Corte di giustizia UE/2013

[OSCURATO:PERSONA] ([OSCURATO:PERSONA]) 14 March 2013 ( * ) (Failure of a [OSCURATO:PERSONA] to fulfil obligations – VAT – Reduced rate – Supply of greyhounds and horses not intended for the preparation or production of foodstuffs for human or animal consumption, hire of horses and insemination services – [OSCURATO:PERSONA] 2006/112/EC – Infringement of Articles 96, 98, read in conjunction with Annex III, and 110) [OSCURATO:PERSONA] C‑108/11, ACTION for failure to fulfil obligations under [OSCURATO:PERSONA] 258 TFEU, brought on 2 March 2011, [OSCURATO:PERSONA], represented by R. Lyal and C. Soulay, acting as Agents, with an address for service in Luxembourg, applicant, v [OSCURATO:PERSONA], represented by E. Creedon, D. O’Hagan, M. Collins and N. Travers, acting as Agents, with an address for service in Luxembourg, defendant, supported by: [OSCURATO:PERSONA], represented by G. de Bergues and J.‑S. Pilczer, acting as Agents, intervener, [OSCURATO:PERSONA] ([OSCURATO:PERSONA]), composed of A. Rosas, President of the [OSCURATO:PERSONA], E. Juhász (Rapporteur) and D. Šváby, [OSCURATO:PERSONA], [OSCURATO:PERSONA]: E. Sharpston, Registrar: L. [OSCURATO:PERSONA], [OSCURATO:PERSONA], having regard to the written procedure and further to the hearing on 20 November 2012, having decided, after hearing the [OSCURATO:PERSONA], to proceed to judgment without an Opinion, gives the following [OSCURATO:PERSONA] 1 By its application, the [OSCURATO:PERSONA] seeks a declaration from the [OSCURATO:PERSONA] that, by applying a reduced rate of value added tax (‘VAT’) of 4.8% to supplies of greyhounds and horses not intended for the preparation of foodstuffs, to the hire of horses and certain insemination services, [OSCURATO:PERSONA] has failed to fulfil its obligations under Articles 96, 98, read in conjunction with Annex III, and 110 of [OSCURATO:PERSONA] 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1, ‘the [OSCURATO:PERSONA]’). Legal context [OSCURATO:PERSONA] law 2 [OSCURATO:PERSONA] 96 of [OSCURATO:PERSONA] 2006/112/EC provides: ‘[OSCURATO:PERSONA] shall apply a standard rate of VAT, which shall be fixed by each [OSCURATO:PERSONA] as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.’ 3 [OSCURATO:PERSONA] 97 of that directive provides: ‘1.      From 1 January 2006 until 31 December 2010, the standard rate may not be lower than 15%. 2.      [OSCURATO:PERSONA] shall decide, in accordance with [OSCURATO:PERSONA] 93 [EC], on the level of the standard rate to be applied after 31 December 2010.’ 4 [OSCURATO:PERSONA] 98 of the [OSCURATO:PERSONA] states: ‘1.      [OSCURATO:PERSONA] may apply either one or two reduced rates. 2.      The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III. ... 3.      When applying the reduced rates provided for in paragraph 1 to categories of goods, [OSCURATO:PERSONA] may use the [OSCURATO:PERSONA] to establish the precise coverage of the category concerned.’ 5 Annex III to [OSCURATO:PERSONA] 2006/112 contains inter alia the following categories of services: ‘(1)      Foodstuffs (including beverages but excluding alcoholic beverages) for human and animal consumption; live animals, seeds, plants and ingredients normally intended for use in the preparation of foodstuffs; products normally used to supplement foodstuffs or as a substitute for foodstuffs; ... (11)      supply of goods and services of a kind normally intended for use in agricultural production but excluding capital goods such as machinery or buildings; ...’ 6 [OSCURATO:PERSONA] 99(1) of the [OSCURATO:PERSONA] provides that the reduced rates are to be fixed as a percentage of the taxable amount, and may not be less than 5%. 7 [OSCURATO:PERSONA] 110 of the [OSCURATO:PERSONA] provides: ‘[OSCURATO:PERSONA] which, at 1 January 1991, were granting exemptions with deductibility of the VAT paid at the preceding stage or applying reduced rates lower than the minimum laid down in [OSCURATO:PERSONA] 99 may continue to grant those exemptions or apply those reduced rates. The exemptions and reduced rates referred to in the first paragraph must be in accordance with Community law and must have been adopted for clearly defined social reasons and for the benefit of the final consumer.’ 