Link to the European VAT legislation
Article 9(1) of Sixth Council Directive 77/388/EEC of 17 May 1977. Art. 43 and 44 of the EU VAT Directive 2006/112/EU
Facts
- Lease Plan is a leasing company whose main business is the leasing of cars underhire purchase contracts.
- Most of Lease Plan’s contracts are with companies established in Luxembourg. The cars leased to them have been bought in Luxembourg, are insured with insurance companies in Luxembourg and are covered by comprehensive contractsunder which the client companies pay an inclusive fee to cover financing, insurance,maintenance and repairs. The companies established in Luxembourg make thesecars available to their own employees, some of whom live in Belgium, either in thefrontier region or elsewhere. The garage operators established in Belgium used bythe employees send their invoices to Lease Plan, which pays the VAT.
- Lease Plan has also leased out some 10 cars, out of its fleet of nearly 1 000, toclients established in Belgium. Those cars were bought by Lease Plan in Belgiumand, unlike those leased to the companies established in Luxembourg, are notcovered by comprehensive contracts. Maintenance, insurance, repairs and taxes areall paid for by the clients established in Belgium.
- Lease Plan applied for a refund of the VAT paid on the purchase in Belgium ofthe cars leased to clients established in Belgium and on the maintenance and repairby Belgian garage operators of the cars leased to companies established inLuxembourg.
- The Belgian tax authorities refused to refund VAT as sought by Lease Plan on theground that it carries out transactions in Belgium in respect of which it is liable forVAT. Those transactions included the repairs carried out on cars leased to clientsestablished in Luxembourg, which did not fall within normal maintenance. Suchrepairs were not covered by the comprehensive contracts and constituted separate services performed at the place where the cars were situated. In addition, for theperiod subsequent to 1 January 1993, the Belgian tax authorities maintain that thefact that Lease Plan carries on an economic activity by possessing a fleet of vehiclesin Belgium for rental purposes is enough for it to have a fixed establishment inBelgium within the meaning of Article 21(2) of the Belgian Law of 3 July 1969 enacting the Value Added Tax Code, as amended by the Law of 28 December1992, which came into force on 1 January 1993
Question to ECJ
Must the term ‘fixed establishment in Article 9(1) of the Sixth VAT Directive (Directive 77/388/EEC) be interpreted as meaning that an undertaking from one Member State which hires or leases out a number of cars to customers established in another Member States has ipso facto, by virtue of that hiring, a fixed establishment in that other Member State?
Decision
1. The term ‘fixed establishment in Article 9(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws ofthe Member States relating to turnover taxes – Common system of valueadded tax: uniform basis of assessment must be interpreted in such a waythat an undertaking established in one Member State which hires out orleases a number of vehicles to clients established in another Member Statedoes not possess a fixed establishment in that other State merely byengaging in that hiring out or leasing.
2. It is contrary to Article 59 of the EC Treaty for national rules to providethat taxable persons not established in a Member State, who apply for arefund of VAT in accordance with the Eighth Council Directive79/1072/EEC of 6 December 1979 on the harmonisation of the laws of theMember States relating to turnover taxes – Arrangements for the refund ofvalue added tax to taxable persons not established in the territory of thecountry, are entitled to interest only from such time as notice to pay wasserved on that Member State and at a lower rate than that applied to theinterest paid to taxable persons established in the territory of that Stateautomatically on the expiry of the statutory time-limit for reimbursement.
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