C-144/13 VDP Dental Laboratory and Others

JUDGMENT OF THE COURT (First Chamber)

26 February 2015 ( *1 )

‛Reference for a preliminary ruling — Value added tax — Deductions — Exemptions — Supplies of dental prostheses’

In Joined Cases C‑144/13, C‑154/13 and C‑160/13,

REQUESTS for a preliminary ruling under Article 267 TFEU from the Hoge Raad der Nederlanden (Netherlands), made by decisions of 1 and 8 March 2013, received at the Court on 21, 27 and 28 March 2013 respectively, in the proceedings

VDP Dental Laboratory NV

v

Staatssecretaris van Financiën (C‑144/13),

Staatssecretaris van Financiën

v

X BV (C‑154/13),

Nobel Biocare Nederland BV (C‑160/13),

THE COURT (First Chamber),

composed of A. Tizzano, President of the Chamber, S. Rodin, A. Borg Barthet (Rapporteur), M. Berger and F. Biltgen, Judges,

Advocate General: J. Kokott,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 19 May 2014,

after considering the observations submitted on behalf of:

VDP Dental Laboratory NV, by R. Oorthuizen, belastingadviseur,

Nobel Biocare Nederland BV, by G.C. Bulk, adviseur,

the Netherlands Government, by M. Bulterman, M. Noort and J. Langer, acting as Agents,

the Estonian Government, by N. Grünberg, acting as Agent,

the European Commission, by A. Cordewener and E. Manhaeve, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 4 September 2014,

gives the following

Judgment

Legal context and the dispute

1These requests for a preliminary ruling concern the interpretation of Article 17(1) and (2) of 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), as amended by Council Directive 2005/92/EC of 12 December 2005 (OJ 2005 L 345, p. 19) (‘the Sixth Directive’), and of Articles 140(a) and (b) and 143(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2007/75/EC of 20 December 2007 (OJ 2007 L 346, p. 13) (‘the VAT Directive’), read in conjunction with Articles 132(1)(e) and 370 of that directive.

2The requests have been made in three sets of proceedings between VDP Dental Laboratory NV (‘VDP’) and the Staatssecretaris van Financiën (State Secretary for Finance) (‘the Staatssecretaris’) and between the Staatssecretaris and (i) X BV (‘X’) and (ii) Nobel Biocare Nederland BV (‘Nobel’) concerning the collection of value added tax (‘VAT’) for the financial years 2006 and 2008.

Legal context

EU law

3The main proceedings relate to the collection of VAT for the financial years 2006 and 2008. As a result, the applicable directives are the Sixth Directive and the VAT Directive. Depending on the period concerned in the present cases, the relevant provisions as set out in the Sixth Directive or in the VAT Directive will be taken into account.

The Sixth Directive

4Article 13A of the Sixth Directive, which relates to exemptions for certain activities in the public interest within the territory of the country, provides:

‘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:

…

services supplied by dental technicians in their professional capacity and dental prostheses supplied by dentists and dental technicians;

…’

5Article 17 of that directive, in the version resulting from Article 28f thereof (‘Article 17 of the Sixth Directive’) and entitled ‘Origin and scope of the right to deduct’, provides in paragraphs 1 and 2:

‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.

2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

[VAT] due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person;

[VAT] due or paid in respect of imported goods within the territory of the country;

[VAT] due pursuant to Articles 5(7)(a), 6(3) and 28a(6);

[VAT] due pursuant to Article 28a(1)(a).’

The VAT Directive

6Article 131 of the VAT Directive states:

‘The exemptions provided for in Chapters 2 to 9 shall apply without prejudice to other Community provisions and in accordance with conditions which the Member States shall lay down for the purposes of ensuring the correct and straightforward application of those exemptions and of preventing any possible evasion, avoidance or abuse.’

7Article 132(1) of the VAT Directive — formerly Article 13A of the Sixth Directive — states:

‘Member States shall exempt the following transactions:

…

the supply of human organs, blood and milk;

the supply of services by dental technicians in their professional capacity and the supply of dental prostheses by dentists and dental technicians;

…’

8Article 138(1) of the Vat Directive states:

‘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.’

