Flashback on ECJ cases C-275/01 (Sinclair Collis) – Cigarette vending machines installed in business premises – Exemption from rental of immovable property

On June 12, 2003, the ECJ issued its decision in the case C-275/01 (Sinclair Collis).

Context: Sixth VAT Directive – Article 13B(b) – Exempt transactions – Letting of immovable property – Meaning – Cigarette vending machines installed in commercial premises.

Article in the EU VAT Directive

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

Article 135 (exemption)
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

SC, which is part of the Imperial Tobacco Group, provides, operates and maintains vending machines for the sale of cigarettes in public houses, clubs and hotels.
To that end it has concluded with each owner of these commercial premises an agreement for the provision of such machines in return for payment of an agreed percentage of the gross profits on overall sales of tobacco products made in the premises, more particularly on sales made through the machines (hereinafter ”the agreement”).
Under the agreement, the machines are to be positioned in such location as the site owner considers to be the most likely to generate the maximum sales. However, the site owner may not unreasonably refuse his consent to a different location selected by SC. SC retains ownership of the cigarettes kept in the machines, of the cash, and of cigars and other tobacco products. The site owner confers on SC for a period of two years the exclusive right to install and operate the machines, which remain the property of SC. In addition, the agreement grants SC an exclusive right to supply cigars and other tobacco products to the establishment in question.
The site owner agrees to provide sufficient electricity and to prevent the installation on his premises of any machine dispensing products comparable to those covered by the agreement. Machines other than those which are designed to be wall-mounted can be moved around.
SC retains exclusive control over access to the machines, keeps them properly stocked and removes the money inside for sharing as agreed.
In January 1996 the Commissioners decided that the supplies under the agreement ought to be exempt from VAT under Article 13B(b) of the Sixth Directive, on the ground that the agreement constituted a licence to occupy land. SC, which had an interest in the supplies being found to be taxable so as to be able to set off input tax, appealed against that decision to the VAT and Duties Tribunal, Manchester (United Kingdom). The Tribunal found that the real subject of the agreement was the installation of cigarette vending machines and not the use or enjoyment of land and accordingly held that the transaction ought not to be exempt from VAT.
The Commissioners appealed against the decision of the Tribunal to the High Court of Justice of England and Wales, which found in their favour. SC appealed against the High Court’s decision to the Court of Appeal (England and Wales) (Civil Division), which dismissed the appeal. SC then appealed to the House of Lords.

Questions

Is the grant, by the owner of premises (”the Siteholder”) to an owner of a cigarette vending machine, of the right to install, operate and maintain the machine in the premises for a period of two years, in a place nominated by the Siteholder, in return for a percentage of the gross profits of the sales of cigarettes and other tobacco goods in the premises, but with no other significant rights of possession or control than those set out in the written agreement between the parties, capable of amounting to the letting of immovable property within the meaning of Article 13B(b) of [the Sixth Directive]; and what are the principles applicable in deciding whether an agreement amounts to the letting of immovable property within such meaning?

AG Opinion

The grant, by the owner of premises (”the Siteholder”) to an owner of a cigarette vending machine, of the right to install, operate and maintain the machine in those premises for a period of two years, in a place nominated by the Siteholder, in return for a percentage of the gross profits of the sales of cigarettes and other tobacco goods in the premises, but with no other significant rights of possession or control than those set out in the written agreement between the parties, does not amount to the letting of immovable property within the meaning of Article 13B(b) of the Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes.

Decision

On a proper construction of Article 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, the grant, by the owner of premises to an owner of a cigarette vending machine, of the right to install the machine, and to operate and maintain it in the premises for a period of two years, in a place nominated by the owner of

the premises, in return for a percentage of the gross profits on the sales of cigarettes and other tobacco goods in the premises, but with no rights of possession or control being granted to the owner of the machine other than those expressly set out in the agreement between the parties, does not amount to a letting of immovable property within the meaning of that provision.

Summary

Source