Flashback on ECJ cases C-468/93 (Gemeente Emmen) – Definition of the term ”building land”

On March 28, 1996, the ECJ issued its decision in the case C-468/93 (Gemeente Emmen).

Context: Tax provisions – Harmonization of laws – Turnover tax – Common system of value added tax – Exemptions provided for by the Sixth Directive – Exemption for the supply of land which has not been built on other than building land – Meaning of building land – To be defined by the Member States

Article in the EU VAT Directive

Articles 4(3)(b) and 13B(h) of the Sixth VAT Directive (Articles 12 and 135(1)(k)of the EU VAT Directive 2006/112/EC).

Article 12

Article 12
1. Member States may regard as a taxable person anyone who carries out, on an occasional basis, a transaction relating to the activities referred to in the second subparagraph of Article 9(1) and in particular one of the following transactions:
(a) the supply, before first occupation, of a building or parts of a building and of the land on which the building stands;
(b) the supply of building land.
2. For the purposes of paragraph 1(a), ‘building’ shall mean any structure fixed to or in the ground.
Member States may lay down the detailed rules for applying the criterion referred to in paragraph 1(a) to conversions of buildings and may determine what is meant by ‘the land on which a building stands’.
Member States may apply criteria other than that of first occupation, such as the period elapsing between the date of completion of the building and the date of first supply, or the period elapsing between the date of first occupation and the date of subsequent supply, provided that those periods do not exceed five years and two years respectively.
3. For the purposes of paragraph 1(b), ‘building land’ shall mean any unimproved or improved land defined as such by the Member States.

Article 135

1. Member States shall exempt the following transactions:

(k) the supply of land which has not been built on other than the supply of building land as referred to in point (b) of Article 12(1);

Facts

In the absence of a legislative definition of the expression building land, the Hoge Raad (Supreme Court of the Netherlands) has held that turnover tax was not due in respect of the supply of land which had not been built on but was intended to be used for building except where the land was improved land. However, according to the Hoge Raad’s case-law, land which has not been built on has to be regarded as being improved land if the site has been prepared with a view to building or if equipment has been installed on it which is exclusively intended for the site.
It appears that that interpretation is narrower than the interpretation formerly employed by the Netherlands tax authorities to the effect that land which had not been built on had to be regarded as improved land where work had been carried out in its surroundings with a view to its development.
In June 1992 the municipality of Emmen supplied eight sites which had not been built on and were earmarked for housing. Before it was supplied, the development land was equipped with roads and sewers. The plots were connected up to the water, gas, electricity, telecommunications and cable television networks.
The municipality of Emmen paid a total of HFL 67 542 by way of turnover tax, but immediately appealed against the assessment on the ground that the work carried out had not caused the land supplied to become transformed immovables within the meaning of Article 11(1)(a)(1) of the WOB.
The Belastingdienst contests the municipality of Emmen’s interpretation, arguing that the plots at issue constitute transformed immovables within the meaning of the WOB. In the view of the Netherlands tax authorities, each plot was provided with equipment exclusively earmarked for it or had had work carried out on it.
The case came before the Gerechtshof te Leeuwarden. It asks whether it is possible to give a narrow interpretation of the expression transformed property in the case of building land. It observes that, according to the Court’s case-law, exceptions to exempting provisions of the Sixth Directive must not be narrowly construed.

Questions

Taking the view that the dispute did not relate solely to the application of the Netherlands legislation but also turned on the interpretation of the combined provisions of Article 13B(h) and Article 4(3)(b) of the Sixth Directive as regards the expression improved land, the national court stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

I. (a)Are the words improved land as used in Article 4(3)(b) of the directive to be understood as meaning only land where the soil itself has been prepared and/or for which measures have been taken which are of use exclusively for the land itself, or

(b)In view of the fact that exceptions to exemptions must be interpreted broadly, is there improved land where the land comes under a zoning plan as referred to in section 2.3 and, prior to the supply and first use of that land, infrastructure measures have been taken, such as

excavation of drains and the laying of a sewerage system and roads (used for construction work);
installation of services as described in section 2.3?

II.If the answer to Question I(a) is in the affirmative, must both the conditions set out therein be satisfied? Does that mean that land coming under a zoning plan for which the measures referred to at I(b) above have been taken by means of one or more of the operations described at (a) to (f) below becomes improved land?

(a)The installation of the abovementioned facilities within the boundaries of the land.
(b)The installation of a standpipe and a distributor on the main sewer connected to or situated on the land, or the connection of the land to the distributor.
(c)The installation for the land of a surface inlet to the main sewer.
(d)The raising of the land by adding soil brought in for the purpose.
(e)The laying of drainage pipes within the area of the zoning plan but outside the boundaries of the land.
(f)The filling-in of a ditch within the boundaries of the land by soil brought in.

AG Opinion

(1) The term ‘building land’, in Article 4(3)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, must be interpreted as including unimproved and improved building land. Building land must not be understood as referring only to land for which services have been provided which exclusively serve that land;
(2) ‘Building land’ means land which has been officially designated or zoned for building purposes or, alternatively, where such building has been legally authorized pursuant to a permission granted in accordance with the laws of the Member States;
(3) The national court must, in so far as it is reasonably possible, interpret its national legislation in the light of the wording and purpose of the definition of ‘building land’ as prescribed by Articles 4(3)(b) and 13B(h) of the Sixth Directive;
(4) In interpreting the term ‘building land’, national courts do not need to make a choice between improvement works, such as those listed in Question II referred by the national court.

Decision

It is for the Member States to define the concept of building land within the meaning of the combined provisions of Article 13B(h) and Article 4(3)(b) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes ─ Common system of value added tax: uniform basis of assessment. It therefore does not fall to the Court to specify what degree of improvement land which has not been built on must exhibit in order to be categorized as building land within the meaning of that directive.

Summary

Article 13B(h) of the Sixth Directive (77/388) on the harmonization of the laws of the Member States relating to turnover taxes, which provides for tax exemption for the supply of land which has not been built on, excludes from tax exemption building land as described in Article 4(3)(b). Since Article 4(3)(b) refers expressly to the Member States’ definitions of building land, it is for the Member States to define what land is to be regarded as being building land, for the purposes of the application both of Article 4(3)(b) and of Article 13B(h), in view of the reference made by the latter provision.It therefore does not fall to the Court to specify what degree of improvement land which has not been built on must exhibit in order to be categorized as building land within the meaning of the directive.

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