On June 30, 2016 on the website of the Court of Justice of the European Union the opinion of Advocate General Szpunar in Case C‑340/15 Christine Nigl, Gisela Nigl sen., Gisela Nigl jun., Josef Nigl, and Martin Nigl versus Finanzamt Waldviertel (ECLI:EU:C:2016:505) was published.

In the underlying case the Bundesfinanzgericht (Federal Finance Court, Austria) has referred to the Court of Justice for a preliminary ruling a number of questions concerning the status of traders as separate taxable persons in the context of the application to them of the common flat-rate scheme for farmers laid down in provisions on value added tax (‘VAT’). The Court of Justice will have an occasion to recall and clarify its case-law on the correct understanding of the concept of economic activity conducted independently, the interpretation of the provisions on ‘VAT groups’ and also the abuse of rights.

 

The dispute in the main proceedings and the questions referred to the Court for a preliminary ruling

·        The Nigl family has for a long time carried out activity relating to grape growing and wine production. With the development of production and an expansion of the area under cultivation, this activity has encompassed an increasing number of new family members. At present they form three civil-law partnerships, each of which grows wine on its own land. Wine is also produced separately from harvests from land belonging to each partnership and although it is sold under the joint ‘Nigl’ name it bears designations which indicate a vintage belonging to a specific civil-law partnership. In addition, in 2001 the family members formed a limited company, Weingut Nigl GmbH. That company engages primarily in the sale of wine in the name and on behalf of the three civil-law partnerships. It also produces wine in its own name made from fruit acquired from the three civil-law partnerships. The equipment necessary for cultivation and production is essentially owned by the individual civil-law partnerships, with the exception of some immovable property and equipment, such as the bottling plant which is owned jointly.

 

·        All four undertakings (that is to say the three civil-law partnerships and the limited company) were, from the time they were formed, registered as separate taxable persons for the purposes of VAT and the civil-law partnerships were covered by the flat-rate scheme for farmers. Inspections by the tax authorities confirmed that status. However, in 2012 those authorities found, as a result of a subsequent inspection, that all three civil-law partnerships should be regarded as one undertaking, and therefore as a single taxable person for the purposes of VAT, starting from 2005. Only the limited company retained the status of a separate person. For that reason the tax authority, which is the defendant in main proceedings, issued in relation to the applicants in the main proceedings tax a number of tax correction decisions for 2005 to 2012 and also a decision restricting the validity of their tax identification numbers as taxable persons for the purposes of VAT.

 

·        Under Austrian law, the finding that the three trading companies are a single undertaking also means that they are excluded from taxation under the flat-rate scheme for farmers.

 

·        As grounds for those decisions, the tax authorities cite the far-reaching economic and organisational integration of the three civil-law partnerships. They point out in particular that all the partnerships interact with third parties under the name ‘Weingut Nigl’, that is to say also the trade name of their products, that they use joint buildings and installations, and that the vinification process essential to the wine production is in fact carried out by one person, Martin Nigl, who is a recognised specialist in that field.

 

·        The applicants in the main proceedings challenged the abovementioned decisions before the national court. They put forward the following arguments, inter alia: the individual civil-law partnerships were formed separately at different times and it is not possible to conclude that a single civil-law partnership was formed by implication, contrary to the express will of its purported members; the joint use of buildings and equipment is a common practice, particularly in agriculture, and it cannot therefore be presumed that individual undertakings are not independent; and the sale of the final product, that is to say the wine, under a joint trading name is likewise not a decisive factor in this case, particularly since that wine also bears the designation of each of the civil-law partnerships.

 

·        In those circumstances, the Bundesfinanzgericht decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:

(1)   Do three associations of persons constitute three independent traders (taxable persons) where those associations consist of different members of one family, conduct themselves outwardly as such independently in relation to their suppliers and to public authorities, possess their own production facilities, with the exception of two business assets, but market under a common trade mark the greater part of their products through a limited company whose shares are held by the members of the associations of persons and other members of the family?

 

(2)    If the three associations of persons are not to be regarded as three independent traders (taxable persons), is any of the following to be regarded as an independent trader (taxable person):

(a)    the marketing company, or

(b)   an association of persons consisting of the members of the three associations of persons, which does not conduct itself as such on the market in relation either to suppliers or to customers, or

(c)   an association of persons consisting of the three associations of persons and the limited company, which does not conduct itself as such on the market in relation either to suppliers or to customers?

 

(3)   If the three associations of persons are not to be regarded as three independent traders (taxable persons), is the refusal of the status of a trader (taxable person)

(a)    retrospective,

(b)   only for the future, or

(c)    not permissible at all

if the associations of persons were at first, after investigations by the tax authorities, recognised by the Tax Office as independent traders (taxable persons)?

 

(4)   If the three associations of persons are to be regarded as three independent traders (taxable persons), are they, as wine growers and therefore farmers, flat-rate farmers if each of those associations of persons which cooperate in practice is in itself covered by the flat-rate scheme for farmers, but the limited company, an association of persons formed of the members of the three associations of persons or an association of persons formed of the limited company and the members of the three associations of persons is, under national law, not covered by the flat-rate scheme on account of the size of the business or its legal form?

 

(5)   If the flat-rate scheme for farmers is in principle excluded for the three associations of persons, is that exclusion

(a)   retrospective,

(b)   only for the future, or

(c)    not effective at all?

 

·        The request for a preliminary ruling was received by the Court on 7 July 2015. Written observations were submitted by the applicant in the main proceedings, the Austrian Government and the European Commission. The same parties were represented at the hearing of 13 April 2016.

 

Conclusion

The Advocate General proposes that the Court give the following answer to the questions referred for a preliminary ruling by the Bundesfinanzgericht (Federal Finance Court, Austria):

 

(1)   The first subparagraph of 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 not forming a basis for refusing the status of taxable person to a person bound by organisational, economic or financial ties to another person where those links are legal ties as referred to in Article 10 of that directive. Article 11 of that directive must be interpreted as meaning that for it to be applied there must exist in national law an express legal basis adopted after prior consultation with the VAT Committee. It is for the national courts to determine whether such a basis exists in national law and whether it applies in a specific case.

 

(2)   It is entirely for the tax authorities and courts of the Member States to establish which persons in a particular set of circumstances can be regarded as a single taxable person.

 

(3)   Article 11 of Directive 2006/112 must be interpreted as meaning that in the application thereof the tax authorities may regard as a single taxable person persons who earlier carried out a taxable activity as separate taxable persons. Those persons can be regarded as a single taxable person retrospectively where they have abused rights arising from their status as separate taxable persons.

 

(4)   Article 296(1) and (2) of Directive 2006/112 must be interpreted as not precluding national legislation under which the flat-rate scheme referred to in that provision is disapplied only where a farmer ceases to meet the criteria for the application of that scheme based on the size of the holding, for example as a result of several economically linked farmers being regarded as a single taxable person.

 

(5)   Article 296(1) and (2) of Directive 2006/112 must be interpreted as not precluding disapplication of the flat-rate scheme referred to in that provision to a farmer to whom that scheme was applied earlier. Such disapplication can be retrospective where application of the flat-rate system entailed abuse of the right.

 

For further information click here to be forwarded to the text of the opinion as published on the website of the CJEU, which will open in a new window.


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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