8 [OSCURATO:PERSONA] 113 of [OSCURATO:PERSONA] 2006/112 allows [OSCURATO:PERSONA] which, at 1 January 1991, in accordance with EU law, were applying reduced rates lower than the minimum laid down in [OSCURATO:PERSONA] 99, in respect of goods and services other than those specified in Annex III of the [OSCURATO:PERSONA], to apply the reduced rate or one of the two reduced rates provided for in [OSCURATO:PERSONA] 98 of the [OSCURATO:PERSONA] to the supply of such goods or services. [OSCURATO:PERSONA] law 9 The provisions applicable to the present dispute are set out in Section 46 of the [OSCURATO:PERSONA]‑[OSCURATO:PERSONA] 2010, which governs VAT rates. 10 Section 46(1)(a) of that legislation sets the standard rate at 21%. 11 Section 46(1)(c) of that legislation applies a reduced rate of 13.5% to supplies of goods and services of a kind specified in Schedule 3 of the legislation, inter alia, artificial insemination services and the sale of livestock semen. 12 Section 46(1)(d) of the [OSCURATO:PERSONA]‑[OSCURATO:PERSONA] 2010 applies a rate of 4.8% to the supply of livestock and live greyhounds as well as to the hire of horses. 13 Section 2(1) of that legislation defines ‘livestock’ as ‘live cattle, horses, sheep, goats, pigs and deer’. 14 Substantially identical provisions were previously set out in Section 11(1) of the [OSCURATO:PERSONA] 1972, in conjunction with Schedule 6 thereto, last amended by the [OSCURATO:PERSONA] 2005. Pre-litigation procedure 15 By letter of formal notice of 23 October 2007, the [OSCURATO:PERSONA] drew [OSCURATO:PERSONA]’s attention to the fact that the application of a reduced rate of VAT to supplies of greyhounds and horses which are not normally intended for the preparation of foodstuffs, to the hire of horses and to mounting services in stud farms, could constitute a failure to fulfil obligations which flow from [OSCURATO:PERSONA] 2006/112 and, in particular, Articles 96, 98, read in conjunction with Annex III, 110 and 113 of the [OSCURATO:PERSONA]. 16 [OSCURATO:PERSONA] replied by letter of 4 March 2008. 17 [OSCURATO:PERSONA] sent [OSCURATO:PERSONA] a reasoned opinion, by letter dated 24 June 2010, requesting that [OSCURATO:PERSONA] to take the measures necessary to comply with the reasoned opinion within two months of its receipt. 18 By letter dated 20 August 2010, [OSCURATO:PERSONA] disputed the [OSCURATO:PERSONA]’s analysis. 19 The line of argument put forward by [OSCURATO:PERSONA] having failed to sway the [OSCURATO:PERSONA], the latter brought this action. The action 20 According to the [OSCURATO:PERSONA], [OSCURATO:PERSONA], in applying a VAT rate of 4.8% to supplies of greyhounds and horses not intended for the preparation of foodstuffs, to the hire of horses and certain insemination services, has failed to fulfil its obligations under Articles 96, 98, read in conjunction with Annex III, and 110 of [OSCURATO:PERSONA] 2006/112. 21 [OSCURATO:PERSONA] notes that the first paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 could, in principle, apply to the disputed rate, but the conditions required under the second paragraph of [OSCURATO:PERSONA] 110 of that directive are not fulfilled. 22 [OSCURATO:PERSONA] contends that, though reduced rates have been applied to the supplies at issue without interruption since 1 January 1991 and that they have been progressively raised since that date, they do not satisfy the two cumulative conditions required under the second paragraph of [OSCURATO:PERSONA] 110 of that directive, which are that those reduced rates must be adopted for clearly defined social reasons and for the benefit of the final consumer. 23 [OSCURATO:PERSONA] disputes the [OSCURATO:PERSONA]’s allegation that it has failed to fulfil its obligations. 24 [OSCURATO:PERSONA] alleges that the [OSCURATO:PERSONA] failed to clarify the concept of ‘horses not normally intended for the preparation of foodstuffs’, which has prevented that [OSCURATO:PERSONA] from preparing its defence at the different administrative and procedural stages of the action. 