Judgment of the European Court of Justice in case C‑449/17 (A & G Fahrschul-Akademie GmbH) of 14 March 2019. The case deals with the question if driving lessons qualify as exempt educational services.
A & G Fahrschul-Akademie GmbH operates a driving school in the legal form of a limited liability company. It did not show the amount of VAT separately on the invoices which it issued to students, although it did initially declare taxable transactions in its VAT Return.
A & G asked for a VAT refund afterwards, claiming that its activities were exempt from VAT. The German tax authorities denied this refund request.
The Finanzgericht (Finance Court, Germany) held, inter alia, that A & G could not rely on the tax exemption referred to in Article 132(1)(j) of Directive 2006/112. The services provided by A & G, consisting in the provision of theoretical tuition and practical driving instruction, were not, that court found, covered by the concept of ‘school or university education’ within the meaning of that provision, since, by virtue of a recommendation for road safety education at school in force during the period at issue, practical driving instruction was neither a necessary nor a desirable component of such education.
A & G did not agree with that, arguing, inter alia, that the national legislature’s objective concerning driving tuition in a driving school is to educate road users to act responsibly. Furthermore, practical driving instruction provided by a driving school and road safety training courses organised by, for example, the Allgemeiner Deutscher Automobil-Club (German Automobile Club) serve the same objectives, ad those were exempt from VAT as well. Therefore, A & G argues that it would be contrary to the principle of neutrality to tax those comparable activities differently.
The Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
‘(1) Does the concept of “school or university education” in Article 132(1)(i) and (j) of Directive [2006/112] cover driving school tuition to acquire category B and category C1 driving licences?
(2) If the answer to the first question is in the affirmative, can the applicant [in the main proceedings be recognised] as “an organisation having similar objects” for the purposes of Article 132(1)(i) of Directive [2006/112] on the basis of the provisions on the driving instructor examination and the issue of a driving instruction and driving school licence in [the Gesetz über das Fahrlehrerwesen (Law on driving instructors) of 25 August 1969], and of the public interest in the training of learner drivers to be safe, responsible and environmentally aware road users?
(3) If the answer to the second question is in the negative, does the term “tuition given privately by teachers” contained in Article 132(1)(j) of Directive [2006/112] require that the taxable person be an individual trader?
(4) If the answers to the second and third questions are in the negative, is an instructor always providing tuition privately within the meaning of Article 132(1)(j) of Directive [2006/112] if he acts on his own account and at his own risk, or must further requirements be met to qualify as a private teacher?’
Considerations of the ECJ:
The ECJ repeats that the VAT exemptions are to be interpreted strictly, since they constitute exceptions to the general principle, arising from Article 2 of that directive, that VAT is to be levied on all services supplied for consideration by a taxable person.
However, the concept of ‘school or university education’, is not limited solely to education which leads to examinations for the purpose of obtaining qualifications or which provides training for the purpose of carrying out a professional or trade activity, but includes other activities which are taught in schools or universities in order to develop pupils’ or students’ knowledge and skills, provided that those activities are not purely recreational.
In that regard, it must be noted, that activities which are not purely recreational are likely to be covered by the concept of ‘school or university education’ as long as the tuition is provided in schools or universities.
The concept of ‘school or university education’ for the purposes of the VAT system refers generally to an integrated system for the transfer of knowledge and skills covering a wide and diversified set of subjects, and to the furthering and development of that knowledge and those skills by the pupils and students in the course of their progress and their specialisation in the various constituent stages of that system.
The European Court of Justice rules as follows:
The concept of ‘school or university education’, must be interpreted as not covering motor vehicle driving tuition provided by a driving school.