9Article 140 of the VAT Directive provides:

‘Member States shall exempt the following transactions:

the intra-Community acquisition of goods the supply of which by taxable persons would in all circumstances be exempt within their respective territory;

the intra-Community acquisition of goods the importation of which would in all circumstances be exempt under points (a), (b) and (c) and (e) to (l) of Article 143;

…’

10Article 143(a) of the VAT Directive states:

‘Member States shall exempt the following transactions:

the final importation of goods of which the supply by a taxable person would in all circumstances be exempt within their respective territory’.

11Article 167 of the VAT Directive reads as follows:

‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’

12Article 168 of the VAT Directive — formerly Article 17(2) of the Sixth Directive — states:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;

the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);

the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;

the VAT due or paid in respect of the importation of goods into that Member State.’

13The VAT Directive also provides for various ‘[d]erogations for States which were members of the Community on 1 January 1978’, on the basis of, inter alia, Article 370 thereof, which states:

‘Member States which, at 1 January 1978, taxed the transactions listed in Annex X, Part A, may continue to tax those transactions.’

14Annex X to the VAT Directive, in part A, headed ‘Transactions which Member States may continue to tax’, refers, in paragraph 1, to:

‘The supply of services by dental technicians in their professional capacity and the supply of dental prostheses by dentists and dental technicians.’

15Article 90 EC (now Article 110 TFEU) was worded as follows:

‘No Member State shall impose, directly or indirectly, on the products of other Member States any internal taxation of any kind in excess of that imposed directly or indirectly on similar domestic products.

Furthermore, no Member State shall impose on the products of other Member States any internal taxation of such a nature as to afford indirect protection to other products.’

Netherlands law

16Article 11(1)(g)(1) of the Law on Turnover Tax (Wet op de omzetbelasting) of 28 June 1968 (Staatsblad 1968, No 329; ‘the VAT Code’), in the version in force from 1 January 2003 to 1 January 2007, states:

‘The following shall be exempt from VAT under conditions to be laid down by general administrative order:

the services provided by professionals whose profession is governed by or in accordance with the Law on professions in the personal health sector [Wet op de beroepen in de individuele gezondheidszorg]; the services supplied by psychologists and dental technicians; supplies of dental prostheses; the supply of transport services for sick or injured persons by ambulance.’

17In the version in force in 2008, the first subparagraph of Article 11(1)(g) of that code is worded as follows:

‘The following shall be exempt from VAT under conditions to be laid down by general administrative order:

medical treatment of humans within the context of the exercise of medical and paramedical professions governed by or in accordance with the Law on professions in the personal health sector and the treatment of individuals by psychologists; the services supplied by dental technicians in that capacity; supplies of dental prostheses by dentists and dental technicians; the supply of transport services for sick or injured persons by ambulance.’

18Article 15(2) of that code, in the version in force in 2006, lays down the following rules:

‘In so far as the goods and services are used for the purposes of services of traders within the meaning of Articles 11 and 28k, the deduction of tax may take place only if it concerns services referred to in Article 11(i), (j) and (k), on condition that the purchaser of those services resides or is established outside the Community or on condition that those services relate directly to goods to be exported outside the Community.’

19Article 17e of the VAT Code states:

‘By ministerial decree, subject to the conditions and restrictions laid down therein, exemption from tax shall be granted for intra-Community acquisitions of goods in respect of which:

the supply in the Netherlands is in all circumstances exempt;

an exemption would apply in all circumstances at the time of importation;

a right to a full refund would exist in all circumstances.’

20Article 21(c) of the VAT Code states:

‘By ministerial decree, subject to the conditions and restrictions laid down therein, exemption from tax shall be granted for:

…

the importation of goods the supply of which in the Netherlands is in all circumstances exempt.’

21Article 16a(1)(a) of the decree implementing the VAT Code states:

‘The following are designated as intra-Community acquisitions within the meaning of Article 17e:

intra-Community acquisitions of human organs, human blood and human milk.’

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

Case C‑144/13

22The dispute in the main proceedings in Case C‑144/13 concerns VDP, which is established in the Netherlands and is an intermediary in the sale of dental prostheses. On receipt of prior orders from dentists established in the Netherlands or outside that Member State, it arranges for prostheses to be manufactured by dental laboratories which have the status of dental technicians and are established outside the Netherlands and both within and outside the European Union. The laboratories concerned supply the dental prostheses to VDP, which in turn sends them to the dentists who ordered them. The dental prostheses which VDP receives from countries which do not belong to the customs territory of the European Union are declared on their arrival in the Netherlands for the purpose of their release for free circulation.

