C-144/00 Hoffmann

JUDGMENT OF THE COURT (Sixth Chamber)

Legal context and the dispute

3 April 2003 *

In Case C-144/00,

REFERENCE to the Court under Article 234 EC by the Bundesgerichtshof (Germany) for a preliminary ruling in the criminal proceedings before that court against

Matthias Hoffmann,

on the interpretation of Article 13A(1)(n) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1),

* Language of the case: German.

THE COURT (Sixth Chamber),

composed of: J.-P. Puissochet (Rapporteur), President of the Chamber, R. Schintgen, V. Skouris, F. Macken and J.N. Cunha Rodrigues, Judges,

Advocate General: L.A. Geelhoed, Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

— Mr Hoffmann, by A.J. Rädler, Steuerberater and M. Lausterer, Rechtsanwalt,

— the German Government, by W.-D. Plessing and T. Jürgensen, acting as Agents,

— the Netherlands Government, by M.A. Fierstra, acting as Agent,

— the United Kingdom Government, by J.E. Collins, acting as Agent, and by A. Robertson, Barrister,

— the Commission of the European Communities, by G. Wilms and K. Gross, acting as Agents, having regard to the Report for the Hearing,

after hearing the oral observations of Mr Hoffmann, represented by A.J. Rädler and M. Lausterer, of the German Government, represented by M. Lumma, acting as Agent, and of the Commission, represented by G. Wilms and K. Gross, at the hearing on 3 October 2002,

after hearing the Opinion of the Advocate General at the sitting on 14 November 2002,

gives the following

Judgment

1By order of 5 April 2000, received at the Court on 17 April 2000, the Bundesgerichtshof (Federal Court of Justice, Germany) referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Article 13A(1)(n) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive').

2The questions were raised in the course of an appeal on a point of law before the Bundesgerichtshof by Mr Hoffman, a concert promoter, following his conviction for, among other things, not having paid value added tax (hereinafter 'VAT') on the fees paid to three soloist singers for concert engagements in Germany.

Community law

3Article 13 of the Sixth Directive governs certain exemptions from VAT. It provides among other things:

'A. Exemptions for certain activities in the public interest

1. Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:

(n) certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned;

2. (a) Member States may make the granting to bodies other than those governed by public law... of [the] exemption provided for in [paragraph] (1)... (n) subject... to one or more of the following conditions:

— they shall not systematically aim to make a profit, but any profits nevertheless arising shall not be distributed, but shall be assigned to the continuance or improvement of the services supplied,

— they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned,

— they shall charge prices approved by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax,

— exemption of the services concerned shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.

(b) The supply of services or goods shall not be granted exemption as provided for in [paragraph] (1)... (n) above if:

— it is not essential to the transactions exempted,

— its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.

...'

National law

4The Umsatzsteuergesetz (Law on value added tax, hereinafter 'the UStG'), contains Paragraph 4, entitled 'Exemption of supplies of goods and services', which provides inter alia:

'... the following are exempt:

20.(a) The activities of the following bodies of the Federal State, the Länder (Lands), and of local authorities and associations thereof: theatres, orchestras, chamber music ensembles, choirs, museums, botanical gardens, zoos, animal parks, archives, libraries, monuments and classified parks. The same provisions apply to the activities of similar bodies belonging to other taxable persons if the competent authority of the Land certifies that they fulfil the same cultural functions as the bodies mentioned in the first sentence....

(b) The organisation of theatrical performances and concerts by other taxable persons, if they are performed by the theatres, orchestras, chamber music ensembles or choirs mentioned in subparagraph (a).'

5Paragraph 18 of the UStG, entitled 'Taxation Procedure', provides, in subparagraph 8(1):

'To ensure the recovery of the tax, the Federal Ministry of Finance may, with the agreement of the Bundesrat (Upper House of Parliament), by order require that tax on the following transactions is to be retained and paid by the recipient:

1. transactions effected by taxable persons established abroad'.

6Such a procedure has effectively been put in place in the Federal Republic of Germany.

7The Umsatzsteuer-Richtlinien (Guidelines for the interpretation and administration of turnover tax) state, with regard to the exempt persons mentioned in Paragraph 4(20) of the UStG:

'(1) All groups of musicians and vocal ensembles consisting of two or more participants are treated as orchestras, chamber music ensembles or choirs. The type of music is not to be taken into account. Consequently, light music groups may also come within this provision.

(2) The tax exemption of concerts is not precluded by the participation therein of soloists provided that the whole performance retains its character as a concert. That condition may be regarded as satisfied, for example, in relation to concerts at which oratorios are performed. The same applies to the organisation of concerts [Paragraph 4(20)(b) of the UStG].'

The main proceedings and the questions referred

8Mr Hoffman organised the world tour of three great solo singers established outside Germany who appeared together in a series of concerts. For their two concerts in Germany, he obtained from the competent cultural authorities certificates that his organising activities' were 'equivalent' to those mentioned in Paragraph 4(20)(a) of the UStG. The German Government has however stated, in the course of these proceedings, that those certificates were not binding on the tax authorities on the question whether the three soloists each constituted a 'body' within the meaning of that provision.

9Mr Hoffman did not deduct any VAT from the fees paid to the three soloists and did not pay that tax. He was prosecuted for tax evasion, for those actions among others, before the Landgericht (Regional Court of Justice), Mannheim (Germany). In his defence he maintained that, in view of the certificates which had been issued to him by the cultural authorities, he did not have to pay VAT on the fees of the three soloists.

10By judgment of 22 December 1998, the Landgericht sentenced Mr Hoffman to a term of imprisonment.

11That court held that the exemption under Paragraph 4(20)(a) of the UStG did not apply to the services of the three artists appearing as soloists, as the exemption only applied to 'bodies', which would exclude individual artists. The Landgericht concluded that, at the concerts in question, the personality of each of the soloists, and not the overall performance, was to the forefront and that the musical arrangement was tailored to the services of each of them. The Landgericht noted also that a separate contract was made with each of the artists, with the result that the services were not those of a duet or a trio.

12According to the Landgericht, its interpretation of Paragraph 4(20)(a) of the UStG is not contrary to Article 13A(l)(n) of the Sixth Directive. Article 13A(2) of that directive leaves it to Member States to make the tax exemption for cultural services by persons other than public-law bodies subject to certain conditions, among which are the absence of a systematic aim to make a profit and management and administration on an essentially voluntary basis. The Community legislature thus considered that it is above all bodies which are economically weak and particularly serving the public interest which deserve to be exempted from VAT. According to the Landgericht, the Member States are thus free to adopt or not the exemptions made possible by the Sixth Directive and, in any event, the exemptions under Article 13A thereof cannot apply to natural persons.

13Mr Hoffmann appealed on a point of law to the Bundesgerichtshof against the judgment of the Landgericht, arguing, essentially, that the refusal to apply the tax exemption to soloists constituted discrimination contrary to Community law.

14In that regard, the Bundesgerichtshof observes that, in Case C-216/97 Gregg [1999] ECR 1-4947, the Court held, in respect of Article 13A(l)(b) and (g) of the Sixth Directive, that the terms 'establishment' and organisation' used therein are sufficiently broad to include natural persons as well. It is true that those terms suggest the existence of an individualised entity performing a particular function, but that condition can be satisfied not only by legal persons, but also by one or more natural persons running a business.

