On June 22, 2016 the Court of Justice of the European Union (CJEU) judged in Case C-11/15 Odvolací finanční ředitelství versus Český rozhlas (ECLI:EU:C:2016:470).
This request for a preliminary ruling concerns the interpretation of Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment.
The request has been made in proceedings between the Odvolací finanční ředitelství (Appellate Tax Directorate; ‘the Tax Directorate’), formerly the Finanční ředitelství pro hlavní město Prahu (Prague City Tax Directorate, Czech Republic), and Český rozhlas (Czech Radio) concerning value added tax (VAT) for which it was liable in connection with its public broadcasting activity.
Can public sector broadcasting, financed by compulsory statutory charges of the amount set by the law, on the basis of ownership of a radio receiver, possession thereof or entitlement to use it on other legal grounds, be regarded as the “provision of a service against payment” within the meaning of Article 2(1) of the Sixth … Directive …, which must be exempted from [VAT] in accordance with Article 13A(1)(q) of that directive, or is it a non-economic activity which is not subject to [VAT] at all under Article 2 of the Sixth Directive, and to which exemption from VAT in accordance with Article 13A(1)(q) of that directive does not therefore apply?
The dispute in the main proceedings and the question referred for a preliminary ruling
· Český rozhlas is a legal person created by law whose principal activity is the public broadcasting of radio programmes.
· By supplementary tax returns covering the period from March to December 2006, Český rozhlas applied for a further increase to its right to deduct VAT by excluding from the calculation of the coefficient used for deducting VAT supplies covered by the radio fees paid to it, which it had initially declared as supplies exempt from VAT and not conferring a right to deduction from VAT. In that regard, Český rozhlas argued that those fees did not constitute remuneration for the public broadcasting service provided.
· By 10 supplementary tax assessments relating to the VAT payable by Český rozhlas for that period, the Finanční úřad pro Prahu 10 (Prague City Tax Office No 10, Czech Republic) refused to exclude those services.
· Český rozhlas lodged a complaint against those supplementary tax assessments.
· Following the rejection of that complaint by 10 decisions of the Tax Directorate, Český rozhlas filed an appeal against those decisions with the Mĕstský soud v Praze (Municipal Court, Prague, Czech Republic).
· By judgment of 6 June 2014, the Mĕstský soud v Praze (Municipal Court, Prague) annulled those decisions and referred the case back to the Tax Directorate.
· The Tax Directorate lodged an appeal on a point of law against that judgment before the referring court.
· In those circumstances, the Nejvyšší správní soud (Supreme Administrative Court) decided to stay the proceedings and refer the following question to the Court of Justice for a preliminary ruling:
‘Can public sector broadcasting, financed by compulsory statutory charges of the amount set by the law, on the basis of ownership of a radio receiver, possession thereof or entitlement to use it on other legal grounds, be regarded as the “provision of a service against payment” within the meaning of Article 2(1) of the Sixth … Directive …, which must be exempted from [VAT] in accordance with Article 13A(1)(q) of that directive, or is it a non-economic activity which is not subject to [VAT] at all under Article 2 of the Sixth Directive, and to which exemption from VAT in accordance with Article 13A(1)(q) of that directive does not therefore apply?’
The CJEU judged as follows:
Article 2(1) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that public broadcasting activities, such as those at issue in the main proceedings, funded by a compulsory statutory charge paid by owners or possessors of a radio receiver and carried out by a radio broadcasting company created by law, do not constitute a supply of services ‘effected for consideration’ within the meaning of that provision and therefore fall outside the scope of that directive.
For further information click here to be forwarded to the text of the judgment as published on the website of the CJEU, which will open in a new window.
The opinion in this case as delivered on March 17, 2016 by Advocate General Szpunar can be found here.
Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).
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