(Reference for a preliminary ruling from the Regeringsrätten (Sweden))

(Sixth VAT Directive – Article 26a – Special arrangements applicable to second-hand goods – The term ‘second-hand goods’ – Horse sold on after training)

Summary of the Judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Special arrangements for second-hand goods – ‘Second-hand goods’ – Live animals – Included – Horse bought from a private individual and sold on after training

(Council Directive 77/388, Art. 26a)

Article 26a of Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, which provides for special arrangements applicable to second-hand goods, which are defined as tangible movable property that is suitable for further use as it is or after repair, must be interpreted as meaning that live animals may be considered to be second-hand goods within the meaning of that provision.

Thus an animal bought from a private individual (other than the breeder) which is sold on after training for a specific use may be considered to be second-hand goods within the meaning of that provision. It is of little import that the increase in value of such an animal does not arise from a ‘repair’ in the strict meaning of the term, but from, for example, a biological process or the training of the animal. Furthermore, since the common system of value added tax aims in principle to tax the economic value added at different stages in the production and distribution process, until the phase of final use, by taxable persons acting as such, within the meaning of the Sixth Directive, it would run contrary to that system to tax the entire sale price asked by the taxable dealer instead of only the economic value added when the animal was in his possession.

(see paras 26-27, 29, operative part 1-2)

JUDGMENT OF THE COURT (Fifth Chamber) 1 April 2004 (1)

(Sixth VAT Directive – Article 26a – Special arrangements applicable to second-hand goods – The term ‘second-hand goods’ – Horse sold on after training)

In Case C-320/02,

REFERENCE to the Court under Article 234 EC by the Regeringsrätten (Sweden) for a preliminary ruling in the proceedings pending before that court between

Riksskatteverket,

on the interpretation of Article 26a of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation 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), as amended by Council Directive 94/5/EC of 14 February 1994 (OJ 1994 L 60, p. 16),

THE COURT (Fifth Chamber),

composed of: P. Jann, acting as President of the Fifth Chamber, A. Rosas (Rapporteur) and S. von Bahr, Judges,

Advocate General: C. Stix-Hackl, Registrar: R. Grass,

after considering the written observations submitted on behalf of:

– Förvaltnings AB Stenholmen, by M. Ljungqvist, Verkställande direktör,

– Riksskatteverket, by L. Hamberg, acting as Agent,

– Commission of the European Communities, by E. Traversa and L. Parpala, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 10 July 2003,

gives the following

1 This request for a preliminary ruling concerns the interpretation of Directive 2011/92/EU of the European Parliament and of the Council of 13 December 2011 on the assessment of the effects of certain public and private projects on the environment (OJ 2012 L 26, p. 1), as amended by Directive 2014/52/EU of the European Parliament and of the Council of 16 April 2014 (OJ 2014 L 124, p. 1) (‘Directive 2011/92’).

2 The request has been made in proceedings between, on the one hand, Waltham Abbey Residents Association and, on the other hand, An Bord Pleanála (Planning Board, Ireland; ‘the Board’), Ireland and the Attorney General (Ireland), concerning authorisation granted by the Board for a strategic residential housing development.

Legal context

European Union law

Directive 2011/92

Recitals 7 to 9 of Directive 2011/92 state:

‘(7) Development consent for public and private projects which are likely to have significant effects on the environment should be granted only after an assessment of the likely significant environmental effects of those projects has been carried out. …

(8) Projects belonging to certain types have significant effects on the environment and those projects should, as a rule, be subject to a systematic assessment.

(9) Projects of other types may not have significant effects on the environment in every case and those projects should be assessed where the Member States consider that they are likely to have significant effects on the environment.’

4 Article 2(1) of that directive provides:

‘Member States shall adopt all measures necessary to ensure that, before development consent is given, projects likely to have significant effects on the environment by virtue, inter alia, of their nature, size or location are made subject to a requirement for development consent and an assessment with regard to their effects on the environment. Those projects are defined in Article 4.’

5 Under Article 3(1) of that directive:

‘The environmental impact assessment shall identify, describe and assess in an appropriate manner, in the light of each individual case, the direct and indirect significant effects of a project on the following factors:

…

(b) biodiversity, with particular attention to species and habitats protected under [Council Directive 92/43/EEC of 21 May 1992 on the conservation of natural habitats and of wild fauna and flora (OJ 1992 L 206, p. 7), as amended by Council Directive 2013/17/EU of 13 May 2013 (OJ 2013 L 158, p. 193) (“Directive 92/43”)] and Directive 2009/147/EC [of the European Parliament and of the Council of 30 November 2009 on the conservation of wild birds (OJ 2010 L 20, p. 7)];

…’

Article 4 of Directive 2011/92 provides:

‘1. Subject to Article 2(4), projects listed in Annex I shall be made subject to an assessment in accordance with Articles 5 to 10.

(a) a case-by-case examination;

(b) thresholds or criteria set by the Member State.

