Flashback on ECJ Cases – C-381/01, C-495/01, C-144/02, C-463/02 (Commission vs Italy, Germany, Finland, Sweden) – Subsidy directly related to price

On July 15, 2004, the ECJ its judgment in the cases C-381/01, C-495/01, C-144/02, C-463/02.

Context: Failure of a Member State to fulfil obligations – Directive 77/388/EEC – VAT – Article 11(A)(1)(a) – Taxable amount – Subsidy directly linked to the price – Regulation (EC) No 603/95 – Aid granted in the dried fodder sector

Article in the EU VAT Directive

Article 11(A)(1)(a) of the Sixth VAT Directive (Article 73 of the EU VAT Directive 2006/112/EC).

Article 73 (Taxable amount)
In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.

Facts

The three conditions for inclusion of a subsidy in the taxable amount are satisfied. It is clear from Regulation No 603/95 that only the undertaking which processes fresh fodder can be granted aid and not producers of fresh fodder, and that the processing undertaking both enters into a sales agreement with undertakings which consume dried fodder (supply of goods) and processing agreements with producers of fresh fodder (supply of services). In the present case there is no doubt that the intervention body which pays the aid in accordance with Regulation No 603/95 is a third person in relation to the processing undertaking and the buyer and that this intervention takes place in accordance with a procedure for the award of public subsidies.

Article 11 A point 1(a) of the Sixth Directive would be interpreted excessively narrowly if only types of aid which are calculated on the basis of the product price are included in the taxable amount for VAT. By its general reference to “subsidies directly linked to the price of [the taxable] supplies”, the Community legislature actually intended to include in the taxable amount for VAT all aid which is directly linked to the price of the goods or services, ie the subsidies which directly influence the size of the supplier’s remuneration. Those subsidies must, in turn, be directly linked to or have a causal connection with precisely indicated or quantifiable supplies of goods or services, ie the aid paid, if and to the extent that the goods or services are actually sold on the market. That is why the subsidy has a direct influence on the product’s sale price and that clearly shows the underlying idea that subsidies should be included in the taxable amount for VAT, on the basis of a non-restrictive interpretation of Article 11 A point 1(a) of the Sixth Directive and in accordance with the general purpose of the article, namely taxation of all the remuneration paid in whole or in part by a person, no matter who, and which is actually received by the supplier as a consequence of the sale of the goods or services.

Questions

C-381/01

Dismisses the action;
Orders the Italian Republic to bear its own costs;
Orders the Republic of Finland and the Kingdom of Sweden to bear their own costs.

C-495/01

Dismisses the action;
Orders the Commission of the European Communities to pay the costs;
Orders the Federal Republic of Germany and the Kingdom of Sweden to bear their own costs

C-144/02

Dismisses the action;
Orders the Commission of the European Communities to pay the costs;
Orders the Republic of Finland and the Kingdom of Sweden to bear their own costs.

C-463/02

The Commission claims that the Court should:

1. Declare that, by failing to levy value added tax on the amount of aid paid under Council Regulation (EC) No 603/95 of 21 February 1995 on the common organisation of the market in dried fodder, Sweden has failed to fulfil its obligations under Article 11 of the Sixth Council Directive 77/388/EC 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; and

2. Order Sweden to pay the costs.

AG Opinion

N/A

Decision

C-381/01

Dismisses the action;
Orders the Italian Republic to bear its own costs;
Orders the Republic of Finland and the Kingdom of Sweden to bear their own costs.

C-495/01

Dismisses the action;
Orders the Commission of the European Communities to pay the costs;
Orders the Federal Republic of Germany and the Kingdom of Sweden to bear their own costs

C-144/02

Dismisses the action;
Orders the Commission of the European Communities to pay the costs;
Orders the Republic of Finland and the Kingdom of Sweden to bear their own costs.

C-463/02