Case C-263/11

Ainārs Rēdlihs

v

Valsts ieņēmumu dienests

(Reference for a preliminary ruling from the Augstākās tiesas Senāts)

‛Sixth VAT Directive — Directive 2006/112/EC — Concept of ‘economic activity’ — Supplies of timber in order to alleviate the damage caused by a storm — Reverse charge procedure — Failure to register in the register of taxable persons — Fine — Principle of proportionality’

Summary of the Judgment

1. Harmonisation of tax legislation — Common system of value added tax — Exploitation of tangible property — Meaning — Sale of timber from a private forest — Included

   (Council Directive 2006/112, as amended by Directive 2006/138, Art. 9(1), second para.)

2. Harmonisation of tax legislation — Common system of value added tax — Economic activities within the meaning of Article 9 of Directive 2006/112 — Definition — Supplies of timber made by a natural person for the purpose of alleviating the consequences of a case of force majeure — Condition for inclusion — Activity carried out for the purposes of obtaining income therefrom on a continuing basis

   (Council Directive 2006/112, as amended by Directive 2006/138, Art. 9(1), second para.)

3. Member States — Retained powers — Field of penalties applicable as regards value added tax — Obligation to exercise that power in accordance with EU law and its general principles

4. Tax provisions — Harmonisation of laws — Turnover taxes — Common system of value added tax — Obligations of persons liable for the tax — Obligation to declare the commencement of activity as a taxable person — National legislation allowing a fine to be imposed on an individual who fails to fulfil his obligation to register in the register of taxable persons for value added tax purposes and who is not liable for that tax — Fine fixed at the level of the rate of value added tax normally applicable for the value of the goods transferred in the supplies made — Lawfulness — Condition — Observance of the principle of proportionality — Verification a matter for the national court

   (Council Directive 2006/112, as amended by Directive 2006/138)

5. Preliminary rulings — Interpretation — Temporal effects of judgments by way of interpretation — Retroactive effect — Limitation by the Court — Conditions — Importance for the Member State concerned of the financial consequences of the judgment — Criterion not conclusive

   (Art. 267 TFEU)

1.  The sale of the fruits of tangible property, such as the sale of timber from a private forest, must be regarded as ‘exploitation’ of that property within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112 on the common system of value added tax, as amended by Directive 2006/138.

   (see para. 31)

2.  Article 9(1) of Directive 2006/112 on the common system of value added tax, as amended by Directive 2006/138, must be interpreted as meaning that supplies of timber made by a natural person for the purpose of alleviating the consequences of a case of force majeure come within the scope of the exploitation of tangible property, which must be regarded as an ‘economic activity’ within the meaning of that provision, where those supplies are carried out for the purposes of obtaining income therefrom on a continuing basis. It is for the national court to carry out an assessment of all the circumstances of the case in order to determine whether the exploitation of tangible property, such as a forest, is carried out for the purposes of obtaining income therefrom on a continuing basis.

   The fact that property is suitable only for economic exploitation will normally be sufficient for a finding that its owner is exploiting it for the purposes of economic activities and, consequently, for the purpose of obtaining income on a continuing basis. On the other hand, if, by reason of its nature, property is capable of being used for both economic and private purposes, all the circumstances in which it is used will have to be examined in order to determine whether it is actually being used for the purpose of obtaining income on a continuing basis. In the latter case, comparing the circumstances in which the person concerned actually uses the property with the circumstances in which the corresponding economic activity is usually carried out may be one way of ascertaining whether the activity concerned is carried on for the purpose of obtaining income on a continuing basis. Thus, where the person concerned takes active steps in forestry management by mobilising resources similar to those deployed by a producer, a trader or a person supplying services within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112, the activity at issue must be regarded as an ‘economic activity’ within the meaning of that provision.

   Furthermore, the fact that the supplies of timber at issue were effected with a view to alleviating the consequences of a case of force majeure cannot, in itself, lead to the conclusion that those supplies were made on an occasional basis and not ‘for the purposes of obtaining income therefrom on a continuing basis’ within the terms of Article 9(1) of Directive 2006/112.

   (see paras 34-37, 40, operative part 1)

3.  See the text of the decision.

   (see paras 44-46)

4.  EU law must be interpreted as meaning that it is possible that a rule of national law allowing a fine to be imposed, fixed at the level of the rate of value added tax normally applicable for the value of the goods transferred in the supplies made, on an individual who has failed to fulfil his obligation to register in the register of taxable persons for value added tax purposes and who was not liable for that tax, may be contrary to the principle of proportionality. It is for the national court to determine whether the amount of the penalty does not go further than is necessary to attain the objectives of ensuring the correct levying and collection of the tax and preventing fraud, having regard to the facts of the case and, inter alia, the sum actually imposed and the possible existence of fraud or circumvention of the applicable legislation attributable to the taxable person whose failure to register is being penalised.

