Flashback on ECJ Cases C-108/99 (Cantor Fitzgerald International) – Accepting a lease assignment for payment is taxable, not exempt

• The taxpayer, Cantor Fitzgerald International (“CFI”), was a UK business that did not initially hold any interest in the immovable property concerned. [vlex.co.uk]
• Prudential Assurance Co Ltd had granted Wako (International) Europe Ltd a 15-year underlease over premises in Finsbury Square, London. In 1993 Wako wished to dispose of that underlease. [vlex.co.uk]
• CFI took an assignment of the underlease from Wako, and in consideration for accepting the assignment Wako paid CFI GBP 1.5 million. [vlex.co.uk]
• The dispute concerned whether CFI’s acceptance of the assignment, in return for that payment, fell within the exemption for the“leasing or letting of immovable property” in Article 13B(b) 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. [eur-lex.europa.eu], [vlex.co.uk]
• A VAT Tribunal chairman ruled on 7 August 1997; on appeal the High Court (Mr Justice Moses, 29 June 1998) considered a reference necessary. The High Court of Justice (England & Wales), Queen’s Bench Division (Divisional Court) referred the matter to the Court under Article 177 of the EC Treaty (now Article 234 EC). The case was lodged on 30 March 1999. [vlex.co.uk], [infocuria…..europa.eu]

Question

The national court referred one question (close paraphrase): [eur-lex.europa.eu]

1. Does the exemption in Article 13B(b) of the Sixth Directive apply so as to exempt a supply of services made by a person who does not have any interest in immovable property, where that person agrees, in return for a payment of money by the existing lessee, to accept an assignment of a lease of that property?

Decision

The Court rules that Article 13B(b) of the Sixth Directive does not exempt a supply of services which is made by a person who does not have any interest in the immovable property and which consists in the acceptance, for consideration, of an assignment of a lease of that property from the lessee. Such a supply is therefore taxable. Because a single question was referred, no further question fell to be addressed. [eur-lex.europa.eu], [eur-lex.europa.eu]

Argumentation (Key Points)

• The letting of immovable property within Article 13B(b) essentially involves the landlord assigning to the tenant, in return for rent and for an agreed period, the right to occupy the property and to exclude other persons from it (para 21). [eur-lex.europa.eu]
• Article 13B(b) applies to the grant of leases by the landlord, but not to transactions which are merely based on the leases, or ancillary to them, and which are not effected by the landlord itself (para 24). [eur-lex.europa.eu]
• CFI had no interest in the property; its acceptance of the assignment for consideration was not a letting, so it could not benefit from the exemption and constituted a taxable supply of services (para 34). [eur-lex.europa.eu]
• As an exemption, Article 13B(b) is strictly construed and its terms are autonomous concepts of Community law. The Court distinguished Lubbock Fine (surrender of a lease by a tenant to the landlord relating to the very interest granted), noting CFI’s situation is materially different because it held no interest to surrender. [eur-lex.europa.eu]
• The judgment was delivered the same day as the companion case Mirror Group (C-409/98) on the same provision. [eur-lex.europa.eu]

Source

• Judgment C-108/99 (EUR-Lex): eur-lex.europa.eu [eur-lex.europa.eu]
• Case file / InfoCuria: curia.europa.eu [infocuria…..europa.eu]
• Joined Opinion of AG Tizzano (23 January 2001): eur-lex.europa.eu [eur-lex.europa.eu]
• Sixth Directive 77/388/EEC: eur-lex.europa.eu — successor Article 135(1)(l) of Directive 2006/112/EC

Similar ECJ Cases

• C-63/92 Lubbock Fine – surrender of a lease by the tenant to the landlord falls within the letting exemption (distinguished here). [eur-lex.europa.eu]
• C-409/98 Mirror Group – companion case; a payment to a future tenant to become a tenant is not exempt letting. [eur-lex.europa.eu]
• C-150/99 Stockholm Lindöpark – meaning and scope of the letting exemption.
• C-326/99 “Goed Wonen” – scope of the immovable-property exemption.
• C-173/88 Henriksen – letting exemption and ancillary transactions.
• C-284/03 Temco Europe – autonomous definition of “letting of immovable property.”

Reference to the Case in the Other EU Member States

The ruling has been widely and consistently cited in subsequent EU case-law delimiting the letting exemption (notably alongside Mirror Group and in later cases such as Temco Europe), confirming that only the landlord’s grant of occupation rights is exempt and that transactions merely based on or ancillary to a lease, effected by a party without an interest in the property, are taxable. No dedicated national-court reference beyond this line of ECJ case-law was identified in public sources. [eu.vlex.com]