On March 21, 2002, the ECJ issued its decision in the case C-267/00 (Zoological Society).
Context: Sixth VAT Directive – Article 13A(2)(a), second indent – Exempt transactions – Bodies managed and administered on a voluntary basis.
Article in the EU VAT Directive
Article 13A(2)(a), second indent of the Sixth VAT Directive (Article 133 of the EU VAT Directive 2006/112/EC)
Article 133 (Exemptions for certain activities in the public interest)
Member States may make the granting to bodies other than those governed by public law of each exemption provided for in points (b), (g), (h), (i), (l), (m) and (n) of Article 132(1) subject in each individual case to one or more of the following conditions:
(a) the bodies in question must not systematically aim to make a profit, and any surpluses nevertheless arising must not be distributed, but must be assigned to the continuance or improvement of the services supplied;
(b) those bodies must be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned;
(c) those bodies must charge prices which are approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to VAT;
(d) the exemptions must not be likely to cause distortion of competition to the disadvantage of commercial enterprises subject to VAT.
Member States which, pursuant to Annex E of Directive 77/388/EEC, on 1 January 1989 applied VAT to the transactions referred to in Article 132(1)(m) and (n) may also apply the conditions provided for in point (d) of the first paragraph of this Article when the said supply of goods or services by bodies governed by public law is granted exemption.
- The Zoological Society is a non-profit-making body set up under the domestic law of the United Kingdom. It carries out a number of activities, including the ownership and operation of two zoological gardens.
- According to its charter, the Zoological Society comprises a governing body, called the council, members and honorary members. The council is composed of three officers, namely a president, a secretary and a treasurer, and 18 other members. It has the power to appoint management boards or committees with responsibility for specific activities. Members of the council and of those boards and committees, like other members and honorary members of the Zoological Society, receive no remuneration from it.
- According to the information provided by the referring court, the Zoological Society employs about 350 to 400 persons, part-time or full-time, who are paid. They include a director general, a director of finance and a director of personnel. Those paid directors are not members of the council or of the management boards or committees, although they frequently attend meetings of the latter and are involved with the functions of the Zoological Society in all areas.
- The Zoological Society lodged a claim with the Commissioners of Customs and Excise for the refund of VAT paid by the society on admission charges to zoos for the period from 1 January 1990 to 31 May 1996, which the Commissioners rejected on the ground that the supplies carried out in that respect could not be regarded as services benefiting from exemption under the Value Added Tax (Cultural Services) Order 1996. The Commissioners contended in particular that the Zoological Society did not satisfy the criterion that, in order to benefit from the VAT exemption, the body requesting that advantage must be managed and administered on an essentially voluntary basis, since some of the society’s paid employees were involved in its management and administration.
- On an action brought by the Zoological Society, the VAT and Duties Tribunal, London (United Kingdom), held at first instance that the society was managed and administered by its three officers and the 18 other members of the council. It also held that, provided that those officers and general members did in fact exercise their powers and fulfil their responsibilities under the charter, the conditions for exemption were satisfied. Thus, taking into account the information at its disposal and having regard in particular to the frequent and extensive control exercised by the council, the VAT and Duties Tribunal allowed the action before it.
How are the words ”managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned” in the second indent to Article 13A(2)(a) of Council Directive 77/388/EEC of 17 May 1977 to be interpreted, having regard to the facts of the present case? In particular:
(a) what are the criteria for determining by whom a body is managed and administered for the purposes of the provision; do these words refer
– only to the members of the senior controlling organs of the body, or
– to any individuals involved in any managerial or administrative function whatsoever? If so, what are the criteria for determining whether a person is involved in a relevant managerial or administrative function?
(b) what are the criteria for determining whether management and administration of a body is conducted on an essentially voluntary basis; do these words refer
– to the extent to which the management and administration of the body is conducted by remunerated and unremunerated persons respectively, and if so, how is the test to be applied; or
– to the individual financial basis upon which each of the persons conducting the management and administration of the body performs that role (for example, none of those persons must receive more than nominal remuneration); or
– to some other test or criterion, and if so, what is that test or criterion?
- In the second indent of Article 13(A)(2)(a) of the Sixth VAT Directive, the concept of management and administration is to be interpreted as referring to the taking of policy decisions such as determine the results of the activities of the body in question, including the exertion of a significant influence on those decisions but excluding day-to-day operational management and administration or the taking of decisions which merely implement policy laid down at a higher level.
- The requirement in the same indent that management and administration be conducted on an essentially voluntary basis is to be interpreted as meaning that substantially all the management and administration, thus defined, of the body in question must be conducted by unremunerated persons. However, the fact that paid staff intervene in such activities occasionally or in a peripheral manner, or that nominal or token payments are made to the persons responsible for management and administration, is not contrary to that requirement.
1. On a proper construction of the second indent of Article 13A(2)(a) 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 condition requiring a body to be managed and administered on an essentially voluntary basis refers only to members of that body who are designated in accordance with its constitution to direct it at the highest level, as well as other persons who, without being designated by the constitution, do in fact direct it in that they take the decisions of last resort concerning the policy of that body, especially in the financial area, and carry out the higher supervisory tasks.
2. On a proper construction of the second indent of Article 13A(2)(a) of the Sixth Directive 77/388, the words ”on an essentially voluntary basis” refer to the members who compose the organs entrusted with the management and administration of a body of the kind referred to in that provision and those persons who, without being designated by the constitution, do in fact direct it, and refer also to the reward which the latter may receive, habitually or exceptionally, from that body.
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