25 In that regard, even though [OSCURATO:PERSONA] did raise a question in relation to the definition of that concept at paragraph 4 of its letter of 20 August 2010, it appears from that letter and from the previous letter, of 4 March 2008, that [OSCURATO:PERSONA] fully understood the failures to fulfil obligations which were alleged by the [OSCURATO:PERSONA] in its letter of formal notice of 23 October 2007 and submitted a defence based on the interpretation and application of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112. 26 In any event, that concept was made clear by the [OSCURATO:PERSONA] in its judgments of 3 March 2011 in [OSCURATO:PERSONA] C‑41/09 [OSCURATO:PERSONA] v Netherlands [2011] ECR I‑831, paragraphs 56 to 59 and of 12 May 2011 in [OSCURATO:PERSONA] C‑453/09 [OSCURATO:PERSONA] v Germany , [2011] ECR I‑0000, paragraphs 44 to 47, that is to say before [OSCURATO:PERSONA] submitted its defence in the present case. 27 [OSCURATO:PERSONA], [OSCURATO:PERSONA] may not allege that it was prevented from arguing its defence on that basis. 28 [OSCURATO:PERSONA] complains that the [OSCURATO:PERSONA] gave no explanation of the reasons why it selected Articles 96 and 98 of, and Annex III, to [OSCURATO:PERSONA] 2006/112 in finding the reduced rate of 4.8% illegal. 29 In that regard, it should be noted that those articles refer to the standard rate and reduced rates of VAT. [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 seeks only, by derogation from those articles, to allow [OSCURATO:PERSONA] to maintain reduced rates, lower than the minimum rate laid down at [OSCURATO:PERSONA] 99 of the [OSCURATO:PERSONA], after 1 January 1991. 30 Therefore, maintaining a VAT rate of 4.8%, such as that in issue, does not relate only to a potential infringement solely of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112, but, logically, also relates to the infringement of Articles 96 and 98 of that directive. 31 Thus, the [OSCURATO:PERSONA] correctly based its action for failure to fulfil obligations not only on [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112, but also on Articles 96 and 98 of that directive. 32 In its application, the [OSCURATO:PERSONA] makes clear that it is asking for a finding of a failure to fulfil obligations only by virtue of the fact that [OSCURATO:PERSONA] has not fulfilled the conditions laid down in the second paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112, inter alia those according to which the rate in question was adopted for ‘clearly defined social reasons’ and ‘for the benefit of the final consumer’. 33 In that regard, it should be noted that there are two cumulative conditions. In order for [OSCURATO:PERSONA] to be eligible for the derogation set out at the first paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112, both conditions must be fulfilled. 34 [OSCURATO:PERSONA] submits that ‘clearly defined social reasons’ means measures taken principally for general social reasons and that the application of reduced rates must reduce the tax burden on the consumption of goods or services covering basic social needs. 35 [OSCURATO:PERSONA] submits that the supply of horses and greyhounds (other than for use in the preparation of foodstuffs), the hire of horses and insemination services cannot be deemed to be necessary in order to cover basic social needs. The cost of the supply of horses and greyhounds is very high and only a small proportion of the population is able to acquire such animals. The promotion of horse races, show-jumping and other equestrian sports does not constitute a social reason. The fact that certain activities are part of a culture or stem from a long tradition in a [OSCURATO:PERSONA] is not sufficient to make their promotion a social reason. 36 [OSCURATO:PERSONA] disputes the [OSCURATO:PERSONA]’s interpretation which it considers too restrictive. In addition, that interpretation is contrary to the [OSCURATO:PERSONA]’s case-law which flows from, inter alia, the judgments of 21 June 1988 in [OSCURATO:PERSONA] 415/85 [OSCURATO:PERSONA] v [OSCURATO:PERSONA] ([1988] ECR 3097), and [OSCURATO:PERSONA] 416/85 [OSCURATO:PERSONA] v [OSCURATO:PERSONA] ([1988] ECR 3127). 37 It should be noted that, in the above cases [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 15, and [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 14, the [OSCURATO:PERSONA] expressed its views on the determination of [OSCURATO:PERSONA] and EU competences by declaring that the establishment of social reasons stems from the political choices of [OSCURATO:PERSONA] and may not be subject to scrutiny by the [OSCURATO:PERSONA] except where, by a distortion of that concept, it results in measures which fall, by virtue of their effect and true objectives, outside that context. 