Interpretation methods of the CJEU and the meaning of the principle of fiscal neutrality: a commentary on the Case C-366/12 Klinikum Dortmund

Abstract

The CJEU constitutes the essential institution in interpreting the European VAT Directive. Recently, in the Case C-366/12 Klinikum Dortmund, the Court had to decide on how to interpret the VAT exemptions of hospital and medical care and closely related activities due to Article 132 (1) (b) as well as the provision of medical care in the exercise of the medical and paramedical professions based on Article 132 (1) (c) of the VAT Directive. The present paper focuses on the literal and the purposive interpretation method applied by the Court and, based on a case-law study, finds that the literal method does not necessarily lead to a restriction and, in the same manner, that the purposive approach does not automatically implies an extension of VAT exemptions. As one argument of the plaintiff concerned the principle of fiscal neutrality, which represents the general principle of equal treatment in the VAT Directive, this principle is, again, investigated on a case-law basis, which will disclose the limited impact of the principle of fiscal neutrality and, what is more, will lead to the conclusion that the relation between the EU Treaty and the VAT Directive is not free of discrepancies.

Notes

1 See for disadvantages of VAT exemptions: B Terra, VAT—The Case of Value Added Tax in the European Union (Series on International Indirect Tax—University of Lund, vol 5, 2014), 46–47.

2 Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, OJ L 347/1, 11/12/2006 (Council Directive 2006/112/EC).

3 See e.g. Case C-453/93 Bulthuis-Griffioen [1995] ECR I-2352, para 19; Case C-346/95 Blasi [1998] ECR-I 491, para 18; and Case C-240/99 Skandia [2001] ECR I-1964, para 32.

4 F Schulyok, “The ECJ'S Interpretation of VAT Exemptions”, (2010) July/August International VAT Monitor , 266.

5 Case C-366/12 Klinikum Dortmund [2014] ECR I-0000, para 18.

6 Ibid, Opinion of AG Sharpston, para 13.

7 Ibid, para 13 and 14;

8 See n 5, para 20.

9 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 L 145, 13/06/1977, 1 (Council Directive 77/388/EEC, or Sixth Directive).

10 See n 5, para 19 and 20.

11 See n 5, para 19.

12 See n 5, para 20.

13 See n 5, para 24.

14 See n 6, para 24.

15 See n 5, para 32; and n 6, para 33, 34 and 36.

16 See n 5, para 32.

17 See n 5, para 41.

18 Ibid.

19 Case 51/76 Verbond van Nederlandse Ondernemingen (VNO) [1977] ECR I-114, para 10 and 11.

20 C Amand, “The Limits of the EU VAT Exemption for Financial Services”, (2009) July/August International VAT Monitor , 263–265.

21 C Gulmann, Methods of Interpretation of the European Court of Justice (Stockholm Institute for Scandinavian Law, vol 24, 1980), 198.

22 G Itzcovich, “The Interpretation of Community Law by the European Court of Justice”, (2009) 10 (5) German law Journal , 537–550.

23 Case C-348/87 Stichting Uitvoering Financiële Acties [1989] ECR I-1749, para 13.

24 Case C-267/00 Zoological Society of London [2002] ECR I-3366, Opinion of AG Jacobs, para 18 and 19.

25 See n 5, para 32.

26 See n 21, p 194.

27 Case C-283/81 Cilfit [1982] ECR I-3415, para 20.

28 Case C-253/07 Canterbury Hockey [2008] ECR I-0000, para 41.

29 Ibid, para 31.

30 Case C-582/08 Commission v United Kingdom [2010] ECR I-07195, Opinion of AG Niilo Jääskinen, para 28.

31 Case C-45/01 Dornier [2003] ECR I-12911, para 42.

32 B Terra and J Kajus, A Guide to the European VAT Directives—Introduction to European VAT, vol 1 (IBFD, 2013), 245.

33 Case C-338/95 Wiener [1997] ECR I-6495, Opinion of AG Jacobs, para 65.

34 Case C-453/93 Bulthuis-Griffioen [1995] ECR I-2341, para 24. By that judgment the ECJ declared that a natural person cannot benefit from the VAT exemption due to Art 132(1)(g) of the VAT Directive.

