On April 26, 2012, the ECJ issued its decision in the case C-225/11 (Able UK).
Context: VAT — Directive 2006/112 — Exemptions — Article 151(1)(c) — Supply of services of dismantling obsolete US Navy ships in the territory of a Member State
Article in the EU VAT Directive
Article 151(1)(c) in the EU VAT Directive
Article 151 (Exemptions relating to certain Transactions treated as exports)
1. Member States shall exempt the following transactions:
(c) the supply of goods or services within a Member State which is a party to the North Atlantic Treaty, intended either for the armed forces of other States party to that Treaty for the use of those forces, or of the civilian staff accompanying them, or for supplying their messes or canteens when such forces take part in the common defence effort;
Facts
- According to the order for reference, Able had secured a contract with the United States Department of Transportation Maritime Administration to dismantle thirteen vessels which were in the service of the US Navy, but had latterly been consigned to the US Navy’s Reserve Fleet and moored in the James River in Virginia (United States). The contract was in two distinct parts; firstly the ships had to be prepared and then towed from the United States to the United Kingdom. Secondly, once they were secured at Able’s facility on Teesside (United Kingdom), they were to be dismantled. United States Government inspectors were to have a presence on the site throughout the duration of the contract.
- In a letter dated 27 August 2008 Able sought a ruling from the Commissioners as to the VAT liability of the dismantling service which it provided. Able argued that the supply was exempt pursuant to the third indent of Article 15(10) 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 (OJ 1977 L 145, p. 1), subsequently replaced by Article 151(1)(c) of the VAT Directive.
- The HMRC gave a ruling on 15 October 2008 that Able’s dismantling services were standard rated. Able sought a reconsideration of that decision on 21 October 2008. The Commissioners confirmed their ruling on 18 November 2008 and Able then appealed against that decision to the First-tier Tribunal (Tax Chamber), which, by a decision of 24 November 2009, held that the services supplied by Able of dismantling ships were exempt.
- The Commissioners appealed against that decision before the referring court. In their view, Article 151(1)(c) of the VAT Directive applies only to armed forces of a State party to the North Atlantic Treaty visiting a Member State which is another party to the same treaty and only where those forces take part in an activity directly related to the common defence effort.
Questions
Is Article 151(1)(c) of the [VAT Directive] to be interpreted as exempting a supply in the UK of services of dismantling obsolete US Navy ships for the US Department of Transportation Maritime Administration in either or both of the following circumstances:
(a) where that supply was not made to a part of the armed forces of a NATO member taking part in the common defence effort or to civilian staff accompanying them;
(b) where that supply was not made to a part of the armed forces of a NATO member stationed in or visiting the UK or to civilian staff accompanying such forces?
AG Opinion
None
Decision
Article 151(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a supply of services such as that at issue in the main proceedings, made in a Member State party to the North Atlantic Treaty and consisting in dismantling obsolete ships of the Navy of another State party to that treaty, is exempt from VAT under that provision only where
– those services are supplied for staff of the armed forces of that other State taking part in the common defence effort or for the civilian staff accompanying them, and
– those services are supplied for members of the armed forces who are stationed in or visiting the Member State concerned or for the civilian staff accompanying them.
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