15According to the Bundesgerichtshof, everything suggests that a uniform interpretation must be placed on the term 'bodies recognised' in Article 13A(1)(n) of the Sixth Directive and consequently performances by 'soloists' as natural persons can fall within the scope of the exemption from VAT. In addition, the principle of fiscal neutrality, inherent in the VAT system and cited by the Court in Case C-283/95 Fischer [1998] ECR I-3369, also precludes traders who carry on similar activities from being treated differently as regards taxation.

16In those circumstances the Bundesgerichtshof decided to refer the following questions to the Court for a preliminary ruling:

'(1) Is Article 13A(1)(n) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) to be interpreted as meaning that the term "other [recognised] cultural bodies" used therein also covers a soloist who supplies cultural services?

(2) If the first question is answered in the affirmative, do restrictions arise from the heading "... certain activities in the public interest" chosen in Article 13A, for example where performances by soloists serve primarily commercial purposes?'

The first question

17Mr Hoffmann and the Commission argue that in Gregg, cited above, the Court abandoned its earlier case-law following from its judgment in Case C-453/93 Bulthuis-Griffioen [1995] ECR I-2341, according to which the benefit of the exemptions set out in Article 13A(1) of the Sixth Directive was reserved exclusively to legal persons. They point out in particular that the Court held, at paragraph 18 in Gregg, that the meaning of 'organisation' covers an individualised entity performing a particular function, and that it is a condition capable of being satisfied both by legal persons and by one or more natural persons running a business. Similarly, the Court held, at paragraphs 19 and 20 of that judgment, that that interpretation is consistent with the principle of fiscal neutrality inherent in the common system of VAT which precludes economic operators carrying on the same activities in a similar situation from being treated differently as far as the levying of VAT is concerned. Mr Hoffmann and the Commission therefore submit that soloists can be bodies within the meaning of Article 13A(1)(n) of the Sixth Directive.

18According to the German, Netherlands and United Kingdom Governments, it-follows from consistent case-law that the exemptions set out in Article 13 of the Sixth Directive must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration (Case C-2/95 SDC [1997] ECR 1-3017, paragraph 20, and Gregg, cited above, paragraph 12).

19The wording and scheme of Article 13A(1)(n) of the Sixth Directive show that only 'certain' cultural services, and supplies of goods which are 'closely' linked to them, may be exempted from VAT. Furthermore, those services must be supplied by specific 'bodies', the Member States having in that regard a discretion as to the bodies other than public-law bodies which they recognise.

20According to those governments, although the Court, in Gregg, applied the term 'organisation' to natural persons, so that the principle of fiscal neutrality was observed, it did not, however, assimilate natural persons generally to recognised organisations. It stated that natural persons can be 'organisations' within the meaning of the provisions in question only if they call on a set of human and material resources for their activity. A soloist cannot therefore be considered as a 'body' because a set of human and material resources and the organisational structure which that implies is manifestly lacking, contrary to the case of a choir, an orchestra or a chamber music ensemble.

21Finally, assuming that soloists can be categorised as 'bodies', the discretion of the Member States in the application of Article 13A(1)(n) of the Sixth Directive must be taken into account. Since the exemption from VAT of bodies other than public-law bodies is expressly subjected to their 'recognition' by the Member State, the national legislature may exclude individual artists from the benefit of that exemption.

22The principle of fiscal neutrality does not preclude this. There is no distortion of competition unless cultural services of the same type are subjected without justification to a different regime. The services of soloists and of 'bodies' are different. The services of soloists are very markedly personal. They are linked to their reputation and are therefore not comparable to those of choirs, orchestras or chamber music ensembles.

23Article 13A(2)(a) of the Sixth Directive authorises Member States to apply one or more of the conditions set out therein to bodies wishing to lake advantage of the provisions of Article 13A(1)(n) of the Sixth Directive. The first two of those conditions (not having a systematic aim to make a profit and those responsible for the management and administration being volunteers) show clearly that the word 'bodies' covers entities which carry on activities in the public interest, and not individuals carrying on their activities alone. The non-profit-making condition cannot apply to a person pursuing an individual activity. Likewise, it would be impossible for an individual to be 'managed and administered' on an essentially voluntary basis by a person with no direct financial interest in the activities of that individual.

24In that regard it must be noted that, at paragraph 17 of the judgment in Gregg, the Court held, in relation to Article 13A(1)(b) and (g) of the Sixth Directive, in respect of certain social and medical services, that the term 'organisation' is in principle sufficiently broad to include natural persons as well, and that the exemptions referred to in that provision are not confined to the activities carried on by legal persons, but may also extend to activities carried on by individuals. The Court stated, at paragraph 18 of the same judgment that, while the meaning of 'organisation' suggests the existence of an individualised entity performing a particular function, that condition is also satisfied by one or more natural persons running a business.

25There is no reason to depart from that view in relation to the cultural services mentioned in Article 13A(1)(n) of the Sixth Directive, with regard to performers supplying services individually such as solo singers.

26In particular, such performers may, in the same way as a cultural group, carry on their activity professionally, semi-professionally or on an amateur basis and do so either on a profit-making basis, or without payment or, as the case may be, on an expenses-only basis. In those various cases, even if the performer supplies his services entirely by his own means, and whatever the legal form he has chosen for his activity, he appears as an individualised entity carrying on a cultural activity, in the same way as a cultural group.

27Consequently, the principle of fiscal neutrality requires that individual performers, as long as their services are recognised as cultural, may be regarded, like cultural groups, as bodies similar to public-law bodies supplying certain cultural services mentioned in Article 13A(1)(n) of the Sixth Directive.

28It is in the context of the application of Article 13A(2)(a) of the Sixth Directive that the Member States may, if they so wish, for individual artists as for cultural groups, make the exemptions set out in paragraph 1(n) of the same provision for certain cultural services subject to one or more conditions set out therein, in particular to the absence of a systematic profit-making aim and to the essentially voluntary nature of the organisation of the cultural services in question.

29Similarly, if they comply with the obligation laid down by Article 13A(2)(b) of the Sixth Directive of excluding from the exemption supplies of services and goods which are not essential to the cultural activity in question or whose basic purpose is to obtain for those concerned additional income by carrying out transactions which are in direct competition with those of commercial enterprises liable for VAT, the Member States must treat individual performers and cultural groups in the same way.

30The reply to the first question must therefore be that Article 13A(1)(n) of the Sixth Directive is to be interpreted to the effect that the expression 'other [recognised] cultural bodies' does not exclude soloists performing individually.

The second question

31By its second question the referring court is asking, essentially, whether the heading, by itself, of Article 13A of the Sixth Directive, which refers to '[exemptions for certain activities in the public interest', entails restrictions to the possibilities of exemption provided for by that provision, in particular if the services in question are provided primarily for commercial purposes.

32Mr Hoffmann submits that the Member States may not apply Article 13A of the Sixth Directive by establishing criteria for the refusal of exemption other than those specifically laid down by that provision. In addition, the establishment of criteria for refusal must comply with the principle of equal treatment, as is clear, in particular, from the judgment in Case C-36/99 Idéal Tourisme [2000] ECR I-6049, paragraph 36.

33According to the German Government, the heading of Article 13A of the Sixth Directive does not in itself entail any restriction on the choice by the Member States of the bodies which may enjoy recognition entitling them to the right to exemption from VAT.

