The European Court of Justice ruled that the transmission of the right to fish by means of a transfer of fishing permits for valuable consideration constituted a supply of services connected with immovable property within the meaning of art. 9(2)(a) of Council Directive 77/388 (‘the sixth directive’). Accordingly the place of supply of those services was the place where the property was situated.

Facts

The taxpayer was a company established in Germany, which had no business premises in Austria. In 1997 and 1998, it bought fishing quotas for a river in Upper Austria from a company established in Austria (‘F’). Those permits authorised their holders to fish on certain stretches of that river at certain times of year.

The taxpayer sold on those permits to a large number of customers residing in different member states. In addition to the sale price of the permits, F invoiced the taxpayer for Austrian VAT at a rate of 20 percent.

The taxpayer subsequently applied to the competent Austrian authority for refund of the VAT paid in relation to the acquisition of fishing permits in 1997 and 1998, relying on the provisions transposing Council Directive 79/1072 (‘the eighth directive’), dealing with the arrangements for the refund of VAT in respect of cross-border supplies, into Austrian law. That application was rejected on the ground that the onward sale of the fishing permits by the taxpayer to its customers constituted a supply of services connected with immovable property situated in Austria, so that a refund of the input VAT paid could not be given. The taxpayer appealed and the national court stayed the proceedings and referred to the ECJ for a preliminary ruling on the interpretation of art. 9(2)(a) of the sixth directive.

Issue

Whether art. 9(2)(a) meant that the transfer, for valuable consideration, of fishing permits for a river constituted a supply of services connected with immovable property within the meaning of that provision.

Decision

The European Court of Justice (Third Chamber), ruling accordingly, said that art. 9(1) of the sixth directive contained a general rule for determining the place of supply for tax purposes whilst art. 9(2) gave a number of specific instances of such places. However, art. 9(1) in no way took precedence over art. 9(2). In each situation, the question was whether it corresponded to one of the instances mentioned in art. 9(2). If not, that situation fell within the scope of art. 9(1). It followed that art. 9(2)(a) was not to be regarded as an exception to a general rule, which had to be narrowly construed. It was therefore necessary to examine whether a transaction such as the present could fall within the ambit of art. 9(2). In order that the onward sale of the fishing permits in question might be regarded as a supply of services connected with immovable property within art. 9(2)(a), it was necessary first of all that the transmission of those rights constituted a ‘supply of services’ and that the stretches of river to which the permits related could be classified as ‘immovable property’. Since it did not appear that Austria had made use of the option granted to member states by art. 5(3) of the sixth directive to treat certain interests in immovable property and/or certain rights in rem giving the holder thereof a right of user over such goods, as ‘tangible property’, the transmission for valuable consideration of the fishing rights in question could not be classified as a supply of goods within the meaning of art. 5(1). That transmission therefore constituted a supply of services within art. 6(1).

One of the essential characteristics of immovable property was that it was attached to a specific part of the earth's surface. A piece of land which was permanently delimited, even if it was underwater, could be classified as immovable property (see Fonden Marselisborg Lystb°adehavn v Skatteministeriet (Case C-428/02) [2005] ECR I 1527, para. 34). Fishing rights such as those acquired and sold on by the taxpayer allowed the exercise of such a right over certain very specific parts of the stretch of water concerned. Those rights, which related not to the quantities of water which flowed in the river and were constantly replaced, but to certain geographical areas, where those rights might be exercised, were thus connected with a surface covered in water, which was permanently delimited. Consequently, the stretches of river to which the fishing permits related had to be regarded as immovable property within art. 9(2)(a). The connection between the service in question and the immovable property had to be sufficient since it would be contrary to the general scheme of art. 9(2)(a) to place within the scope of that special rule every supply of services provided that it had a connection, even a very tenuous one, with immovable property, since a large number of services were connected in one way or another with immovable property. Thus, only supplies of services which had a sufficiently direct connection with immovable property came under art. 9(2)(a). Such a connection was moreover characteristic of all the supplies of services listed in that provision.

The fishing rights at the centre of the dispute in this case could be exercised only in relation to the river in question and on the stretches of that river mentioned in the permits. The stretch of water itself, therefore, made up a constituent element of the fishing permits and, accordingly, of the transmission of the fishing rights. Since a supply of services such as that in question consisted in the transmission of an actual right of use of the property, in this case the river, that immovable property constituted a central and essential element of that supply. Furthermore, the place where the immovable property was situated was the place of final consumption of the service. It followed that there was a sufficiently direct connection between the transmission of fishing permits and the stretches of water to which they related. Consequently, a service such as that provided by the taxpayer was connected with immovable property within the meaning of art 9(2)(a).

European Court of Justice (Third Chamber). Judgment delivered
7 September 2006.