23In its VAT return for the first quarter of 2006, VDP declared, as regards the supplies of dental prostheses effected during that period to dentists established in the Netherlands, that the supplies in question were exempt from VAT, in accordance with the first subparagraph of Article 11(1)(g) of the VAT Code, in the version in force until 1 January 2008. VDP also deducted the VAT which it had been charged during that quarter in respect of the supplies of the prostheses concerned, relying on the interpretation of Article 17(2) of the Sixth Directive given by the Court in its judgment in VDP Dental Laboratory (C‑401/05, EU:C:2006:792). The Tax Inspectorate refused that deduction on the basis of Article 15(2) of the VAT Code and dismissed the objection lodged by VDP.

24In respect of the supplies of dental prostheses made to dentists established in the Netherlands in the third quarter of 2008, VDP paid no VAT pursuant to its tax returns, relying on the fact that it had, since 1 January 2008, the status of ‘dental technician’ within the meaning of Article 132(1)(e) of the VAT Directive, and taking the view, therefore, that it was entitled to an exemption in accordance with the first subparagraph of Article 11(1)(g) of the VAT Code. In accordance with Article 15(2) of that code, VDP did not deduct the tax which had been charged to it during that quarter in respect of the supplies in question.

25In addition, for that quarter, VDP declared and paid the tax in respect of the importation and the intra-Community acquisition of dental prostheses from laboratories established outside the Netherlands. However, it subsequently took the view that it was not liable to pay that tax so far as concerns the importation of the declared prostheses, in accordance with Article 21(c) of the VAT Code, read in conjunction with Article 143(a) of the VAT Directive, and so far as concerns the intra-Community acquisitions of such prostheses, in accordance with Article 17e(a) of the VAT Code, read in conjunction with Article 140(a) of the VAT Directive. The objection lodged by VDP in this regard was also rejected by the Tax Inspectorate.

26With regard to the first quarter of 2006, the Rechtbank te Haarlem (District Court, Haarlem) dismissed VDP’s action and held that the application of the exemption in accordance with Article 11(1)(g) of the VAT Code meant that, pursuant to Article 15(2) of the VAT Code, input tax could not be deducted. VDP brought an appeal on a point of law against the decision of that court.

27With regard to the third quarter of 2008, the Rechtbank te Haarlem considered that the action brought by VDP was well founded and held that, in accordance, firstly, with Article 21(c) of the VAT Code, read in conjunction with Article 143(a) of the VAT Directive, and, secondly, with Article 17e(a) of the VAT Code, read in conjunction with Article 140(a) of the VAT Directive, no VAT was payable on the importation and intra-Community acquisition of dental prostheses, since the basis was still a supply effected by a foreign dental technician, and such a supply in the Netherlands was exempt. The Staatssecretaris brought an appeal on a point of law against that decision.

28According to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), both the appeal brought by VDP and that brought by the Staatssecretaris give rise to questions of European Union law.

29In those circumstances, the Hoge Raad der Nederlanden decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Should Article 17(1) and (2) of the Sixth Directive be interpreted to mean that if a national statutory provision, contrary to the Directive, provides for an exemption (in respect of which the right to deduct is excluded), the taxable person is entitled to the right to deduct in reliance on Article 17(1) and (2) of the Sixth Directive?

Should Article 143(a) and Article 140(a) and (b) of the [VAT Directive] be interpreted to mean that the exemptions from VAT contained in those provisions do not apply to the importation and the intra-Community acquisition of dental prostheses? If the answer to that question is in the negative, is the application of the exemptions then subject to the condition that the dental prostheses must have been supplied from another country by a dentist or dental technician and/or supplied to a dentist or dental technician?’

Case C‑154/13

30Case C‑154/13 concerns X, which is established in the Netherlands and operates a dentistry practice, the activities of which are, in accordance with the first subparagraph of Article 11(1)(g) of the VAT Code, exempt from VAT without the right to deduct. During the period from 1 January 2008 to 30 September 2008, X acquired, from a dental technician established in Germany, dental prostheses which were transported and supplied to X from Germany without VAT invoicing. X did not pay VAT pursuant to its tax returns in respect of intra-Community acquisitions concerning those purchases. The Tax Inspectorate takes the view that intra-Community acquisitions are nevertheless involved and issued a notice of additional assessment.

