Flashback on ECJ Cases – C-116/10 (Feltgen and Bacino Charter Company) – Exemption from transactions related to the rental of seagoing vessels

On December 22, 2010, the ECJ issued its decision in the case C-116/10 (Feltgen and Bacino Charter Company).

Context: Sixth VAT Directive – Exemptions – Article 15(4)(a) and 15(5) – Exemption for the hiring of sea-going vessels – Scope

Article in the EU VAT Directive

Article 15(5) of the Sixth VAT Directive (Article 148(c) of the EU VAT Directive 2006/112/EC).

Article 148
Member States shall exempt the following transactions:
(c) the supply, modification, repair, maintenance, chartering and hiring of the vessels referred to in point (a), and the supply, hiring, repair and maintenance of equipment, including fishing equipment, incorporated or used therein;

Facts

Between 10 July 1998 and 8 August 1999, Bacino regularly made available, for reward, a vessel which it owned, with a crew, to natural persons for purposes of leisure travel on the high seas. As it considered that transaction to be exempt from VAT, Bacino did not pay any VAT.
Taking the view that the exemption provided for in Article 43(1)(i), second indent, of the Luxembourg Law did not apply, in so far as the boat was not a commercial vessel but a yacht within the meaning of the Grand-Ducal Regulation mentioned in paragraph 5 of this judgment, the tax authority notified Bacino in 2001 of the tax assessments for the financial years 1998 and 1999, which set out the amounts of VAT owed by the company.
Following an unsuccessful objection, Bacino challenged that assessment before the Tribunal d’arrondissement de Luxembourg (District Court, Luxembourg), arguing that the transaction came within the scope of Article 43(1)(i), second indent, of the Luxembourg Law.
When that action was dismissed, Bacino appealed to the Cour d’appel (Court of Appeal), which upheld its claim. That court concluded, inter alia, that the principal service was vessel hire with crew and an ancillary transport service. Having noted that the boat owned by Bacino was engaged in navigation on the high seas and that the carriage of travellers was for reward, with the result that the hire of that boat constituted a commercial transaction, the Cour d’appel found that the two conditions set out in Article 15(5) of the Sixth Directive had been met.

Questions

May services provided by the owner of a vessel who, for reward, with a crew, makes it available for natural persons for the purpose of leisure travel on the high seas by those clients, be exempted under Article 15(5) of [the Sixth Directive] … where those services are considered to be both vessel-hire services and transport services?

AG Opinion

None

Decision

Article 15(5) 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, must be interpreted as meaning that the exemption from value added tax provided for by that provision does not apply to services consisting of making a vessel available, for reward, with a crew, to natural persons for purposes of leisure travel on the high seas.

Summary

Exemption from transactions related to the rental of seagoing vessels

Article 15(5) of the Sixth Directive must be interpreted as meaning that the exemption from VAT provided for in that provision does not apply to supplies of services consisting in the provision, for remuneration, of a boat with crew to natural persons for pleasure trips at full sea.

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