Member States may decide to apply both procedures referred to in points (a) and (b).

Where a case-by-case examination is carried out or thresholds or criteria are set for the purpose of paragraph 2, the relevant selection criteria set out in Annex III shall be taken into account. Member States may set thresholds or criteria to determine when projects need not undergo either the determination under paragraphs 4 and 5 or an environmental impact assessment, and/or thresholds or criteria to determine when projects shall in any case be made subject to an environmental impact assessment without undergoing a determination set out under paragraphs 4 and 5.

Where Member States decide to require a determination for projects listed in Annex II, the developer shall provide information on the characteristics of the project and its likely significant effects on the environment. The detailed list of information to be provided is specified in Annex IIA. The developer shall take into account, where relevant, the available results of other relevant assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The developer may also provide a description of any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

The competent authority shall make its determination, on the basis of the information provided by the developer in accordance with paragraph 4 taking into account, where relevant, the results of preliminary verifications or assessments of the effects on the environment carried out pursuant to Union legislation other than this Directive. The determination shall made available to the public and:

(a) where it is decided that an environmental impact assessment is required, state the main reasons for requiring such assessment with reference to the relevant criteria listed in Annex III; or

(b) where it is decided that an environmental impact assessment is not required, state the main reasons for not requiring such assessment with reference to the relevant criteria listed in Annex III, and, where proposed by the developer, state any features of the project and/or measures envisaged to avoid or prevent what might otherwise have been significant adverse effects on the environment.

Member States shall ensure that the competent authority makes its determination as soon as possible and within a period of time not exceeding 90 days from the date on which the developer has submitted all the information required pursuant to paragraph 4. In exceptional cases, for instance relating to the nature, complexity, location or size of the project, the competent authority may extend that deadline to make its determination; in that event, the competent authority shall inform the developer in writing of the reasons justifying the extension and of the date when its determination is expected.’

Annex II.A of that directive contains the list of ‘information to be provided by the developer on the projects listed in Annex II’. That list reads as follows:

‘1. A description of the project, including in particular:

(a) a description of the physical characteristics of the whole project and, where relevant, of demolition works;

(b) a description of the location of the project, with particular regard to the environmental sensitivity of geographical areas likely to be affected.

(a) the expected residues and emissions and the production of waste, where relevant;

(b) the use of natural resources, in particular soil, land, water and biodiversity.

Annex III to that directive sets out the ‘criteria to determine whether the projects listed in Annex II should be subject to an environmental impact assessment’.

Directive 2014/52

Recitals 11 and 29 of Directive 2014/52 state:

‘(11) The measures taken to avoid, prevent, reduce and, if possible, offset significant adverse effects on the environment, in particular on species and habitats protected under [Directive 92/43] and Directive 2009/147 …, should contribute to avoiding any deterioration in the quality of the environment and any net loss of biodiversity, in accordance with the [European] Union’s commitments in the context of the [United Nations Convention on Biological Diversity, signed in Rio de Janeiro on 5 June 1992,] and the objectives and actions of the Union Biodiversity Strategy up to 2020 laid down in the [Communication from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions] of 3 May 2011 entitled ‘Our life insurance, our natural capital: an EU biodiversity strategy to 2020’ [(COM(2011) 244 final)]

…

(29) When determining whether significant effects on the environment are likely to be caused by a project, the competent authorities should identify the most relevant criteria to be considered and should take into account information that could be available following other assessments required by Union legislation in order to apply the screening procedure effectively and transparently. In this regard, it is appropriate to specify the content of the screening determination, in particular where no environmental impact assessment is required. Moreover, taking into account unsolicited comments that might have been received from other sources, such as members of the public or public authorities, even though no formal consultation is required at the screening stage, constitutes good administrative practice.’

Directive 92/43

Article 6(3) of Directive 92/43 provides:

‘Any plan or project not directly connected with or necessary to the management of the site but likely to have a significant effect thereon, either individually or in combination with other plans or projects, shall be subject to appropriate assessment of its implications for the site in view of the site’s conservation objectives. In the light of the conclusions of the assessment of the implications for the site and subject to the provisions of paragraph 4, the competent national authorities shall agree to the plan or project only after having ascertained that it will not adversely affect the integrity of the site concerned and, if appropriate, after having obtained the opinion of the general public.’

Article 12(1) of that directive provides:

‘Member States shall take the requisite measures to establish a system of strict protection for the animal species listed in Annex IV(a) in their natural range, prohibiting:

(a) all forms of deliberate capture or killing of specimens of these species in the wild;

(b) deliberate disturbance of these species, particularly during the period of breeding, rearing, hibernation and migration;

(c) deliberate destruction or taking of eggs from the wild;

(d) deterioration or destruction of breeding sites or resting places.’

Point (a) of Annex IV to that directive mentions ‘all species’ of bats belonging to the suborder of ‘microchiroptera’.

