1.

The request for a preliminary ruling concerns the interpretation of Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax. ( 2 )

2.

The request was made in proceedings between Apcoa Parking Danmark A/S (‘Apcoa’) and the Skatteministeriet (Ministry of Taxation, Denmark) concerning whether control fees for infringement of regulations on parking on private property are subject to value added tax (VAT).

3.

The Court is invited to rule on whether those fees constitute an amount payable as compensation for breach of contractual obligations or, in contrast, consideration for an identifiable supply for the purposes of the VAT Directive.

4.

I will set out the reasons that lead me to propose that the Court should find them to be the latter.

5.

Article 2(1)(c) of the VAT Directive provides that ‘the supply of services for consideration within the territory of a Member State by a taxable person acting as such’ is subject to VAT.

6.

Article 9(1) of that directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

7.

According to Article 14(1) of that directive, the transfer of the right to dispose of tangible property as owner is considered to be a ‘supply of goods’.

8.

Article 24(1) of the directive provides:

‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’

9.

Under Article 25 of the VAT Directive:

‘A supply of services may consist, inter alia, in one of the following transactions:

10.

Article 135(1)(l) and (2)(b) of that directive provides:

‘1.   Member States shall exempt the following transactions:

…

2.   The following shall be excluded from the exemption provided for in point (l) of paragraph 1:

…

11.

Paragraph 4(1) of the lov om merværdiafgift (Law on Value Added Tax) ( 3 ) provides:

‘Goods and services supplied for consideration within the national territory shall be subject to the tax. “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner. Any other supply shall be a supply of services.’

12.

Under Paragraph 13(1)(8) of that law:

‘The following goods and services shall be exempt from the tax:

…

13.

Paragraph 27(1) of that law provides:

‘In respect of the supply of goods and services, the taxable amount shall be paid, including subsidies directly linked to the price of the goods or services, but shall not include tax payable hereunder. If payment takes place in full or in part before the supply or before the invoice is issued, the taxable amount shall be 80% of the sum paid.’

14.

According to the referring court, the færdselsloven (Law on Road Traffic) does not specify the situations in which control fees can be charged for parking on private land in breach of the regulations. However, since a legislative amendment in 2014, it has provided in Paragraph 122c(1) that an inspection charge (control fee) may be imposed in respect of parking on publicly accessible private land only if that is clearly indicated on site (subject to any clearly marked general prohibition on parking in the area).

15.

Apcoa is a private company that operates car parks on private land under contracts with the site owners. It lays down conditions for use of the parking areas, such as a prohibition on parking without an individual permit, maximum parking time and any payment of a fee for parking. Where the conditions of use are infringed, Apcoa levies additional specific control fees (510 Danish krone (DKK) (approximately EUR 69) in 2008 and 2009).

16.

A sign at the entrance to the car parks at issue states, inter alia, that ‘control fees of DKK 510 may be charged for infringement of the regulations’ or ‘control fees of DKK 510/day may be charged for infringement of the regulations’. They also state that ‘the car park is operated in accordance with the rules of private law’.

17.

Apcoa is subject to VAT on the fees charged for parking in accordance with the parking regulations.

18.

On 25 October 2011, Apcoa applied to SKAT (the Danish tax authority) for a refund of the VAT paid in respect of control fees levied between 1 September 2008 and 31 December 2009, assessed at DKK 25089292 (approximately EUR 3370000).

19.

The dispute does not concern whether VAT is payable on sums arising under the relationship between Apcoa and the landowner of the car park in question.

20.

On 12 January 2012, SKAT refused the application on the ground that the control fees are regarded as subject to VAT under Paragraphs 4(1) and 27(1) of the Law on VAT, read in conjunction with the second sentence of Paragraph 13(1)(8) of that law.

21.

On 23 December 2014, the Landsskatteretten (National Tax Tribunal, Denmark) upheld that decision.

22.

The Landsskatteretten (National Tax Tribunal) listed 13 types of situation in which Apcoa can levy control fees:

‘1. Where the fee paid is insufficient.

2. Where no currently valid parking ticket is visible in the windscreen.

3. Where the ticket cannot be checked, for example where the parking ticket is not displayed correctly.

Situations 1 to 3 apply to paid parking.

4. Where there is no valid parking ticket, for example in the case of a residents’ parking zone where permission is required to use specific parking spaces.

