On October 26, 2010, the ECJ issued its decision in the case C-97/09 (Schmelz).
Context: Sixth VAT Directive – Articles 24(3) and 28i – Directive 2006/112/EC – Article 283(1)(c) – Validity – Articles 12 EC, 43 EC and 49 EC – Principle of equal treatment – Special scheme for small undertakings – Exemption from VAT – Benefit of the exemption refused to taxable persons established in other Member States – Definition of ‘annual turnover
Article in the EU VAT Directive
Articles 24(3) and 28i of the Sixth VAT Directive. (Articles 282, 283, 402 of the EU VAT Directive 2006/112/EC).
Article 282
The exemptions and graduated tax relief provided for in this Section shall apply to the supply of goods and services by small enterprises.
Article 283
1. The arrangements provided for in this Section shall not apply to the following transactions:
(a) transactions carried out on an occasional basis, as referred to in Article 12;
(b) supplies of new means of transport carried out in accordance with the conditions specified in Article 138(1) and (2)(a);
(c) supplies of goods or services carried out by a taxable person who is not established in the Member State in which the VAT is due.
2. Member States may exclude transactions other than those referred to in paragraph 1 from the arrangements provided for in this Section.
Article 402 (Transitional arrangements for the taxation of trade between Member States)
1. The arrangements provided for in this Directive for the taxation of trade between Member States are transitional and shall be replaced by definitive arrangements based in principle on the taxation in the Member State of origin of the supply of goods or services.
2. Having concluded, upon examination of the report referred to in Article 404, that the conditions for transition to the definitive arrangements are met, the Council shall, acting in accordance with Article 93 of the Treaty, adopt the provisions necessary for the entry into force and for the operation of the definitive arrangements.
Facts
- Ms Schmelz is a German national, resident in Germany. She is the owner of an apartment in Austria which she lets at a monthly rent of EUR 330 plus operating costs.
- Since Ms Schmelz considered that, as she was a small undertaking, she was exempt from the payment of turnover tax pursuant to Article 6(1)(27) of the UStG of 1994, she did not charge that tax on the rent.
- The Finanzamt takes the view that, unless she is resident or established in Austria, Ms Schmelz cannot benefit from the exemption granted to small undertakings. Therefore, having found that Ms Schmelz had generated net turnover of EUR 5 890.90 for 2006 and EUR 5 936.37 for 2007 in respect of her letting in Austria, the Finanzamt issued two tax assessments dated 19 June and 17 November 2008 respectively, finding Ms Schmelz liable to tax on the turnover in the amounts of EUR 334.93 and EUR 316.15 respectively.
- Ms Schmelz then appealed against those assessments to the Unabhängiger Finanzsenat, Außenstelle Wien (Independent Finance Tribunal, Vienna). That court explained, by way of additional information, that Ms Schmelz declared on 10 March 2009 that she had generated no other turnover, during the years at issue in the main proceedings, in the territory of the European Union.
- The referring court, on the one hand, considers that the decisions on liability to tax taken by the Finanzamt comply with national law, which itself is consistent with the provisions of both the Sixth Directive and the VAT Directive but, on the other hand, points out that, in contrast to Ms Schmelz, a person residing in Austria could, as a small undertaking, benefit from the exemption from turnover tax.
- The Unabhängiger Finanzsenat, Außenstelle Wien, accordingly has doubts as to whether those directives are compatible with the prohibitions on discrimination resulting from primary law, namely, from Articles 12 EC, 43 EC and 49 EC, and from the general principle of European Union law (‘EU law’) on equal treatment.
Questions
1. Does the wording “as well as supplies of goods and services effected by a taxable person who is not established in the territory of the country” in Article 24(3) and in Article 28i of the Sixth … Directive … and a scheme transposing this provision into national law infringe the [EC] Treaty …, in particular the principle of non‑discrimination (Article 12 EC), the freedom of establishment (Article 43 EC et seq.), the freedom to provide services (Article 49 EC et seq.), or fundamental rights under [European Union] law (the [EU]-law principle of equal treatment) because the provision has the effect that Union citizens who are not established in the territory of the relevant country are excluded from the exemption under Article 24(2) of the Sixth Directive (Special scheme for small undertakings), whilst Union citizens who are established in the territory of the relevant country are able to claim this exemption where the relevant Member State grants an exemption for small undertakings in accordance with the Directive?
