ORDER OF THE COURT (Seventh Chamber)
10 February 2022 (*)
(Reference for a preliminary ruling – Article 99 of the Rules of Procedure of the Court of Justice – Common system of value added tax (VAT) – Directive 2006/112/EC – Article 392 – Margin taxation scheme – Scope – Supply of buildings and building land purchased for the purpose of resale – Taxable person for whom the VAT on the purchase of buildings was not deductible – Resale subject to VAT – Concept of ‘building land’)
In Case C‑191/21,
REQUEST for a preliminary ruling under Article 267 TFEU from the cour administrative d’appel de Lyon (Administrative Court of Appeal, Lyons, France), made by decision of 18 March 2021, received at the Court on 25 March 2021, in the proceedings
Ministre de l’Economie, des Finances et de la Relance
v
Les Anges d’Eux SARL,
Echo 5 SARL,
Cletimmo SAS,
THE COURT (Seventh Chamber),
composed of J. Passer, President of the Chamber, F. Biltgen and M.L. Arastey Sahún (Rapporteur), Judges,
Advocate General: A. Rantos,
Registrar: A. Calot Escobar,
having decided, after hearing the Advocate General, to rule by reasoned order, pursuant to Article 99 of the Rules of Procedure of the Court of Justice,
makes the following
Order
1 This request for a preliminary ruling concerns the interpretation of Article 392 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1, ‘the VAT Directive’).
2 The request has been made in proceedings between the ministre de l’Économie, des Finances et de la Relance (Minister for Economic Affairs, Finance and Recovery, France) (‘the tax authority’) and Les Anges d’Eux SARL, Echo 5 SARL and Cletimmo SAS concerning additional assessments of value added tax (VAT) regarding the supply of building land initially purchased as land which had been built on.
Legal context
European Union law
3 Article 9(1) of the VAT Directive states:
‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’
4 Article 12 of that directive provides:
‘1. Member States may regard as a taxable person anyone who carries out, on an occasional basis, a transaction relating to the activities referred to in the second subparagraph of Article 9(1) and in particular one of the following transactions:
(a) the supply, before first occupation, of a building or parts of a building and of the land on which the building stands;
(b) the supply of building land.
2. For the purposes of paragraph 1(a), “building” shall mean any structure fixed to or in the ground.
Member States may lay down the detailed rules for applying the criterion referred to in paragraph 1(a) to conversions of buildings and may determine what is meant by “the land on which a building stands”.
Member States may apply criteria other than that of first occupation, such as the period elapsing between the date of completion of the building and the date of first supply, or the period elapsing between the date of first occupation and the date of subsequent supply, provided that those periods do not exceed five years and two years respectively.
3. For the purposes of paragraph 1(b), “building land” shall mean any unimproved or improved land defined as such by the Member States.’
5 Under Article 73 of that directive:
‘In respect of the supply of goods or services, other than as referred to in Articles 74 to 77, the taxable amount shall include everything which constitutes consideration obtained or to be obtained by the supplier, in return for the supply, from the customer or a third party, including subsidies directly linked to the price of the supply.’
6 Under Title XIII ‘Derogations’, in Chapter 1, entitled ‘Derogations applying until the adoption of definitive arrangements’, Article 392 of that directive provides:
‘Member States may provide that, in respect of the supply of buildings and building land purchased for the purpose of resale by a taxable person for whom the VAT on the purchase was not deductible, the taxable amount shall be the difference between the selling price and the purchase price.’
French law
7 Article 260 of the code général des impôts (General Tax Code), in the version applicable to the tax periods at issue, states:
‘The following may, on request, pay [VAT]:
…
5° bis The persons carrying out a transaction referred to in Article 261(5);
…’
8 Article 261 of the code provides:
‘The following are exempt from [VAT]:
…
5. (Real estate transactions):
…
2° supplies of buildings completed more than five years previously.
…’
9 Article 268 of that code is worded as follows:
‘As regards the supply of building land or a transaction referred to in Article 261(5)(2) in respect of which the option provided for in Article 260(5 bis) has been exercised, if the acquisition by the transferor has not given rise to the right to deduct [VAT], the taxable amount shall be the difference between:
1° First, the price stated and the relevant associated costs and expenses;
2° Second, as the case may be:
(a) either any and all sums paid by the transferor for the purchase of the land or building;
(b) or the nominal value of the shares or parts received in consideration for the contributions in kind which the transferor has made.
