ECJ C-741/22 (Casino de Spa and Others) – Judgment – VAT Directive and Neutrality in Gambling Differentiation

On September 12, 2024, the ECJ issued the judgment in the case C-741/22 (Casino de Spa and Others).

Context: Reference for a preliminary ruling – Tax law – Value added tax – Directive 2006/112/EC – Article 135(1)(i) – Exemption of gambling – Direct effect of the exemption – Differentiation between online gambling and analogue gambling – Differentiation between various kinds of online gambling (lotteries and other forms of online gambling) – Inadmissibility of questions referred for a preliminary ruling – Temporary maintenance in force of national law without prior reference for a preliminary ruling – VAT exemption as aid)

Article in the EU VAT Directive

Article 135(1)(i) in the EU VAT Directive 2006/112/EC.

Article 135
1. Member States shall exempt the following transactions:
(i) betting, lotteries and other forms of gambling, subject to the conditions and limitations laid down by each Member State;

Facts

The companies that form the VAT unit GAMING ARDENT operate online games. That activity was exempt from VAT.
However, Articles 29 to 34 of the Program Law of 1 July 2016 repealed the exemption from VAT for online gambling other than lotteries. VAT therefore became applicable to that activity, with ‘traditional’ gambling and all lotteries remaining exempt.
Actions seeking annulment were brought before the Constitutional Court by online gambling undertakings and by the Walloon Region. The actions were joined. Those actions alleged, first, infringement of the rules on the division of powers between the Federal State and the Regions as laid down in Article 177 of the Constitution and the loi spéciale du 16 janvier 1989 relative au financement des communautés et des régions (Special Law of 16 January 1989 on the financing of communities and regions) and, second, infringement of Articles 10, 11 and 172 of the Constitution, considered in isolation or in conjunction with the principle of neutrality applied by the Court of Justice and with Articles 107 and
108 TFEU and Articles 401 and 135 of the VAT Directive
By a judgment of 22 March 2018, 1 the Constitutional Court held that:
- – the pleas in law alleging infringement of Article 177 of the Constitution, in conjunction with Article 3(1)(1) of the Special Law on financing, are well founded;
- – Articles 29 to 34 of the Programme Law of 1 July 2016 must be annulled;
- – there is no need to examine the other pleas in law, since they could not lead to a more extensive annulment;
- – in view of the budgetary and administrative difficulties which repayment of taxes already paid would cause, the effects of the annulled provisions must be maintained permanently, pursuant to Article 8 of the Special Law of 6 January 1989 on the Constitutional Court.
By a judgment delivered on 8 November 2018, the Constitutional Court ruled on the interpretation to be given to its annulment judgment of 22 March 2018 and stated that:
– the publication of the judgment in the Moniteur Belge of 22 May 2018 led to the retroactive removal of the annulled provisions from the legal order, meaning those provisions can no longer constitute the legal basis for making gambling provided electronically subject to VAT;
– the maintaining, by judgment No 34/2018, of the effects of Articles 29 to 34 of the Programme Law of 1 July 2016 must therefore be interpreted as meaning that the effects of the annulled provisions which are maintained shall be limited to the taxes already paid for the period from 1 July 2016 to 21 May 2018.
In view of the annulment of the provisions establishing VAT on online gaming, the applicant considered, in its periodic VAT return for September 2019, that the VAT paid to the Treasury during the period from 1 July 2016 to 21 May 2018 should be refunded to it.
It therefore entered this amount of EUR 29 328 371.20 in box 62, ‘Miscellaneous VAT adjustments in favour of the declarant’.
Furthermore, given that it was therefore no longer entitled to deduct VAT for this period, the applicant entered the amount of VAT deducted during the same period, i.e. EUR 13 746 969.14, in box 61. The result of that VAT return was a balance of EUR 15 581 402.06 to be paid to the applicant by the Belgian State, taking into account the compensation.
The administration disputed the applicant’s reasoning. In a report of 5 December 2019, it pointed out that the Constitutional Court had limited the decision to maintain the effects permanently ‘to taxes already paid’ and concluded that those taxes could not be recovered by taxpayers. It thus considered that the amount of EUR 29,328,370.36, together with interest, was to be paid to the State. The VAT unit was also ordered to pay a proportional fine of EUR 2 932 830.00.
The appellant’s complaint was rejected, save as regards the application for remission of fines. Indeed, the fine, which was set at 10% of the taxes in respect of which repayment was sought, was reduced to 10% of the net amount of the taxes in respect of which repayment was requested (i.e., the difference between boxes 62 and 61); it is reduced to the rounded amount of EUR 1 558 140,00. 2 C.C., 8 November 2018, 155/2018.
By application of 12 October 2020, the applicant challenged the tax authority’s decision imposing VAT on it, together with the fines and default interest. It seeks the annulment and/or full reduction of the sums claimed from it due to infringement of the principle of fiscal neutrality of VAT, of Article 107 TFEU prohibiting State aid and of the right to repayment of overpaid VAT.
In the alternative, it claims that the Belgian State is liable on account of a fault on the part of the Constitutional Court in that maintaining the effects of the annulled provisions infringes Article 1 of the First Protocol to the European Convention for the Protection of Human Rights and Fundamental Freedoms guaranteeing the protection of property.
In the further alternative, it claims that the Belgian State is liable on account of a fault on the part of the legislature.
It also seeks the annulment, suspension, remission or, at least, reduction of the fine.
The Belgian State, SPF Finances, considers that the claim is unfounded and that it cannot be ordered to refund the VAT