34The Netherlands Government asserts that it is possible to exclude cultural bodies pursuing commercial purposes from the exemption under Article 13A of the Sixth Directive, which concerns 'certain activities in the public interest', since, according to paragraph 1(n) of that provision, those entitled to exemption must be recognised by the Member States which may refuse such recognition. In addition, the Netherlands Government points out that the Member States may, on the basis of Article 13A(2) of the Sixth Directive, subject the grant of exemption to bodies other than public-law bodies to the condition that they do not have a systematic profit-making aim.

35According to the United Kingdom Government, the heading of Article 13A of the Sixth Directive indicates that the exemptions provided for by that provision must be restricted to activities in the public interest. Therefore, Article 13A(1)(n) of the Sixth Directive is to be interpreted restrictively, in such a way that only cultural activities carried on in the public interest are exempted and not those carried on solely for profit.

36The Commission points out that, in accordance with Article 13A(2)(a) of the Sixth Directive, the Member States may lay down restrictions on the exemption for bodies with a systematic profit-making aim. In addition, paragraph (b) of that provision entails restrictions on the possibilities of exemption set out in Article 13A(1)(n) of the Sixth Directive, particularly where the exemption is capable of distorting competition. In the main proceedings, it is for the court-adjudicating on the substance of the case to determine whether the performances in question were intended to obtain additional income for Mr Hoffmann's business, whether he was in competition with commercial enterprises subject to VAT and whether the grant of the exemption would distort competition.

37In that regard, it must be observed that the heading of Article 13A of the Sixth Directive, the wording of which is 'Exemptions for certain activities in the public interest', does not, of itself, entail restrictions on the possibilities of exemption provided for by that provision.

38First, the activities which are to be exempted from VAT, those which may be exempted by the Member States and those which may not, as well as the conditions to which the activities eligible for exemption may be made subject by the Member States, are specifically defined by the content of Article 13A of the Sixth Directive. Second, as is confirmed by paragraph 2(a) of that article, which authorises, but does not oblige, the Member States to restrict exemption to bodies other than public-law bodies which do not have a systematic profit-making aim, the commercial nature of an activity does not preclude it from being, in the context of Article 13A of the Sixth Directive, an activity in the public interest.

39The possible restrictions on the benefit of the exemptions provided for by Article 13A of the Sixth Directive may be imposed, as is pointed out at paragraphs 28 and 29 of this judgment, only in the context of the application of paragraph 2 of that provision.

40The reply to the second question must therefore be that the heading of Article 13A of the Sixth Directive does not, of itself, entail restrictions on the possibilities of exemption provided for by that provision.

Costs

Costs

41The costs incurred by the German, Netherlands and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the case pending before the referring court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Bundesgerichtshof by order of 5 April 2000, hereby rules:

1. Article 13A(1)(n) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, is to be interpreted to the effect that the expression 'other [recognised] cultural bodies' does not exclude soloists performing individually.

2. The heading of Article 13A of that directive does not, of itself, entail restrictions on the possibilities of exemption provided for by that provision.

Puissochet Schintgen Skouris

Macken Cunha Rodrigues

Delivered in open court in Luxembourg on 3 April 2003.

R. Grass J.-P. Puissochet

Registrar President of the Sixth Chamber

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 14 November 2002 1

I — Introduction

1In this case the Bundesgerichtshof (Federal Court of Justice), Germany, has submitted two questions on the interpretation of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment 2 (hereinafter 'the Sixth Directive'). The factual background to those questions is a series of performances by the three tenors Luciano Pavarotti, Placido Domingo and José Carreras. To what extent is VAT chargeable on those performances?

2Those questions relate more particularly to Article 13A of the Sixth Directive, which exempts certain activities in the public interest from VAT. The exempt activities include cultural services supplied by cultural bodies. The national court seeks to

1 — Original language: Dutch.

2 — OJ 1977 1. 145, p. 1.

ascertain whether soloists can be regarded as cultural bodies. The national court also asks whether performances by soloists which have a primarily commercial aim can be activities in the public interest.

3The questions afford the Court the opportunity to refine the Gregg judgment. 3 In that judgment the Court ruled that also natural persons may — under certain conditions — be regarded as charitable organisations for the purposes of Article 13A of the Sixth Directive.

II — The legal framework

A — European law

4Article 13A(1) requires the Member States to exempt certain activities in the

3 — Case Case C-216/97 Gregg V Commissioners of Customs & Excise [1999] ECR I-4947.

public interest from VAT. That provision reads, in so far as is relevant: 'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible each individual case to one or more of the following conditions:

evasion, avoidance or abuse: — they shall not systematically aim to make a profit, but any profits nevertheless arising shall not ;be distributed, but shall be assigned to the continuance or — improvement of the services supplied, (n) certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned.'

they shall be managed and administered on an essentially voluntary basis by persons who have no direct or indirect interest, either themselves or through intermediaries, in the results of the activities concerned, — they shall charge prices approved by

5Article 13A(2) provides:

'(a) Member States may make the granting to bodies other than those governed by the public authorities or which do not exceed such approved prices or, in respect of those services not subject to approval, prices lower than those charged for similar services by commercial enterprises subject to value added tax, — exemption of the services concerned public law of each exemption provided for in (1)... (n) of this Article subject in shall not be likely to create distortions of competition such as to place at a disadvantage commercial enterprises liable to value added tax.

(b) The supply of services or goods shall not be granted exemption as provided for in (1)... (n) above if:

— it is not essential to the transactions exempted,

— its basic purpose is to obtain additional income for the organisation by carrying out transactions which are in direct competition with those of commercial enterprises liable for value added tax.'

6Article 28(3), introduction and (b), provides:

'During the transitional period referred to in paragraph 4, Member States may:

(b) continue to exempt the activities set out in Annex F under conditions existing in the Member State concerned.'

7Annex F gives a list of transactions which may be exempted pursuant to Article 28(3)(b). Point 2 of the Annex mentions:

'Services supplied by authors, artists, performers, lawyers and other members of the liberal professions, other than the medical and paramedical professions... .'

B — National law

8For the purposes of the main proceedings the Umsatzsteuergesetz (Law on Turnover Tax) 4 is of primary importance.

9Paragraph 4 of that Law excludes categories of supplies and services from VAT.

4 — In the version of 24 March 1999, BGBl. I, p. 402.

Activities which are carried out by certain public bodies are exempt under Paragraph 4(20)(a). Those bodies are: theatres, orchestras, chamber music ensembles, choirs, museums, botanical gardens, zoological gardens, archives, libraries and buildings and parks which are protected as national monuments. Those exceptions also apply to activities carried out by bodies of the same kind which are owned by other taxable persons (private bodies) in so far as the competent authority of a Land declares that they perform the same cultural functions as the public bodies listed in the previous sentence.

10Paragraph 4(20)(b) also exempts the organisation of theatrical performances and concerts in so far as these are carried out by the theatres, orchestras, chamber music ensembles or choirs referred to in Paragraph 4(20)(a).

11Paragraph 12 of the Umsatzsteuergesetz provides for a reduced rate of VAT for services provided by theatres, orchestras, chamber music ensembles, choirs and museums and the organisation of theatrical performances and concerts by other economic operators.

12Paragraph 18 of the Umsatzsteuergesetz lays down rules on the levying procedure. In order to ensure that tax is collected the Federal Minister for Finance may stipulate that tax payable in respect of a number of activities is to be paid by it being withheld by the person to whom the services are supplied. This applies inter alia to activities carried out by a taxable person who is established abroad. The Minister for Finance has used that power.

