On January 18, 2017 the Court of Justice of the European Union (CJEU) judged in Case C-471/15, Sjelle Autogenbrug I/S versus Skatteministeriet (ECLI:EU:C:2017:20).
This request for a preliminary ruling concerns the interpretation of Article 311(1)(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax.
The request has been made in proceedings between Sjelle Autogenbrug I/S and Skatteministeriet (Ministry of Taxation, Denmark), concerning the applicability of the scheme for taxing the profit margin to the sale of parts from end-of-life vehicles intended to be sold as spare parts.
The dispute in the main proceedings and the question referred for a preliminary ruling
· Sjelle Autogenbrug is a vehicle reuse undertaking whose principal activity is trading in used motor vehicle parts from end-of-life vehicles.
· Sjelle Autogenbrug’s engages, inter alia, in the environmental and waste treatment of end-of-life vehicles, a prerequisite for being entitled to remove the spare parts. Lastly, sale of scrap metal (scrap), which remains following the treatment and removal of the motor vehicle parts, forms a lesser part of the undertaking’s overall turnover.
· Sjelle Autogenbrug purchases end-of-life vehicles from private individuals and insurance companies. Neither the individuals nor the insurance companies declare VAT on the sales made. The referring court stated, in its decision, that the question it refers to the Court relates only to the characterisation of the used parts from vehicles Sjelle Autogenbrug purchased from private individuals.
· When end-of-life vehicles are scrapped, this gives the entitlement to a scrappage payment, paid by the Environment Ministry to the vehicle owner most recently registered in the national vehicle register. The aim of the scheme is to give owners an incentive to ensure that the vehicle is scrapped in an environmentally sound manner. As from 2014, vehicle owners themselves, and no longer Sjelle Autogenbrug, have had to ensure that they receive payment of the allowance.
· The referring court states that there is no information on the composition of the purchase price of the vehicles and, in particular, on how the value of the motor vehicle parts, the scrap metal and the scrappage payment provided for in respect of the environmental and waste treatment of vehicle waste is determined and included in the selling price.
· The referring court points out that Sjelle Autogenbrug declares VAT in accordance with the general rules. On 15 July 2010, it requested a binding decision from the Danish tax authorities on whether the VAT arrangements for second-hand goods set out in Chapter 17 of the Law on VAT could be applied in relation to its business of reselling used motor vehicle parts.
· According to the binding decision the authorities issued to it on 6 August 2010, Sjelle Autogenbrug is not eligible for the tax arrangements relating to the profit margin of the sales of second-hand goods, on the ground that the motor vehicle parts at issue do not fall within the concept of ‘second-hand goods’ within the meaning of the legislation applicable.
· The Landsskatteretten (National Tax Tribunal, Denmark) upheld that decision by a judgment of 12 December 2011. The applicant in the main proceedings lodged an appeal against that decision in the referring court.
· In those circumstances the Vestre Landsret (Western Regional Court, Denmark) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘In the circumstances of the present case, can parts from end-of-life vehicles which a VAT-registered vehicle reuse undertaking removes from a vehicle with a view to resale as spare parts be regarded as second-hand goods as referred to in Article 311(1)(1) of [Directive 2006/112]?’
Judgment
The CJEU judged as follows:
Article 311(1)(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that used parts, from end-of-life motor vehicles purchased by a vehicle reuse undertaking from a private individual, intended to be sold as spare parts, constitute ‘second-hand goods’ within the meaning of that provision, with the result that the supplies of such parts, effected by a taxable dealer, are subject to the application of the profit margin scheme.
From the considerations of the Court
· By its question, the referring court asks, in essence, whether Article 311(1)(1) of Directive 2006/112 must be interpreted as meaning that used parts, from end-of-life motor vehicles purchased by a vehicle reuse undertaking from a private individual, intended to be sold as spare parts, constitute ‘second-hand goods’ within the meaning of that provision, with the result that the supplies of such parts, effected by a taxable dealer, are subject to the application of the profit margin scheme.
· In that regard, it should be borne in mind that, in determining the scope of a provision of EU law, its wording, objective and context must all be taken into account (judgment of 3 March 2011, Auto Nikolovi, C‑203/10, EU:C:2011:118, paragraph 41 and the case-law cited).
· In that regard, as set out in Article 311(1)(1) of Directive 2006/112, ‘movable tangible property that is suitable for further use as it is or after repair’ constitutes ‘second-hand goods’.
· It must be found that it is not apparent from that provision that the concept of ‘second-hand goods’, within the meaning thereof, excludes movable tangible property that is suitable for further use as it is or after repair, coming from other property in which it was incorporated as a component. The fact that used property which forms part of other property is separated from the latter does not call into question the characterisation of the property removed as ‘second-hand goods’, to the extent that it may be reused ‘as it is or after repair’.
