proceedings before that court is whether the fees paid under the contract between Ms Walderdorff and the angling club are taxable at the normal rate of VAT under the general system or whether the exemption provided for in Article 6(1)(16) of the UStG is applicable.

Questions

Is Article 13B(b) of 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 ¹ (as last amended by Council Directive 2006/69/EC of 24 July 2006 ²), hereinafter referred to as ‘the Sixth Directive’, to be interpreted as meaning that the grant of the entitlement to fish, for consideration, in the form of a lease concluded for a period of 10 years

1. by the owner of the property on which the body of water in respect of which the entitlement was granted is located,

2. by the holder of fishing rights in respect of a body of water located on public land

constitutes ‘the leasing or letting of immovable property’?

AG Opinion

The concept of leasing or letting of immovable property in Article 13B(b) of Sixth Council Directive 77/388/EEC involves assigning the right to occupy the property and to exclude other persons from it. It does not extend to a situation in which the owner of the property assigns the right to use it for a specific purpose but retains the right to use the property himself, or to authorise others to use it, for the same purpose or for other purposes.

Decision

Article 13B(b) of Sixth Council Directive 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 must be interpreted to mean that the grant for consideration, under a contract of let for a period of 10 years, of the right to fish, by the landowner in waters owned by that person, and by the holder of fishing rights in publicly owned waters, does not constitute either a leasing or a letting of immovable property, inasmuch as that grant does not confer the right to occupy the immovable property concerned and to exclude any other person from it.

Summary

Leasing of fishing rights – Exemption from rental of immovable property

The transfer for consideration of the right to fish, under a ten-year lease, by the owner of the water for which this right has been granted and by the holder of the fishing right in a public domain water, does not constitute a lease or rental of immovable property, insofar as this transfer does not confer the right to use the immovable property concerned and to exclude anyone else from the enjoyment of that right.

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