Flashback on ECJ Cases C-532/11 (Leichenich) – The rental of a houseboat, with the associated berth and jetty, must be regarded as the leasing and rental of immovable property is VAT exempt

On November 15, 2012, the ECJ issued its decision in the case C-532/11 (Leichenich),

Context: Directive 77/388/EEC – VAT – Exemptions – Article 13B(b) – Leasing or letting of immovable property – Houseboat, without a system of propulsion, permanently attached alongside a riverbank – Leasing of the houseboat, including the landing stage, the plot of land and the area of water contiguous therewith – Exclusive use for the permanent operation of a restaurant‑discotheque – Single supply)

Article in the EU VAT Directive

Article 2 of the Sixth Directive, which forms part of Title II, headed ‘Scope’, provides:

‘The following shall be subject to [VAT]:

1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;

Article 13 of that directive, headed ‘Exemptions within the territory of the country’, provides in paragraph B, headed ‘Other exemptions’:

‘Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(b) the leasing or letting of immovable property excluding:

1. the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;

2. the letting of premises and sites for parking vehicles;

3. lettings of permanently installed equipment and machinery;

4. lettings of safes.

Member States may apply further exclusions to the scope of this exemption;

5 The content of the above provision of the Sixth Directive was repeated, virtually unchanged, in Article 135 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), which constitutes the recasting of the Sixth Directive and its successive amendments.

6 Article 38 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax (OJ 2011 L 77, p. 1), which forms part of Subsection 10 of that regulation entitled ‘Hiring of means of transport’, provides:

‘1. “Means of transport”, as referred to in Article 56 and point (g) of the first paragraph of Article 59 of Directive 2006/112/EC shall include vehicles, whether motorised or not, and other equipment and devices designed to transport persons or objects from one place to another, which might be pulled, drawn or pushed by vehicles and which are normally designed to be used and actually capable of being used for transport.

3. Vehicles which are permanently immobilised and containers shall not be considered to be means of transport as referred to in paragraph 1.’

Facts

It is apparent from the documents before the Court that, in 1999, Mrs Leichenich concluded with the German State, represented by the Water and Waterways Administration (Wasser und Schifffahrtsverwaltung; ‘the WSV’), an agreement for the occupation of a parcel of land situated on the left bank of the Rhine, near the City of Cologne, and an area of water, namely a portion of the river, adjacent to that land. By that agreement, the WSV placed those parcels at the disposal of the users for the purposes of operating a houseboat with a landing stage as a restaurant. The houseboat in question has been moored in the same place for many years, has never been moved, and is immobilised by means of ropes, chains and anchors. It has no engine or system of propulsion. It is, moreover, connected to the water and electricity networks and has an address, a telephone line and a septic tank.
By a contract of 1 February 2000, Mrs Leichenich let the houseboat, the landing stage and the adjoining area to a company, which used the houseboat exclusively as a café‑restaurant and, later, as a discotheque. No VAT was charged on the amount of the rent, given that, according to the advice of Mrs Leichenich’s tax advisers, this was the letting of immovable property. However, on an inspection by the Finanzamt Köln-Altstadt, the tax authority having territorial jurisdiction, for the years 2000 to 2003, the period during which Mrs Leichenich was the sole proprietor of the let property, that authority took the view that the letting was of movable property and that, consequently, she was subject to VAT.
Mrs Leichenich then brought a civil action against her tax advisers before the Landgericht (Regional Court) Köln (Germany), seeking reimbursement of the sums paid by way of VAT. That court, by judgment of 9 December 2010, referring to the judgment of the Court of Justice of 16 January 2003 in Case C‑315/00 Maierhofer [2003] ECR I‑563, took the view that the houseboat did not constitute immovable property or an essential element of such property, since it was not incorporated into the ground. It could be moved in a few hours, even if that implied a certain preparation and the use of specialist personnel. Consequently, this was an item of moveable property not falling within the exception under Article 13B(b) of the Sixth Directive.
In the appeal lodged against that judgment, the Oberlandesgericht (Higher Regional Court) Köln observes that, according to the terms of the letting contract, the latter is not limited to the letting of the houseboat and the landing stage but also includes the area of water and the adjoining plot of land. Therefore, the fixed and permanent use of the houseboat and the landing stage was indissociably linked to the occupation of the area of water and adjoining riverbank. The fixed use of the houseboat permanently prevented any other use of the water covered by it, in particular for public transport. In other words, according to that contract, part of the river, and thus of the ground, had been let. The letting of the houseboat and adjoining landing stage, stipulated in the contract, thus necessarily included the occupation and use of the area of water and plot of land which had previously been granted to Mrs Leichenich by the agreement concluded with the WSV.
The referring court further states that, according to the contract, the houseboat can be used only at the specified location and cannot be moved. It had, moreover, been at the same location for many years. That court also states that, given that the letting contract places the ground at the disposal of the lessees for a fixed use of the houseboat and that the latter has a telephone line, connections, and even a septic tank, it may be considered, on the basis of a functional approach, that the houseboat constitutes a building within the meaning of the Sixth Directive, it being understood that such a building cannot, naturally, be fixed to an area of water as solidly as to dry land.
The referring court further raises the question whether a distinction must be made, for VAT purposes, between the letting of the part of the immovable property used for the houseboat and the letting of that used for the landing stage, which, according to the terms of the contract, was placed at the disposal of the persons concerned to be used as a mooring place for boats. It raises the question whether that latter supply should not be regarded as ancillary in the context of a single contract, by reason of the fact that the provision of the landing stage served, wholly or in part, to give access to the houseboat.