31The Rechtbank te ’s-Gravenhage (District Court, The Hague) declared X’s action to be well founded. According to that court, Article 17e of the VAT Code and Article 140 of the VAT Directive must be interpreted as meaning that, in the case of a supply of a dental prosthesis by a dentist or a dental technician established outside the Netherlands, the corresponding intra-Community acquisition by a client in the Netherlands is exempt from VAT, given that such a supply is also exempt when it is made in the Netherlands. The Staatssecretaris brought an appeal on a point of law against that decision and referred to, inter alia, the liability to tax of supplies of dental prostheses in Germany.

32In those circumstances, the Hoge Raad der Nederlanden decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

Must Article 140(a) and (b) of the [VAT Directive] be interpreted as meaning that the exemption from VAT for which that provision provides does not apply to the intra-Community acquisition of dental prostheses? If the answer is no, is the application of the exemption subject to the condition that the dental prostheses are supplied from abroad by a dentist and/or dental technician to a dentist or dental technician?

If the exemption from VAT (whether or not under the conditions described in Question 1) for which Article 140(a) and (b) of the [VAT Directive] provides applies to the intra-Community acquisition of dental prostheses, does the exemption therefore apply in Member States, such as the Netherlands, which have complied with the exemption provided for in Article 132 of the [VAT Directive], to the intra-Community acquisition of dental prostheses originating from a Member State which has taken advantage of the derogating and transitional arrangements for which Article 370 of the [VAT Directive] provides?’

Case C‑160/13

33Case C‑160/13 concerns Nobel, which is established in the Netherlands and has the status of dental technician within the meaning of the first subparagraph of Article 11(1)(g) of the VAT Code. Nobel is an intermediary in the sale of dental prostheses. On receipt of prior orders it sells and supplies those prostheses to dental laboratories established in the Netherlands. The dental prostheses are manufactured in Sweden by Nobel’s parent company, A AB (‘A’), which is also a dental technician. A supplies the prostheses, in return for an agreed remuneration, to Nobel, which then supplies those prostheses to the abovementioned laboratories.

34In the case of the dental prostheses supplied in December 2008, A did not charge VAT. As regards those supplies, Nobel entered in its return VAT in respect of the intra-Community acquisitions. It then submitted an objection in that connection. The Rechtbank te Haarlem ruled in its favour and held that Article 17e of the VAT Code and Article 140 of the VAT Directive had to be interpreted as meaning that, in the case of a supply of a dental prosthesis by a dentist or a dental technician established outside the Netherlands, the corresponding intra-Community acquisition by a client in the Netherlands was exempt from VAT, given that such a supply is also exempt when it is made in the Netherlands. The Staatssecretaris brought an appeal on a point of law against the decision of that court.

35In those circumstances, the Hoge Raad der Nederlanden decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Must Article 140(a) and (b) of the [VAT Directive] be interpreted as meaning that the exemption from VAT for which that provision provides does not apply to the intra-Community acquisition of dental prostheses? If the answer is no, is the application of the exemption subject to the condition that the dental prostheses are supplied from abroad by a dentist and/or dental technician to a dentist or dental technician?’

36By order of the President of the Court of 4 June 2013, Cases C‑144/13, C‑154/13 and C‑160/13 were joined for the purposes of the written and oral procedure and the judgment.

The questions referred for a preliminary ruling

The first question in Case C‑144/13

37By its first question in Case C‑144/13, the referring court asks, in essence, whether Article 168 of the VAT Directive, which reproduces the content of Article 17(2) of the Sixth Directive, must be interpreted as meaning that, where an exemption provided for by national law is incompatible with the VAT Directive, Article 168 of that directive does not permit a taxable person both to benefit from that exemption and to exercise the right to deduct tax.

38The Court has already had occasion to rule that, where an exemption provided for by national law is incompatible with the VAT Directive, Article 168 of that directive does not permit a taxable person both to benefit from that exemption and to exercise the right to deduct tax (judgment in MDDP, C‑319/12, EU:C:2013:778, paragraph 45).

39As the Advocate General observed in point 37 of her Opinion, in such a situation, the only choice open to a taxable person is either to avail himself of the national tax exemption, thus ruling out the right to deduct, or to subject his transactions to VAT in accordance with EU law, thus rendering himself subsequently eligible to deduct input tax.

