Contents
Judgment of the Court (Sixth Chamber)20 January 2021note(Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Article 2 — Article 9 — Concepts of economic activity and taxable person — Transactions which seek to obtain income from goods on a continuing basis — Acquisition by a creditor of immovable property in the context of an enforcement procedure carried out for the purpose of the recovery of loans secured by mortgage guarantees and the sale of those buildings — Simple exercise of the right of ownership by its holder)In Case C‑655/19,REQUEST for a preliminary ruling under Article 267 TFEU from the Curtea de Apel Alba Iulia (Court of Appeal, Alba Iulia, Romania), made by decision of 22 March 2018, received at the Court on 30 August 2019, in the proceedingsAdministraţia Judeţeană a Finanţelor Publice SibiuDirecția Generală Regională a Finanțelor Publice Brașov (DGRFP)vLN,THE COURT (Sixth Chamber),composed of L. Bay Larsen, President of the Chamber, C. Toader and N. Jääskinen (Rapporteur), Judges,Advocate General: A. RantosRegistrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– LN, by G. Comăniţă, avocat,– the Romanian Government, by E. Gane, A. Rotăreanu and S.‑A. Purza, acting as Agents,– the European Commission, by A. Armenia and R. Lyal, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following
Judgment
1This request for a preliminary ruling concerns the interpretation of Articles 2 and 9 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’).
2The request has been made in proceedings between the Administrația Județeană a Finanțelor Publice Sibiu (the AJFP Sibiu) (Provincial Administration of Public Finances, Subiu, Romania) and the Direcția Generală Regională a Finanțelor Publice Brașov (DGRFP Brașov) (Regional Directorate-General of Public Finances, Brașov, Romania), on the one hand, and LN, on the other, concerning taxation in addition to value added tax (VAT).
Legal context
European Union law
3Article 2(1)(a) of the VAT Directive provides that the supply of goods for consideration within the territory of a Member State by a taxable person acting as such is subject to VAT.
4Article 9(1) of that 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.’
Romanian law
5Article 125a of Legea nr. 571/2003 privind Codul fiscal (Law No 571/2003 establishing the Tax Code) of 22 December 2003 (M. Of., Part I, No 927/23 December 2003), in the version applicable to the main proceedings (the ‘Tax Code’), provides:(1) Pursuant to this Title, the following terms and expressions shall have the following meaning:…(18) A “taxable person” under Article 127(1) shall mean a natural person, a group of persons, a public institution, a legal person and any entity capable of carrying on an economic activity;…(20) A “non-taxable person” shall mean a person who does not fulfil the conditions required under Article 127(1) in order to be considered a taxable person;(21) A “person” shall mean a taxable person, a non-taxable legal person or a non-taxable person;…’
6Article 127 of that Code is worded as follows:(1) A “taxable person” shall mean any person who, independently, carries on in any place an economic activity as referred to in paragraph 2, whatever the purpose or result of that activity.(2) Pursuant to this title, 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”. Economic activity shall include, in particular, the exploitation of tangible or intangible property on a continuing basis for the purposes of obtaining income therefrom.(21) The circumstances in which natural persons who engage in the supply of immovable property become taxable persons are explained by the implementing provisions.…’
7Under Article 152 of that code:(1) A taxable person established in Romania whose annual turnover, declared or achieved, is below the threshold of EUR 35000, the equivalent of which in [Romanian Lei (RON)] shall be set according to the exchange rate provided by the Banca Națională a României [(National Bank of Romania)] on the date of accession and rounded to the nearest thousandth, may apply the exemption from taxation, referred to hereafter as the “special exemption scheme”, to operations pursuant to Article 126(1), excluding intra-community supply of new means of transport, which are exempted in accordance with Article 143(2)(b).(2)The turnover which serves as a reference for the application of paragraph 1 shall consist, net of VAT, in the circumstances provided for in paragraphs 7 and 7a, of supplies of goods and services rendered by the taxable person in the course of a calendar year that are taxable or, as appropriate, would be taxable if they were not carried out by a small undertaking, and turnover resulting from economic activities for which the place of delivery or supply is deemed to be abroad, provided the tax would be deductible if the transaction were carried out in Romania in accordance with Article 145(2)(b), and exempt transactions for which a right to deduct exists and exempt transactions for which no right to deduct exists, as referred to in Article 141(2)(a), (b), (e) and (f), where they are not ancillary to the principal activity, excluding the following transactions:(a) the supply of tangible or intangible fixed assets, as defined in Article 125a(1)(3), carried out by the taxable person;(b) the intra-community supply of new means of transport, which are exempt in accordance with Article 143(2)(b).…(6) A taxable person to whom the special exemption scheme applies and whose turnover, as referred to in paragraph 2, is equal to or above the exemption threshold for a calendar year must register for VAT purposes, in accordance with Article 153, within 10 days from the date on which that threshold is reached or exceeded. … The special exemption scheme shall apply until the date of VAT registration in accordance with Article 153. Where the taxable person concerned does not request VAT registration or is late in doing so, the competent tax authorities shall be entitled to make that person liable to pay the VAT, together with the ancillary charges, with effect from the date on which the taxable person should have been registered for VAT purposes under Article 153.…’