13The Umsatzsteuer-Richtlinien comprise guidelines for the tax authorities on turnover taxes. They give inter alia the following interpretation of Paragraph 4(20) of the Umsatzsteuergesetz:

— all groups of musicians and vocal ensembles consisting of two or more persons constitute orchestras, chamber music ensembles or choirs. The type of music is not relevant; the music may also be light music.

— the tax exemption for concerts also applies where soloists take part, provided that the event as a whole has the character of a concert. The same applies to the organisation of concerts.

III — Facts and procedure

14Matthias Hoffmann, the accused in the main proceedings, had run a concert office in respect of pop and (later also) classical music concerts since 1971. By the beginning of the 1990s he was one of the most important concert organisers in Germany. In 1996/1997 he organised the world tour of the three tenors Luciano Pavarotti, Placido Domingo and José Carreras. Two of the concerts on that world tour were held in Germany.

15Mr Hoffmann failed to withhold turnover tax on the fees paid to the three soloists and also failed to pay the tax concerned over to the German tax authorities. He was required to do so under the Umsatzsteuergesetz, 5 since the persons actually liable to pay VAT (the three soloists) were established abroad.

16Mr Hoffmann was convicted of tax fraud, in particular in connection with the above offence. By judgment of 22 December

5 —That obligation follows from Paragraph 18(8) of the Law and from implementing legislation. 'Fnat obligation is not under discussion in the proceedings before the Court. 1998 the Landgericht (Regional Court) sentenced him to a period of imprisonment.

17In so far as is relevant the Landgericht gives the following grounds for that conviction. The exemption provided for in Paragraph 4(20)(a) of the Umsatzsteuergesetz applies only to organisations, which excludes individual artists. In particular where performances by the three tenors are concerned, it is the case that the personality of each of them is foremost, and not the show as a whole. Moreover, a separate contract was concluded with each of them. The Landgericht submits, furthermore, that even according to a broad interpretation of the Umsatzsteuer-Richtli nien an organisation within the meaning of Paragraph 4(20)(a) of the Umsatzstcuerge-setz must consist of at least two members.

18The Landgericht does not consider that interpretation of the national legislation to be contrary to Article 13 of the Sixth Directive. Article 13A(2) empowers the Member States to make exemption from VAT for bodies other than public bodies subject to conditions. That paragraph of the Article mentions among the conditions that may be laid down inter alia that a body must not systematically aim to make a profit and that a body must be managed and administered on an essentially voluntary basis. The Community legislature is thereby indicating that the exemption is aimed primarily at economically weak bodies which serve the public interest.

19The Landgericht further states that the Member States are free to decide whether to exploit the exemptions from liability to pay VAT which are set out in Article 13A. In the view of the Landgericht those exemptions should not, in any case, be applicable to natural persons.

20In his appeal to the Bundesgerichtshof against his conviction, Mr Hoffmann argues that the failure to apply the VAT exemption infringes Community law. He claims that it constitutes unlawful discrimination. It is true that the Sixth Directive permits exemptions from the normal levying of VAT, with the national legislature having an 'additional power', but transposition into national law must not lead to results which run counter to the aims of Community law. If the number of persons involved is used as a criterion this is contrary to the purpose of the Sixth Directive, which is to ensure uniform taxation and thereby avoid distortion of competition. The accused refers in that connection to the changes in the case-law of the Court of Justice concerning charitable organisations, according to which, in 6 contrast with the Court's earlier view, the term 'organisation' is no longer applicable only to legal persons but also to natural persons (the Gregg judgment 7).

21The Public Prosecutor's Office takes a different position in the main proceedings.

6 — Case C-453/93 Bulthuis-Griffioen v Inspecteur der Omzetbelasting [1995] ECR I-2341.

7 — Cited in footnote 3.

The exemption from VAT is intended as a subsidy to certain public bodies. That subsidy relates to the fact that the public would not, the Public Prosecutor's Office maintains, be prepared to pay higher prices for cultural performances. The Public Prosecutor's Office submits that the case-law of the Court allows subsidisation in itself of undertakings by means of tax relief. The case-law merely prohibits undertakings from being placed at a disadvantage on the basis of their legal form. What is important is whether in this case the artists are to be treated in the same way as bodies which are assisted by the State.

22The Bundesgerichtshof subsequently made a reference for a preliminary ruling by order of 5 April 2000, which was received at the Registry of the Court on 17 April 2000, on the following questions:

1. Is Article 13A(1)(n) of the Sixth Council Directive to be interpreted as meaning that the term 'other [recognised] cultural bodies' used therein also covers a soloist who supplies cultural services?

2. If the first question is answered in the affirmative, do restrictions arise from the heading '... activities in the public interest' chosen in Article 13A, for example where performances by soloists serve primarily commercial purposes?

23In the proceedings before the Court, written observations have been submitted by Mr Hoffmann, the Commission and the German, Netherlands and United Kingdom Governments. At the hearing on 3 October 2002 Mr Hoffmann, the Commission and the German Government explained their positions orally.

IV — Relevant case-law

A — General

24It is a well-known fact that the Sixth VAT Directive generates a lot of Court of Justice case-law. This is true of the Directive in general and of Article 13A in particular.

25The large number of cases brought before the Court is the result, in my opinion, of the character of the Sixth Directive. That Directive is detailed in nature, particularly in the description of the many exemptions from the main rule laid down in the Sixth Directive, which is that VAT is always chargeable on a transaction. That detailed nature does not mean, however, that the scope of the exemptions is self-evident and it certainly does not-mean that it was possible for all — including future — situations to be covered by the wording of the Sixth Directive. On the contrary, a detailed body of rules such as this is by its nature incapable of covering a constantly changing reality. This applies all the more to a body of rules on taxation which itself can give rise to changes in legal or company constructs in order to avoid payment of taxation.

26The main line of reasoning in the Court's case-law relates to the characteristics outlined above. On the one hand that line of reasoning is strict. On the other, the Court looks at the legislature's aim in creating certain legal concepts. That case-law of the Court guides this Opinion.

27In the recent Commission v Germany judgment 8 the Court enumerates a number of elements which are important for this case. First of all the Court states that Article 2 of the Sixth Directive contains a definition of liability to VAT. That provision defines the transactions which are to be subject to VAT as the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such and the importation of goods. The Sixth Directive provides, particularly in Title X, of which Article 13 forms part, for exemption from VAT for certain categories of activity. An exemption for which no provision is made in the Sixth Directive constitutes a deviation from the general rule laid down in Article 2 of the Sixth Directive. Such a deviation can only be consistent with Community law if it is permitted in accordance with the provisions of that Directive.

28On this point the Court thus interprets the Sixth Directive strictly, in the sense that only exemptions for which express provision is made in the Sixth Directive are permitted. This interpretation follows from one of the Community legislature's most important starting points when it was drawing up the Sixth Directive. This was the equality of fiscal treatment, which was intended to combat distortion of competition. In this connection exceptions to

8 — Case C-287/00 [2002] ECR I-5811, paragraph 38 et seq. harmonisation must be interpreted strictly, since each exception results in further divergence of the level of the tax burden in the Member States. 9

29Following on from this I would mention a second of the Community legislature's starting points, fiscal neutrality. This refers to the Community legislature seeking to ensure that all economic activities, whatever their purpose or results, provided that they are themselves subject to 10 VAT, are taxed in a wholly neutral way.

