Flashback on ECJ cases C-8/03 (BBL) – Investment companies with variable capital (SICAVs) have the status of a taxable person

On October 21, 2004, the ECJ issued its decision in the case C-8/03 (BBL).

Context: Sixth VAT Directive – Articles 4 and 9(2)(e) – Concept of taxable person – Place where services are supplied – SICAV.

Article in the EU VAT Directive

Aricle 4 and 9(2)(e) of the Sixth VAT Directive (Article 9 and 44 of the EU VAT Directive 2006/112/EC).

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

1. “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.’

Article 9(1) and the third and fifth indents of Article 9(2)(e) of that directive provide: (now Article 44 of the EU VAT Directive 2006/112/EC).

1. The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

2. However:

(e) the place where the following services are supplied when performed for customers established outside the Community or for taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides:

– services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and the supplying of information,

– banking, financial and insurance transactions including reinsurance, with the exception of the hire of safes’.

Facts

The order for reference states that, during the period relevant to the main proceedings, BBL provided services to Luxembourg SICAVs [BBL Renta Fund, BBL Renta Cash, BBL Patrimonial, International Aviation Fund, BBL Capital Cash, BBL Portfolio and BBL (L) Invest]. Under the consultancy agreement entered into with each of its SICAVs, BBL undertook to:
- – assist the SICAV in the management of its assets, by ensuring that any advice given by it was strictly in accordance with the general management guidelines and investment policy adopted by the SICAV;
- – provide to those responsible for the day-to-day management of the SICAV all documentation, information and oral or written advice they might deem necessary in order to carry out their duties;
- – assist the SICAV in the acquisition, subscription, transfer and disposal of shares, bonds and all other negotiable securities and in relation to currency or treasury operations.
In February 1998, BBL was the subject of an inspection carried out by the Liège special tax inspection department for the period from 1 May 1993 to 31 December 1997. As a result of that inspection, a report was drawn up on 28 May 1998, stating that BBL had not invoiced VAT in relation to fees invoiced to the Luxembourg SICAVs for advice given, as it considered that those services had been supplied in the Grand Duchy of Luxembourg by virtue of Article 21(3)(7)(d) or (e) of the Belgian VAT Code.
In that regard, the national court states that the report suggests that Article 21(3)(7) of the Belgian VAT Code does not apply, because Luxembourg SICAVs are not considered under Luxembourg legislation to be taxable persons.
Furthermore, according to the report, BBL acted with the intention of avoiding VAT or permitting VAT to be avoided, as it could not have been unaware that VAT arising on the cost of the services supplied to the Luxembourg SICAVs was not paid either to the Belgian State or to the Luxembourg State.
On 8 June 1998, a final demand was issued to BBL for, inter alia, EUR 45 491 373.03 by way of VAT due for the period from 1 May 1993 to 31 December 1997, for EUR 90 982 746.07 by way of a fine at the rate of 200% and for EUR 1 819 654.49 in respect of interest on late payment from 1 January to 20 June 1998.
BBL brought proceedings to contest that final demand before the Tribunal de première instance de Bruxelles (Brussels Court of First Instance).
The national court observes that to take the view that each Member State is free to treat, or not to treat, persons established in its territory or carrying on business there as being subject to VAT is to misconstrue the Community provisions relating to VAT, the purpose of which is precisely to harmonise the concept of a taxable person and to allocate among the Member States the power to tax transactions by providing a uniform definition of the place where goods and services are supplied.
In accordance with the duty to interpret national provisions in conformity with Community law, Article 21(3) of the Belgian VAT Code, which transposed Article 9(2)(e) of the Sixth Directive into Belgian law, must be interpreted in the light of the wording of that directive and the purpose which it is intended to achieve, and there is no need to refer to Luxembourg law.
However, the national court observes that the question whether SICAVs carry out an economic activity within the meaning of Article 4 of the Sixth Directive and accordingly whether they are subject to VAT has not yet been decided by the Court.
If the Luxembourg SICAVs were not to be treated as subject to VAT, with the result that the services supplied by BBL would be deemed to be supplied in Belgium, the national court observes that the question arises whether those services could benefit from the exemption provided for under Article 13B(d)(6) of the Sixth Directive.

Questions

– Are sociétés d’investissement à capital variable (open-ended investment companies) (SICAVs) established in a Member State which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Council Directive 85/611 of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) taxable persons for value-added-tax purposes within the meaning of Article 4 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, so that, where services referred to in Article 9(2)(e) of that directive are supplied to those SICAVs, the place where those services are deemed to be supplied is the place where the SICAVs have established their seat?

– If the answer to that question is in the negative, the resolution of the case entails determining what types of services provided to SICAVs may benefit from the exemption under Article 13B(d)(6) of the Sixth Directive: is it necessary in that context to distinguish between services which comprise the giving of assistance and management advice, on the one hand, and management services in the strict sense, on the other, the latter being said to differ from the former in that they imply a power on the manager’s part to take decisions relating to the administration and disposal of the assets under management?

AG Opinion

(1) Article 4 of the Sixth Council Directive 77/388/EEC of 17 May 1977 must be interpreted as meaning that SICAVs established in accordance with Council Directive 85/611/EEC of 20 December 1985 are taxable persons for value added tax purposes, so that the services referred to in Article 9(2)(e) of the Sixth Council Directive 77/388/EEC of 17 May 1977 supplied to them are deemed to be provided at the place where the said SICAVs have established their business.

(2) Having regard to the response to the first question, it is unnecessary to reply to the second question.

Decision

Open-ended investment companies (SICAVs) which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) are taxable persons within the meaning of Article 4 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, so that, where services referred to in Article 9(2)(e) of that directive are supplied to such SICAVs which are established in a Member State other than that of the supplier of the services, the place where those services are provided is the place where the SICAVs have established their business.

Summary

Investment companies with variable capital (SICAVs) the sole object of which is collective investment in securities of capital raised from the public in accordance with Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to certain collective undertakings. investment in transferable securities (UCITS) have the status of taxable person within the meaning of Article 4 of the Sixth Directive, so that the place where the services referred to in Article 9(2)(e) of the same directive are provided to such persons in a Member State other than granted by SICAVs established by the service provider, is the place where these SICAVs have established their business.

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