38 It follows from the wording of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 and that case-law that [OSCURATO:PERSONA] may invoke social reasons so long as they are ‘well defined’ and as the concept of social interest is not distorted, that is to say used for purposes other than social reasons. 39 Moreover, it is to be borne in mind that [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 is an exception to the principle set out at [OSCURATO:PERSONA] 99 of the [OSCURATO:PERSONA] and must therefore be strictly interpreted. 40 It is not disputed that the social reasons capable of justifying the adoption of the reduced rate in question are not defined in the [OSCURATO:PERSONA] legislation. 41 [OSCURATO:PERSONA], in its application, quotes the declarations made by the Minister of [OSCURATO:PERSONA] before the [OSCURATO:PERSONA], at the time of the adoption of legislative measures granting exemption from VAT on the sale of horses and greyhounds in 1973, and the reduced rate at issue on those sales in 1990. It appears that those measures were not of a social nature; rather their aim was not to compromise the sectors concerned. 42 In those circumstances, and given that [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 constitutes a derogation from the VAT system, which must be strictly interpreted, [OSCURATO:PERSONA] ought to have provided evidence that the reduced rate in question was adopted for reasons of exclusively social interest or, at least, for reasons of principally social interest. 43 It must be noted that [OSCURATO:PERSONA], despite having made lengthy submissions on the situation in question, has not provided any such evidence. 44 It appears from [OSCURATO:PERSONA]’s defence and from its response to the [OSCURATO:PERSONA]’s formal letter of notice, to which that [OSCURATO:PERSONA] refers in its defence, that the measures in question were adopted for mainly economic reasons. 45 In its written submissions, [OSCURATO:PERSONA] invokes the concepts of ‘rural industry’, ‘horse industry’ and ‘equine-related industries’. Those terms are normally used to designate an economic activity, even if that activity also has a social impact. 46 [OSCURATO:PERSONA] for [OSCURATO:PERSONA] of 1987, of which the policy in question formed part, contains a strategy which serves to ‘regenerate the economy and improve social equity’. [OSCURATO:PERSONA] for Economic and [OSCURATO:PERSONA] of 1991, which followed the previous programme, sought to maintain as many full-time commercially viable family farms as possible. 47 According to [OSCURATO:PERSONA], the policy in question has contributed to a significant increase in the number of horses, from 90 000 in the beginning of the 1990s to 170 000 nowadays. 48 Even if it can be true that that policy is capable of having social effects and that those effects have actually been felt, its principally economic, rather than social, nature is shown by the circumstances described at paragraphs 45 to 47 of the present case. 49 [OSCURATO:PERSONA], the condition relating to the fact that the reduced rate less than the minimum laid down at [OSCURATO:PERSONA] 99 of [OSCURATO:PERSONA] 2006/112 must have been adopted for clearly defined social reasons is not satisfied. 50 The second condition laid down in the second paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 requires the reduced rate which is less than the minimum laid down at [OSCURATO:PERSONA] 99 of that directive to have been adopted ‘for the benefit of the final consumer’. 