30At this point I return to the Commission v Germany judgment. The Court regards the concepts used in Article 13 of the Sixth Directive as independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another. Title A exempts from VAT certain activities which are in the public interest. That provision does not however provide exemption from the application of VAT for every activity performed in the public

9 — See in this regard inter alia my Joined Opinion in Cases C-345/99 and C-40/00 Commission v France [2001] ECR I-4493 and I-4539, point 35 et seq.

10 — See inter alia the judgments in Cases 268/83 Rompelmann [1985] ECR 655, paragraph 19; 50/87 Commission v France [1988] ECR 4797, paragraph 15, and C-37/95 Ghent Coal Terminal [1998] ECR I-1, paragraph 15. interest, but only for those which are listed and described in great detail in it. 11 Most of those exemptions — including exemption (n), which is at issue here —• cover organisations acting in the public interest in a social, cultural, religious or sports setting or in a similar setting. The purpose of the exemptions is therefore to provide more favourable treatment, in the matter of VAT, for certain organisations whose activities are directed towards non-com 12 mercial purposes.

B — Article 13A(1)

31As regards the exemptions for cultural activities, I would refer to my Opinion in Commission v Finland, in which I reached the conclusion that the Community legislature had opted for a measured system of VAT on art. 13 Certain cultural activities may be exempt from VAT on the basis of Article 13 of the Sixth Directive, other activities may be exempt for a transitional period and Member States may apply a reduced rate of VAT to yet other activities.

32The exemptions provided for in Article 13 of the Sixth Directive are granted

11 — Paragraphs 44 and 45 of the judgment.

12 — Judgment in Case C-174/00 Kennemer Golf [2002] ECR I-3293, paragraph 19.

13 — Opinion in Case C-169/00 |2002| FCR I-2433.

in favour of activities pursuing specific objectives. Such activities are not always defined by reference to purely material or functional criteria. Most of the provisions — including exemption (n) — also define the bodies which arc authorised to 1 supply the exempted services. 4

33The Gregg judgment 15 is relevant in this connection. In that judgment the Court-gives an interpretation of the restriction of the exemption to activities undertaken by establishments or organisations. The Court states that those terms are in principle sufficiently broad to include natural persons as well. In employing those terms, the Community legislature did not intend to confine the exemptions to the activities carried on by legal persons, but meant to extend the scope of those exemptions to activities carried on by individuals. The terms 'establishment' and 'organisation' suggest the existence of an individualised entity performing a particular function, but that does not mean that normally only legal persons satisfy that condition. One or more natural persons running a business may constitute an 'establishment' or 'organisation'.

14 — See the judgment in Case 107/84 Commission v Germany [1985| FCR 2655, paragraph 13, and paragraph 11 of the Gregg judgment, cited in footnote 1.

15 — Cited in footnote 1.

34The Court bases that interpretation, which is broad in this respect, inter alia on the principle of fiscal neutrality. Economic operators carrying on the same activities may not be treated differently, on the basis of their legal form, as far as the levying of 16 VAT is concerned.

35Without prejudice to Article 13A(2), Member States may not lay down conditions which affect the definition of the subject-matter of the exemptions envisaged by Article 13A(1), the Court states in the Commission v Spain judgment. Only conditions intended to ensure the correct and straightforward application of the exemptions may be laid down. Those conditions refer to measures intended to prevent any 17 possible evasion, avoidance or abuse.

C — Article 13A(2)

36Article 13A(2) of the Sixth Directive specifies additional conditions which Member States may lay down for the granting of certain exemptions listed in

16 — See on these lines also the judgment in Case C-141/00 Ambulanter Pflegedienst Kügler [2002] ECR I-6833, paragraph 30.

17 — Judgment in Case C-124/96 [1998] ECR I-2501, paragraphs 11 and 12.

Article 13A(1). Those additional conditions may only be imposed where the exemption benefits bodies other than those governed by public law. The list of conditions contained in Article 13A(2) is exhaustive in 18 nature.

37The present case is concerned particularly with the conditions set out in the first two indents. The question is how much discretion the content of those indents allows the national legislature. Two recent judgments of 21 March 2002 are relevant in this connection, namely Kennemer 19 Golf and Zoological Society of Lon 20 don.

38The Kennemer Golf judgment provides an interpretation of the first indent. The Court states that the organisation in question must not aim to make a profit. Such an organisation may have a surplus at the end of an accounting year, but must not aim to make a profit in the sense of financial advantages for the organisation's members.

39The Zoological Society of London judgment deals with the second indent.

18 — As follows from paragraph 18 of the Commission v Spain judgment cited in footnote 17.

19 — Cited in footnote 12, in particular paragraph 32 et seq. 20 — Judgment in Case C-267/00 Zoological Society [2002] ECR I-3353, in particular paragraph 20 et seq.

The additional condition which requires a body to be managed and administered on an essentially voluntary basis is interpreted by the Court in the light of the legal context of that condition. The Community legislature intended, according to the Court, to make a distinction between the activities of commercial undertakings and those of bodies that do not aim to generate profits for their members. The aim of that condition is therefore to reserve VAT exemption for bodies which do not have a commercial purpose, by requiring that the persons who participate in the management and administration of such bodies have no financial interest of their own in their results, by means of remuneration, distribution of profits or any other financial interest, even indirect.

40Essentially, the second indent gives Member States the opportunity to interpret the public interest objective where the exemption benefits bodies other than those governed by public law. The Community legislature evidently proceeded on the assumption that the activities carried on by bodies governed by public law are by their nature in the public interest.

41The Community legislature also proceeds on the assumption that non-commer cial bodies are more likely than commercial bodies to serve the public interest. The Community legislature therefore expressly gives the Member States the power to treat the two categories of body differently in fiscal terms. That power even goes so far that the exemptions may result in a distortion of competition to the disadvantage of commercial undertakings which arc indeed subject to VAT, since the condition set out in the fourth indent — which is designed to combat distortion of competition — is optional in nature.

V — Assessment of the first question

A — Framework for the assessment

42The first question concerns the term 21 'cultural body' used in Article 13A(l)(n) of the Sixth Directive. Can a soloist — i.e. one natural person — be regarded as a body as well? That question cannot be answered without first defining the content and scope of the terms 'cultural service' and 'cultural body' contained in Article 13A(l)(n) of the Sixth Directive.

21 — IN the Dutch version of the text the word 'instelling' is used in item (n), wink' m other pans of Article 13A(1) 'innch-ting' and 'organisatie' are used. There is no significance in this termological difference. In many language versions including the French, English and German language versions) this difference is not made. Moreover, it can also he inferred from GREGG that the same thing is meant.

43I would point out for the record that paragraph (2) of Article 13A plays no part here. Quite apart from the fact that the referring court's question focuses on paragraph (1), paragraph (2) does not give the Member States the power to lay down conditions regarding the (minimum) size of a body. The list of conditions contained in paragraph (2) is exhaustive in nature.

44The question concerning interpretation essentially comprises four elements. In the first place it must be established which cultural services fall within the scope of the exemption provided for in Article 13A(1)(n). However, cultural services are not eligible for exemption in all cases. The exemption applies only where the services are supplied by certain cultural bodies. The second element concerns the significance of that restriction to certain bodies.

45The third element which I will discuss is the crux of the question referred, namely whether one natural person may also be deemed to be a body. The fourth element is connected with the interpretation which the German legislature has given this autonomous concept. Article 13A(1)(n) gives the Member States — as does paragraph (2) of Article 13A — discretion as far as bodies other than those governed by public law are concerned, since the VAT exemption need only be granted to cultural bodies that have been recognised by the Member State concerned. The Court must rule on the extent to which the national legislature may stipulate a minimum size for a body as a condition of its recognition.

