Action brought on 24 July 2020 – European Commission v Italian Republic
(Case C-341/20)
Language of the case: Italian
Parties
Applicant: European Commission (represented by: F. Moro, A. Armenia, Agents)
Defendant: Italian Republic
Form of order sought
The Commission accordingly requests the Court to declare that, in granting the benefit of the exemption from excise duty to fuels used by private pleasure craft only if those craft are subject to a charter agreement, regardless of the manner in which such craft are in fact used, the Italian Republic has failed to fulfil its obligations under Article 14(1)(c) of Directive 2003/96/EC. 1
The Commission also requests the Court to order the Italian Republic to pay the costs.
Pleas in law and main arguments
Article 14(1)(c) of Council Directive 2003/96/EC of 27 October 2003, restructuring the Community framework for the taxation of energy products and electricity, provides that Member States are required to apply an exemption for energy products supplied for use as fuel for the purposes of navigation within EU waters, including fishing, other than private pleasure craft. It is apparent from the definition of private pleasure craft in that provision that the exemption is reserved to pleasure craft used for the supply of services for consideration for commercial purposes. That applies whether the user is the owner of the craft or hires or charters it.
The concept of user has been clarified in the judgment of the Court of Justice of 21 December 2011, Haltergemeinschaft, C-250/10, 2 which establishes that in the context of a lease or charter, the user who must be taken into account for the purposes of granting or refusing the exemption in question is the lessee or charterer, not the lessor or owner of the craft. It follows from that judgment also that, in order to be eligible for the exemption, it is not sufficient for the chartering to be considered as such as a commercial activity for the owner of the craft, in that what is important to verify is the use that the charterer makes of that craft. It is, therefore, the end user and the ultimate use of the craft that are relevant, and it is that use which must used ‘directly for the supply of services for consideration’ in order to be eligible for the exemption, as the Court of Justice noted in the judgment of 13 July 2017, Vakarų Baltijos laivų statykla, C-151/16. 3
For the purposes of applying the exemption in question, it is, therefore, necessary to analyse on a case-by-case basis what the actual use of the private pleasure craft is.
However, it is apparent from the Italian legislation which applies the exemption in question and from the replies to the letter of formal notice and to the reasoned opinion that the exemption is refused or granted regardless of the actual use made of the craft.
In the present action, the Commission considers that in Italy the application of the exemption in question is contrary to Article 14(1)(c) of Directive 2003/96/EC.
In particular, the Commission submits that, for the purposes of granting or refusing the exemption, the Italian tax authorities do not carry out a case-by-case assessment of the manner in which is the craft is actually used. Indeed, the Italian authorities maintain that the assessment is carried out taking into account aspects of the sectoral legislation intended only to facilitate such an assessment, such as the fact that the navigation takes place through a typical charter agreement or a lease agreement or occasional charter. However, the Italian authorities maintain that in the case of a charter the exemption must in any event be granted to economic operators who provide maritime navigation services, whereas those involved in leasing or occasional chartering must be excluded from that exemption. In reasserting that the exemption must be granted or refused on the basis of the type of contract entered into and therefore on an abstract basis, the Italian authorities confirm that they do not specifically ascertain that the exemption is granted to those entitled and refused to those not entitled.
Apart from charters, in the case of leasing or occasional chartering, any possibility of exemption is precluded, even if, in fact, the craft may be used by the end user in order directly to supply services for consideration, and it is of no importance in that connection that the lessor or owner intends himself or herself to carry out navigation activity. Occasional chartering is not considered under Italian law as a possible commercial use of a craft.
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1 Council Directive 2003/96/EC of 27 October 2003 restructuring the Community framework for the taxation of energy products and electricity (OJ 2003 L 283, p. 51).
2 EU:C:2011:862, paragraph 22.
3 EU:C:2017:537, paragraphs 29 and 30.