40Consequently, the answer to the first question in Case C‑144/13 is that Article 168 of the VAT Directive must be interpreted as meaning that, where the exemption from VAT provided for by national law is incompatible with the VAT Directive, Article 168 does not permit a taxable person both to benefit from that exemption and to exercise the right to deduct.

The second question in Case C‑144/13, the first question in Case C‑154/13 and the question in Case C‑160/13

41By its second question in Case C‑144/13, its first question in Case C‑154/13 and its question in Case C‑160/13, the referring court asks, in essence, whether the VAT exemption provided for in Article 140(a) and (b) and Article 143(a) of the VAT Directive applies to the intra-Community acquisition and the importation of dental prostheses, and whether, depending on the circumstances, the application of that exemption is subject to the condition that the dental prostheses have been supplied from another Member State or a third country by a dentist or dental technician and/or supplied to a dentist or dental technician.

42It must be noted that Articles 132, 140 and 143 of the VAT Directive form part of the system of exemption provided for in Title IX of the VAT Directive under the title ‘Exemptions’. Those provisions set out an exemption mechanism for transactions relating to specific goods, when certain conditions are satisfied.

43The purpose of the exemptions provided for in Article 132(1) of the VAT Directive is to facilitate access to certain services and the supply of certain goods by avoiding the increased costs that would result if they were subject to VAT (see, to that effect, judgments in Commission v Germany, C‑287/00, EU:C:2002:388, paragraph 47, and in MDDP, EU:C:2013:778, paragraph 26).

44It is settled case-law that those exemptions constitute independent concepts of EU law the purpose of which is to avoid divergences in the application of the VAT system from one Member State to another (see, inter alia, judgments in CPP, C‑349/96, EU:C:1999:93, paragraph 15, and in Skandia, C‑240/99, EU:C:2001:140, paragraph 23).

45It must also be remembered that the aim of Article 132 of the VAT Directive is to exempt from VAT certain activities which are in the public interest. That provision does not, however, provide exemption from VAT for every activity performed in the public interest, but only for those which are listed therein and described in great detail (judgment in Institute of the Motor Industry, C‑149/97, EU:C:1998:536, paragraph 18).

46The exemption of the supply of dental prostheses made by dentists and dental technicians is intended to ensure that the supply of health-related products does not become inaccessible by reason of the increased costs of those products if their supply were subject to VAT (see, concerning Article 13A(1)(b) of the Sixth Directive, now Article 132(1)(b) of the VAT Directive, judgment in Commission v France, C‑76/99, EU:C:2001:12, paragraph 23).

47Article 140(a) of the VAT Directive, for its part, requires Member States to exempt the intra-Community acquisition of goods the supply of which by taxable persons would in all circumstances be exempt within their respective territory.

48As a preliminary point, it should be noted, as observed by the Advocate General in point 45 of her Opinion, that the phrase ‘in their respective territory’ refers to the Member State of importation. That is clear from a comparison with provisions such as Articles 88, 207 or 214(1)(a) of the VAT Directive, which contain the same phrase.

49Thus, in order to determine whether an intra-Community acquisition of goods is exempt from VAT, it is necessary to establish whether the supply of those same goods is exempt within the territory of the Member State of destination.

50In the cases in the main proceedings, the intra-Community acquisitions of dental prostheses could fall within the scope of Article 140(a) of the VAT Directive, and thus qualify for an exemption, if they are exempt within the territory of the Member State of destination. Since Article 132(1)(e) of that directive requires Member States to exempt the supply of dental prostheses by dentists and dental technicians, the supply within the territory of a Member State of that product will necessarily be exempt, provided that the Member State has not implemented the transitional rules provided for in Article 370 of the VAT Directive.

51Consequently, the intra-Community acquisitions of dental prostheses by dentists and dental technicians fall within the scope of Article 140(a) of the VAT Directive.

52It must also be stated that the exemption of the final importation of goods provided for in Article 143(a) of the VAT Directive is clearly based on Article 140(a) of that directive, with the difference that the transactions affected by the exemption are the final importations of goods.

53In order to determine whether an importation of goods is exempt from VAT, it is necessary to ascertain whether the supply of those same goods is exempt within the territory of the Member State of destination. It is apparent from the wording of the provisions at issue that the EU legislature has provided for an identical mechanism for Articles 140(a) and 143(a) of the VAT Directive.

54It follows that those provisions must be interpreted in the same way.

