Flashback on ECJ cases C-267/99 (Adam) – Concept of liberal profession – Manager of co-owned buildings

On October 11, 2001, the ECJ issued its decision in the case C-267/99 (Adam).

Context: Sixth VAT directive – Concept of liberal profession – Managing agent of buildings in co-ownership

Article in the EU VAT Directive

Articles 12(4), 28(2)(e) of Sixth VAT Directive

Article 28(2)(e) of the Sixth Directive, in the version resulting from Directive 92/77, which is the relevant provision in this case, provides:

Member States which at 1 January 1991 applied a reduced rate to supplies of goods and services other than those specified in Annex H may apply the reduced rate or one of the two reduced rates provided for in Article 12(3) to such supplies, provided that the rate is not lower than 12%

Facts

Taking the view that her activity involved the parctice of a liberal profession, Mrs Urbing-Adam submitted her VAT returns for the years 1991 and 1992 on the basis of a reduced rate of 6% and those relating to the years 1993 and 1994 on the basis of the intermediate rate of 12%. Since the Administration considered that Mrs Urbing-Adam’s activity was not that of a property administrator and was therefore not a liberal profession, but a commercial activity, it adjusted the tax and applied the normal VAT rate of 15% to the transactions in issue.
Mrs Urbing-Adam appealed against that decision before the Tribunal d’arrondissement. Emphasising the independence enjoyed by managing agents under the Luxembourg legislation in carrying on their activity, she submitted that she practised a liberal profession within the meaning of Article 4 of the Grand Ducal Regulation of 7 March 1980 and Article 7 of the Grand Ducal Regulation of 21 December 1991. She argued that, on that basis, she was entitled to the reduced rate for the years 1991 and 1992, by virtue of Article 40(4)(b) of the VAT Law, and to the intermediate rate for the years 1993 and 1994, by virtue of Article 40(3) of that law, in its version resulting from the Finance Law of 20 December 1991.
The Administration disputed that the activity of managing agent was a liberal profession as envisaged by the Luxembourg legislation, arguing that it was an activity different from that of property administrator, that its exercise did not require the possession of a special qualification and that it consisted of the simple management of the common parts of a building, under the supervision of the meeting of co-owners.

Questions

(1) Is the concept of a liberal profession mentioned in Annex F(2) to the Sixth Council Directive (77/388/EEC), on the harmonisation of the laws of the Member States relating to turnover taxes, an independent concept of Community law?

If the answer to the first question is in the affirmative:

(2) Does the concept of a liberal profession cover the activity of a managing agent of buildings in co-ownership?

AG Opinion

In light of the above considerations, I therefore propose that the Court declare that it has no jurisdiction to rule on the questions referred by the Tribunal d’arrondissement de Luxembourg. In any event, Article 28(3) of and Annex F to the Sixth Directive are concerned with operations which are eligible for VAT exemption and not with those, such as the ones in point the main proceedings, which are subject to a reduced VAT rate; as a result, the definition of the latter operations, including the concept of ”liberal profession”, is a question which in this case is not relevant for the purposes of Community law, but falls within the competence of the Member States.

Decision

It is for each Member State to determine and define the transactions to which may be applied a reduced rate under Article 12(4) of the 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, until 31 December 1992, and under Article 28(2)(e) of that directive as amended by Council Directive 92/77/EEC of 19 October 1992 supplementing the common system of value added tax and amending Directive 77/388 (approximation of VAT rates), as from 1 January 1993, subject to the necessity to respect the principle of neutrality of the value added tax.

The liberal professions mentioned in Annex F(2) to the Sixth Directive 77/388 are activities which involve a marked intellectual character, require a high-level qualification and are usually subject to clear and strict professional regulation. In the exercise of such an activity, the personal element is of special importance and such exercise always involves a large measure of independence in the accomplishment of the professional activities.

Summary

It is for each Member State to determine, in accordance with the principle of neutrality, which transactions were eligible for a reduced rate until 31 December 1992 under Article 12(4) of the Sixth Directive and which from 1 January 1993 under Article 28(2)(e) of that directive (approximation of VAT rates), and to define those transactions.

The liberal professions referred to in Annex F(2) to the Sixth Directive are activities of a decidedly intellectual nature, requiring a high level of competence and normally subject to specific and strict professional rules. When exercising such an activity, the personal factor is of particular importance and such exercise in any case requires a high degree of autonomy in the performance of professional activities.

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