Case C-320/02

Förvaltnings AB Stenholmen

v

Riksskatteverket

(Reference for a preliminary ruling from the Regeringsrätten (Sweden))

(Sixth VAT Directive – Article 26a – Special arrangements applicable to second-hand goods – The term ‘second-hand goods’ – Horse sold on after training)

Summary of the Judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Special arrangements for second-hand goods – ‘Second-hand goods’ – Live animals – Included – Horse bought from a private individual and sold on after training

(Council Directive 77/388, Art. 26a)

Article 26a of Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, which provides for special arrangements applicable to second-hand goods, which are defined as tangible movable property that is suitable for further use as it is or after repair, must be interpreted as meaning that live animals may be considered to be second-hand goods within the meaning of that provision.

Thus an animal bought from a private individual (other than the breeder) which is sold on after training for a specific use may be considered to be second-hand goods within the meaning of that provision. It is of little import that the increase in value of such an animal does not arise from a ‘repair’ in the strict meaning of the term, but from, for example, a biological process or the training of the animal. Furthermore, since the common system of value added tax aims in principle to tax the economic value added at different stages in the production and distribution process, until the phase of final use, by taxable persons acting as such, within the meaning of the Sixth Directive, it would run contrary to that system to tax the entire sale price asked by the taxable dealer instead of only the economic value added when the animal was in his possession.

(see paras 26-27, 29, operative part 1-2)

JUDGMENT OF THE COURT (Fifth Chamber) 1 April 2004 (1)

(Sixth VAT Directive – Article 26a – Special arrangements applicable to second-hand goods – The term ‘second-hand goods’ – Horse sold on after training)

In Case C-320/02,

REFERENCE to the Court under Article 234 EC by the Regeringsrätten (Sweden) for a preliminary ruling in the proceedings pending before that court between

and

on the interpretation of Article 26a 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 (OJ 1977 L 145, p. 1), as amended by Council Directive 94/5/EC of 14 February 1994 (OJ 1994 L 60, p. 16),

THE COURT (Fifth Chamber),,

composed of: P. Jann, acting as President of the Fifth Chamber, A. Rosas (Rapporteur) and S. von Bahr, Judges,

Advocate General: C. Stix-Hackl,

after considering the written observations submitted on behalf of:

after hearing the Opinion of the Advocate General at the sitting on 10 July 2003,

gives the following

‘“Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.’

‘The taxable amount shall be:

(a)

‘…

(d)

(e)

…’

‘Is a horse – which is bought as an untrained young horse from a private individual (rather than a breeder) and is sold as a riding horse after training – to be regarded as second-hand goods at the time of sale, so that the rules on profit margin taxation can be applied?’

‘The definition of the term second-hand goods specifies that, apart from having been used, the goods must be suitable for further use as they are or following repair. Under the definition, it seems that it must be determined whether the goods are second-hand at the time the – subsequent – dealer acquires them. That can also be inferred from the provisions which define the term taxable dealer. The goods are thus sold on in the condition in which they were acquired, or – it may be assumed – if they are in a bad condition and thus do not fulfil a function which is normal and expected in those goods, after they have been rendered usable again by repair.

It clearly follows that, before the goods are sold on, as long as they have been in the dealer’s possession, they cannot have acquired characteristics which affect their value other than by repair or similar. That may be considered to be the case irrespective of whether the characteristics were added through a biological process or in some other way. Living, growing organisms, whether animals or plants, undergo changes during their life cycles such that they can be considered, to a greater or lesser extent, to be continuously acquiring new characteristics which may affect their value.

Moreover, it must be borne in mind that, leaving aside the term second-hand goods, there is no doubt that the goods covered by Chapter 9a of the ML constitute inanimate objects which, with the exception of certain collectors’ items, have been manufactured. In normal usage the term second-hand goods tends to be reserved for such objects, rather than living organisms, and the word ‘repair’ suggests something manufactured, the function of which can be restored by repair.

In the light of the above observations and since the animals in the present case have, moreover, been endowed with skills as riding horses, which they did not have previously, or at least when Stenholmen acquired them, or did not have to the same extent as when they were sold on, the Skatterättsnämnden finds that the sale of horses cannot be classified as sales of second-hand goods.’

‘1.

If that question is answered in the affirmative, the Court is asked to answer the following question.

On those grounds,

THE COURT (Fifth Chamber)

in answer to the questions referred to it by the Regeringsrätten by order of 10 September 2002, hereby rules:

Jann

Rosas

von Bahr

Delivered in open court in Luxembourg on 1 April 2004.

R. Grass

V. Skouris

Registrar

President