Case C-284/03

État belge

v

Temco Europe SA

(Reference for a preliminary ruling from the Cour d’appel de Bruxelles)

(Sixth VAT Directive – Article 13B(b) – Exempt transactions – Letting of immovable property – Licence to occupy)

Summary of the judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions laid down by the Sixth Directive – Exemption for the letting of immovable property – Meaning – Grant of a licence in return for a payment set essentially on the basis of the area occupied – Included – Condition – Contracts having as their essential object the making available, in a passive manner, of premises or parts of buildings in exchange for a payment linked to the passage of time

(Council Directive 77/388, Art. 13B(b))

Article 13B(b) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that transactions by which one company, through a number of contracts, simultaneously grants associated companies a licence to occupy a single property in return for a payment set essentially on the basis of the area occupied and by which the contracts, as performed, have as their essential object the making available, in a passive manner, of premises or parts of buildings in return for a payment linked to the passage of time, are transactions comprising the ‘letting of immovable property’ within the meaning of that provision and not the provision of a service capable of being categorised in a different way.

(see para. 28, operative part)

JUDGMENT OF THE COURT (First Chamber) 18 November 2004 (1)

(Sixth VAT Directive – Article 13B(b) – Exempt transactions – Letting of immovable property – Licence to occupy)

In Case C-284/03,REFERENCE for a preliminary ruling under Article 234 EC from the Cour d'appel de Bruxelles (Belgium), by decision of 19 June 2003, received at the Court on 2 July 2003, in the proceedings

v

THE COURT (First Chamber),,

composed of: P. Jann, President of the Chamber, A. Rosas (Rapporteur), R. Silva de Lapuerta, K. Lenaerts and S. von Bahr, Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

having regard to the written procedure and further to the hearing on 1 April 2004,after considering the observations submitted on behalf of:

after hearing the Opinion of the Advocate General at the sitting on 4 May 2004,

gives the following

‘…

Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

…

(b)

Member States may apply further exclusions to the scope of this exemption;

…’

‘The letting of things is a contract by which one of the parties undertakes to allow the other the enjoyment of a thing during a certain time, and in exchange for a certain sum which the latter undertakes to pay to the former.’

‘Temco Europe SA is liable to VAT in respect of its property cleaning and maintenance business … .

It is the owner of a property at 107 to 117 Chaussée de Ruisbroeck. Between the end of 1993 and the beginning of 1994 it had refurbishment work carried out to the building at number 111 and deducted the VAT for which it was invoiced on that work. It has no place of business in the building.

Temco Energy Management Company SA, Publi-round SA and Petrus SA are companies belonging to the same group. Together with Temco Europe SA they are subject to a common central management.

On 1 February 1994, Temco Europe SA entered into three contracts [“the contracts”] with those three companies which the parties thereto described as “transfers”, under which Temco Europe SA allowed each transferee to carry on its activities in the property, as allocated by the board of directors of the transferor, without the transferee having individual rights over any specific part of the property. Neither evidence of the transferees’ activities nor the allocation resolutions of the board of directors of the transferor have been produced.

The contracts have been entered into for the duration of the transferee’s activities, and the latter is bound to use the premises exclusively for its activity in compliance with the internal rules laid down by the transferor. The transferor’s board of directors, however, is entitled at any time without notice to require the transferee to vacate the premises referred to in the transfer.

The transferee is responsible for all expenses required for its activity. Gas and electricity are calculated according to consumption and communal outgoings in accordance with the area occupied. The transferee is also liable for repairing deterioration of the premises occupied by it on the basis of criteria set by the transferor’s board of directors.

Rent is payable annually and set at BEF 3 500 per m² in the part fitted out as offices and BEF 1 000 per m² in the part fitted out for storage plus 0.4% of the transferee’s turnover exclusive of VAT and BEF 5 000 per annum for each person employed.

The parties expressly excluded application of Article 1709 of the code civil.

The internal rules establish the provisions for access to the building, cleaning, the rights to affix advertising signs and to unlimited access for persons authorised by the transferor and the duty on transferees to ensure that there is:

Temco Europe SA has provided no relevant information on the performance of those contracts.

In a report drawn up on 30 September 1996, the assistant auditor of the VAT authority stated that:

It is not disputed that the companies remained in occupation of the buildings whilst proceedings were pending.’

‘In the present case the defendant, the transferor, and the transferees entered into contracts on unequal terms by which the transferees were granted a licence to occupy the property. Those contracts were clearly put in place in order not to come within the scope of the rental and letting of immovable property.

One cannot examine those contracts, however, without taking into account the close link between those companies, all sharing the same management, which enables the transferees to enjoy the benefit of continuity of occupation and fair performance of the terms of the contracts.

The performance of the contracts has shown that the transferees have continuous and unrestricted access to the premises and that they enjoy a high degree of security in occupying their offices and storage premises.’

‘May Article 13B(b) of the Sixth Directive be interpreted to mean that transactions, corresponding in Belgian law to a contract of indefinite duration by which one company, through a number of contracts, simultaneously grants associated companies a licence to occupy a single property in return for a payment set partially but essentially on the basis of the area occupied, where the inherent insecurity of a licence is absent owing to the fact that the transferee and the transferor are under common management, constitute a letting of immovable property within the meaning of Community law, or, in other words, does the independent Community law concept of the “letting of immovable property” in Article 13B(b) of the Sixth Directive cover use, for consideration, of an immovable asset for purposes other than those of the taxpayer’s business – which definition is adopted in Article 44(3)(2)

Article 13B(b) of the Sixth Directive must be interpreted as meaning that transactions by which one company, through a number of contracts, simultaneously grants associated companies a licence to occupy a single property in return for a payment set essentially on the basis of the area occupied and by which the contracts, as performed, have as their essential object the making available, in a passive manner, of premises or parts of buildings in return for a payment linked to the passage of time, are transactions comprising the ‘letting of immovable property’ within the meaning of that provision and not the provision of a service capable of being categorised in a different way.

On those grounds, the Court (First Chamber) hereby rules:

Signatures.