On June 8, 2006, the ECJ issued its decision in the case C-430/04 (Feuerbestattungsverein Halle).
Context: Sixth VAT Directive – Possibility of relying on the second subparagraph of Article 4(5) – Activities engaged in by a private taxable person in competition with a public authority – Body governed by public law – Treatment as a non-taxable person in respect of activities engaged in as a public authority
Article in the EU VAT Directive
Article 4(5) of the Sixth VAT Directive (Article 13 of the EU VAT Directive 2006/112/EC).
The first and second subparagraphs of Article 4(5) of the Sixth Directive provide:
‘States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions.
However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.
Article 13
1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.
2. Member States may regard activities, exempt under Articles 132, 135, 136 and 371, Articles 374 to 377, Article 378(2), Article 379(2) or Articles 380 to 390b, engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.
Facts
- Feuerbestattungsverein is a charitable association which operates a crematorium in the town of Halle. It made an application to the Finanzamt, seeking information as to the tax reference number under which the last notice of tax assessment was issued to Lutherstadt Eisleben, a local authority which also operates a crematorium, as well as the date on which that assessment was adopted. In that application, Feuerbestattungsverein asserted that if Lutherstadt Eisleben were treated as a non-taxable person for the purposes of value added tax (hereinafter ‘VAT’) it would enable that local authority to offer cremation services at prices lower than those which Feuerbestattungsverein itself charges.
- After pointing out that it is bound to observe confidentiality in tax matters, the Finanzamt refused, by decision of 25 June 1998, to communicate the information sought to Feuerbestattungsverein.
- Since Feuerbestattungsverein’s notice of objection to that refusal was unsuccessful, it then brought an action before the Finanzgericht (Finance Court), which set aside that decision and ordered the Finanzamt to reach a fresh decision on the application for information. The Finanzgericht referred particularly to the provisions of Paragraph 30(4)(1) and (2)(1)(a) of the AO, by which the disclosure of information obtained in the course of administrative proceedings is permitted provided it furthers the conduct of court proceedings relating to tax matters. It also held that a possible action by Feuerbestattungsverein against the tax assessments on Lutherstadt Eisleben would be admissible, since that association could maintain that its rights have been infringed because that local authority is treated as a non-taxable person for VAT purposes or is undertaxed.
- The Finanzamt appealed to the Bundesfinanzhof (Federal Finance Court) on a point of law against the Finanzgericht’s judgment. The Bundesfinanzhof considers that the question whether Feuerbestattungsverein is entitled, as a private business person, to rely on the illegality of the supposed treatment as a non-taxable person or undertaxation of Lutherstadt Eisleben requires the interpretation of the second subparagraph of Article 4(5) of the Sixth Directive.
- In this case, in the referring court’s view, the conditions in Paragraph 30(4)(1) of the AO, concerning the permissibility of disclosing information covered, as a rule, by confidentiality in tax matters, are met.
- In addition, it maintains that the action referred to in Paragraph 40(1) of the Finance Court Rules which Feuerbestattungsverein intends to bring in respect of competition, is admissible only if the claimant in such an action adduces evidence that his rights have been infringed by an administrative measure, by the refusal or failure to adopt such a measure or by the refusal or failure to perform another act. The rights of a third party who is not involved in the relevant tax relationship are infringed, in the referring court’s view, only if the treatment as a non-taxable person or undertaxation breaches a statutory rule which was not only adopted in the public interest but which is also intended to protect the interests of certain third parties who are not involved in the relevant tax relationship.
- Thus, in view of the case-law of the Court of Justice, which has already accepted that Article 4(5) of the Sixth Directive can be relied upon by bodies governed by public law in order to preserve their rights, the referring court states that it seems possible that the provision is intended to protect also private competitors since the treatment of bodies governed by public law as non-taxable persons could lead to significant distortions of competition. However, that court also accepts that another reading of that case-law is conceivable, according to which Article 4(5) is intended only to ensure the fiscal neutrality of VAT, without enabling private competitors to base rights of their own upon it.
Questions
Is a private taxable person able to rely on the second subparagraph of Article 4(5) of Council Directive 77/388/EEC where that taxable person is in competition with a body governed by public law and asserts that the non-taxation or undertaxation of that body is unlawful?
AG Opinion
None
Decision
A private person who is in competition with a body governed by public law and alleges that that body is, in respect of the activities in which it engages as a public authority, treated as a non-taxable person for value added tax purposes or undertaxed is entitled to rely, before the national court, on the second subparagraph of Article 4(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 in proceedings, such as the main proceedings, between a private person and the national tax authorities.
Summary
A private individual who is in competition with a body governed by public law and claims that this body is not or undertaxed in VAT for the activities it carries out as a public authority, may, in the context of a dispute with the national tax administration, such as the main proceedings, rely on the second subparagraph of Article 4(5) of the Sixth Directive.
Source
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