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Flashback on ECJ Cases – Joined Cases C-454/12 (Pro Med Logistik) & C-455/12 (Pongratz) – Different VAT rates for two types of passenger transport in principle not contrary to EU law

On February 27, 2014, the ECJ issued its decision in the joined cases C-454/12 (Pro Med Logistik) & C-455/12 (Pongratz).

Context: References for a preliminary ruling — VAT — Sixth VAT Directive — Article 12(3) — Annex H, category 5 — Directive 2006/112/EC — Article 98(1) and (2) — Annex III, point 5 — Principle of neutrality — Transport of passengers and their accompanying luggage — Legislation of a Member State applying different rates of VAT to transport by taxi and to transport by minicab


Article in the EU VAT Directive

Articles 98(1) and (2) of the EU VAT Directive 2006/112/EC.

Article 98 (VAT Rates – Reduced Rates)
1. Member States may apply either one or two reduced rates.
2. The reduced rates shall apply only to supplies of goods or services in the categories set out in Annex III.
The reduced rates shall not apply to electronically supplied services.


Facts

C‑454/12

  • Pro Med is a limited company under German law which holds, inter alia, a licence under Paragraph 2(1), point 4, of the PBefG for minicab services but has no licence for taxi services under Paragraph 47 of the PBefG.
  • In 2006 and 2007, Pro Med transported patients on behalf of sickness insurance funds by means of vehicles not specifically adapted for that purpose.
  • On 27 November 2007, Pro Med accepted all of the conditions provided for by the agreement concluded on 1 October 2007 between Sickness Insurance Fund A and the Association of Taxi and Minicab Undertakings (Taxi- und Mietwagenunternehmerverband; ‘the Association’) on the transport, by taxi undertakings, of patients insured with Sickness Insurance Fund A. Pursuant to the first sentence of Article 1(1) of that agreement, the object of that agreement is the participation of taxi undertakings which belong to the Association in the transport of patients insured with Sickness Insurance Fund A. Under Article 5(1) of that agreement, the remuneration for the transport of patients is in accordance with the fare agreement in Annex 1 thereto.
  • Following a tax investigation carried out by the Finanzamt Dresden-Süd, Pro Med was ordered to declare the transport services which it had provided pursuant to the agreement concluded between Sickness Insurance Fund A and the Association at the standard rate of VAT laid down in Paragraph 12(1) of the UStG. Its objections, by which it sought, inter alia, application of the reduced rate established by Paragraph 12(2), point 10, of the UStG, were unsuccessful.
  • Pro Med brought the matter before the Finanzgericht (Finance Court). That court held that Pro Med did not have the right to apply the reduced rate for the transport services at issue on the ground that it had not provided taxi services as it was not licensed to do so. However, the Finanzgericht expressed uncertainty as to whether the difference in treatment between the two categories of undertakings could be justified. It found that taxi undertakings are permitted to provide transport services for sickness insurance funds which are not subject to the fare rates applicable to local public transport services and which are based on agreements concluded with those sickness insurance funds. Those transport services do not, however, have the essential characteristics of local public transport which constitute the basis for the favourable tax treatment.
  • Pro Med brought an appeal on a point of law against that decision by which the Finanzgericht refused to allow it to apply the reduced tax rate to the turnover from the patient transport services which it had carried out.
  • The referring court raises the issue of whether the selective national provision in Paragraph 12(2), point 10(b), of the UStG is compatible with the principle of fiscal neutrality as interpreted by the Court of Justice. On the one hand, that court takes the view that, from the consumer’s point of view, both taxis and minicabs are used for passenger transport, which suggests that the services so provided are comparable. On the other hand, according to that court, there are significant differences between those two modes of passenger transport, having regard to the respective conditions governing their performance, even in the case of a special agreement between a taxi undertaking and major customers, so far as concerns, inter alia, the fixing of the price for the journey and the obligation to carry on business and to provide transport, differences which might rule out any infringement of that principle.