55Since the reference factor is the existence of an exemption for the supply of the goods in the Member State of destination, so far as concerns dental prostheses, reference must be made to the exemption provided for in Article 132(1)(e) of the VAT Directive under the same conditions as for Article 140(a) of that directive. Thus, the final importation of dental prostheses made by dentists and dental technicians falls within the scope of Article 143(a) of that directive.

56As regards Article 140(b) of the VAT Directive, in order to determine whether an intra-Community acquisition of goods qualifies for an exemption in a Member State, it will be sufficient to ascertain whether the final importation of those goods within the territory of that Member State is entitled to an exemption under Article 143(a) of that directive.

57As regards the question relating to the conditions necessary for entitlement to the exemption, it should be stated that it follows from the actual wording of Article 132(1)(e) of the VAT Directive that that entitlement is subject to the condition that the dental prostheses are supplied by dentists or dental technicians.

58Consequently, the answer to the second question in Case C‑144/13, the first question in Case C‑154/13 and the question in Case C‑160/13 must be that Article 140(a) and (b) and Article 143(a) of the VAT Directive must be interpreted as meaning that the exemption from VAT for which they provide applies to the intra-Community acquisition and the final importation of dental prostheses supplied by dentists and dental technicians where the Member State of the supply or importation has not implemented the transitional rules provided for in Article 370 of that directive.

The second question in Case C‑154/13

59By its second question in Case C‑154/13, the referring court asks, in essence, whether Article 140(a) and (b) of the VAT Directive must be interpreted as meaning that the exemption from VAT provided for in that provision also applies where the intra-Community acquisition of dental prostheses originates from a Member State which has implemented the derogating and transitional arrangements provided for in Article 370 of the VAT Directive.

60It must be borne in mind that the Community system of VAT is the result of a gradual harmonisation of national legislation pursuant to Articles 113 TFEU and 115 TFEU. The Court has consistently held that this harmonisation, as brought about by successive directives and in particular by the Sixth Directive, is still only partial (judgments in ORO Amsterdam Beheer and Concerto, C‑165/88, EU:C:1989:608, paragraph 21, and in Eurodental, C‑240/05, EU:C:2006:763, paragraph 50).

61The VAT Directive, by virtue of Article 370 thereof, authorised the Member States to retain certain provisions of their national legislation predating that directive which would, without that authorisation, be incompatible with that directive (see, to that effect, judgments in Idéal tourisme, C‑36/99, EU:C:2000:405, paragraph 38, and in Eurodental, EU:C:2006:763, paragraph 51).

62Thus, it is apparent from the answer given to the second question in Case C‑144/13, the first question in Case C‑154/13 and the question in Case C‑160/13 that, in order to determine whether an intra-Community acquisition of dental prostheses qualifies for an exemption, it is necessary to ascertain whether the supply or importation of those goods is exempt within the territory of the Member State of destination. It follows that the reference factor is the arrangement applicable in the Member State of destination.

63Where that State has not implemented the derogating and transitional arrangements provided for in Article 370 of the VAT Directive, and therefore applies the exemption provided for in Article 132(1)(e) of that directive, the exemptions provided for in Article 140(a) and (b) of that directive will also apply. This is so regardless of whether the Member State of origin makes use of those derogating and transitional arrangements laid down in Article 370 of the VAT Directive.

64Consequently, the answer to the second question in Case C‑154/13 must be that Article 140(a) and (b) of the VAT Directive must be interpreted as meaning that the exemption from VAT provided for in that provision also applies where the intra-Community acquisition of dental prostheses originates from a Member State which has implemented the derogating and transitional arrangements provided for in Article 370 of the VAT Directive.

Costs

65Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the national court, the decisions on costs are 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 (First Chamber) hereby rules:

Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2007/75/EC of 20 December 2007, must be interpreted as meaning that, where the exemption from value added tax provided for by national law is incompatible with Directive 2006/112, as amended by Directive 2007/75, Article 168 does not permit a taxable person both to benefit from that exemption and to exercise the right to deduct tax.

Article 140(a) and (b) and Article 143(a) of Directive 2006/112, as amended by Directive 2007/75, must be interpreted as meaning that the exemption from value added tax for which they provide applies to the intra-Community acquisition and the final importation of dental prostheses supplied by dentists and dental technicians where the Member State of the supply or importation has not implemented the transitional rules provided for in Article 370 of Directive 2006/112, as amended by Directive 2007/75.

