92001E0232

WRITTEN QUESTION E-0232/01

by Caroline Jackson (PPE-DE) to the Commission

(7 February 2001)

Subject: VAT on garage rentals

In the United Kingdom, the practice is that where a tenant takes both the lease of a house or flat and the lease of a garage, paying rent for both to the local Council or a Housing Association, the Treasury regards the garage as part and parcel of the letting of the domestic accommodation and therefore treats the garage rent as exempt from VAT.

However, where a person who is not a tenant of Council accommodation takes the lease only of a lock-up garage from the local Council, VAT is levied on that garage rental because it is considered that there is no domestic property rental with which to associate that lease.

This situation leads to an inequity between tenants of garages, since one may be paying VAT while another will not, though the garages may be identical.

In the interests of equity and equality, does the Commission have any power to alter this situation, either directly or through a new proposal, so that either all tenants pay VAT on the rent for a garage owned by a public body or the exemption should apply to all tenants?

Answer given by Mr Bolkestein on behalf of the Commission

(22 March 2001)

Under Article 13B(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes Common system of value added tax: uniform basis of assessment(1), the letting and leasing of immovable property is generally exempt from VAT, irrespective of the nature of the entity making the supply. However there are specific exclusions from this exemption, one of which is the letting of premises and sites for the parking of vehicles.

The question as to whether various goods or services supplied simultaneously are single or multiple supplies has been addressed by the Court of Justice on several occasions. With regard to the letting of a garage in conjunction with a domestic property it is felt that the garage is a minor ancillary element subsumed into the principal supply and consequently is treated the same for tax purposes(2). The same principle would apply to outhouses, garden sheds and green houses.

Thus from a VAT point of view there is no inequity here because the comparison is not between the letting of two garages but between the letting of a garage and the letting of a dwelling. It is only the particular nature of the latter supply that warrants an exemption from VAT. With the letting of a garage on its own, the difficult question of the taxation of a person's permanent residential dwelling does not arise and there can therefore be no possibility of exemption.

(1) OJ L 145, 13.6.1977.

(2) Skatteministeriet v. Henriksen CJEC C-173/88.