8Article 153 of that Code provides:(1)A taxable person established in Romania in accordance with Article 125a(2)(b), and who carries out or intends to carry out an economic activity involving taxable transactions and/or VAT-exempt transactions with a right of deduction, must register with the competent tax authority, as follows:…(b) if, during a calendar year, the taxable person reaches or exceeds the exemption threshold for which Article 152(1) provides, within 10 days of the end of the month during which he reached or exceeded that threshold;…(6) The competent tax authorities shall register for VAT purposes, in accordance with this article, all persons who are required, pursuant to the provisions of this title, to seek registration, in accordance with paragraphs (1), (2), (4) or (5).(7) Where the person required to register pursuant to paragraphs (1), (2), (4) or (5) fails to request registration, the competent tax authorities shall register that person of their own motion.…’
9Paragraph 3 of Hotărârea Guvernului nr. 44/2004 pentru aprobarea Normelor metodologice de aplicare a Legii 571/2003 privind Codul fiscal (Government Decision No 44/2004 approving the detailed rules for the implementation of Law No 571/2003 establishing the Tax Code) of 22 January 2004 (M. Of., Part I, No 112/6 February 2004), in the version applicable to the main proceedings, provides:‘(1) Under Article 127(2) of the Tax Code, the exploitation of tangible or intangible property shall, in accordance with the fundamental principle of the VAT regime whereby the tax must be neutral, cover every kind of transaction, regardless of its legal form, as established by the Court in the cases van Tiem, C‑186/89, C‑306/94, Régie dauphinoise, and C‑77/01, Empresa de Desenvolvimento Mineiro SA (EDM).(2) In accordance with paragraph 1, natural persons shall be deemed not to be carrying out an economic activity subject to VAT in the case where they obtain income from the sale of personally owned dwellings or other property used by them for personal purposes. The category of assets used for personal purposes includes buildings and, as the case may be, the accompanying land, belonging personally to natural persons, which have been used for the purposes of dwellings, including holiday homes and all other assets used privately by the natural person, as well as assets of any type legally inherited or those acquired by the application of corrective measures provided for in the laws on the reconstitution of the right of property.(3) A natural person who has not already become a taxable person in respect of another activity shall be regarded as carrying out an economic activity involving the exploitation of tangible or intangible property if that person acts as such, in an independent manner, and if the activity in question is carried out in order to obtain therefrom income on a continuing basis within the meaning of Article 127(2) of the Tax Code.(4) Where immovable property is constructed by natural persons for the purposes of being sold, the economic activity shall be regarded as having commenced at the time when the natural persons in question formed the intention of carrying out that activity, and their intention must be assessed on the basis of objective factors, such as the fact that they began to incur expenses and/or make preparatory investments with a view to commencing the economic activity. The economic activity shall be regarded as being conducted on a continuing basis from its commencement and shall also include the supply of the immovable property constructed, or parts of that property, even in the case of a single immovable property.(5) Where land and/or buildings are acquired by a natural person for the purposes of being sold, the supply of that property shall be regarded as an economic activity of a continuous nature if the natural person carries out more than one single transaction during a calendar year. However, if the natural person is already constructing immovable property for the purposes of selling it, in accordance with subparagraph 4, since the economic activity is already regarded as having commenced and as being of a continuous nature, every other transaction carried out subsequently shall no longer be capable of being regarded as occasional in nature. Although the first supply shall be considered occasional, if there is a second supply within the same year, the first supply shall not be taxed but shall be taken into account for the calculation of the threshold provided for in Article 152 of the Tax Code. The supply of buildings and of land, exempt from tax in accordance with Article 141(2)(f) of the Tax Code, shall be taken into account both in order to establish the continuous nature of the economic activity and for the calculation of the exemption threshold set out in Article 152 of the Tax Code.’