5. Parking in disabled parking spaces. This ground for charges applies only where there is a disabled parking sign, irrespective of whether parking is free or paid. To be able to park in those spaces, the motorist must have displayed evidence of entitlement in the windscreen.

6. Parking other than in designated parking places. This ground applies to all types of parking spaces where there is a sign indicating that vehicles should be parked inside the spaces.

7. Where parking is prohibited. This ground for charges applies, for example, where a vehicle is parked on a fire emergency access route.

8. Reserved parking areas. This ground for charges applies to all types of parking spaces where vehicles must be parked in the specific spaces.

9. Where no parking disc is visible.

10. Where a parking disc is incorrectly set/the parking time indicated has been exceeded.

11. Where the parking disc is illegible. This ground for charges applies, for example, where the needles on the parking disc have become detached or where there is an error in an electronic disc.

12. Where there is more than one parking disc. This ground for charges applies where the motorist has displayed several parking discs in the windscreen in order to extend the parking period.

Grounds for charges 9 to 12 are applied where parking is free for a limited period but a parking disc is required as proof of the time the vehicle was parked.

13. Other. This ground for charges applies to the infringement of parking regulations not described in any of the 12 preceding points. Point 13 applies, for example, where the parking clearly obstructs traffic. If this ground for charges is used to justify the levying of control fees, it shall be supplemented by a written description of the infringement.’

23.

Apcoa’s action against that decision was dismissed by the Retten i Kolding (Kolding District Court, Denmark) by a judgment of 23 January 2017, which was upheld by the Vestre Landsret (High Court of Western Denmark, Denmark) by its judgment of 10 September 2018.

24.

Apcoa appealed against that judgment to the Højesteret (Supreme Court, Denmark) seeking, inter alia, acknowledgement by the Ministry of Taxation that the control fees levied for infringement of the parking regulations – in the relationship between the individual motorist and Apcoa – do not constitute consideration for a service subject to VAT within the meaning of Paragraph 4(1) of the Law on VAT, read in conjunction with Article 2(1)(c) of the VAT Directive.

25.

The referring court states that the parties disagree as to whether there is a mutual exchange of services, in the light of the judgment of 3 March 1994 in Tolsma. ( 4 ) Having regard to the Court’s case-law on the expression ‘supply of services’, it is uncertain whether Article 2(1)(c) of the VAT Directive can be interpreted as a basis for considering the control fees at issue to be remuneration for a service.

26.

The referring court notes that, according to the information in the case file, the German, Swedish and United Kingdom tax authorities take the view that control fees for infringement of parking conditions on private land are not subject to VAT.

27.

In those circumstances, the Højesteret (Supreme Court) stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

‘Must Article 2(1)(c) of [the VAT Directive] be interpreted as meaning that control fees for infringement of regulations on parking on private property constitute consideration for a service supplied and that there is therefore a transaction subject to VAT?’

28.

Apcoa, the Danish Government, Ireland and the European Commission filed written observations.

29.

Apcoa and the Danish Government replied within the time limits given to the questions to be answered in writing.

30.

By its request for a preliminary ruling, the referring court enquires whether a transaction consisting of levying control fees ( 5 ) for infringement of parking conditions on private sites managed by Apcoa can be characterised as a supply of services, within the meaning of the VAT Directive.

31.

Several principles need to be called to mind at the outset.

32.

First, as the Court of Justice stated in its judgment of 2 June 2016 in Lajvér: ( 6 )

33.

Secondly, according to Article 24 of the VAT Directive, ‘supply of services’ means any transaction which does not constitute a supply of goods.

34.

Thirdly, it can be seen from the Court’s settled case-law that a supply of services is made for consideration, within the meaning of the VAT Directive, and hence is taxable, only if there is a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient. That is the case if there is a direct link between the service supplied and the consideration received, the sums paid constituting actual consideration for an identifiable service supplied in the context of such a legal relationship. ( 7 )

35.

Since the dispute in the main proceedings does not concern whether Apcoa receives income from control fees on an ongoing basis, ( 8 ) it is necessary to determine the characteristics of the supply of services and of the consideration for that supply, having regard to the economic reality of the transaction at issue. ( 9 )

36.

It should be noted in that respect that:

37.

I will therefore examine the following questions in turn:

38.

It is apparent from the request for a preliminary ruling that Apcoa manages private car parks on behalf of private landowners. ( 13 )

39.