2. Does the wording “supplies of goods or services carried out by a taxable person who is not established in the Member State in which the VAT is due” in Article 283(1)(c) of [the VAT Directive] … and that of a scheme transposing this provision into national law infringe the [EC] Treaty …, in particular the principle of non‑discrimination (Article 12 EC), the freedom of establishment (Article 43 EC et seq.), the freedom to provide services (Article 49 EC et seq.), or fundamental rights under [European Union] law (the [EU] law principle of equal treatment), because the provision has the effect that Union citizens who are not established in the relevant Member State are excluded from the exemption under Article 282 et seq. of [the VAT] Directive … (Special scheme for small enterprises), whilst Union citizens who are established in the territory of the relevant country are able to claim this exemption where the relevant Member State grants an exemption for small enterprises in accordance with the [VAT] Directive?
3. If the answer to the first question is in the affirmative: is the wording “as well as supplies of goods and services effected by a taxable person who is not established in the territory of the country” in Article 24(3) and in Article 28i of the Sixth Directive invalid within the meaning of Article 234(b) EC?
4. If the answer to the second question is in the affirmative: is the wording “supplies of goods or services carried out by a taxable person who is not established in the Member State in which the VAT is due” in Article 283(1)(c) of [the VAT] Directive invalid within the meaning of Article 234(b) EC?
5. If the answer to the third question is in the affirmative: should “annual turnover” within the meaning of Annex XV of the [Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded] …, IX. Taxation, point (2)(c) and of Article 24 of the Sixth Directive respectively be understood to mean the turnover generated in one year in the particular Member State for which the small undertakings scheme is utilised or the undertaking’s turnover generated in one year throughout the [Union]?
6. If the answer to the fourth question is in the affirmative: Should “annual turnover” within the meaning of Article 287 of [the VAT] Directive be understood to mean the turnover generated in one year in the particular Member State for which the small undertakings scheme is utilised or the undertaking’s turnover generated in one year throughout the [Union]?
AG Opinion
(1) Annual turnover
– within the meaning of Article 24 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 in the version of Council Directive 92/111/EEC of 14 December 1992 in conjunction with Annex XV – List provided for in Article 151 of the Act of Accession – IX. Taxation, point 2(c) of the 1994 Act of Accession and
– within the meaning of Article 287 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax
means the sum of the turnover generated by a taxable person in one year in the Member State in which he is established.
(2) The notion of taxable person not established domestically for the purposes of the third subparagraph of Article 24(3) of the Sixth Directive and for the purposes of Article 283(1)(c) of Directive 2006/112 is to be interpreted as not covering an economic operator who generates turnover liable for value added tax exclusively in the State in question, namely through the letting of an apartment owned by him, and that turnover falls below the threshold applicable to the exemption for small undertakings in that State.
If the abovementioned provisions are interpreted in this way, the examination of the questions referred has not revealed anything which could call into question the validity of the provisions.
Decision
1. Consideration of the questions has disclosed no factor of such a kind as to affect the validity, with regard to Article 49 EC, of Articles 24(3) and 28i 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 2006/18/EC of 14 February 2006, or of Article 283(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.
2. Articles 24 and 24a of Directive 77/388, as amended by Directive 2006/18, and Articles 284 to 287 of Directive 2006/112 must be interpreted as meaning that the term ‘annual turnover’ refers to the turnover generated by an undertaking in one year in the Member State in which it is established.
Summary
Principle of equal treatment – Refusal of a small business scheme for taxpayers established in other Member States – Concept of “annual turnover”
Examination of the questions has not revealed any facts or circumstances capable of affecting the validity, in the light of Article 49 EC, of Articles 24(3) and 28i of the Sixth Directive and of Article 283(1)(1)(1) c, of the VAT Directive.
Articles 24 and 24a of the Sixth Directive , as well as Articles 284 to 287 of the VAT Directive, must be interpreted as meaning that the terms ‘annual turnover’ and ‘annual turnover’ respectively refer to the turnover achieved by an undertaking during a year in the Member State where it is established.
Source:
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