The dispute in the main proceedings and the questions referred for a preliminary ruling
10In 2009, LN granted a third party a number of loans for the total amount of EUR 80400, secured by mortgage guarantees on several buildings. Since the loans could not be repaid, those buildings were auctioned and three of them were awarded to LN.
11In 2010, LN concluded two contracts for sale, the subject of the first contract being one of the three buildings mentioned in the preceding paragraph, the other concerning a piece of land which had been acquired in 2005. The other two buildings which were awarded to LN were the object of separate contracts for sale in 2011 and 2012.
12In 2016, during a tax audit, the AJFP Sibiu found that the transactions carried out as of 2010 produced, on 30 June 2010, income amounting to RON 611364 (approximately EUR 145000), such that those transactions were classified as economic activity on a continuing basis carried out for the purposes of obtaining income. The AJFP Sibiu therefore considered that LN should have been registered for VAT as of 10 July 2010 on the ground that the turnover threshold of EUR 35000, beneath which the special exemption scheme set out in Article 152(1) and (2) of the Tax Code applies, had been exceeded.
13According to the AJFP Sibiu, the two buildings sold by LN in 2010 had not been used for personal purposes, but had been acquired with the intention of reselling them in order to obtain income therefrom.
14As regards the sale carried out in 2011, the AJFP Sibiu considered that that sale should be exempt from VAT, the supply of the asset in question having taken place after 31 December of the year following its first occupation. As to the sale carried out in 2012, the tax authority considered, by contrast, that that transaction was subject to VAT.
15In those circumstances, by a notice of 28 March 2016, the AJFP Sibiu subjected LN to additional VAT as well as interest and penalties for late payment.
16The complaint submitted by LN against that tax notice was rejected by a decision of the Regional Directorate-General of Public Finances, Brașov of 8 November 2016.
17LN brought an action against that rejection before the Tribunalul Sibiu (Regional Court, Sibiu, Romania) by which he disputed, inter alia, the power of the tax authority to tax a natural person who has not voluntarily registered for VAT and to treat as economic activity legal transactions for the sale of buildings, such as those in the main proceedings.
18The Tribunalul Sibiu (Regional Court, Sibiu) upheld the action brought by LN. That court considered that economic activity essentially resides in the acquisition of income on a continuing basis, so that the mere acquisition and sale of buildings cannot, in themselves, constitute an economic activity. Additionally, that court held that, in that case, the subsequent sale of goods acquired at auction was merely a method which the defendant in the main proceedings had at his disposal for the recovery of the loans he had granted in 2009.
19The tax authority lodged an appeal against that judgment before the Curtea de Apel Alba Iulia (Court of Appeal, Alba Iulia, Romania).
20According to that court, the question arises whether a legal transaction by which a lender who has granted loans secured by mortgage guarantees on buildings acquires those buildings by means of an enforcement procedure and then sells them must be considered to be economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, and must as such be subject to VAT in accordance with Article 2(1)(a) of that directive. Within that context, the referring court also asks whether the person who carries out that legal transaction must be considered a taxable person within the meaning of the first subparagraph of Article 9(1) of that directive.
21In these circumstances, the Curtea de Apel Alba Iulia (Court of Appeal, Alba Iulia) decided to stay the main proceedings and refer the following questions to the Court for a preliminary ruling:(1) Does Article 2 of [the VAT Directive] preclude a transaction whereby a taxpayer, as creditor, acquires immovable property in the context of an enforcement procedure and, some time later, sells it in order to recover a sum of money which he had loaned, from being regarded as an economic activity in the form of the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis?(2) Can an individual who has carried out such a legal transaction be regarded as a taxable person within the meaning of Article 9 of [the VAT Directive]?’
