Flashback on ECJ cases C-208/91 (Beaulande / Directeur des services fiscaux de Nantes) – VAT Directive allows for a stamp duty charged on the acquisition of building land

On , the ECJ issued its decision in the case C-208/91 (Beaulande / Directeur des services fiscaux de Nantes).

Context: Tax provisions — Harmonization of laws — Turnover taxes — Common system of VAT— Prohibition on levying other national taxes that can be characterized as turnover taxes — Objective — Concept of ‘turnover taxes’ — Scope — National taxation such as French stamp duty — Exclusion

Article in the EU VAT Directive

Article 33 of the Sixth VAT Directive (Article 401 of the EU VAT Directive 2006/112/EC).

Article 401 (Other taxes, duties and charges)

Without prejudice to other provisions of Community law, this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties or, more generally, any taxes, duties or charges which cannot be characterised as turnover taxes, provided that the collecting of those taxes, duties or charges does not give rise, in trade between Member States, to formalities connected with the crossing of frontiers.

Facts

By order of 7 May 1991, received at the Court on 2 August 1991, the Tribunal de Grande Instance, Nantes, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question concerning the interpretation of Article 33 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes ° Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter “the Sixth Directive”).
That question arose in proceedings between R. Beaulande and the Directeur des Services Fiscaux de Loire Atlantique (Director of the Tax Authorities of Loire Atlantique) relating to the charging of stamp duty on building land.
The documents before the Court show that Mr Beaulande purchased a house in Nantes on 16 January 1980, undertaking to demolish it and to erect a residential building within four years.
As the purchase took place under the system of VAT on real estate transactions in accordance with Article 257 of the French Code Général des Impôts (General Tax Code, hereinafter “the CGI”), Mr Beaulande paid the tax and was granted exemption from payment of stamp duty under Article 691 of the CGI. This article provides that purchases of undeveloped land or land covered by buildings that are to be demolished are exempt from stamp duty when they attract VAT, on condition in particular that the purchase deed contains an undertaking to erect a building within four years of the date of the deed and that the purchaser adduces proof that the work has been carried out at the end of that period.
Article 1840 G ter of the CGI lays down that if the purchaser fails to adduce the proof provided for in Article 691 he is required to pay, upon the first demand, the stamp duty from which he had been exempted and, in addition, a supplementary duty of 6%. However, under Article 291 of Annex II to the CGI, the VAT paid at the time of purchase and not yet deducted may be offset against the stamp duty payable.
As the building was not constructed within the prescribed period, Mr Beaulande received a demand from the tax authorities for the duty payable under Article 1840 G ter of the CGI.
Following the rejection of the objection which he had lodged with the tax authorities of Loire Atlantique, Mr Beaulande brought an action against those authorities before the Tribunal de Grande Instance, Nantes, on 14 September 1989. In support of his action for the annulment of the demand for payment, he argued in particular that the stamp duty claimed could be characterized as a turnover tax, so that its imposition alongside VAT in connection with the same conveyance was contrary to Article 33 of the Sixth Directive.

Questions

Is it not the case that stamp duties which are charged on the acquisition of building land in the event of a breach of the undertaking to build within the four-year period (or such longer period as is allowed) and which are proportional to the value of the property can be characterized as turnover taxes and hence, by virtue of Article 33 of the Sixth Council Directive of 17 May 1977, are incompatible with VAT charged at the time of acquisition?

AG Opinion

N/A

Decision

Article 33 of the Sixth Directive is to be interpreted as meaning that it does not preclude the introduction or maintenance of a national tax which has the characteristics of stamp duty charged on the acquisition of building land in them event of a breach of the undertaking to build within the four-year period provided for by national legislation.

Summary

Article 401 of the VAT Directive does not preclude the introduction or maintenance of a national tax with the characteristics of a registration fee, levied on the acquisition of building sites in the event of non-compliance with the obligation imposed by the applicable national legislation to to be built within four years.

Source