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Flashback on ECJ Cases – C-22/15 (Commission v Netherlands) – No exemption for the rental of moorings and storage places for vessels to members of water sports associations

On February 25, 2016, the ECJ issued its decision in the case C-22/15 (Commission v Netherlands).

Context: Failure of a Member State to fulfil obligations — Value added tax — Directive 2006/112/EC — Exemptions — Article 132(1)(m) — Supply of services closely linked to sport or physical education — Exemption for the hiring out of berths and sites for the storage of boats to the members of water sports associations in the context of sailing or leisure activities which cannot be equated with the practice of sport or physical education — Exemption limited to the members of water sports associations which have no employees for delivery of their services — Excluded — Point (d) of the first paragraph of Article 133


Article in the EU VAT Directive

Article 132(1)(m) of the EU VAT Directive 2006/112/EC.

Article 132 (Exemptions for certain activities in the public interest)
1. Member States shall exempt the following transactions:

(m) the supply of certain services closely linked to sport or physical education by non-profit-making organisations to persons taking part in sport or physical education;


Facts & Questions

  •  On 9 October 2009, the Commission sent a letter of formal notice to the Kingdom of the Netherlands, in which it made two complaints against it. On the one hand, it accused the Kingdom of the Netherlands of having failed to fulfill its obligations under Articles 2(1), 24(1) and 133 of Directive 2006/112, in conjunction with the Article 132(1)(m) of that directive, by exempting from VAT, pursuant to Article 11(1)(e) and 2 of the VAT Law, the hiring out of workstations mooring and places for storing boats to members of water sports associations in the context of water activities which cannot be assimilated to the practice of sport or physical education. On the other hand,
  • On 4 December 2009, the Dutch government replied to that letter, denying that it had failed to fulfill its obligations under Directive 2006/112. He explained in particular that the provision of berths and places for the storage of boats is closely linked to the practice of sport. He added that the limitation of the exemption to members of associations which do not employ employees is justified in order to combat the distortions of competition referred to in point (d) of the first paragraph of Article 133 of that directive.
  • By letter of 28 June 2010, the Commission sent the Kingdom of the Netherlands a reasoned opinion in which it maintained its position expressed in the letter of formal notice.
  • By letter of 26 August 2010, the Dutch Government replied to the reasoned opinion by again contesting the merits of the objections addressed to it. With regard more particularly to the first complaint, he pointed out, on the one hand, that the maintenance and repair services of boats can be essential to the practice of sport and, on the other hand, that sport can be practiced using motorboats.
  • The Commission, while considering that those two observations were correct, none the less considered that the position of the Kingdom of the Netherlands was unsatisfactory and decided to bring the present action.

 By its application, the European Commission asks the Court to find that:

– by exempting from value added tax (hereinafter “VAT”), in the context of navigation or leisure activities that cannot be assimilated to the practice of sport or physical education, the rental berths and places for the storage of boats to members of water sports associations which do not employ employees for the provision of their services, and

– by limiting, when the rental of berths and places for the storage of boats is made to persons who practice the sport and when the rental is closely linked and essential to the practice of this sport, the exemption rental to water sports associations that do not employ employees for the provision of their services,

the Kingdom of the Netherlands has failed to fulfill its obligations under Articles 2(1), 24(1) and 133 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ L 347, p. 1), in conjunction with Article 132(1)(m) of that directive.


 

AG Opinion

None


Decision

1) The Kingdom of the Netherlands has failed to fulfill its obligations under Articles 2 (1), 24 (1) and 133 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of taxation on the added value, in connection with Article 132 (1) (m) of this Directive:

– by exempting from value added tax the rental of moorings and stowage places for vessels to members of water sports associations who do not make use of one or more persons employed by them for sailing or relaxation activities which cannot be equated with the practice of sports or physical education, and

– by limiting the exemption from such rental to water sports associations, where the rental of moorings and stowage places for vessels is made to members who practice sport and the rental is closely related and indispensable to the practice of that sport, making one or more persons employed by them.

2. Orders the Kingdom of the Netherlands to pay the costs.


Summary

The Commission contends that the Netherlands VAT exemption in article 11(1)(e) Wet OB 1968 (services by sports associations to their members) is both too broad and too narrow. First of all, the Commission takes issue with the fact that the VAT exemption is not limited to the hiring of quays and moorings to members of non-profit-making organisations taking part in sport, but also extends to the hiring of quays and moorings to the members of associations which, whether on a purely recreational or perhaps even residential basis, use the vessel located in the hired quay or mooring, without leaving the location. The exemption is to that extent contrary to Articles 2(1), 24(1) and 133 of the VAT Directive. In addition, the Commission takes issue with the fact that, in order to benefit from the exemption, the associations in question must not have any employees. The Netherlands thereby adds a condition that goes beyond what is permitted by Article 133 of the VAT Directive (in conjunction with Article 132(1)(m) thereof).


Source:


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