The European Court of Justice (Third Chamber) ruled that, under art. 13(B)(b) of Council Directive 77/388 (the sixth directive), the grant for consideration, under a contract for a period of ten years, of the right to fish, by the landowner in waters owned by that person and by the holder of fishing rights in publicly owned waters, did not constitute either a leasing or a letting of immovable property, since that grant did not confer the right to occupy the immovable property concerned and to exclude any other person from it.

Facts

The taxpayer managed an agricultural and forestry holding in Austria. The transactions which she carried out in the course of her business were subject to the general provisions of the VAT system. In 1995 the taxpayer and an angling club entered into a contract for a period of ten years. Under that contract the angling club had the right, on payment of a consideration, to fish, first, in two ponds located within the taxpayer's holding, where she had the fishing rights in her capacity as the land owner, and secondly, in publicly owned fishing waters where the taxpayer had fishing rights registered in the Fisheries register. The taxpayer did not pay VAT in respect of those lettings and the tenants were not invoiced for VAT.

Following a tax inspection for the years 1998 to 2000, the tax authority determined that those lettings should be subject to VAT at the normal rate, since the income obtained from the lettings in question was not received on the basis of a letting, exempted under the national law, of a right in rem to immovable property. The tax authority took the view that the right to fish was a right which was independent of the land. On appeal the national court referred to the European Court of Justice the issue whether the fees paid under the contract between the taxpayer and the angling club were exempt from VAT under art. 13(B)(b) of the sixth directive.

Issue

Whether the grant of the fishing rights constituted ‘a leasing or letting of immovable property’ within the meaning of art. 13(B)(b).

Decision

The European Court of Justice (Third Chamber) (ruling accordingly) said that in the absence of a definition of ‘leasing’ and ‘letting of immovable property’ in art. 13(B)(b), the court had defined the letting of immovable property, within the meaning of that provision, as the landlord of property assigning to the tenant, in return for rent and for an agreed period, the right to occupy his property and to exclude any other person from it. In accordance with the case law, the terms used to specify the exemptions provided for by art. 13, including ‘leasing’ and ‘letting of immovable property’ were to be interpreted strictly. An area which was wholly or partly underwater could itself be categorised as immovable property that could be leased or let. All the criteria of the definition of leasing or letting of immovable property had to be satisfied, including, in particular, the criterion that the leasing or letting of immovable property conferred the right to occupy that property and to exclude any other person from it. That was not the case on the facts of this case.

Under the contract entered into by the taxpayer and the angling club, the club only had the right to fish in the bodies of water concerned. It was also clear from the documents submitted to the court that the provisions of the contract of let stated that the taxpayer reserved the right to fish in those waters for herself and for one guest per day authorised by her. Accordingly, under the contract in the main proceedings, the angling club did not have any right to exclude any other person from use either of the waters owned by the taxpayer or of the publicly owned waters where she had fishing rights registered in the Fisheries register.

Consequently, it was unnecessary to rule on the issue whether a contract which granted fishing rights, such as that at issue in the main proceedings, related to immovable property, since the court had to hold that one of the elements in the definition of the Community law concepts of leasing or letting immovable property which were employed within the Community system of VAT was lacking in the present case, given that the contract for that grant, at issue in the main proceedings, did not confer on the angling club the right to occupy the immovable property concerned and to exclude any other person from it. European Court of Justice (Third Chamber).

European Court of Justice (Third Chamber)
Judgment delivered 6 December 2007.