…’
The dispute in the main proceedings and the question referred for a preliminary ruling
10 Les Anges d’Eux, Echo 5 and Cletimmo, defendants in the main proceedings, are engaged in property dealing.
11 In the course of that activity, Les Anges d’Eux and Cletimmo purchased, from private individuals, built-on land consisting of plots each comprised of a dwelling house with adjoining land and outbuildings, those transactions falling outside the scope of the VAT Directive. Echo 5 carried out a similar transaction, the only difference being that the immovable property purchased by Echo 5 consisted of a dwelling house with a courtyard and garden, outbuildings, a spring and forest area.
12 Subsequently, the defendants in the main proceedings divided or redistributed the unimproved land adjoining the original buildings in order to sell those plots as building land, making those transactions subject to VAT under the margin scheme provided for in Article 268 of the General Tax Code, transposing Article 392 of the VAT Directive into French law.
13 Following investigations, the tax authorities called the application of that scheme into question and carried out additional VAT assessments on the entire selling price of the land sold for the period from 1 January 2013 to 31 December 2014 regarding Les Anges d’Eux, for the periods from 1 January to 31 December 2014 and from November 2015 regarding Echo 5, and from 1 January to 31 December 2014 regarding Cletimmo.
14 By judgments of 6 November, 20 November and 11 December 2018, the tribunal administratif de Lyon (Administrative Court, Lyons, France) upheld, for the most part, the claims by which the defendants in the main proceedings sought total discharge of those additional VAT assessments and of the corresponding default interest, to the detriment of the tax authorities.
15 The tax authorities appealed against those judgments before the referring court, arguing that, on the one hand, application of the VAT margin scheme necessarily presupposes that the goods resold have the same legal classification as that of the property purchased, since the concept of ‘purchase-resale’ of building land must be understood as excluding all transformation transactions. On the other hand, the tax authorities take the view that the transaction consisting of the sale as building land, after division, into plots, of land initially purchased as land on which buildings were built, cannot qualify for that derogating scheme but must be subject to VAT on the total price of the transfer.
16 The defendants in the main proceedings contend that transfers of building land which did not give rise to a right to deduct VAT at the time of their purchase are eligible for the option to apply VAT on the margin, since the fact that the physical characteristics and the legal classification of the property purchased were altered before the transfer are irrelevant.
17 The referring court is of the opinion that the outcome of the dispute in the main proceedings depends on the Court’s clarifications as to the interpretation of Article 392 of the VAT Directive.
18 In those circumstances, the cour administrative d’appel de Lyon (Administative Court of Appeal, Lyons, France) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Is Article 392 of the [VAT] Directive to be interpreted as excluding the application of the margin taxation scheme to transactions for the supply of building land in the following two cases:
1. where that land, purchased as land which has been built on, becomes building land in the intervening period between its purchase and resale by the taxable person;
2. where that land, in the intervening period between its purchase and resale by the taxable person, is altered, in the sense that it is divided into lots?’
Consideration of the question referred
19 Under Article 99 of the Rules of Procedure of the Court, where the reply to a question referred to the Court for a preliminary ruling may be clearly deduced from existing case-law or where the answer to such a question admits of no reasonable doubt, the Court may, at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, decide to rule by reasoned order.
20 It is appropriate to apply that provision in the context of the present reference for a preliminary ruling, since the answer to the question posed can be clearly deduced from the case-law of the Court, in particular the judgment of 30 September 2021, Icade Promotion (C‑299/20, EU:C:2021:783).
21 By its question, the referring court seeks, in essence, to ascertain whether Article 392 of the VAT Directive must be interpreted as precluding the application of the margin taxation scheme to transactions involving the supply of building land, first, where the purchased land which has been built on has become, between the time of its purchase and the time at which it is resold by the taxable person, building land and, secondly, where that land has been subject, between the time of its purchase and the time at which it is resold by the taxable person, to alterations such as its partitioning into lots.
22 As regards, in the first place, purchased land which has been built on that has become building land, it should be noted that, first of all, as is apparent from Article 392 of the VAT Directive, Member States may provide that, in respect of the supply of buildings and building land purchased for the purpose of resale by a taxable person for whom the VAT on the purchase was not deductible, the taxable amount is the difference between the selling price and the purchase price.