In that capacity, Apcoa sets the conditions for using the car parks, such as:

40.

It emerges from the request for a preliminary ruling and the observations of the parties and interested parties that the key question to be determined is whether the conclusion that the Court reached in its judgment of 18 July 2007, Société thermale d’Eugénie-les-Bains, ( 15 ) can be extended by analogy to cover the transactions at issue and, therefore, be distinguished from the conclusion reached in the judgment in MEO – Serviços de Comunicações e Multimédia.

41.

Specifically, should the control fees be regarded as compensation, as Apcoa and the Commission suggest, or as consideration for the benefit enjoyed by a customer, that is to say, a space to park a vehicle, irrespective of the particular circumstances associated with the parking regulations, as the Højesteret (Supreme Court) has already held ( 16 ) and as the Danish Government claims?

42.

I share the second view. First, I would recall that, according to the Court’s case-law, how contractual provisions are characterised under national civil law is of no effect unless those provisions genuinely reflect the economic reality of the transaction, which it is for the referring court to determine. ( 17 )

43.

Second, the control fees seem to me to be components of the consideration for the opportunity to park their vehicles that is offered to customers, by reason of the economic components that comprise those fees.

44.

Apcoa offers a service consisting of making parking spaces available to motorists, according to a variety of practical arrangements. In order to do so, Apcoa has defined spaces and reserved some of them, such as those for disabled customers. That service is supplied irrespective of whether or not the regulations governing use of those spaces are complied with.

45.

In specific terms, as soon as a motorist enters an Apcoa-managed car park, he or she is placed in a position to benefit from a parking space for a given period.

46.

That service falls within the definition of ‘letting’ within the meaning of Article 135(2)(b) of the VAT Directive, which includes any economic activity consisting of receiving remuneration in consideration for making vehicle parking spaces available, irrespective of the legal status of the person letting them or whether that person owns those spaces. ( 18 )

47.

That being so, where Apcoa charges additional fees, it is necessary to ascertain whether any analogy can be drawn with the solution that the Court identified in its judgment of 18 July 2007, Société thermale d’Eugénie-les-Bains as regards whether those fees are subject to VAT. ( 19 )

48.

In that judgment, the Court held that ‘a sum paid as a deposit, in the context of a contract relating to the supply of hotel services which is subject to VAT, is to be regarded, where the client exercises the cancellation option available to him and that sum is retained by the hotelier, as a fixed cancellation charge paid as compensation for the loss suffered as a result of client default and which has no direct connection with the supply of any service for consideration and, as such, is not subject to that tax.’ ( 20 )

49.

The Court stated that ‘the retention of the deposit at issue in the main proceedings is … triggered by the client’s exercise of the cancellation option made available to him and serves to compensate the hotelier following the cancellation’. ( 21 ) Accordingly, in such a situation, it is because the hotelier was unable to provide the hotel service reserved by the client and because the client, obviously, did not use the service that the client compensates the hotelier for a loss of profit.

50.

My view is therefore that the scope of the judgment of 18 July 2007, Société thermale d’Eugénie-les-Bains, ( 22 ) should be confined to those cases in which the contracting party is compensated because there was no transaction, which is in line with the judgments of 1 July 1982, BAZ Bausystem ( 23 ) (concerning interest on account of late payment); of 29 February 1996, Mohr ( 24 ) (concerning compensation for lost business); and of 18 January 2017, SAWP ( 25 ) (concerning fair compensation for the holders of reproduction rights).

51.

In the present case, where an Apcoa-managed car park is used, the motorist who pays control fees has had the benefit of a parking space or area. The amount of the fees is determined by the fact that the conditions which the motorist accepted on entering the car park are fulfilled.

52.

Under those circumstances, I believe, in common with the Danish Government, that it is helpful to compare the situation under analysis with the judgment in Vodafone Portugal, delivered after the request for a preliminary ruling was submitted and after Apcoa filed its written observations, because it has had the effect of supplementing the judgment in MEO – Serviços de Comunicações e Multimédia, ( 26 ) in a manner conducive to an interpretation of the scope of that judgment different from the scope for which Apcoa argues in its written observations.

53.

In Vodafone Portugal, the Court stated that:

54.

The Court noted the following features: ( 29 )

55.

The Court held that ‘where those customers do not comply with that tie-in period, the supply of services must be regarded as having been made, since those customers are placed in a position to benefit from those services’. ( 30 )

56.

