Flashback on ECJ Cases – C-471/15 (Sjelle Autogenbrug) – Sale of parts from end-of-life vehicles intended to be sold as spare parts are subject to the application of the margin scheme

On January 18, 2017, the ECJ issues its decision in the case C-471/15 (Sjelle Autogenbrug).

Context: Reference for a preliminary ruling — Taxation — Value added tax –– Directive 2006/112/EC — Special scheme for taxing the profit margin — Concept of ‘second-hand goods’ — Sales of parts removed from end-of-life vehicles

Article in the EU VAT Directive

Article 311(1)(1) of the EU VAT Directive 2006/112/EC.

Article 311 (Special arrangements for second-hand goods)
1. For the purposes of this Chapter, and without prejudice to other Community provisions, the following definitions shall apply:
(1) ‘second-hand goods’ means movable tangible property that is suitable for further use as it is or after repair, other than works of art, collectors’ items or antiques and other than precious metals or precious stones as defined by the Member States;

Facts

Sjelle Autogenbrug is a vehicle reuse undertaking whose principal activity is trading in used motor vehicle parts from end-of-life vehicles.
Sjelle Autogenbrug’s engages, inter alia, in the environmental and waste treatment of end-of-life vehicles, a prerequisite for being entitled to remove the spare parts. Lastly, sale of scrap metal (scrap), which remains following the treatment and removal of the motor vehicle parts, forms a lesser part of the undertaking’s overall turnover.
Sjelle Autogenbrug purchases end-of-life vehicles from private individuals and insurance companies. Neither the individuals nor the insurance companies declare VAT on the sales made. The referring court stated, in its decision, that the question it refers to the Court relates only to the characterisation of the used parts from vehicles Sjelle Autogenbrug purchased from private individuals.
When end-of-life vehicles are scrapped, this gives the entitlement to a scrappage payment, paid by the Environment Ministry to the vehicle owner most recently registered in the national vehicle register. The aim of the scheme is to give owners an incentive to ensure that the vehicle is scrapped in an environmentally sound manner. As from 2014, vehicle owners themselves, and no longer Sjelle Autogenbrug, have had to ensure that they receive payment of the allowance.
The referring court states that there is no information on the composition of the purchase price of the vehicles and, in particular, on how the value of the motor vehicle parts, the scrap metal and the scrappage payment provided for in respect of the environmental and waste treatment of vehicle waste is determined and included in the selling price.
The referring court points out that Sjelle Autogenbrug declares VAT in accordance with the general rules. On 15 July 2010, it requested a binding decision from the Danish tax authorities on whether the VAT arrangements for second-hand goods set out in Chapter 17 of the Law on VAT could be applied in relation to its business of reselling used motor vehicle parts.
According to the binding decision the authorities issued to it on 6 August 2010, Sjelle Autogenbrug is not eligible for the tax arrangements relating to the profit margin of the sales of second-hand goods, on the ground that the motor vehicle parts at issue do not fall within the concept of ‘second-hand goods’ within the meaning of the legislation applicable.
The Landsskatteretten (National Tax Tribunal, Denmark) upheld that decision by a judgment of 12 December 2011. The applicant in the main proceedings lodged an appeal against that decision in the referring court.

Questions

In the circumstances of the present case, can parts from end-of-life vehicles which a VAT-registered vehicle reuse undertaking removes from a vehicle with a view to resale as spare parts be regarded as second-hand goods as referred to in Article 311(1)(1) of [Directive 2006/112]?

AG Opinion

Article 311(1)(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the definition of ‘second-hand goods’ covers motor vehicle parts which, after being removed from an end-of-life vehicle acquired by a vehicle reuse undertaking from an individual, are resold as spare parts, thereby rendering the taxable dealer eligible for the margin scheme.

Decision

Article 311(1)(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that used parts, from end-of-life motor vehicles purchased by a vehicle reuse undertaking from a private individual, intended to be sold as spare parts, constitute ‘second-hand goods’ within the meaning of that provision, with the result that the supplies of such parts, effected by a taxable dealer, are subject to the application of the profit margin scheme.

Personal comments/VATupdate

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