   (see para. 55, operative part 2)

5.  See text of the decision.

   (see paras 57-63)

Case C-263/11

Ainārs Rēdlihs

v

Valsts ieņēmumu dienests

(Reference for a preliminary ruling from the Augstākās tiesas Senāts)

‛Sixth VAT Directive — Directive 2006/112/EC — Concept of ‘economic activity’ — Supplies of timber in order to alleviate the damage caused by a storm — Reverse charge procedure — Failure to register in the register of taxable persons — Fine — Principle of proportionality’

Summary of the Judgment

1. Harmonisation of tax legislation — Common system of value added tax — Exploitation of tangible property — Meaning — Sale of timber from a private forest — Included

   (Council Directive 2006/112, as amended by Directive 2006/138, Art. 9(1), second para.)

2. Harmonisation of tax legislation — Common system of value added tax — Economic activities within the meaning of Article 9 of Directive 2006/112 — Definition — Supplies of timber made by a natural person for the purpose of alleviating the consequences of a case of force majeure — Condition for inclusion — Activity carried out for the purposes of obtaining income therefrom on a continuing basis

   (Council Directive 2006/112, as amended by Directive 2006/138, Art. 9(1), second para.)

3. Member States — Retained powers — Field of penalties applicable as regards value added tax — Obligation to exercise that power in accordance with EU law and its general principles

4. Tax provisions — Harmonisation of laws — Turnover taxes — Common system of value added tax — Obligations of persons liable for the tax — Obligation to declare the commencement of activity as a taxable person — National legislation allowing a fine to be imposed on an individual who fails to fulfil his obligation to register in the register of taxable persons for value added tax purposes and who is not liable for that tax — Fine fixed at the level of the rate of value added tax normally applicable for the value of the goods transferred in the supplies made — Lawfulness — Condition — Observance of the principle of proportionality — Verification a matter for the national court

   (Council Directive 2006/112, as amended by Directive 2006/138)

5. Preliminary rulings — Interpretation — Temporal effects of judgments by way of interpretation — Retroactive effect — Limitation by the Court — Conditions — Importance for the Member State concerned of the financial consequences of the judgment — Criterion not conclusive

   (Art. 267 TFEU)

1.  The sale of the fruits of tangible property, such as the sale of timber from a private forest, must be regarded as ‘exploitation’ of that property within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112 on the common system of value added tax, as amended by Directive 2006/138.

   (see para. 31)

2.  Article 9(1) of Directive 2006/112 on the common system of value added tax, as amended by Directive 2006/138, must be interpreted as meaning that supplies of timber made by a natural person for the purpose of alleviating the consequences of a case of force majeure come within the scope of the exploitation of tangible property, which must be regarded as an ‘economic activity’ within the meaning of that provision, where those supplies are carried out for the purposes of obtaining income therefrom on a continuing basis. It is for the national court to carry out an assessment of all the circumstances of the case in order to determine whether the exploitation of tangible property, such as a forest, is carried out for the purposes of obtaining income therefrom on a continuing basis.

   The fact that property is suitable only for economic exploitation will normally be sufficient for a finding that its owner is exploiting it for the purposes of economic activities and, consequently, for the purpose of obtaining income on a continuing basis. On the other hand, if, by reason of its nature, property is capable of being used for both economic and private purposes, all the circumstances in which it is used will have to be examined in order to determine whether it is actually being used for the purpose of obtaining income on a continuing basis. In the latter case, comparing the circumstances in which the person concerned actually uses the property with the circumstances in which the corresponding economic activity is usually carried out may be one way of ascertaining whether the activity concerned is carried on for the purpose of obtaining income on a continuing basis. Thus, where the person concerned takes active steps in forestry management by mobilising resources similar to those deployed by a producer, a trader or a person supplying services within the meaning of the second subparagraph of Article 9(1) of Directive 2006/112, the activity at issue must be regarded as an ‘economic activity’ within the meaning of that provision.

   Furthermore, the fact that the supplies of timber at issue were effected with a view to alleviating the consequences of a case of force majeure cannot, in itself, lead to the conclusion that those supplies were made on an occasional basis and not ‘for the purposes of obtaining income therefrom on a continuing basis’ within the terms of Article 9(1) of Directive 2006/112.

   (see paras 34-37, 40, operative part 1)

3.  See the text of the decision.

   (see paras 44-46)

4.  EU law must be interpreted as meaning that it is possible that a rule of national law allowing a fine to be imposed, fixed at the level of the rate of value added tax normally applicable for the value of the goods transferred in the supplies made, on an individual who has failed to fulfil his obligation to register in the register of taxable persons for value added tax purposes and who was not liable for that tax, may be contrary to the principle of proportionality. It is for the national court to determine whether the amount of the penalty does not go further than is necessary to attain the objectives of ensuring the correct levying and collection of the tax and preventing fraud, having regard to the facts of the case and, inter alia, the sum actually imposed and the possible existence of fraud or circumvention of the applicable legislation attributable to the taxable person whose failure to register is being penalised.

   (see para. 55, operative part 2)

5.  See text of the decision.

   (see paras 57-63)