Questions

Is Article 13(B)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes, to be interpreted as meaning that the concept of the leasing or letting of immovable property covers the letting of a houseboat, including the mooring place and landing stage belonging to it, which is designed exclusively for stationary long-term use as a discotheque/restaurant establishment at a demarcated and identifiable mooring place on the water? Does the reply depend on the means whereby the houseboat is attached to the land or on the cost of removing the fastenings of the boat?

2. If the answer to the first question in question 1 above is in the affirmative: Is Article 13(B)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 to be interpreted as meaning that the term ‘vehicles’ which, according to the judgment in Case C-428/02 Fonden Marselisborg Lystbådehavn, includes boats, is not applicable to a leased houseboat which has no means of self-propulsion (engine) and which has been let for exclusive long-term use at the locality in question and not for the purpose of locomotion? Does the letting of the houseboat and the landing stage, including the areas of land and water on which they are situated, constitute a single tax-free service or is it necessary to differentiate for VAT purposes between the letting of the houseboat and that of the landing stage?

AG Opinion

None

Decision

1. On a proper interpretation of Article 13B(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, the concept of the leasing or letting of immovable property includes the leasing of a houseboat, including the space and the landing stage contiguous therewith, which is fixed by attachments which are not easily removable to the bank and bed of a river, stays in a demarcated and identifiable location in the river water and is exclusively used, according to the terms of the leasing contract, for the permanent operation of a restaurant‑discotheque at that location. That leasing constitutes a single exempt supply, without it being necessary to distinguish between the leasing of the houseboat and that of the landing stage.

2. Such a houseboat does not constitute a vehicle within the meaning of Article 13B(b), point 2, of the Sixth Directive 77/388.

Summary

Leasing and rental of immovable property includes the rental of a houseboat, with its associated mooring and jetty, secured to the bank and bottom of a river with cables that cannot be easily detached, at a defined and identifiable berth in the river water and, according to the terms of the lease, is exclusively intended for permanent use there as a restaurant/discotheque.

That rental is a single exempt supply, whereby no distinction needs to be made between the rental of the houseboat and the rental of the jetty.

Such a houseboat is not a vehicle.

Source