46I will explain these elements in the light of the main lines of the case-law, which I have set out in the previous paragraph. To sum up: the provisions of Article 13A are autonomous concepts of Community law which must be interpreted strictly, where it is a matter of defining the scope of an exemption. The crux of Article 13A(1)(n) is the exemption of certain cultural activities. The restriction to certain bodies is in the nature of a derivation of this. Moreover, the discretion to differentiate between bodies which are and bodies which are not eligible for exemption must be assessed in accordance with the principle of fiscal neutrality.

B — Cultural services

47As I stated in point 31, the Community legislature opted for a measured system of VAT on art. Certain, but not all, cultural services are covered by the exemption provided for in Article 13A. Inspired by the Commission's observations, I would differentiate in the context of this case, which concerns classical concerts, between two services. The first service is the service supplied to the concert-goers in return for the purchase of an entry ticket. The purchase of the ticket entitles them to attend a concert or, in other words, to receive a cultural service. They may assert that entitlement against the other party, irrespective of whether that other party is the theatre in which the concert is being held, an independent organiser such as the accused in the main action in this case or the music group itself. According to the 22 legislative history of the Sixth Directive, the term 'cultural service' covers in any event services which are supplied to the public. The consideration for such services is constituted by the prices the public pays. There is no doubt that such services are exempt from VAT, provided of course that the other conditions laid down in Article 13A are satisfied. That conclusion is not contradicted in these proceedings.

48The services which Hoffmann supplied to the public (expressed in the sale of entry tickets) were, so it appears from the uncontested submissions to the Court, exempt from VAT. The main proceedings relate to a second service. At issue is the levying of VAT on the fee which Hoffmann, the

22 — See more extensively on this subject Terra and Kajus, Commentary on the Value Added Tax of the European Community, IBFD Publications 1993, Volume 2, p. 83. accused in the main proceedings, paid to the three soloists. In order to answer the question referred it is essential to examine whether also the service ensuing from the legal relationship into which the performing artist enters and which involves that artist giving the organiser of a concert an undertaking that he will perform falls within the scope of Article 13A(l)(n).

49It does not appear from the legislative history of the Sixth Directive in so many words that this service too comes under the VAT exemption. Moreover, provision was made in Article 28(3)(b) in conjunction with Annex F, point 2, of the Sixth Directive for a separate exemption from liability to VAT for a transitional period for services provided by performing artists (per f o r m e r s ). F u r t h e r m o r e, u n d er 23 Article 12(3)(a) of the Sixth Directive, the reduced rate of VAT may be applied. In view of the premiss underlying the Court's case-law — a strict interpretation of the exemptions from liability to VAT — these points militate in favour of keeping the service concerned outside the scope of Article 13A.

50Strikingly enough, the applicability of the VAT exemption to the fee paid to the

23 — According to the wording introduced by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388/EEC and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47). performing artist is not as such under discussion in the proceedings before the Court. Thus, the German Government too is of the opinion that after expiry of the transitional period referred to in Article 28(3) performing artists may continue to enjoy the VAT exemption provided that the conditions laid down in Article 13A(1)(n) are satisfied. The German national legislation also permits that exemption in principle (except for soloists). At the hearing the Commission confirmed that in its view the service concerned could be exempt from VAT. According to Hoffmann that service is so closely connected with the service which the organiser supplies to the public that it would be contrary to the purpose of the exemption to make the fee subject to VAT. That purpose is, precisely, to keep the price of a cultural service low by means of a fiscal measure.

51I too am of the opinion that in the circumstances which form the subject matter of the main proceedings the exemption likewise applies to the service which the performing artist supplies. I, like Hoffmann, attach importance to the link which exists between the service which is supplied directly to the public and the service which the soloists supply to Hoffmann. The two transactions are directly connected. The price which Hoffmann must pay to the soloists is part of his costs and is usually passed directly on to the public.

52If that transaction with the soloists were not exempt from VAT and the costs incurred by Hoffmann in providing a service were therefore taxed, that would reduce the effectiveness of the VAT exemption, and the purpose of the rule — which I would describe in this respect as more favourable treatment of certain cultural activities — would thus be thwarted.

53I would, additionally, make the following observation. The temporary exemption from liability to VAT under Article 28(3)(b) of the Sixth Directive applied to services supplied by performing artists. My opinion regarding the scope of the exemption provided for in Article 13A(1)(n) of the Sixth Directive entails a degree of overlap between the two provisions. There is likewise an overlap with the possibilities for a reduced rate of VAT on the basis of Article 12(3). The existence of such an overlap does not in itself constitute a reason for a different interpretation of Article 13A(1)(n), however. Article 12 of the Umsatzsteuergesetz shows that the overlap need not result in unclear implementing legislation and consequently in legal uncertainty for the taxable person. That provision explicitly states that unre cognised bodies are subject to a reduced rate of VAT.

C — Cultural bodies

54At this point I come to the restriction of the exemption to cultural services which are supplied by bodies governed by public law or by other cultural bodies recognised by the Member State concerned. The Sixth Directive not only provides that activities intended to achieve certain objectives are exempt from VAT but also governs who — and this is an extra requirement — may 24 supply the exempt activities.

55When interpreting that restriction the following four points merit attention:

— what is the significance of applying the restriction to cultural bodies?

— are commercial bodies excluded from exemption?

— how does this restriction relate to the principle of fiscal neutrality?

24 — I am using here the Court's wording, which was discussed in point 33 of this Opinion.

— how great is the Member States' discretion to recognise or not recognise bodies?

56The requirement that a body must be of a cultural nature should be interpreted as far as possible in the same way as the 28 cultural nature of the service provided. Restricting myself to the sector to which the main proceedings relate, I would state for the record that the Community legislature had in mind primarily bodies in which cultural activities take place, such as concert halls and theatres. Because concert halls and theatres are government bodies at one time and structures governed by private law at another, it was necessary not to restrict the exemption to bodies governed by public law. The purpose of the rule is not, after all, to give government bodies a fiscal advantage over bodies governed by private law. The Sixth Directive therefore affords the Member States the possibility of exempting similar cultural bodies governed by private law as well. By way of illustration I would point to the German national legislation, which lays down as a criterion for the exemption of bodies governed by private law that such bodies must

25 — It is not apparent from the legislative history of the Directive as described inT erra and Kapis, loc. cit., that the Community legislature set out to make an express distinction between the terms.

have the same 'cultural function' as the bodies governed by public law which are by their nature exempt.

57The exemption need not be restricted to concert halls and theatres, however. Performing artists are not excluded. There is no reason for them to be either. It is the artists who supply the cultural service, and that service falls — as I stated above — within the scope of the term 'cultural service' within the meaning of Article 13A(1)(n) of the Sixth Directive. In a nutshell, all bodies which regularly supply cultural services are by definition cultural bodies.

58The second point concerns the issue of the extent to which commercial bodies are excluded. This point is relevant primarily on account of the Kennemer Golf judg 26 ment, in which the Court states that the purpose of the exemptions listed in Article 13A is to provide more favourable treatment, in the matter of VAT, for certain organisations whose activities are directed towards non-commercial purposes. I would also point out that the bodies recognised by the Member States are mentioned in the same breath as bodies governed by public law which by their nature are no

26 — See point 38 of this Opinion.