Irish law

In the light of the above observations and since the animals in the present case have, moreover, been endowed with skills as riding horses, which they did not have previously, or at least when Stenholmen acquired them, or did not have to the same extent as when they were sold on, the Skatterättsnämnden finds that the sale of horses cannot be classified as sales of second-hand goods.

Stenholmen appealed to the Regeringsrätten against that preliminary opinion. The Riksskatteverket contends that the Regeringsrätten should uphold the contested preliminary opinion.

In the view of the Regeringsrätten, in its order for reference, animals and other living organisms are goods within the meaning of the Community legislation on value added tax. It is not certain, however, that living animals can be regarded as second-hand goods under that legislation.

Considering it necessary to obtain an interpretation of Community law on this point, the Regeringsrätten decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

If that question is answered in the affirmative, the Court is asked to answer the following question.

The questions referred to the Court

It is appropriate to consider the questions together.

Observations submitted to the Court

All the parties accept that animals are goods within the meaning of the Sixth Directive.

With regard to the first question, Stenholmen and the Commission consider that an animal may be regarded as second-hand goods in accordance with Article 26a of the Sixth Directive, even when it was bought from a private individual (other than the breeder) and sold on after having been trained for a specific use.

They draw attention to the aim of the special arrangements applicable to second-hand goods, which is to avoid cumulative taxation and note that to exclude animals from the scope of application of those arrangements would undermine them. Stenholmen states that traders dealing in animals would be disadvantaged in comparison to other categories of traders dealing in other second-hand goods.

With regard to the second question, Stenholmen and the Commission consider that the status of second-hand goods depends solely on the criteria set out in Article 26aB of the Sixth Directive, that is to say essentially the fact that input VAT cannot be deducted. The seller’s status or the future use of the animal should not be taken into consideration.

The Rikskatteverket relies on the same arguments, in essence, as those put forward by the Skatterättsnämnden in the reasons for its preliminary opinion. It maintains that the essential part of the value of a future transfer of a horse sold on after having been trained for a specific use arises from the training process and that it would be economically unfair and contrary to the intention of the legislature to tax only the economic value created during the final phase of the economic cycle if the horse was bought from a private individual or non-taxable person.

The Court’s response

Firstly, as stated in Case 10/87 (Tattersalls [1988] ECR 3281), animals are tangible property within the meaning of Article 5 of the Sixth Directive.

Furthermore, it should be noted that nothing in Article 26a of the Sixth Directive indicates that the special arrangements applicable to the supply of second-hand goods do not apply to the supply of animals such as horses.

On the contrary, as Advocate General Stix-Hackl noted at point 34 of her Opinion, to exclude those supplies from the special arrangements applicable to second-hand goods would be contrary to the express intention of the legislature to avoid double taxation, as set out in the third and fifth recitals to Directive 94/5. To tax the supply by a taxable dealer of an animal such as a horse, bought from a private individual and sold on after training, on the basis of its total price would theoretically amount to double taxation since, however large that part of the price attributable to the training, part of the price would continue to represent the purchase price, including, in almost all cases, a sum paid in respect of input VAT by the private individual, which neither he nor the taxable dealer could deduct.

Therefore the restrictive interpretation put forward by the Riksskatteverket of the term ‘as it is or after repair’ in the definition of second-hand goods found in Article 26aA of the Sixth Directive cannot be accepted. In this context it is of little import that the increase in value of the animal in question does not arise from a ‘repair’ in the strict meaning of the term, but from, for example, a biological process or the training of the animal.

Furthermore, it should be noted that the common system of VAT aims in principle to tax the economic value added at different stages in the production and distribution process, until the phase of final use, by taxable persons acting as such, within the meaning of the Sixth Directive. It is clear that in a situation such as that at issue in the main proceedings, it would run contrary to this system to tax the entire sale price asked by the taxable dealer instead of only the economic value added when the animal was in his possession.

Accordingly, contrary to the argument of the Riksskatteverket, it is neither economically unfair nor contrary to the intention of the Community legislature to tax only the economic value added at this final phase of the economic cycle.

It follows from all the foregoing considerations that the answer to the national court’s questions must therefore be:

– Article 26a of the Sixth Directive must be interpreted as meaning that live animals may be considered to be second-hand goods within the meaning of that provision.

– Thus an animal bought from a private individual (other than the breeder) which is sold on after training for a specific use may be considered to be second-hand goods.

Costs

The costs incurred by the Commission, which has submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

in answer to the questions referred to it by the Regeringsrätten by order of 10 September 2002, hereby rules:

Article 26a 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, as amended by Council Directive 94/5/EC of 14 February 1994, must be interpreted as meaning that live animals may be considered to be second-hand goods within the meaning of this provision.

Thus an animal bought from a private individual (other than the breeder) which is sold on after training for a specific use may be considered to be second-hand goods.

Delivered in open court in Luxembourg on 1 April 2004.

Registrar

President

Language of the case: Swedish.