Article 140(a) and (b) of Directive 2006/112, as amended by Directive 2007/75, must be interpreted as meaning that the exemption from value added tax provided for in that provision also applies where the intra-Community acquisition of dental prostheses originates from a Member State which has implemented the derogating and transitional arrangements provided for in Article 370 of that directive.

Signatures

[Signatures]

( *1 ) Language of the cases: Dutch.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 4 September 2014 ¹

‛Tax law — Value added tax — Tax exemption in the case of intra-Community acquisitions of goods — Article 140(a) and (b) of Directive 2006/112/EC — Tax exemption in the case of the importation of goods — Article 143(a) of Directive 2006/112/EC — Applicability of tax exemptions in the case of supplies of dental prostheses exempt under Article 132(1)(e) of Directive 2006/112/EC — Deduction of input tax — Article 17(2)(a), in the version of Article 28f(1), of Sixth Directive 77/388/EEC — Direct effect — Right to deduct input tax in the case of transactions benefiting from a national exemption contrary to EU law’

I – Introduction

1The Court is called on yet again ² to consider the question of value added tax in relation to dental prostheses. This is a special case inasmuch as, while the supply of dental prostheses is exempt from VAT in certain situations, there are still some Member States which tax all supplies of dental prostheses on the basis of a transitional arrangement.

2The effects of these peculiarities on the deduction of input tax and the conditions of competition between suppliers of dental prostheses in different Member States have already been examined by the Court in the judgment in Eurodental. ³ The present requests for a preliminary ruling are also concerned with the aforementioned conditions of competition, although this time against the background of the tax exemptions for intra-Community acquisitions and imports from third countries. The issue of whether these are applicable to dental prostheses has yet to be settled.

3In addition, following on from its first judgment in VDP Dental Laboratory, ⁴ the Court will once again have to address the consequences for the right to deduct input tax of an exemption granted in breach of European Union (EU) law. The recent judgment in MDDP ⁵ should have left no questions unanswered in this regard, however.

II – Legal framework

A – EU law

4The main proceedings concern the collection of value added tax for the years 2006 and 2008. Consequently, regard must be had in the present cases both to 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, ⁶ in the version applicable for 2006 (‘the Sixth Directive’), and to Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, ⁷ which came into force on 1 January 2007, in the version applicable for 2008 (‘the VAT Directive’). In what follows, therefore, the rules are reproduced either in the version of the VAT Directive or in the version of the Sixth Directive, depending on the tax period in relation to which their interpretation is called for.

1. Taxable events

5In accordance with Article 2(1) of the VAT Directive, the following transactions are subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

the intra-Community acquisition of goods for consideration within the territory of a Member State by:

a taxable person acting as such, … where the vendor is a taxable person acting as such …;

…

…

the importation of goods’.

6Article 14(1) of the VAT Directive defines the ‘supply of goods’ as ‘the transfer of the right to dispose of tangible property as owner’.

7The ‘intra-Community acquisition of goods’ is defined in the first paragraph of Article 20 of the VAT Directive as ‘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’.

8In accordance with the first paragraph of Article 30 of the VAT Directive, ‘importation of goods’ means ‘the entry into the Community of goods which are not in free circulation within the meaning of Article 24 of the Treaty’.

2. Tax exemption for dental prostheses

9Under Article 132(1)(e) of the VAT Directive, Member States are to exempt the following transactions from VAT:

‘the supply of services by dental technicians in their professional capacity and the supply of dental prostheses by dentists and dental technicians’.

10However, Chapter 1 of Title XIII of the VAT Directive, under the heading ‘Derogations applying until the adoption of definitive arrangements’, contains a derogation from that tax exemption in its Section 1 (‘Derogations for States which were members of the Community on January 1978’). In that section, Article 370 provides:

‘Member States which, at 1 January 1978, taxed the transactions listed in Annex X, Part A, may continue to tax those transactions’.

11Point 1 of Annex X, Part A, refers to ‘the supply of services by dental technicians in their professional capacity and the supply of dental prostheses by dentists and dental technicians’.

3. Exemptions for intra-Community acquisitions and on importation

12Furthermore, in accordance with Article 140 of the VAT Directive, Member States are to exempt:

the intra-Community acquisition of goods the supply of which by taxable persons would in all circumstances be exempt within their respective territory;

the intra-Community acquisition of goods the importation of which would in all circumstances be exempt under points (a), (b) and (c) and (e) to (l) of Article 143;

…’

13In the case of imports from third countries, in accordance with Article 143(a) of the VAT Directive, Member States are to exempt:

‘the final importation of goods of which the supply by a taxable person would in all circumstances be exempt within their respective territory’.

