Firma Z v Finanzamt Y (C-802/19)

Contents

Judgment of the Court (Seventh Chamber)11 March 2021^note(Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Article 90(1) — Reduction of the taxable amount — Principles laid down in the judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400) — Supplies of medicinal products — Granting of discounts — Hypothetical nature of the question referred — Inadmissibility of the request for a preliminary ruling)In Case C‑802/19,REQUEST for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decision of 6 June 2019, received at the Court on 31 October 2019, in the proceedingsFirma ZvFinanzamt Y,THE COURT (Seventh Chamber),composed of A. Kumin, President of the Chamber, T. von Danwitz and P.G. Xuereb (Rapporteur), Judges,Advocate General: G. Hogan,Registrar: A. Calot Escobar,having regard to the written procedure,after considering the observations submitted on behalf of:– Firma Z, by A. Erdbrügger, Rechtsanwalt,– the German Government, by J. Möller and S. Eisenberg, acting as Agents,– the European Commission, initially by R. Lyal and R. Pethke, and subsequently by R. Pethke, acting as Agents,having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,gives the following

Judgment

1The request for a preliminary ruling concerns the interpretation of Article 90(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1, and corrigendum OJ 2007 L 335, p. 60) and of the principle of neutrality of value added tax (VAT).

2That request was made in proceedings between Firma Z, a company which sells medicinal products by mail order in the Netherlands, and Finanzamt Y (Tax Office Y, Germany) (the ‘Tax Office’) concerning the reduction of the taxable amount in the case of discounts on the prices of prescription-only medicinal products for human use supplied from the Netherlands to Germany.

Legal context

European Union law

3Under Article 2(1)(a) and (b) of Directive 2006/112:‘The following transactions shall be subject to VAT:(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;(b) the intra-Community acquisition of goods carried out for consideration within the territory of a Member State by:(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;…’

4Article 13(1) of that directive provides:‘States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.’

5Article 20 of that directive provides:‘“Intra-Community acquisition of goods” shall mean the acquisition of the right to dispose as owner of movable tangible property dispatched or transported to the person acquiring the goods, by or on behalf of the vendor or the person acquiring the goods, in a Member State other than that in which dispatch or transport of the goods began.…’

6Article 33(1) of Directive 2006/112 states:‘By way of derogation from Article 32, the place of supply of goods dispatched or transported by or on behalf of the supplier from a Member State other than that in which dispatch or transport of the goods ends shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer ends, where the following conditions are met:(a) the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;(b) the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier.’

7Article 73 of that directive reads as follows:‘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 any form of subsidy directly linked to the price of the supply.’

8Under Article 83 of the same directive:‘In respect of the intra-Community acquisition of goods, the taxable amount shall be established on the basis of the same factors as are used in accordance with Chapter 2 to determine the taxable amount for the supply of the same goods within the territory of the Member State concerned …’

9Article 90(1) of Directive 2006/112 sets out that:‘In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.’

10Article 138(1) of that directive provides:‘Member States shall exempt the supply of goods dispatched or transported to a destination outside their respective territory but within the Community, by or on behalf of the vendor or the person acquiring the goods, for another taxable person, or for a non-taxable legal person acting as such in a Member State other than that in which dispatch or transport of the goods began.’

German law

VAT law

11Under Paragraph 1(1)(1) and (5) of the Umsatzsteuergesetz (Law on turnover tax), in the version applicable to the dispute in the main proceedings (BGBl. 2005 I, p. 386) (‘the UStG’), the following are subject to VAT:‘(1) the supplies of goods and services carried out for consideration within the territory of the country by a trader in the course of his business,…(5) intra-Community acquisition carried out for consideration on the national territory.’

12Paragraph 1a(1) of the UStG provides:‘Intra-Community acquisition shall occur where the following conditions are met:(1) goods move, in the course of its supply to the customer (person acquiring the goods), from the territory of one Member State to the territory of another Member State …(2) the person acquiring the goods is:(a) a trader who acquires the good for his company or(b) a legal person who is not a trader or who does not acquire the good for his company, and(3) the supply to the person acquiring the good(a) is carried out by the trader for consideration as part of his business ……’

13The first sentence of 17(1) of the UStG provides:‘When the basis of assessment of a taxable transaction for the purposes of the first subparagraph of Paragraph 1(1) has changed, the trader who made the supply shall adjust correspondingly the amount of tax payable.’