· In addition, in order to be characterised as ‘second-hand goods’, it is only necessary that the used property has maintained the functionalities it possessed when new, and that it may, therefore, be reused as it is or after repair.
· That is the case of motor vehicle parts removed from an end-of-life motor vehicle, in so far as, even if separated from that vehicle, they maintain the functionalities they possessed when new and may, therefore, be reused for the same purposes.
· That interpretation is, moreover, consistent with the fundamental principle laid down in recital 5 of Directive 2000/53 that motor vehicle waste, which includes, inter alia, the components and materials of end-of-life vehicles, should be reused and recovered.
· The Danish Government’s argument that the characterisation as ‘second-hand goods’, within the meaning of Article 311(1)(1) of Directive 2006/112, presupposes that the property purchased retains its identity as the property sold, which would not be the case where a complete motor vehicle is purchased and the parts removed from that vehicle are resold, cannot call such an interpretation into question. The Danish Government contends that the parts removed from a used vehicle were produced when the waste from the vehicle was treated. They did not, therefore, retain their identity between the time when they were purchased by the undertaking as parts of an end-of-life vehicle and when they were sold as spare parts.
· It must, however, be noted that a motor vehicle is composed of a set of parts which have been assembled and may be removed and resold, as they are or after repair.
· In those circumstances, the parts from end-of-life motor vehicles must be regarded as constituting ‘second-hand goods’ within the meaning of Article 311(1)(1) of Directive 2006/112, with the result that the supplies of such parts, effected by taxable dealers, are subject to the application of the profit margin scheme, in accordance with Article 313(1) of that directive.
· In that regard, as for the profit margin scheme, it is to be noted that, in the words of the second paragraph of Article 315 of Directive 2006/112, the profit margin of the taxable dealer is to be equal to the difference between the selling price charged by him for the goods and the purchase price.
· The failure to apply those arrangements to spare parts, taken from end‑of-life vehicles purchased from private individuals, would be contrary to the objective of the special margin scheme which seeks, as is apparent from recital 51 of Directive 2006/12, to avoid double taxation and distortions of competition between taxable persons in the area of second-hand goods (see, to that effect, judgments of 1 April 2004, Stenholmen, C‑320/02, EU:C:2004:213, paragraph 25; of 8 December 2005, Jyske Finans, C‑280/04, EU:C:2005:753, paragraph 37; and of 3 March 2011, Auto Nikolovi, C‑203/10, EU:C:2011:118, paragraph 47).
· Making transactions for the supply of such spare parts effected by a taxable dealer subject to VAT would lead to double taxation, in so far as, first, the sale price of those parts necessarily already takes account of input VAT paid at the time of the vehicle’s purchase by a person falling within Article 314(a) of Directive 2006/112 and, secondly, neither that person nor the taxable dealer was able to deduct that amount (see judgment of 3 March 2011, Auto Nikolovi, C‑203/10, EU:C:2011:118, paragraph 48 and the case-law cited).
· Admittedly, the Danish and Greek Governments refer to possible difficulties in determining, in accordance with Article 315 of Directive 2006/112, the taxable amount of the profit margin and, in particular, the purchase price of each of the parts removed.
· However, any practical difficulties in applying the profit margin scheme cannot justify excluding certain categories of taxable dealers from that scheme, since the possibility of such an exclusion is provided for in neither Article 313 nor any other provision of Directive 2006/112.
· In addition, the taxable amount determined in accordance with the profit margin scheme must be on the basis of accounts from which it may be ascertained that all the conditions for applying that scheme have been fulfilled.
· Furthermore, it must be borne in mind that, in order to simplify the procedure for collecting the tax and after consulting the VAT Committee, Member States may provide that, for certain transactions or for certain categories of taxable dealers, the taxable amount in respect of supplies of goods subject to the margin scheme and to which the same rate of VAT is applied, will be the total profit margin made, as defined in Article 318 of Directive 2006/112.
· In the light of all the foregoing considerations, the answer which must be given to the referring court is that Article 311(1)(1) of Directive 2006/112 must be interpreted as meaning that used parts, from end-of-life motor vehicles purchased by a vehicle reuse undertaking from a private individual, intended to be sold as spare parts, constitute ‘second-hand goods’ within the meaning of that provision, with the result that the supplies of such parts, effected by a taxable dealer, are subject to the application of the profit margin scheme.
For further information click here to be forwarded to the text of the judgment as published on the website of the CJEU, which will open in a new window.
Click here to be forwarded to the Opinion of Advocate General Bott as delivered on September 22, 2016.
Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).
Copyright – internationaltaxplaza.info
Follow International Tax Plaza on Twitter (@IntTaxPlaza)
and
Follow International Tax Plaza on Facebook
