On May 12, 2016 the Court of Justice of the European Union (CJEU) judged in Case C‑520/14 Gemeente Borsele versus Staatssecretaris van Financiën and Staatssecretaris van Financiën versus Gemeente Borsele (ECLI:EU:C:2016:334).
The request for a preliminary ruling relates to the interpretation of Articles 2(1)(c) and 9(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1, ‘the VAT Directive’).
(1) Should Article 2(1)(c) and Article 9(1) of the VAT Directive be interpreted as meaning that, with regard to the transport of school pupils, on the basis of an arrangement as described in the present judgment, a municipality should to this extent be regarded as a taxable person within the meaning of that directive?
(2) For the purpose of answering that question, should the arrangement as a whole be considered, or should this assessment be made for each transport operation separately?
(3) If the latter is the case, should a distinction be made according to whether pupils are transported over a distance of between 6 and 20 kilometres or over a distance exceeding 20 kilometres?
The dispute in the main proceedings and the questions referred for a preliminary ruling
· The municipality of Borsele uses, for the transport of eligible pupils to and from school, the services of transport undertakings. In that respect, for 2008, it paid the sum of EUR 458 231, inclusive of VAT.
· In accordance with the provisions of the Decree of the municipality of Borsele concerning the transport of pupils, 2008, approximately one third of parents of pupils for whom school transport was provided paid contributions, equivalent to 3% of the amount paid by that municipality to fund school transport services, totalling to EUR 13 958. The difference was financed by the municipality from public funds.
· The municipality of Borsele claimed, before the tax authorities, that it was a taxable person for the purposes of VAT in respect of the provision of school transport services in return for payment of contributions and was thus entitled to deduct from that payment the VAT that had been charged by transport undertakings. That claim was rejected on the ground that the municipality did not provide services for consideration and thus did not carry out any economic activity.
· By decision of 1 July 2009, the tax authorities fixed the amount owed by the VAT Compensation Fund to the municipality of Borsele in respect of 2008; that amount did not include the VAT charged to that municipality by the transport undertakings.
· The municipality of Borsele brought an action against that decision before the Rechtbank te ’s-Gravenhage (District Court, the Hague, Netherlands). That action was rejected as unfounded by decision of 29 December 2010. The municipality of Borsele appealed against that decision before the Gerechtshof te ’s-Gravenhage (Appeal Court, the Hague, Netherlands), which, by judgment of 20 April 2012, set aside the decision at first instance and annulled the decisions of the tax authorities. The municipality of Borsele and the Secretary of State for Finance each brought a separate appeal on a point of law before the Hoge Raad der Nederlanden (Supreme Court, the Netherlands) against the decision of the Gerechtshof te ’s-Gravenhage (Appeal Court, the Hague).
· In those circumstances, the Hoge Raad der Nederlanden (Supreme Court, the Netherlands) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:
(1) Should Article 2(1)(c) and Article 9(1) of the VAT Directive be interpreted as meaning that, with regard to the transport of school pupils, on the basis of an arrangement as described in the present judgment, a municipality should to this extent be regarded as a taxable person within the meaning of that directive?
(2) For the purpose of answering that question, should the arrangement as a whole be considered, or should this assessment be made for each transport operation separately?
(3) If the latter is the case, should a distinction be made according to whether pupils are transported over a distance of between 6 and 20 kilometres or over a distance exceeding 20 kilometres?
The CJEU judged as follows:
Article 9(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 a regional or local authority which provides a service for the transport of schoolchildren under conditions such as those described in the main proceedings does not carry out an economic activity and is not therefore a taxable person.
The opinion in this case as delivered on December 23, 2015 by Advocate General Kokott can be found here.
For further information click here to be forwarded to the text of the ruling as published on the website of the CJEU, which will open in a new window.
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