On March 17, 2021, the ECJ issued its decision in the case C‑459/19 (Wellcome Trust Ltd). This case deals with the place of supply of investment management services received by a charitable organisation for non-economic business activity from suppliers established outside the European Union. In short, the UK wanted to find out if a business that performs non-economic activities (purchase and sale of shares and other securities in the course of the management) which receives (management) services from abroad in relation to these activities, should be treated as a business (taxable person).
Context: Reference for a preliminary ruling – Harmonisation of fiscal legislation – Value added tax (VAT) – Directive 2006/112/EC – Articles 43 and 44 – Place of supply of services to a taxable person acting as such – Place of supply of investment management services received by a charitable organisation for a non-economic business activity from suppliers established outside the European Union
Articles in the EU VAT directive
Article 44 of the EU VAT Directive 2006/112/EU
Article 44 (Place of supply of services)
The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the taxable person who receives such services has his permanent address or usually resides.
Facts (simplified)
Wellcome Trust Ltd (‘WTL’) is a charitable organisation of long standing which is extremely generously endowed. As might be expected, WTL uses the services of investment managers to assist it in managing that large endowment portfolio. Those endowments generate very significant annual income which is then disbursed by WTL by way of grants for the purposes of medical and pharmaceutical research.
It was in this context that WTL used the investment management services of suppliers established outside the European Union for certain investment activities, activities which the Court has already held, in a case involving WTL, amount to non-economic activities for VAT purposes. It is accepted that WTL did not use those services for taxable supplies within the meaning of Article 2(1)(c) of the VAT Directive, essentially because it was simply an investor, rather than a professional trader. It is also accepted that WTL is not ‘a taxable person acting as such’ for the purposes of Article 2(1)(c) of the VAT Directive, when it itself engages in investment activities.
The key question posed by the referring court is whether, in such circumstances, WTL is nonetheless ‘a taxable person acting as such’ within the meaning of Article 44 of the VAT Directive, even if it is not such for the purposes of Article 2(1)(c). An answer to this question is necessary in order to determine the place of supply of the services in question and whether VAT was in fact due by WTL in respect of those services.
In answering this question, the Court must determine, inter alia, whether or not the term ‘a taxable person acting as such’ has the same meaning when used in Article 2(1)(c) of the VAT Directive and in Article 44 of that directive.
Question
Is Article 44 of Directive 2006/1121 to be interpreted as meaning that when a taxable person carrying on a non-economic activity consisting of the purchase and sale of shares and other securities in the course of the management of the assets of a charitable trust acquires a supply of investment management services from a person outside of the Community exclusively for the purposes of such activity, it is to be regarded as “a taxable person acting as such”? If Question 1 is answered in the negative and Articles 46 to 49 of the Directive do not apply, does Article 45 of the Directive apply to the supply or does neither Article 44 or Article 45 apply to the supply?
AG Opinion
Article 44 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2008/8 / EC of 12 February 2008 amending Directive 2006 / 112 / EC as regards the place of supply, it must be interpreted as meaning that where a taxable person carrying out a non-economic activity consisting of the purchase and sale of shares and other securities in the context of the management of the assets of a charitable trust (charitable trust), purchases investment management services from a person outside the European Union solely for the purpose of such activity, it should be considered as “a taxable person acting as such” within the meaning of that provision of the Directive.
Decision
Article 44 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2008/8/EC of 12 February 2008, must be interpreted as meaning that, where a taxable person carrying on a non-economic activity in a business capacity acquires services for the purposes of that non-economic activity, those services must be regarded as being supplied to that taxable person ‘acting as such’, within the meaning of that article.
Considerations:
The present request for a preliminary ruling has its origins in the judgment in Wellcome Trust (Case C‑155/94, Wellcome Trust) and in an amendment to the VAT Directive introduced by Article 2 of Directive 2008/8 with effect on 1 January 2010.
In the judgment in Wellcome Trust , the Court found that the investment activities of WTL, which consisted essentially in the acquisition and sale of shares and other securities with a view to maximising the dividends and capital yields destined for the promotion of medical research, did not constitute economic activities within the meaning of Article 4(2) of the Sixth VAT Directive (now Article 9(1) of the VAT Directive). Given that WTL could not engage in trade, the Court considered that ‘irrespective whether the activities in question are similar to those of an investment trust or a pension fund, the conclusion must be that a trust which is in a position such as that described by the referring tribunal must … be regarded as confining its activities to managing an investment portfolio in the same way as a private investor’. In paragraph 41 of that judgment, the Court thus held that the concept of economic activities, within the meaning of that provision is to be interpreted as not including an activity consisting in the purchase and sale of shares and other securities by a trustee in the course of the management of the assets of a charitable trust.
As I indicated earlier, the current version of Articles 43 to 45 of the VAT Directive was introduced into Directive 2006/112 by Article 2 of Directive 2008/8. Given the requirements of unity and coherence of the European Union legal order, the concepts used by Directives 2006/112 and 2008/8 should, at least in principle, have the same meaning, unless the Union legislature has, in a specific legislative context, expressly indicated a different intention. On that basis, it would follow, that the term ‘a taxable person acting as such’ in Article 2(1)(c) and Article 44 of the VAT Directive should have, as WTL contends, the same meaning and effect.
In my view, however, such an interpretation of Article 44 of the VAT Directive, which focuses on the term ‘acting as such’ in isolation from the surrounding words, cannot be accepted. While, as I have just indicated, there is a general presumption that words and phrases as they appear in different places in a particular directive should generally bear the same meaning, this cannot be at the expense of the more fundamental rule as to context. Words and phrases necessarily derive colour and meaning from the words which surround them and, in particular, from the specific context in which they appear. My fundamental reason for disagreement with WTL’s claim, therefore, is that it fails to take account of the particular context in which the words occur and the objective pursued by the rules of which they form part.
I therefore consider that Article 44 of the VAT Directive, read in the light of Article 43 and recital 4 of that directive and Article 19 of the Implementing Directive, applies in respect of the supply of all services to a taxable person as defined in Article 43 of the VAT Directive unless that person receives them ‘for his own personal use or for that of his staff’. The use of the term ‘acting as such’ in Article 44 of the VAT Directive serves to exclude services supplied to a taxable person, as defined in a broad sense by Article 43 of that directive, ‘for his own personal use or for that of his staff’. The term ‘acting as such’ do not exclude from Article 44 of the VAT Directive taxable persons in receipt of services for non-economic business purposes.
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