35 Case C-216/97 Gregg & Gregg [1999] ECR I-4947, para 21. By that judgment the ECJ declared that a natural person can benefit from the VAT exemption due to Art 132(1)(b) and (g) of the VAT Directive.

36 See n 22, p 550.

37 See n 21, p 203.

38 See n 4, p 268.

39 See n 30, para 26.

40 See n 35.

41 See n 5, paras 38 and 39.

42 See, for the purpose of who qualifies for Art 132(1)(b) of the VAT Directive, S Chirichigno and V Segre, “Hospital and Medical Care by Commercial Hospitals under EU VAT”, (2014) March/April International VAT Monitor 78–79.

43 See n 28, para 35.

44 Ibid, para 41.

45 See n 24, para 19.

46 See n 5, para 40.

47 Ibid.

48 Case C-174/08 NCC Construction Danmark A/S [2009] ECR I-10567, para 41.

49 Case C-384/01 Commission v France [2003] ECR I-4395, para 25.

50 Case C-94/09 Commission v France [2010] ECR I-4261, para 40.

51 Ibid, para 41.

52 Case C-155/94 Wellcome Trust [1996] ECR I-3013, para 38.

53 Case C-481/98 Commission v France [2001] ECR I-3369, para 22.

54 Ibid.

55 Case C-309/06 Marks & Spencer [2008] ECR I-2283, Opinion of AG Kokott, para 57.

56 Ibid, para 59.

57 Joined Cases C-259/10 and C-260/10 The Rank Group [2011] ECR I-10947, para 75.

58 See n 6, para 21.

59 Ibid, para 53.

60 Ibid, para 53.

61 See n 5, para 40.

62 Case C-36/99, Idéal Tourisme [2000] ECR I-6049, para 16; and Case C-127/07 Société Arcelor Atlantique et Lorraine [2008] ECR I-9895, para 23.

63 H Kogels, “Making VAT as Neutral as Possible”, (2012) 21 (5) EC Tax Review, 230.

64 Committee on Fiscal Affairs Working Party No 9 on Consumption Taxes, “OECD International VAT/GST Guidelines—Guideline on Neutrality” (approved by the Committee on Fiscal Affairs on 28 June 2011), 4.

65 See n 48, para 41.

66 Case C-549/11, Orfey Balgaria [2012] ECR I-0000, para 33; and see n 48: NCC Construction Danmark, para 44.

67 See n 5: Klinikum Dortmund, para 40; Case C-174/11 Zimmerman [2012] ECR I-0000, paras 49–50; and Case C-44/11 Deutsche Bank [2012] ECR I-0000, para 45.

68 See n 59.

69 See n 67: Deutsche Bank, Opinion of AG Sharpston, para 60.

70 C Amand, “VAT Neutrality: a Principle of EU Law or a Principle of the VAT System?”, (2013) 2 (3) World Journal of VAT/GST Law 163–167.

71 Ibid, 168 and 169.

72 Ibid, 170.

73 Ibid, see further “inconsistencies” in the article.

74 See n 62: Idéal Tourisme, para 40.

75 Ibid, para 37.

76 Ibid, para 38.

77 R de la Feria, “VAT and the EC Internal Market: The Shortcomings of Harmonisation”, Oxford University Centre for Business Taxation, WP 09/29, 2009, 15.

78 See n 70, p 173: Christian Amand refers to Debates of the European Parliament, Report of the sessions from 18–22 April 1977, OJ 216, Enclosures, 180.

79 See n 70, p 173.

80 See n 62: Idéal Tourisme, para 39.

81 A Cordewener and E Reimer, “The Future of Most-Favoured-Nation Treatment in EC Tax Law—Did the ECJ Pull the Emergency Brake without Real Need?—Part 1”, European Taxation (IBFD, 2006), 239–241, 243 and 244.

82 Article 3(1)(b) TFEU states the exclusive competence of the Union in the area of the internal market. Due to Art 113 TFEU, the Union shall harmonize turnover taxes (VAT) in order to ensure the establishment and the functioning of the internal market. Consequently the member states of the EU did solely confer their rights concerning the establishment of the internal market.

83 Case C-376/03 D [2005] ECR I-5821, paras 61 and 63.

84 See n 6, para 57.