59Nevertheless, the Sixth Directive enables commercial bodies to benefit from the exemption. I would point out in this connection that the wording of the Sixth Directive does not exclude commercial bodies. More importantly, Article 13A(2) of the Sixth Directive provides for the optional exclusion of commercial bodies. Thus, on the basis of paragraph (2) Member States are entitled, but not obliged, to exclude commercial bodies. This was not done in the German legislation at issue in the main proceedings.

60The third point is that Article 13A(1)(n) of the Sixth Directive therefore does not treat all taxable persons equally. The exemption only benefits certain taxable persons. Thus the rule is at odds with the principle of fiscal neutrality: it looks like similar cases are receiving different fiscal treatment in connection with the aim of 27 activities. The Court defends this unequal treatment in so many words in 28 the Kennemer Golf judgment. It can be seen from that judgment that the principle of fiscal neutrality is not always the deciding factor.

27 — See regarding this principle point 34 of this Opinion. 28 — See point 37 et seq. of this Opinion.

61That principle does not preclude a difference in treatment between activities which are similar but not the same. In this regard I have already drawn attention in 29 my Opinion in Commission v Finland to the fact that the Sixth Directive is very detailed in nature, which automatically means that in a number of cases activities which are substantively somewhat similar but not entirely the same are treated differently. The Sixth Directive has created many borderline cases, with the boundaries used not always being natural ones. This certainly applies to the exemptions listed in Article 13A, which relate only to certain ·—• and therefore not all ·—• activities in the 30 public interest.

62The principle of fiscal neutrality does, according to the Court in the Gregg judgment, preclude economic operators carrying on the same activities from being treated differently, on the basis of their legal form, as far as the levying of VAT is concerned.

63Nevertheless, it appears to me appropriate to look once again at the relationship

29 — Cited in footnote 13; point 41 of that Opinion.

30 — See point 43 of this Opinion.

between Article 13A(l)(n) and the principle of fiscal neutrality in order to ascertain whether the distinction which depends on the aim of the activities must be regarded as a distinction between the same or between similar cases. The first distinction is not permitted, but the second is.

64My conclusion, then, is that the restriction, referred to in the previous point, of the persons covered by the exemption is permitted. The exemption does not have as its object, contrary to what the Landgericht claims in the main proceedings, to place economically weak bodies at an advantage, but to lower the threshold for theatre visits by the public. The threshold constituted by the level of the entry price exists primarily in the case of (more difficult) cultural performances which do not of themselves attract a wide public. That threshold does not exist, or at any rate exists to a far lesser degree, in the case of commercial performances which are in themselves profitable. The public is far more prepared to pay the price demanded by the organiser. The VAT exemption mechanism — which, moreover, still leads to only a relatively limited price reduction — therefore fails in such cases to achieve the objective pursued. Since the exemption also entails a loss of tax revenue, I consider it reasonable to regard the exempt and non-exempt activities as similar but not the same.

65The fourth point is the discretion of the Member State. As I see it, the first matter of importance is that the power granted to a Member State in Article 13A(1)(n) to recognise (or not recognise) bodies other than bodies governed by public law is not subject to any provisos. In principle that freedom is unrestricted — within the 31 limits of Article 13. That freedom goes so far that a Member State may even provide in its legislation that no cultural body which is not governed by public law may be recognised. But Member States may also, for example, take the commercial or non-commercial character of a cultural body as a criterion. A different criterion was selected in Germany: in order to be recognised the body must be declared by the competent authority of a Land to perform a 'cultural function'.

66In these proceedings the Commission submits that when exercising that discretion Member States must comply with Community law and, more particularly,

31 — In Commission v Spain (cited in footnote 17), for example, the Court defined the following limit: the criteria which the Member States use must not affect the substantive scope of the exemption by resulting in certain cultural services being excluded from the VAT exemption.

the principle of fiscal neutrality. I support the Commission in that view and would state it in more precise terms as follows. Where a Member State makes use of the discretion granted to it to recognise bodies, such use is bound by general principles of Community law. I am thinking in particular of the following:

— use of that discretion must not conflict with the aim of Article 13A(1)(n). In other words, the effectiveness of that provision must not be impaired.

— use must not result in unequal treatment of equivalent cases. In other words, the principle of fiscal neutrality must be complied with. I have already discussed this principle above.

67As regards the effectiveness of the provision, I would draw attention to the following. In general, Member States are under an obligation to achieve the result pursued by a directive and to take all appropriate general or specific measures to ensure compliance with that obligation. To put it in negative terms, Member States must refrain from taking measures which jeopardise the attainment of the result prescribed by a directive. Specifically, we are dealing here with a power of discretion which is not subject to any provisos. That discretion is wide, but use thereof must not 32 negate the system. In the present case it is therefore necessary to consider whether the national measure excluding soloists from the VAT exemption can negate the system.

D — Can one person also be regarded as a body?

68This brings me to the third element of the question posed, namely the question whether one natural person can be regarded as a body. This is the crux of the national court's question. The German, United Kingdom and Netherlands Governments submit that this is not possible. The German Government points out, moreover, that a term taken from a body of Community rules must be interpreted literally as far as possible. In its opinion there must be a minimum degree of concurrence 33w ith the

32 — Case C-305/97 Royscot and Others [1999] ECU I-6671, paragraph 24.

33 — At the hearing of the Court the German Government used the term 'Mindestkonvergenz'.

usual meaning of a word. Hoffmann and the Commission take a different view.

69It can be seen from Gregg that the legal form of the body is not important, although there must be an individualised entity performing a particular function. The Gregg judgment concerned two natural persons performing a function together. They ran a business (more specifically, a nursing home) and acted outwardly like a unit. The present case concerns a different sector, the cultural sector, and more specifically the performance of music.

70A case similar to the one in Gregg occurs where a musical duo or trio acts outwardly as a unit, including where contracts with concert organisers are concerned. There is no doubt in my mind that, by analogy with Gregg, such a music group consisting of two or more persons can be regarded as a cultural body within the meaning of the Sixth Directive.

71This being the case I do not see why, particularly in view of the facts at issue in the main proceedings, a soloist could not be

I - 2 9 41 regarded as such an entity. A soloist is entirely comparable with the music group apart from the fact that he consists of one person. In the light of the principle of fiscal neutrality, and in the absence of clarity in the wording of the Sixth Directive, it does not appear to me to be right to interpret the Sixth Directive in such a way that the number of participants in a music group is decisive for the question whether a VAT exemption is granted. In this regard I agree with the Commission and Hoffmann in so far as they argue that an absolute exclusion of soloists is contrary to Community law. This conclusion is not affected by the 1994 34 guidelines on the interpretation of Article 13 to which the German Government refers. Those guidelines exclude artists who work alone. Quite apart from the fact that those guidelines are not binding, I am of the opinion that their content has been superseded by Gregg.

72The foregoing does not mean that an individual who provides a cultural service can be regarded in all circumstances as a cultural body. In my view, what is decisive is whether the individual (soloist) acts outwardly as an entity. Moreover, the service on which VAT is or is not levied must be an individualised service which the

34 — Guidelines of the Advisory Committee provided for in Article 29 of the Directive, issued at the 41st meeting on 28 February and 1 March 1994.

soloist does not supply as part of a whole such as, in the case of classical music, an orchestra.

73By way of illustration I would again point out the following. In a case such as the present there is all the more reason to regard the soloists as bodies. They are soloists who have considerable business interests which it would have been obvious are being managed by a legal person. It would also have been obvious if the contracts which the accused concluded in the case at issue in the main proceedings had had such a legal person as the other party. The incidental fact that this did not happen — as can be seen from the facts of the case — must not lead to different fiscal treatment.