Health insurance law

14Paragraph 2 of the Fünftes Buch Sozialgesetzbuch (Fifth Book of the Social Code), in the version applicable to the dispute in the main proceedings (BGBl. 2011 I, p. 2983) , provides:(1) Health insurance funds shall make the benefits referred to in Chapter 3 available to persons they insure in accordance with the principle of sound management (Paragraph 12), in so far as those benefits are not the responsibility of the persons insured themselves.(2) Insured persons shall receive benefits in the form of benefits in kind or services, unless otherwise stipulated in this book or in the Ninth Book … The provision of services in kind are subject to agreements concluded between the health insurance funds with service providers in accordance with the provisions of Chapter 4.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

15Firma Z is a pharmacy which, throughout 2013, supplied prescription-based medicinal products to Germany from the Netherlands. Those medicinal products were dispatched both to persons covered by statutory health insurance and to persons covered by a private health insurance scheme. Firma Z paid them a certain amount as ‘compensation’ for answering a questionnaire about the illness they suffered.

16Whenever it carried out what it viewed as the direct supply of prescription-only medicinal products to persons covered by a private health insurance scheme, Firma Z deemed itself to have concluded contracts with those persons for the sale of those medicinal products. Based on the rules governing mail-order sales provided for in Article 33 of Directive 2006/112 and on national law, it took the view that those supplies were taxable in Germany. It also took the view that the amount of the compensation paid to those persons led to a reduction of the taxable amount in accordance with Paragraph 17(1) of the UStG. Neither the taxation of those supplies to persons covered by a private health insurance scheme nor the taxation of over-the-counter products either to persons covered by private health insurance or to persons covered by statutory health insurance (on the basis of a sales contract which Firma Z concluded directly with those persons) are the subject of the dispute in the main proceedings.

17Whenever Firma Z supplied prescription-only medicinal products to persons covered by statutory health insurance, it first settled with the statutory health insurance funds under social security law and then offset the amount of compensation paid to the persons concerned against the share to be paid by those persons for the medicinal product ordered. Firma Z took the view that, since the place of supply for those supplies was in the Netherlands as of 1 October 2013, it could rely on the VAT exemption there for intra-Community supplies. The statutory health insurance funds, on the other hand, had to pay VAT on acquisitions in Germany, based on Article 2(1)(b)(i) of Directive 2006/112. Firma Z also adjusted the taxable amount for supplies made in Germany to persons covered by a private health insurance scheme having taken the view that the amount of the compensation paid to persons covered by statutory health insurance led to a reduction in that taxable amount in accordance with Paragraph 17(1) of the UStG.

18Having not followed that approach, the Tax Office issued a notice of additional assessment. After rejecting Firma Z’s complaint against that notice, it then brought an action before the Finanzgericht (Finance Court, Germany).

19The Finanzgericht (Finance Court) dismissed that action on the ground that, since the supply to the statutory health insurance funds was not taxable, the taxable amount could not be reduced. It ruled that there was no legal basis for Firma Z to establish a right to a partial VAT refund.

20Taking the view that it was entitled to a reduction of the taxable amount as a result of a deduction in how much it received, in accordance with the judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400), Firma Z brought an appeal on a point of law against the ruling of the Finanzgericht (Finance Court) before the Bundesfinanzhof (Federal Finance Court, Germany).

21The referring court notes that, in light of the judgments of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraphs 28 and 31), and of 16 January 2014, Ibero Tours (C‑300/12, EU:C:2014:8, paragraph 29), where a manufacturer of a product who, having no contractual relationship with the final consumer but being the first link in a chain of transactions which ends with the final consumer, grants a price reduction to that final consumer, that reduction must be deducted from the taxable amount for VAT purposes, based on the case-law of the Court.

22It observes that the Court has, nonetheless, ruled that there should be no deduction where a travel agent, acting as an intermediary, grants the final consumer, on the travel agent’s own initiative and at his own expense, a reduction of the price of the principal service provided by the tour operator (judgment of 16 January 2014, Ibero Tours, C‑300/12, EU:C:2014:8, paragraph 33).

23It also claims the Court ruled that the discount granted, under national law, by a pharmaceutical company to a private health insurance company results, for the purposes of Article 90(1) of Directive 2006/112, in a reduction of the taxable amount in favour of that pharmaceutical company, where it supplies medicinal products via wholesalers to pharmacies which make supplies to persons covered by a private health insurance scheme that reimburses the purchase price of the medicinal products to persons it insures (judgment of 20 December 2017, Boehringer Ingelheim Pharma, C‑462/16, EU:C:2017:1006, paragraph 46).

24According to the referring court, there is a need to clarify the concept of the ‘chain of transactions’ which begins with the person granting the discount, in the present case Firma Z, and ends with the person receiving it, namely those persons covered by statutory health insurance. The question which arises is whether all the transactions in that chain should or should not fall within the scope of VAT under Article 2(1) of Directive 2006/112 in order to qualify for the reduction of the taxable amount under Article 90(1) of that directive.