Questions

1/ Must Article 135(1)(i) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and the principle of neutrality be interpreted as precluding a Member State from using different treatment for online lotteries offered by Loterie Nationale [(the Belgian national lottery)], a public establishment, which are exempt from value added tax, and other online games of chance offered by private operators, which are subject to value added tax, assuming that they are similar supplies?
2/ In answering the previous question, in order to determine whether there are two similar categories which are in competition with each other and which require the same treatment for the purposes of value added tax, or whether there are separate categories which allow for different treatment, must the national court consider only whether or not the two forms of games are in competition with each other from the point of view of the average consumer, in the sense that services are similar where they have similar characteristics and meet the same needs from the
point of view of consumers, the test being whether their use is comparable, and where the differences between them do not have a significant influence on the decision of the average consumer to use one or the other of those services (alternative criterion), or must it take into account other criteria such as the existence of a discretionary power on the part of the Member State to exempt certain categories of games from VAT and to subject others to it, the fact that lotteries belong to a distinct category of games, referred to in Article 135(1)(i) of the VAT Directive, the different legal frameworks which apply to Loterie Nationale and to other games of chance, the different supervisory authorities or the societal and gambler protection objectives pursued by the legislation applicable to Loterie Nationale?
3/ Must the principle of sincere cooperation set out in Article 4(3) of the Treaty on European Union, read in conjunction with Article 267 of the Treaty on the Functioning of the European Union, the provisions of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and, where applicable, the principle of effectiveness, be interpreted as meaning that they allow the constitutional court of a Member State to maintain – on its own initiative and without a reference for a preliminary ruling under Article 267 TFEU – on the basis of a provision of national law – in this case Article 8 of the loi spéciale du 6 janvier 1989 sur la Cour constitutionnelle (Special Law of 6 January 1989 on the Constitutional Court) – the retrospective effect of national provisions on value added tax which were found to be contrary to the national Constitution and were annulled on that ground and whose non-conformity with EU law was also relied on in support of the action for annulment before the national court, without, however, that complaint having been examined by the latter, on the general ground of ‘budgetary and administrative difficulties which repayment of taxes already paid would cause’, thus completely depriving taxable persons subject to VAT of the right to reimbursement of the VAT collected in breach of EU law?
4/ If the answer to the preceding question is in the negative, do the same provisions and principles, interpreted, in particular, in the light of the judgment of 10 April 2008, Marks & Spencer, C-309/06, under which the general principles of Community law, including that of fiscal neutrality, give a trader who has made supplies a right to recover the sums mistakenly claimed in respect of them (judgment of 10 April 2008, Marks & Spencer, C-309/06), require the Member State concerned to refund to the taxable persons the VAT collected in breach of EU law where, as in the present case, it subsequently follows from a judgment of the Court of Justice, in response to questions referred for a preliminary ruling, that the annulled national provisions are not in conformity with Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and that the decision of the Constitutional Court to maintain the retrospective effect of the provisions annulled by it is not in conformity with EU law?
5/ Does the different treatment introduced by Articles 29, 30, 31, 32, 33 and 34 of the loi-programme du 1er juillet 2016 (Programme Law of 1 July 2016), which were annulled by Constitutional Court judgment No 34/2018 of 22 March 2018, but the effects of which were maintained after that date in respect of the taxes already paid for the period from 1 July 2016 to 21 May 201[8], between lotteries, whether terrestrial or online, and other online games and forms of betting create a selective advantage in favour of the operators of those lotteries and thus aid granted by the Belgian State or through Belgian State resources which distorts or threatens to distort competition by favouring certain undertakings, which is incompatible with the internal market within the meaning of Article 107 of the Treaty on the Functioning of the European Union?
6/ If the answer to the preceding question is in the affirmative, does the obligation on the Member States to safeguard the rights of individuals affected by the unlawful implementation of the aid in question, in accordance with, inter alia, the judgment of 5 October 2006, Transalpine Ölleitung in Österreich, C-368/04, the principle of sincere cooperation and the general principles of Community law, including that of fiscal neutrality, which give a trader who has made supplies a right to recover the sums mistakenly charged in respect of them (judgment of 10 April 2008, Marks & Spencer, C-309/06), allow taxable persons who have been charged VAT on the basis of unlawful State aid to recover the equivalent of the tax paid in the form of damages for the loss suffered?

AG Opinion

(1) Article 135(1)(i) of the VAT Directive has no direct effect. It is neither unconditional nor sufficiently precise.

(2) The principle of neutrality of VAT does not preclude a differentiation between gambling which is provided electronically and gambling which is not provided electronically. Instead, there are objective reasons for this and for the differentiation between gambling which is provided electronically and lotteries which are organised electronically.

(3) In proceedings relating solely to a business’ own tax liability the question of State aid to a third party is inadmissible. In principle, those liable to pay a tax cannot rely on the argument that the exemption enjoyed by other businesses constitutes State aid in order to avoid payment of that tax.

Decision

(1) Article 135(1)(i) of the VAT Directive has no direct effect. It is neither unconditional nor sufficiently precise.

Source