74In short, Community law does not exclude a soloist from the exemption.

E — The Member States' discretion in the matter

75I now come to the fourth element which I identified in point 65 above: in so far as the bodies concerned are not public bodies, the VAT exemption set out in Article 13A(1)(n) applies only to cultural bodies recognised by the Member State concerned. Assuming that Article 4(20) of the Umsatzsteuergesetz is to be interpreted as meaning that soloists are excluded from the VAT exemption, this means that a soloist in Germany cannot be regarded as a cultural body. In the light of the interpretation of the Sixth Directive which I have given above, the exclusion of soloists from the VAT exemption therefore ensues in the present case purely from the national legislation. That legislation provides, in so far as is relevant, only for an exemption for groups of musicians and vocal ensembles comprising two or more people.

76The interpretation of the German Law is of course reserved for the national court. These proceedings before the Court are concerned only with whether a Member State which makes the possible recognition of a body conditional upon the number of participants in the body is overstepping the limit of the discretion granted to it. The Commission takes the view that the general exclusion of soloists does not fall within the limit of that discretion, given that the Member State bases the difference in treatment on subjective criteria.

77To begin with, the test for effectiveness: it is necessary to examine whether the national measure excluding soloists from the VAT exemption can negate the system. I consider the purpose of the exemption to be of primary importance in this connection. According to the Kennemer Golf judgment that purpose is to provide more favourable treatment for certain organisations whose activities arc directed 35 towards non-commercial purposes. I would emphasise that the rule does not mean that all non-commercial bodies are provided with more favourable treatment. As has been said, the Member States have the necessary latitude on this point. In my opinion a national rule which restricts the more favourable treatment to cultural bodies with more than one participant does not negate the system. Such a rule merely limits the scope of the exemption in the Member State concerned.

78As the Court stated in Gregg, the principle of fiscal neutrality precludes economic operators carrying on the same activities from being treated differently, as far as the levying of VAT is concerned, on the basis of their legal form. In my view that opinion can be applied by analogy to the present case. The unequal treatment applies here to music groups with one participant on the one hand and music groups with two or more participants on the other, who carry on the same activities.

35 — SEE IN particular Kennemer Golf, cited in footnote 12. That distinction bears no relation whatever, moreover, to the aim pursued by the rule. I therefore regard this distinction as unequal treatment of equivalent cases.

79Since the activities concerned here are the same and not comparable, I take the view that the German Government is in like the service which the organiser supplies to the public, fall within the scope of Article 13A(1)(n) of the Sixth Directive.

— the Member States have wide discre breach of the principle of fiscal neutrality. This does not mean that Community law itself is being breached. A Member State may put forward a special ground as justification. A distinction might be necessary, for example, for inspection reasons. No special justification for the distinction has been put forward in the present case, however.

tion to recognise 'cultural bodies' other than public bodies as eligible for the VAT exemption. They may use the non-commercial or commercial nature of a cultural body as a criterion.

— Their discretion is wide, but not unre

F — Summary

80To sum up, I would answer the first question referred by the national court in the affirmative on the basis of the following findings:

stricted. It is subject to general principles of Community law such as effectiveness and the principle of fiscal neutrality.

— A soloist may be regarded as a 'cultural — the service supplied by a performer to the organiser of a performance may, body' within the meaning of Article 13A(1)(n) of the Sixth Directive provided that he acts outwardly as an entity and provided that the service on which VAT is or is not levied is an individualised service.

— The absolute exclusion of soloists by a national rule does not impair the effectiveness of the Sixth Directive. Such a rule does infringe the principle of fiscal neutrality. Exclusion is therefore contrary to Community law, save where there is special justification.

VI — Assessment of the second question

81As I have answered the first question in the affirmative, it is also necessary to answer the second question referred by the national court.

82This question relates to the restriction of the exemption provided for in Article 13A to activities in the public interest. The term 'public interest' is used in the heading of the article.

83Mr Hoffmann points out that the various exemptions listed in Article 13A are worded precisely and that they all entail a subsidy with a view to the public interest. The German Government's observations tend in the same direction, given that they point out that the heading does not entail any restriction at all on the Member State when it is transposing the provision into national law. In the view of the United Kingdom and Netherlands Governments, on the other hand, it follows from the term 'public interest' that bodies which systematically aim to make a profit may not be exempted. The Commission refers in connection with the second question to Article 13A(2). This forms the basis on which to exclude commercial bodies from the exemption.

84I would point out to begin with that the heading of an article docs not form part of the regulatory part of a body of rules. Like the title of the body of rules as a whole or of a part of it, the title (the heading) of an Article describes the subject-matter of what follows. A title is explanatory in nature. The essential difference between the regulatory part of a body of rules and the explanatory part is expressed well in the Interinstitutional Agreement of 22 December 1998 on common guidelines for the quality of drafting of Community 6 legislation. 3 Nevertheless, the legislature's intention can be inferred from the title of a provision. In that sense, such a title may play a part in the Court's assessment. I also interpret the term 'public interest' contained in the title of Article 13A in that way. The term therefore does not entail any direct restriction, but does determine the interpretation of the exemptions listed in Article 13.

1.

36 — OJ 1999 C 73, p.

85That being said, the heading concerned in the present case has no independent meaning. I would refer in this connection to the wording of Article 13A(1)(n). That provision relates only to cultural services supplied by certain cultural bodies. The requirement that both the service and the body must be of a cultural nature means of itself that the exemption relates to the public interest. I concur with the contribution made by Hoffmann and the German Government.

86Moreover, the term 'public interest' can also be interpreted in a second way in this context, namely as a non-commercial interest. The discussion of the first question gives a sufficiently definite answer as regards that interpretation as well. Indeed, the Court has pointed out that the purpose of the VAT exemptions is to provide more favourable treatment, in the matter of VAT, for certain organisations whose activities are directed towards non-com mercial purposes. That purpose is also expressed in the conditions which a Member State may, on the basis of Article 13A(2), impose on the exemption 37 of bodies not governed by public law. The heading has no independent meaning

37 — See the much-cited Kennemer Golf judgment referred to in footnote 12, paragraph 19.

in this respect, however, since, as I said previously when answering the first question, commercial bodies are not excluded by their nature. To put it more strongly, the conditions set out in Article 13A(2), which have as their object to give the Member States the power to exclude commercial bodies, are of an optional nature. That paragraph (2) removes any doubt: Article 13A(1)(n) does not preclude commercial bodies — which therefore do not act in the public interest in the restricted sense referred to here — from benefiting from the exemption as well.

87To sum up:

— the term 'public interest' in the title of Article 13A has no independent meaning.

— the Sixth Directive does not exclude commercial bodies from the exemption by virtue of their nature.

VII — Conclusion

88On the basis of the foregoing considerations I propose that the Court give the following answer to the questions referred by the Bundesgerichtshof:

— As regards the first question: A soloist may be regarded as a 'cultural body' within the meaning of Article 13A(l)(n) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, provided that he appears outwardly as an entity and the service on which VAT is or is not levied is an individualised service. The absolute exclusion of soloists in a national rule does not impair the effectiveness of the Sixth Directive. Such a rule does infringe the principle of fiscal neutrality. Exclusion is therefore contrary to Community law, save where there is special justification.

— As regards the second question: the term 'public interest' in the title of Article 13A has no independent meaning.