Flashback on ECJ Cases – C-154/08 (Commission v Spain) – Services rendered by the ‘registradores de la propiedad’ are subject to VAT

On November 12, 2009, the ECJ issued its decision in the case C-154/08 (Commission v Spain).

Context: ‘Failure to comply with State – Sixth VAT Directive – Articles 2 and 4, paragraphs 1, 2 and 5 – Harmonization of the laws of the Member States relating to turnover taxes – Common system of value added tax: tax base uniform – Taxpayers – Activities or operations carried out by the Property Registrars as titular liquidators of the Mortgage District Liquidating Offices – Economic activities − Activity carried out independently − Public Law Bodies that carry out activities in the exercise of public functions – Infraction Community law attributable to a national court

Article in the EU VAT Directive

Articles 2, 4(1), 4(2) of the Sixth VAT Directive (Articles 2 and 9(1) of the EU VAT Directive 2006/112/EC.

Article 2 (Scope)

1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

Article 9 (Taxable person)
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 & Questions

Considering that the services provided to the Autonomous Communities by the registrars-liquidators should be subject to VAT, the Commission sent the Kingdom of Spain a written request on October 18, 2004.
In said brief, the Commission referred to the judgment of the Supreme Court and observed that, as a consequence of the aforementioned judgment, the Spanish Administration had modified its practice regarding the subjection to VAT of the activities of the registrars-liquidators, a change that It was clear, according to the Commission, from a resolution of the General Directorate of Taxes of November 14, 2003 and a judgment of the National High Court of October 23, 2003, which modified its previous opinion on this matter in the light of the Supreme Court ruling.
On 27 December 2004, the Kingdom of Spain sent a reply expressing its disagreement with the Commission’s position.
In particular, it argued that the Property Registrars have a double character, as professionals, on the one hand (regarding the services provided in the field of Property Registry management), and as civil servants, on the other (regarding the functions they perform in the area of inheritance and transfer taxes).
According to that Member State, when the registrar-liquidator performs liquidation and collection functions, he is obliged to follow the instructions given by the Autonomous Community, which demonstrates the existence of a dependency relationship. In addition, the acts of the registrar-liquidator can be submitted to the contentious-administrative jurisdiction like those of any other administrative body and the collection premium received by the registrar-liquidator is only a mere compensation for the expenses incurred, and not a true payoff.
Taking into account the response given by the Kingdom of Spain, the Commission Services, in a letter dated June 21, 2005, requested additional information on the criteria applied to calculate the “compensation” for the expenses incurred by the registrars -liquidators, the legal regime applied by them to the personnel employed in the performance of their functions and the regulations promulgated by the Autonomous Communities by which the Registrars are entrusted with the function of liquidators who hold the liquidating offices.
On February 7, 2006, the Kingdom of Spain sent a letter in response to this request for information. On 17 February, a meeting took place between the Commission services and the representatives of that Member State. On May 2 and November 20, 2006, the aforementioned State forwarded complementary briefs in response to the Commission’s brief of June 21, 2005. In these briefs, the Kingdom of Spain recalled that the settlement offices are administrative bodies that depend of the Autonomous Communities.
Considering that the documentation provided and the information exchanged revealed that the Kingdom of Spain was failing to comply with its obligations under Community VAT legislation, the Commission sent a reasoned opinion on December 15, 2006 to the Kingdom of Spain, granting a period of two months to adjust to it. In said opinion, the Commission reiterated the position already expressed in the letter of requirement, namely, that the ruling of the Supreme Court gave rise to a change in Spain regarding the subjection to VAT of the activities of the registrars-liquidators.
In its reply of 15 March 2007, that is to say, one month after the expiry of the period set in the reasoned opinion, the Kingdom of Spain reiterated the arguments set out in its previous communications. Likewise, it argued, with regard to the Supreme Court ruling, that the Spanish judicial authorities considered that a request for a preliminary ruling was not necessary since they were aware of the pertinent criteria derived from the Court of Justice’s jurisprudence regarding the issue of the subjection or not to VAT of services such as those at issue in this case.

AG Opinion

None

Decision

1) Declare that the Kingdom of Spain has breached its obligations under articles 2 and 4, paragraphs 1 and 2, of Council Directive 77/388 / EEC, of May 17, 1977, Sixth Directive in matter of harmonization of the laws of the Member States relating to taxes on turnover – Common system of value added tax: uniform tax base, considering that the services provided to an Autonomous Community by Property Registrars, in their capacity as liquidators holders of a Mortgage District Liquidation Office, they are not subject to value added tax.

Personal comments/VATupdate

By taking the view that the services rendered by the ‘registradores de la propiedad’ in their capacity as taxable officials of a taxing body for a particular cadastral area (‘oficina liquidadora de distrito hipotecario’) for the benefit of an autonomous community , are not subject to value added tax, the Kingdom of Spain has failed to fulfill its obligations under Articles 2 and 4(1) and (2) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis.

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