25In that respect, it recalls that the principle of neutrality requires that, within each country, similar goods should bear the same tax burden whatever the length of the production and distribution chain (judgments of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400, paragraph 20, and of 20 December 2017, Boehringer Ingelheim Pharma, C‑462/16, EU:C:2017:1006, paragraph 33). It claims that the length of the production and distribution chain should therefore be determined by the relevant transactions, pursuant to Article 2(1) of Directive 2006/112 relating to the scope of VAT.

26It also takes the view that, in the dispute giving rise to the judgment of 20 December 2017, Boehringer Ingelheim Pharma (C‑462/16, EU:C:2017:1006), the discount had reduced the expenses for private health insurance companies and, consequently, the expenses for those who had to bear the cost of the taxable acquisition of medicinal products, which is not the case in the case before it, since the discount granted to those persons covered by statutory health insurance does not have any bearing on the expenses which must be paid by the statutory health insurance funds.

27The referring court also has doubts as to the equal treatment of transactions carried out in national territory and those carried out in the internal market.

28In those circumstances, the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:(1) Based on the judgment of the [Court] of 24 October 1996, Elida Gibbs Ltd, C‑317/94 (EU:C:1996:400), is a pharmacy which supplies medicinal products to a statutory health insurance fund entitled to reduce the taxable amount as a result of a discount granted to the persons insured under a health insurance scheme?(2) In the event that this is answered in the affirmative: Is it contrary to the principles of neutrality and equal treatment in the internal market if a pharmacy in the national territory is able to reduce the taxable amount, but a pharmacy which supplies the statutory health insurance fund by means of an intra-Community, tax-exempt supply from another Member State is not able to do so?’

Admissibility of the request for a preliminary ruling

29The German Government contends that the reference for a preliminary ruling is inadmissible on the ground that the questions referred are irrelevant to the outcome of the main proceedings and hypothetical.

30The German Government observes that it is common ground that the supplies in question in the present case were intra-Community and VAT-exempt in the Member State where the supply began, namely the Netherlands, under Directive 2006/112. Therefore, since there is no taxable amount for supplies, no reduction is possible under Article 90 of that directive. In that respect, the German Government also notes that, in the case in the main proceedings, Firma Z did not reduce the taxable amount for supplies it made to the statutory health insurance fund, but did reduce the taxable amount for supplies to persons covered by a private health insurance scheme, even though there was no connection between the taxable amount and the supplies to the statutory health insurance fund.

31According to the German Government, the issue of whether the taxable amount may be reduced is irrelevant to the outcome of the case in the main proceedings since such a reduction would apply only to pharmacies established in Germany, where the supply of medicinal products is not tax-exempt but taxable.

32In any event, German legislation prohibits pharmacies established in Germany from granting discounts on medicinal products.

33Firma Z also takes the view that the request for a preliminary ruling is inadmissible since there is a direct supply link between it and those covered by statutory health insurance. Therefore, the price deductions directly reduce the taxable amount and the two questions posed by the referring court are irrelevant, while the preliminary question regarding the nature of the Firma Z’s relationship with those persons should be examined.

34The Court considers that, according to settled case-law, in the context of the cooperation between the Court and the national courts and tribunals provided for in Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU law, the Court is, in principle, bound to give a ruling (judgment of 24 November 2020, Openbaar Ministerie (Irregularity), C‑510/19, EU:C:2020:953, paragraph 25 and the case-law cited).

35It follows that questions relating to EU law enjoy a presumption of relevance. The Court may refuse to rule on a question referred by a national court for a preliminary ruling only where it is quite obvious that the interpretation of EU law that is sought bears no relation to the actual facts of the main action or its subject matter, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, to that effect, judgment of 24 November 2020, Openbaar Ministerie (Irregularity), C‑510/19, EU:C:2020:953, paragraph 26 and the case-law cited).

36In the present case, according to the request for a preliminary ruling, the referring court entertains doubts as to the interpretation and application of Article 90(1) of Directive 2006/112 regarding the right of a pharmacy established in one Member State to a reduction in their taxable amount where (i) it supplies medicinal products in another Member State to a national statutory health insurance fund as part of a transaction falling within the scope of VAT in that Member State, and (ii) it grants a discount to a person insured by that fund who receives the medicinal product as part of a second supply falling outside the scope of VAT. In that respect, the referring court has adequately and precisely set out the facts giving rise to the main proceedings and the legal background thereof, from which it is apparent that the questions referred are not hypothetical.

