Keywords
Summary

Keywords

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Sixth Directive – Transactions constituting an abusive practice

(Council Directive 77/388)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Sixth Directive – Transactions constituting an abusive practice

(Council Directive 77/388, Arts 11A(1) and 13B(a) and (d))

Summary

1. The Sixth Directive 77/338 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that there can be a finding of an abusive practice when the accrual of a tax advantage constitutes the principal aim of the transaction or transactions at issue.

(see para. 45, operative part 1)

2. It is for the national court to determine whether, for the purposes of the application of value added tax, leasing transactions having the following characteristics can be considered to be an abusive practice under the Sixth Directive 77/338 on the harmonisation of the laws of the Member States relating to turnover taxes:

– the two companies taking part in the leasing transaction are part of the same group;

– the service supplied by the leasing company is subject to a division, the financing element is entrusted to another company to be split into a credit service, an insurance service and a brokerage service;

– the service of the leasing company is therefore reduced to a service for renting a vehicle;

– the lease payments made by the customer are of an amount which is only slightly higher than the purchase cost of the vehicle;

– that service, considered in isolation, therefore seems to be economically unprofitable, so that the viability of the business cannot be ensured solely by means of contracts concluded with the customers;

– the leasing company receives the consideration of the leasing transaction only through the cumulative lease payments made by the customer and the amounts transferred from the other company of the same group.

It is also for the national court to assess if, the contractual structure of the transaction notwithstanding, the evidence put before the court discloses the characteristics of a single transaction. In that context, it may find it necessary to extend its analysis by seeking evidence of indications of the existence of an abusive practice. For that purpose, the national court must verify, first, whether the result sought is a tax advantage, the granting of which would be contrary to one or more of the objectives of the Sixth Directive and, then, whether that constituted the principal aim of the contractual approach adopted.

As regards the first criterion, that court can take into account that the anticipated result is the accrual of a tax advantage linked to the exemption, pursuant to Article 13B(a) and (d) of the Sixth Directive, of the services entrusted to the co-contracting company of the leasing company. That result would appear to be contrary to the objective of Article 11A(1) of the Sixth Directive, namely the taxation of everything which constitutes consideration received or to be received from the customer. Since the leasing of vehicles under leasing contracts constitutes a supply of services within the meaning of Articles 6 and 9 of the Sixth Directive, such a transaction is normally subject to value added tax, for which the taxable amount is determined in accordance with Article 11A(1) of the Sixth Directive.

As regards the second criterion, the national court, in the assessment which it must carry out, may take account of the purely artificial nature of the transactions and the links of a legal, economic and/or personal nature between the operators involved, those aspects being such as to demonstrate that the accrual of a tax advantage constitutes the principal aim pursued, notwithstanding the possible existence, in addition, of economic objectives arising from, for example, marketing, organisation or guarantee considerations.

(see paras 54-55, 57-63, operative part 2)