Flashback on ECJ cases C-68/03 (Lipjes) – Place of supply of intermediary services

On May 27, 2004, the ECJ issued its decision in the case C-68/03 (Lipjes).

Context: Sixth VAT Directive – Article 28b(E)(3) – Services by intermediaries – Place of supply

This ECJ case dealt with the place of supply of services which was valid till Jan 1, 2010.

Article in the EU VAT Directive

Article 28b(E)(3) of the Sixth VAT Directive

Article 28b(E)(3) By way of derogation from Article 9(1), the place of the supply of services rendered by intermediaries acting in the name and for the account of other persons, when such services form part of transactions other than those referred to in paragraph 1 or 2 or in Article 9(2)(e), shall be the place where those transactions are carried out. However, where the customer is identified for purposes of value added tax in a Member State other than that within the territory of which those transactions are carried out, the place of supply of the services rendered by the intermediary shall be deemed to be within the territory of the Member State which issued the customer with the value added tax identification number under which the service was rendered to him by the intermediary.’

Facts

Mr Lipjes, who resides in the Netherlands, is a trader involved in the purchase and sale of used leisure watercraft and as a broker in the sale and purchase of yachts. In 1996 and 1997, he was twice involved in the purchase of yachts located in France, in both cases apparently on behalf of an individual purchaser residing in the Netherlands, whereas the vendor was an individual residing in France. Mr Lipjes did not declare the VAT pertaining to those two intermediary operations in either the Netherlands or France.
Following an audit, the Netherlands tax authorities charged VAT retroactively on those supplies of services. The Gerechtshof te ’s-Gravenhage (Regional Court of Appeal, The Hague) (Netherlands), before which the case was brought, found that, in the light of the place where the yachts were situated at the time of the sale, the intermediary services had not been supplied in the Netherlands and that Mr Lipjes was therefore entitled not to declare the VAT there.
That court relied on Article 6a(3)(c) of the Wet op de omzetbelasting 1968 (1968 Law on turnover tax) of 28 June 1968 (Staatsblad 1968, 329), as amended by the Law of 24 December 1992 (Staatsblad 1992, 713). That provision corresponds to the first paragraph of Article 28b(E)(3) of the Sixth Directive, which provides with respect to intra-Community transactions:
By way of derogation from Article 9(1), the place of the supply of services rendered by intermediaries acting in the name and for the account of other persons, when such services form part of transactions other than those referred to in paragraph 1 or 2 or in Article 9(2)(e), shall be the place where those transactions are carried out.
However, where the customer is identified for purposes of value added tax in a Member State other than that within the territory of which those transactions are carried out, the place of supply of the services rendered by the intermediary shall be deemed to be within the territory of the Member State which issued the customer with the value added tax identification number under which the service was rendered to him by the intermediary.’
Article 9(1) of the Sixth Directive, from which that provision makes an exception, establishes the place where a service is supplied as in principle the place where the supplier has established his business.
The Gerechtshof found that, since the yachts were in France and since the intermediary services had been supplied there as well, it was appropriate to apply not the general provision but the exception applying to intra-Community transactions, with the result that the Kingdom of the Netherlands is not entitled to make the transactions subject to VAT.
The Staatssecretaris van Financiën appealed against that judgment to the Hoge Raad der Nederlanden. It argues that Article 28b(E)(3) of the Sixth Directive and the corresponding national provision must be interpreted narrowly to the effect that the term ‘transactions’ includes intermediary services only when the underlying contract, that is, the contract for the supply of a product or service, was concluded by professionals subject to VAT, which is not the case in the main proceedings, which involves individuals.

Questions

1. Must Article 28b(E)(3) of the Sixth Directive be construed as meaning that that provision refers only to services by intermediaries where the recipient of the service is a taxable person within the meaning of the directive or a non-taxable legal person within the meaning of Article 28a of the Directive?

2. If not, must the first sentence of Article 28b(E)(3) of the Sixth Directive then be construed as meaning that where an intermediary acts in the purchase and sale of a tangible object between two individuals, for the purposes of determining the place where the intermediary acts, regard must be had to the place where the transaction is carried out, as if the transaction were a supply or service by a taxable person as referred to in Article 8 of the Sixth Directive?

AG Opinion

(1) Article 28b(E)(3) 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 also applies where the intermediary services to which it refers are supplied to an individual, irrespective of the capacity in which the person effecting the sale in the principal transaction acts.

(2) Accordingly, the place where the intermediary acts must be determined by reference to the criteria stated in Article 28b(A) and (B) of the Sixth Directive.

Decision

1. Article 28b(E)(3) 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, as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers, is not to be interpreted as meaning that it covers only the services of intermediaries provided to a taxable person or to a non-taxable legal person for the purposes of value added tax.

2. When an intermediary transaction falls within the scope of Article 28b(E)(3) of Sixth Directive 77/388, as amended, it is necessary, for the purposes of determining the place where the transaction underlying the supply of intermediary services was carried out, to refer to the provisions of Article 28b(A) and (B) of that directive.

Summary

Article 28b(E)(3) of the Sixth Directive must not be interpreted as covering only intermediary services where the recipient of the service for VAT purposes is a taxable person or a non-taxable legal person.

Where an act of an intermediary falls under Article 28b(E)(3) of the Sixth Directive, the determination of the place of performance of the acts on which the intermediary services are based should be based on the provisions of Article 28b, A and B, of this Directive.

Source