Consideration of the questions referred
22By its two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 2(1)(a) and Article 9(1) of the VAT Directive must be interpreted as meaning that the transaction by which a person acquires an immovable property in the context of an enforcement procedure carried out in order to recover a loan previously granted and, subsequently, sells that property, constitutes an economic activity, and whether that person must, by virtue of that transaction, be considered a taxable person.
23It is apparent from the order for reference that the legal transactions at issue in the main proceedings consisted of the sale of buildings previously awarded to a creditor following an enforcement procedure for mortgages which guaranteed that creditor’s loans in respect of the previous owner of the buildings.
24In that regard, it must be noted at the outset that, although the VAT Directive gives a very wide scope to VAT, only activities of an economic nature are covered by that tax. Accordingly, under Article 2 of that directive, concerning taxable transactions, together with the importation of goods, the intra-Community acquisition of goods, the supply of goods and the supply of services effected for consideration within the territory of the Member State by a taxable person are subject to VAT (judgment of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraphs 20 and 21 and the case-law cited).
25Furthermore, it is apparent from the Court’s case-law that, in that context, the concept of ‘taxable person’ must be defined by reference to the term ‘economic activity’ within the meaning of the second subparagraph of Article 9(1) of the VAT Directive. It follows that it is the existence of such an activity which establishes the status of ‘taxable person’ (see, by analogy, judgment of 15 September 2011, Słaby and Others, C‑180/10 and C‑181/10, EU:C:2011:589, paragraph 43 and the case-law cited), that being, in accordance with the first subparagraph of Article 9(1) of that directive, any person who independently carries out, in any place, such an economic activity.
26The concept of ‘economic activity’ is defined in the second subparagraph of Article 9(1) of that directive as encompassing any activities of producers, traders and persons supplying services, with that provision further clarifying what is considered to be such an activity, in particular, ‘the exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis’.
27As regards the term ‘exploitation’ within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, it is well-established case-law that that concept, in accordance with the requirements of the principle of neutrality of the common system of VAT, refers to all transactions, whatever may be their legal form, by which it is sought to obtain income from the goods in question on a continuing basis (see, to that effect, judgments of 6 October 2009, SPÖ Landesorganisation Kärnten, C‑267/08, EU:C:2009:619, paragraph 20 and the case-law cited, and of 2 June 2016, Lajvér, C‑263/15, EU:C:2016:392, paragraph 24 and the case-law cited).
28By contrast, the simple acquisition and the mere sale of an asset cannot amount to exploitation of an asset intended to produce income on a continuing basis within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, as the only consideration for those transactions consists of a possible profit on the sale of that asset (judgment of 15 September 2011, Słaby and Others, C‑180/10 and C‑181/10, EU:C:2011:589, paragraph 45 and the case-law cited).
29Similarly, the mere exercise of the right of ownership by its holder cannot, in itself, be regarded as constituting an economic activity (see, to that effect, judgments of 15 September 2011, Słaby and Others, C‑180/10 and C‑181/10, EU:C:2011:589, paragraph 36; of 9 July 2015, Trgovina Prizma, C‑331/14, EU:C:2015:456, paragraph 23; and of 13 June 2019, IO (VAT – Activity as a member of a supervisory board), C‑420/18, EU:C:2019:490, paragraph 29).
30First, as regards the criteria which may be taken into account in order to determine whether an activity constitutes an economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, it follows from the Court’s case-law that the number and scale of sales cannot constitute a criterion for distinguishing between the activities of an operator acting in a private capacity which fall outside the scope of the VAT Directive, and those of an operator whose transactions constitute an economic activity (judgments of 15 September 2011, Słaby and Others, C‑180/10 and C-181/10, EU:C:2011:589, paragraph 37, and of 17 October 2019, Paulo Nascimento Consulting, C‑692/17, EU:C:2019:867, paragraph 25).
31Second, as regards the sale of building land, the Court has already stated that a relevant assessment criterion is the fact that the interested party has taken active steps to market property by mobilising resources similar to those deployed by producers, traders or persons supplying services. Such initiatives do not normally fall within the scope of the management of private assets so that the resulting transactions cannot be regarded as the mere exercise of the right of ownership by its holder (see, to that effect, judgment of 9 July 2015, Trgovina Prizma, C‑331/14, EU:C:2015:456, paragraph 24 and the case-law cited). Such initiatives more often fall within the scope of an activity carried out for the purpose of obtaining income therefrom on a continuing basis and thus may be classified as an economic activity.