23 Article 392 of the VAT Directive thus constitutes a derogation from the general principle of that directive laid down in Article 73 thereof, according to which VAT is to be calculated on the basis of the consideration for the supply of goods or services, that is to say, the selling price.
24 That derogation must be interpreted strictly, without, however, rendering Article 392 of the VAT Directive meaningless (see, to that effect, judgment of 30 September 2021, Icade Promotion, C‑299/20, EU:C:2021:783, paragraph 48).
25 In addition, it should be stated that, under Article 12(3) of the VAT Directive, ‘building land’ means any unimproved or improved land defined as such by the Member States (judgment of 30 September 2021, Icade Promotion, C‑299/20, EU:C:2021:783, paragraph 49).
26 It is apparent from all the above that the derogating scheme provided for in Article 392 of the VAT Directive applies only to building land which, defined as such by the Member States, is purchased for the purpose of resale.
27 Thus, the application of the margin taxation scheme presupposes, under Article 392 of the VAT Directive, that the goods purchased and those resold are legally identical.
28 In the present case, Les Anges d’Eux and Cletimmo purchased plots of building land, each comprising a dwelling house with adjoining land and outbuildings. The immovable property purchased by Echo 5 included a dwelling house with a courtyard and garden, outbuildings, a spring and forest area. The defendants in the main proceedings then divided or re-distributed those plots with a view to reselling them as building land.
29 It is therefore for the referring court to determine, having regard to the definitions provided for by the national legislation and to all the circumstances in which the transactions at issue in the main proceedings took place, whether the goods purchased by the defendants in the main proceedings fall within the concept of ‘building land’ within the meaning of Article 12(3) of the VAT Directive and, thus, within the scope of Article 392 of that directive.
30 As regards, in the second place, the question of whether Article 392 of the VAT Directive precludes the application of the margin taxation scheme to transactions involving the supplies of building land where that land has been subject, between the time of its purchase and the time at which it is resold by the taxable person, to alterations such as its partitioning into lots, it should be borne in mind that the Court has held that that article must be interpreted as not precluding the application of the margin taxation scheme to transactions involving the supply of such land (see, to that effect, judgment of 30 September 2021, Icade Promotion, C‑299/20, EU:C:2021:783, paragraph 62).
31 In that respect, the Court clarified that, although Article 392 of the VAT Directive refers to the ‘supply of building land purchased for the purpose of resale’, it cannot be concluded that those terms prohibit the land from being subject to alterations by the taxable dealer, provided that that land can be classified as building land upon resale. Such a conclusion is apparent neither from the intentions of the EU legislature concerning that provision, nor from the contextual interpretation thereof (judgment of 30 September 2021, Icade Promotion, C‑299/20, EU:C:2021:783, paragraph 60).
32 Therefore, where unimproved land is regarded as building land under the national legislation of the Member State concerned, the alterations made to that land for the purposes of its improvement, the land thus remaining earmarked to be built on, have no effect on its classification as ‘building land’ as long as those improvements cannot be classified as ‘buildings’ (judgment of 30 September 2021, Icade Promotion, C‑299/20, EU:C:2021:783, paragraph 61).
33 Thus, Article 392 of the VAT Directive must be interpreted as not precluding the application of the margin taxation scheme to transactions involving the supply of building land, considered as such by national law, where that land has been subject to alterations such as its partitioning into lots.
34 In the light of all the foregoing considerations, the answer to the question referred is that Article 392 of the VAT Directive must be interpreted as precluding the application of the margin taxation scheme to transactions involving the supply of building land where that purchased land which has been built on has become, between the time of its purchase and the time at which it is resold by the taxable person, building land; however, it must be interpreted as not precluding the application of that scheme to transactions involving the supply of building land where that land has been subject, between the time of its purchase and the time at which it is resold by the taxable person, to alterations such as its partitioning into lots.
Costs
35 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
On those grounds, the Court (Seventh Chamber) hereby orders:
Article 392 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax is to be interpreted as precluding the application of the margin taxation scheme to transactions involving the supply of building land where that purchased land which has been built on has become, between the time of its purchase and the time at which it is resold by the taxable person, building land; however, it is to be interpreted as not precluding the application of that scheme to transactions involving the supply of building land where that land has been subject, between the time of its purchase and the time at which it is resold by the taxable person, to alterations such as its partitioning into lots.
[Signatures]