C-455/12

  • From the end of December 1994, Ms Oertel ran a minicab undertaking in city A. The services provided included passenger transport, transport of seated patients, transport of patients for dialysis treatment, transport of schoolchildren, courier services and transport of materials, hotel and airport transfers, city tours and the organisation of transfers from one place to another.
  • In addition to private individuals, Ms Oertel’s clientele included many regular customers and a number of customers generating significant turnover. Bookings were taken by telephone, fax or e‑mail. The price of a journey was determined according to a map divided into zones with fixed rates which allowed the final price charged to the customers to be calculated. During the period concerned, Ms Oertel had 10 company vehicles.
  • In her VAT returns for the financial years 2003 to 2006, Ms Oertel applied the reduced rate of VAT (7%) to her turnover from the minicab service in respect of journeys not exceeding 50 km or within city A.
  • The Finanzamt Würzburg rejected the returns and applied the standard rate of VAT (16%) to the transactions at issue.
  • Ms Oertel brought an action before the Finanzgericht. That court essentially dismissed her application seeking to have the reduced rate of tax applied to the turnover in question. It held that, as a minicab undertaking, Ms Oertel’s business did not meet the conditions for the application of the reduced rate and that the legislation limiting the application of that rate to taxi undertakings was constitutional. Nor, it held, could Ms Oertel seek application of that rate under the Sixth Directive or rely on the principle of fiscal neutrality. According to the Finanzgericht, although the application of two different rates admittedly restricts competition between the two categories of undertakings inasmuch as they provide the same type of services, that restriction was justified, inter alia by the public interest, namely, in this case, the provision by taxi undertakings of a well-organised and comprehensive local transport service.
  • Ms Oertel brought an appeal on a point of law against that decision refusing her application of the reduced rate of VAT.

Questions

C-454/12

Having regard to the principle of neutrality, do the third subparagraph of Article 12(3)(a) in conjunction with Annex H, Category 5, of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes and Article 98(1) in conjunction with Annex III, Category 5, of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, p. 1) preclude national rules which provide for a reduced rate of turnover tax for local passenger transport by taxi, whereas local passenger transport by minicab is subject to the standard rate of tax?
For the answer to the first question, is it relevant whether operators of hackney cabs and taxis and operators of minicabs perform journeys on the basis of special agreements with major customers under almost identical conditions?

 

C-455/12 

Having regard to the principle of neutrality, does the third subparagraph of Article 12(3)(a) in conjunction with Annex H, Category 5, of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes preclude national rules which provide for a reduced rate of turnover tax for local passenger transport by taxi, whereas local passenger transport by minicab is subject to the standard rate of tax?


AG Opinion

None


Decision

1. Having regard to the principle of fiscal neutrality, the third subparagraph of Article 12(3)(a) of 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, as amended by Council Directive 2001/4/EC of 19 January 2001, read in conjunction with Annex H, category 5, thereto, and Article 98(1) and (2) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Annex III, point 5, thereto, must be interpreted as not precluding two types of services for the local transport of passengers and their accompanying luggage, namely transport by taxi and transport by minicab, from being subject to different rates of value added tax, one a reduced rate and the other the standard rate, in so far as, first, by reason of the different statutory requirements to which those two types of transport are subject, the activity of local transport of passengers by taxi constitutes a concrete and specific aspect of the category of services of transport of passengers and their accompanying luggage, covered by category 5 and point 5 of the respective annexes to those directives and, secondly, those differences have a decisive influence on the decision of the average user to use one such service or the other. It is for the referring court to determine whether that is the position in the cases in the main proceedings.

2. By contrast, having regard to the principle of fiscal neutrality, the third subparagraph of Article 12(3)(a) of Sixth Directive 77/388, as amended by Directive 2001/4, read in conjunction with Annex H, category 5, thereto, and Article 98(1) and (2) of Directive 2006/112, read in conjunction with Annex III, point 5, thereto, must be interpreted as precluding two types of services for the local transport of passengers and their accompanying luggage, namely transport by taxi and transport by minicab, from being subject to different rates of value added tax in the case where, under a special agreement which applies indiscriminately to the taxi undertakings and minicab undertakings which are parties to it, the transport of passengers by taxi is not a concrete and specific aspect of the transport of passengers and their accompanying luggage, and where that activity carried out under that agreement is considered to be similar, from the point of view of the average user, to the activity of local transport of passengers by minicab, this being a matter for the referring court to determine.


Summary

National scheme according to which different VAT rates apply to transport by taxi and transport by rental car with driver

It is permitted that 2 types of transport of people and the luggage they carry in local traffic, i.e. by taxi or by rental car with driver, are subject to different VAT rates, namely the reduced or the normal rate, in so far as, owing to the different legal requirements to which those two types of transport services are subject, the carriage of passengers by taxi in the local traffic constitutes a concrete and specific aspect of the category of transport of passengers and the luggage they carry, and they also differ from are decisive when the average user decides to use one or the other transport service. It is for the national court to determine whether that is the case in the main proceedings.

It is not allowed that 2 types of transport of people and the luggage they carry in local traffic, i.e. by taxi or by rental car with driver, are subject to different VAT rates when pursuant to a special agreement that applies without distinction to the taxi and chauffeur-driven car rental companies that are parties thereto, the carriage of persons by taxi does not constitute a concrete and specific aspect of the transport of persons and the luggage they carry, and when this activity is carried on under this Agreement regarded as a service which, from the point of view of the average user, is similar to the transport of passengers by hired car with a driver in local traffic, which is for the national court to determine. 


Source:


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