32In the light of those considerations, it must be determined whether the legal transaction by which a creditor who has granted loans secured by mortgage guarantees on buildings, whereby those buildings have been acquired in the context of an enforcement procedure, following a set deadline, sells those buildings constitutes an economic activity within the meaning of the second subparagraph of Article 9(1) of the VAT Directive, or whether it merely concerns the exercise of the right of ownership by its holder.
33In the present case, it is apparent from the information provided by the referring court that, in 2009, the defendant in the main proceedings granted to the same natural person a number of loans secured by mortgage guarantees on buildings and that since those loans were not repaid, three of those buildings were awarded to the creditor in an auction which took place within that same year. Thereafter, the creditor sold those three buildings between 2010 and 2012.
34It is also apparent from the information available to the Court that, in the first place, the legal transactions at issue were carried out by the defendant in the main proceedings for the purpose of recovering his assets and his debts, following the failure to repay the loans granted. In the second place, since his objective was the recovery of his debts and of his assets, the defendant in the main proceedings has not taken active steps to market property and, in particular, has not mobilised resources similar to those deployed by producers, traders or persons supplying services, within the meaning of the second subparagraph of Article 9(1) of the VAT Directive.
35Subject to verification by the referring court, these circumstances appear to establish that the sale of the buildings at issue in the main proceedings in fact fell within the scope of a simple exercise of the right of ownership and of sound management of private assets, and, consequently, does not fall within the scope of the exercise of an economic activity.
36Similarly, none of the other information received from the referring court demonstrates the economic nature, within the meaning of Article 9(1) of the VAT Directive, of the activity carried out by the defendant in the main proceedings.
37Consequently, the position of the Romanian government, that the fact that the defendant in the main proceedings was present at the auction and acquired, at that auction, the buildings which were the subject of the mortgage guarantees, without waiting for the recovery of the amount loaned by the enforcement of his debtor’s guarantees, confirms that there had been an exploitation of a tangible asset for the purpose of obtaining income therefrom on a continuing basis and, consequently, that the defendant in the main proceedings must be considered a taxable person for the purposes of VAT, must be dismissed.
38That fact rather appears to establish that the sales of the buildings at issue in the main proceedings, in the light of the particularities of those transactions, as set out in the preceding paragraphs of the present judgment, fell within the scope of management of the personal assets of the defendant in the main proceedings.
39In those circumstances, the legal transactions carried out by the defendant must be regarded as falling within the scope of the management of private assets provided that, as is apparent from the information available to the Court, which it is for the referring court to verify, first, the interested party’s objective was the recovery of his debts and his assets, and, second, he did not take active steps to market the property. It follows that the interested party cannot be considered a taxable person for the purposes of VAT within the meaning of the first subparagraph Article 9(1) of the VAT Directive, in respect of the sale of the buildings at issue in the main proceedings, so that those transactions should not have been subjected to that tax.
40So far as this point is relevant, it should be borne in mind that the main proceedings, as set out by the referring court, and its questions referred for a preliminary ruling do not apply to the sales of buildings considered to be part of the direct extension of the economic activity of granting loans carried on by LN.
41Having regard to all the forgoing considerations, the answer to the questions referred is that Article 2(1)(a) and Article 9(1) of the VAT Directive must be interpreted as meaning that a transaction by which a person acquires immovable property in the context of an enforcement procedure undertaken for the purpose of recovery of a loan which had previously been granted and, consequently, sells that property does not constitute, in itself, an economic activity, where that transaction falls within the scope of a simple exercise of the right of ownership and of the sound management of private assets, such that that person cannot, in the context of that transaction, be considered a taxable person.
Costs
42Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
Operative part
On those grounds, the Court (Sixth Chamber) hereby rules: Article 2(1)(a) and Article 9(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 a transaction by which a person acquires immovable property in the context of an enforcement procedure undertaken for the purpose of recovery of a loan which had previously been granted and, consequently, sells that property does not constitute, in itself, an economic activity, where that transaction falls within the scope of a simple exercise of the right of ownership and of the sound management of private assets, such that that person cannot, in the context of that transaction, be considered a taxable person.
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