Having regard to the economic reality of the transactions, the Court found that the amounts payable by customers reflect the recovery of some of the costs associated with the supply of the services which that operator has provided to those customers. ( 31 ) Those amounts represent part of the cost of the service which the provider committed to supplying ( 32 ) and seek to guarantee the operator a minimum remuneration for the service provided. ( 33 )

57.

In my view that finding can be transposed to the transactions at issue in the main proceedings since, in common with the Danish Government, I believe that, in the situations in which control fees are payable, the users of Apcoa-managed car parks have had an opportunity to benefit from a place to park. The price of that service is correlated with the ways in which the sites can be used that the operator is not able to control.

58.

Apcoa argues that the control fees are not consideration for a supply, because they are at a standard rate far above the value of the supply made to the motorist. In common with the Commission, it asserts that those fees seek to penalise an infringement of the conditions of use of its car parks.

59.

However, first, I would note that the Court has held that the amount of the consideration is irrelevant. ( 34 ) Second, no argument can be based on the fact that the flat-rate charge is intended to deter clients from infringing the parking regulations because, according to settled case-law, the purpose and results of the transaction concerned are irrelevant to its characterisation, which is determined exclusively by the economic reality. ( 35 )

60.

In the present case, my view is that, first, the amount of the control fees is correlated with the fact that a driver who has parked in a car park made available by Apcoa chooses to exceed the time for using the parking space concerned, or not to correctly prove entitlement to use it or to park either in a space not reserved for that motorist or in a manner that causes an obstruction.

61.

Second, in terms of the economic reality, it should be found that the amount of the control fees necessarily take into account the higher cost of operating car parks. That increased cost is caused by parking that does not fulfil the normal conditions of use of the service offered. In other words, the amount of the consideration seeks to provide Apcoa with contractual remuneration for the supply made in circumstances attributable to the user which do not alter the economic and commercial reality of its relationship with the user.

62.

I note that the June 2013 report on enhanced consumer protection in the field of parking, drawn up by a working group of the Justitsministeriet (Danish Ministry of Justice), to which the referring court refers, states that ‘the representatives of the Danske Private Parkeringsselskabers Brancheforening [(Danish Private Parking Association)] informed the working group that the increase [in private parking fees ( 36 )] to DKK 590 was prompted inter alia by an ongoing increase in the various operating expenses of a parking undertaking and by the fact that the public tariff could no longer be charged. That association asserted specifically in that respect that the fee had to reflect the higher price of parking compliant with the regulations, that companies are subject to VAT on the parking fees paid and that, unlike the fees imposed by public authorities, their payment cannot be required of the owner on the basis of third-party liability’. The report also states that ‘the level of the current private parking fees is determined on the basis of calculations of overall changes in prices and pay and in fact normally depends on costs and on the market’. ( 37 )

63.

It is apparent from settled case-law that a supply of services is effected ‘for consideration’, within the meaning of Article 2(1)(c) of the VAT Directive, and is therefore subject to tax, only if there is a direct link between the service supplied and the consideration received. ( 38 )

64.

Apcoa concurs with the Commission in considering there to be no such direct link, because there is no specific economic link with the value of a parking service.

65.

However, it emerges from the Court’s settled case-law that there is a direct link where two services are mutually dependent on each other, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient, that is to say, that one is made only on condition that the other is also made, and vice versa. ( 39 )

66.

That is the case here. There is direct link between a motorist’s parking in specific circumstances determined by Apcoa and the fact that Apcoa receives increased parking fees.

67.

Moreover, in my view liability to tax cannot depend on whether the customer uses the parking space or area supplied correctly or incorrectly. A person who benefits from the supply of a parking service at an ordinary price cannot be treated differently for the purposes of VAT from a person who is prepared to use that service at a higher cost. ( 40 )

68.

I therefore conclude that the control fees received by Apcoa constitute actual consideration for the parking service enjoyed by the client in specific circumstances chosen by the client and, accordingly, that they are subject to VAT.

69.

In the light of the foregoing, I propose that the Court should reply as follows to the question referred by the Højesteret (Supreme Court, Denmark) for a preliminary ruling:

Article 2(1)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the fees levied by an economic operator in consideration for the parking of vehicles, where the amount of those fees is fixed by the operator on the basis of the conditions of use relating to that parking, must be considered to be remuneration for a supply of services for consideration and as such subject to that tax.