51 As the [OSCURATO:PERSONA] has held, under the general scheme of value-added tax, the final consumer is the person who acquires goods or services for personal use, as opposed to an economic activity, and thus bears the tax. The result is that, in the light of the social purpose of [OSCURATO:PERSONA] 17 [which is taken up in substance by the second paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112], the term ‘final consumer’ can be applied only to a person who does not use exempted goods or services in the course of an economic activity. The provision of goods or services at a stage higher in the production or distribution chain which is nevertheless sufficiently close to the consumer to be of advantage to him must also be considered to be for the benefit of the final consumer as so defined (see above cases [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 18, and [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 17). 52 The term ‘final consumer’ thus excludes buyers of horses or greyhounds and the users of insemination services who exercise an economic activity and are in a position to pass on the VAT to other persons. 53 According to the [OSCURATO:PERSONA], the reduced rate in question applies to, amongst other things, purchases made by farmers who are subject to the flat-rate system and by other persons carrying out an economic activity within the meaning of [OSCURATO:PERSONA] 9(1) of [OSCURATO:PERSONA] 2006/112. 54 [OSCURATO:PERSONA] admits that those economic agents benefit from the reduced rate at issue, but argues, without providing any data, that, firstly, most of the persons who practise an equestrian sport or one relating to greyhounds do so in their private capacity as final consumers and furthermore that, according to the [OSCURATO:PERSONA]’s case‑law, it is possible to satisfy the second condition laid down under the second paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 also in the event that the buyers are not final consumers, but where the upstream transaction which is subject to a reduced rate is sufficiently close to the consumer to be of advantage to him (see aforementioned cases [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 18, and [OSCURATO:PERSONA] v [OSCURATO:PERSONA] , paragraph 17). 55 In that regard, it should be noted that a great many buyers of horses or greyhounds or users of insemination services are economic agents who are in a position to pass on the VAT to other persons. 56 In addition, there is nothing in [OSCURATO:PERSONA]’s explanations to indicate that, in the circumstances under consideration, consumers are closer to the upstream transactions subject to VAT than in other economic activities. 57 By way of example, it is not possible to see those factors which, in that regard, set the transactions in question apart from transactions in the motor vehicle sector, that is to say the sale of motor cars, spare parts or after-sales service. 58 It follows that the second condition laid down under the second paragraph of [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 is not fulfilled either. 59 Concerning insemination services, considered by [OSCURATO:PERSONA] as sales transactions, it is sufficient to note that [OSCURATO:PERSONA]’s objection is, in any event, ineffective if [OSCURATO:PERSONA] 110 of [OSCURATO:PERSONA] 2006/112 is not applicable, given that the categorisation of those acts is irrelevant. 60 It follows from all of the above that the [OSCURATO:PERSONA]’s action is well founded. Costs 61 [OSCURATO:PERSONA] 138(1) of the Rules of Procedure of the [OSCURATO:PERSONA] of Justice, the unsuccessful party must be ordered to pay the costs if they have been applied for in the other party’s pleadings. Since the [OSCURATO:PERSONA] has requested that [OSCURATO:PERSONA] be ordered to pay the costs and [OSCURATO:PERSONA] has been unsuccessful, it must be ordered to pay the costs. 62 Pursuant to [OSCURATO:PERSONA] 140(1) of those rules, the [OSCURATO:PERSONA], which intervened in support of the submission made by [OSCURATO:PERSONA], must bear its own costs. On those grounds, the [OSCURATO:PERSONA] ([OSCURATO:PERSONA]) hereby 1. Declares that, in applying a reduced rate of value added tax of 4.8% to supplies of greyhounds and horses not intended for the preparation of foodstuffs, to the hire of horses and certain insemination services, [OSCURATO:PERSONA] has failed to fulfil its obligations under Articles 96, 98, read in conjunction with Annex III, and 110 of [OSCURATO:PERSONA] 2006/112/EC of 28 November 2006 on the common system of value added tax; 2. [OSCURATO:PERSONA] to pay the costs; 3. [OSCURATO:PERSONA] the [OSCURATO:PERSONA] to bear its own costs. [Signatures] * Language of the case: English.