Flashback on ECJ cases C-94/09 (Commission v France) – Application of a reduced rate to transport by car of deceased persons

On May 16, 2010, the ECJ issued its decision in the case C-94/09 (Commission v France).

Context: Failure of a Member State to fulfil obligations – VAT – Directive 2006/112/EC – Article 98(1) and (2) – Supply of services by undertakers – Application of a reduced rate to the service involving transportation of a body by vehicle.

By its application, the Commission of the European Communities seeks a declaration from the Court that, by failing to apply a single rate of value added tax (‘VAT’) generally to the supply of services by undertakers, and to the related supplies of goods, the French Republic has failed to fulfil its obligations under Articles 96 to 99(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

Article in the EU VAT Directive

Article 96, 98(1) and (2) of the EU VAT Directive 2006/112/EC.

Article 96
Member States shall apply a standard rate of VAT, which shall be fixed by each Member State as a percentage of the taxable amount and which shall be the same for the supply of goods and for the supply of services.

Article 98
1. Member States may apply a maximum of two reduced rates.
The reduced rates shall be fixed as a percentage of the taxable amount, which shall not be less than 5 % and shall apply only to the supplies of goods and services listed in Annex III.
Member States may apply the reduced rates to supplies of goods or services covered in a maximum of 24 points in Annex III.
2. Member States may, in addition to the two reduced rates referred to in paragraph 1 of this Article, apply a reduced rate lower than the minimum of 5 % and an exemption with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in a maximum of seven points in Annex III.
The reduced rate lower than the minimum of 5 % and the exemption with deductibility of the VAT paid at the preceding stage may only be applied to supplies of goods or services covered in the following points of Annex III:
(a) points (1) to (6) and (10c);
(b) any other point of Annex III falling under the options provided for in Article 105a(1).
For the purposes of point (b) of the second subparagraph of this paragraph, the transactions regarding housing referred to in Article 105a(1), second subparagraph, shall be regarded as falling under Annex III, point (10).
Member States applying, on 1 January 2021, reduced rates lower than the minimum of 5 % or granting exemptions with deductibility of the VAT paid at the preceding stage to supplies of goods or services covered in more than seven points in Annex III, shall limit the application of those reduced rates or the granting of those exemptions to comply with the first subparagraph of this paragraph by 1 January 2032 or by the adoption of the definitive arrangements referred to in Article 402, whichever is the earlier. Member States shall be free to determine to which supplies of goods or services they will continue to apply those reduced rates or grant those exemptions.

Facts & Questions

By its action, the Commission claims that French tax legislation distorts the functioning of the VAT system to the extent that it applies two VAT rates to services and goods supplied by funeral directors to the families of deceased persons whereas they constitute, in practice, a single complex transaction which should be subject to a single rate of tax.
The applicant complains in particular about the unjustified splitting off by the defendant of the service involving the transportation of the body by a vehicle designed especially for that purpose, for which a reduced VAT rate is applicable, from the other services carried out by funeral directors, such as the use of persons to move the body or the supply of a coffin, which, for their part, are subject to the normal rate of VAT. According to settled case-law, a transaction which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system. In the circumstances, the vast majority of families requesting the undertaking to organise funerals would moreover consider the activities in question as forming the same single supply.
The Commission also contests the defendant’s choice to apply variable reduced rates to the services provided by funeral directors. Article 98(1) of the VAT Directive does not allow a reduced rate to be applied to certain transportation services and a normal rate to other services carried out by the undertakings in question, since that is bound to make the actual rate of tax lower than the normal rate applicable in France. In addition, the level of that reduced tax varies from transaction to transaction according to the relative extent, in each case, of the services provided at a reduced rate, which is also prohibited by the directive.

AG Opinion

None

Decision

Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. Since the French Republic has applied for costs to be awarded against the Commission and the latter has been unsuccessful, the Commission must be ordered to pay the costs.

On those grounds, the Court (First Chamber) hereby:

1. Dismisses the action;

2. Orders the European Commission to pay the costs.

Summary

Application of a reduced rate to corpse transport by car

The French legislation, according to which the transport of corpses by car is subject to a reduced VAT rate, fulfills the conditions laid down by the EU legislation in this regard.

Source