37Furthermore, as regards Firma Z’s arguments, it should be noted that the referring court pointed out, with particular regard to national health insurance law, that it entertained no doubts as to the nature of the service relationships in question. In that respect, it should be noted that, under Article 267 TFEU – which is based on a clear separation of functions between the national courts and tribunals and the Court – any assessment of the facts in the case is a matter for the national court or tribunal. In particular, the Court is empowered only to give rulings on the interpretation or the validity of an EU provision on the basis of the facts which the national court or tribunal puts before it. On the other hand, it falls exclusively to the referring court to interpret national legislation. It is for the national court alone, in their preliminary rulings, to define the subject matter of the questions which it wishes to refer to the Court. The Court cannot, at the request of one party to the main proceedings, examine questions which have not been submitted to it by the national court or tribunal (see, to that effect, the order of 7 October 2013, Società cooperativa Madonna dei miracoli, C‑82/13, EU:C:2013:655, paragraph 11 and the judgment of 11 June 2015, Berlington Hungary and Others, C‑98/14, EU:C:2015:386, paragraph 48).

38It follows, first, that the interpretation of EU law sought in the present case is related to the subject matter of the main proceedings and, second, that the questions raised are not hypothetical in nature, without there being any need to examine the nature of Firma Z’s relationship with the persons covered by statutory health insurance.

39The reference for a preliminary ruling is therefore admissible.

The first question

40By its first question, the referring court asks, in essence, in the light of the principles laid down by the Court in the judgment of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400), whether Article 90(1) of Directive 2006/112 must be interpreted as meaning that a pharmacy established in one Member State may reduce its taxable amount where it carries out intra-Community supplies of pharmaceutical products, those supplies being VAT-exempt in that Member State, to a statutory health insurance fund established in another Member State and it grants a discount to the persons covered by that insurance.

41Article 90(1) of the Directive 2006/112 provides that, in the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount is to be reduced accordingly under conditions which are to be determined by the Member States.

42In the present case, it is clear from the order for reference that, in the particular circumstances of the main proceedings, there are two supplies relating to the pharmaceutical products in question: one by the pharmacy to the statutory health insurance fund and the other by that fund to those persons insured through that fund. On the one hand, the first supply is an intra-Community supply which, under Article 138(1) of Directive 2006/112, is tax-exempt in the Netherlands. Thus, the statutory health insurance fund is required to pay VAT as a legal person on the acquisition associated with that supply under Article 2(1)(b)(i) of that directive. On the other hand, the second supply made by the statutory health insurance fund to persons it insures does not fall within the scope of VAT under Article 2(1)(a) of Directive 2006/112.

43In so far as Firma Z does not have a taxable amount capable of being adjusted, it must be held that the conditions for applying Article 90(1) of Directive 2006/112 are not fulfilled.

44Moreover, it is clear from the information in the order for reference that, as a result of a discount granted to persons covered by statutory health insurance, Firma Z sought to benefit from a reduction in its taxable amount in respect of supplies to persons insured under a private scheme. As both the referring court and the European Commission have rightly pointed out, offsetting the reduction to the taxable amount for one transaction when calculating the taxable amount for another transaction is precluded under the common VAT system.

45As far as concerns the judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400), the Court held, in that judgment, that when a manufacturer of a product who, having no contractual relationship with the final consumer but being the first link in a chain of transactions which ends with the final consumer, grants a price reduction to that final consumer, that reduction must, in accordance with the Court’s case-law, be deducted from the taxable amount for VAT purposes (judgment of 16 January 2014, Ibero Tours, C‑300/12, EU:C:2014:8, paragraph 29).

46The Court added that, otherwise, the Tax Office would receive by way of VAT a sum greater than that actually paid by the final consumer, at the expense of the taxable person (judgment of 24 October 1996, Elida Gibbs, C‑317/94, EU:C:1996:400, paragraph 31).

47As is clear from paragraph 43 of the present judgment, in so far as Firma Z does not have a taxable amount capable of being adjusted and the conditions for applying Article 90(1) of Directive 2006/112 are therefore not met, an examination does not need to be carried out in these circumstances as to the existence of a potential chain of transactions within the meaning of the judgment of 24 October 1996, Elida Gibbs, (C‑317/94, EU:C:1996:400).

48In the light of all the foregoing considerations, the answer to the first question is that Article 90(1) of Directive 2006/112 must be interpreted as meaning that a pharmacy established in one Member State may not reduce its taxable amount where it carries out intra-Community supplies of pharmaceutical products, those supplies being VAT-exempt in that Member State, to a statutory health insurance fund established in another Member State and it grants a discount to those persons covered by that insurance.

The second question

49Having regard to the answer to the first question, it is not necessary to answer the second question.

Costs

50Since 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 (Seventh Chamber) holds: Article 90(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 pharmacy established in one Member State may not reduce its taxable amount where it carries out intra-Community supplies of pharmaceutical products, those supplies being exempt from value added tax in that Member State, to a statutory health insurance fund established in another Member State and it grants a discount to those persons covered by that insurance.