4. Exemptions for intra-Community supplies of goods and on exportation

14In the case of a cross-border supply within the EU that amounts to an intra-Community acquisition, Article 138(1) of the VAT Directive provides for the following exemption:

‘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’.

15Article 146 of the VAT Directive makes similar provision in the case of exports:

‘1. Member States shall exempt the following transactions:

the supply of goods dispatched or transported to a destination outside the Community by or on behalf of the vendor;

the supply of goods dispatched or transported to a destination outside the Community by or on behalf of a customer not established within their respective territory …

…’

5. Right to deduct input tax

16For the purposes of the 2006 tax period, the right of a taxable person to deduct input tax on goods or services acquired by him (‘input transactions’) is governed by Article 17(1) and (2), in the version of Article 28f(1), of the Sixth Directive as follows:

‘1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.

2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

value added tax due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person:

value added tax due or paid in respect of imported goods within the territory of the country;

…

value added tax due pursuant to Article 28a(1)(a).

3. Member States shall also grant every taxable person the right to the deduction or refund of the value added tax referred to in paragraph 2 in so far as the goods and services are used for the purposes of:

…

transactions which are exempt pursuant to Article … 15 … or 28c(A) and (C);

…’

17Article 28a(1)(a) of the Sixth Directive sets out the chargeable event of intra-Community acquisition that corresponds to that provided for in Article 2(1)(b)(i) of the VAT Directive. ⁸ Article 15 of the Sixth Directive governed the exemptions on exportation that are now provided for in Article 146 of the VAT Directive. ⁹ Article 28c(A) of the Sixth Directive contained the exemption for intra-Community supplies that is now to be found in Article 138 of the VAT Directive. ¹⁰

18The provisions concerning the deduction of input tax contained in Article 17(1) to (3), in the version of Article 28f(1), of the Sixth Directive have their counterpart in Articles 167 and 168 of the VAT Directive.

B – National law

19Netherlands law contained provisions corresponding in principle to the aforementioned provisions of EU law.

20However, in 2006, the tax exemption for dental prostheses provided for in Article 132(1)(e) of the VAT Directive was still transposed, in Article 11(1)(g)(1) of the Netherlands Law on Turnover Tax (Wet op de omzetbelasting 1968), in a manner, contrary to EU law, ¹¹ such that the supplier of dental prostheses did not have to be either a dentist or a dental technician.

III – Main proceedings

21All three sets of main proceedings concern Netherlands taxable persons who arrange for dental prostheses to be manufactured in other countries in order subsequently either to sell them on as intermediaries or to use them themselves in the course of their activities as dentists. The issue in all three cases is whether purchases of dental prostheses from other countries are exempt from value added tax.

A – Case C‑144/13 (VDP Dental Laboratory)

22Case C‑144/13 concerns the Netherlands company VDP Dental Laboratory NV (‘VDP’). On receipt of orders from dentists, it arranged for dental prostheses to be manufactured by dental laboratories located in other countries both within and outside the EU. The dispute in the main proceedings concerns VDP’s liability to VAT in the Netherlands in the first quarter of 2006 and the third quarter of 2008.

23According to the information supplied by the referring court, in 2006 VDP was not yet to be regarded as a dental technician within the meaning of Article 132(1)(e) of the VAT Directive. Relying on Article 11(1)(g) of the Netherlands Law on Turnover Tax, VDP none the less treated its supplies of dental prostheses as exempt. At the same time, notwithstanding that exemption, it claimed entitlement to deduct the tax on its input transactions, relying at this stage on EU law. However, the Netherlands tax administration refused to allow VDP to deduct the input tax.

24According to the account given by the referring court, VDP is now a dental technician within the meaning of the exemption provided for in Article 132(1)(e) of the VAT Directive, and has been since 2008. VDP treated its supplies of dental prostheses as exempt and, moreover, did not claim input tax deduction. In addition, however, it does not wish to pay tax on the dental prostheses which it obtains from abroad in so far as these constitute intra-Community acquisitions or imports from third countries. VDP takes the view that it is entitled to benefit from the exemptions provided for in Article 140(a) and Article 143(a) of the VAT Directive.

B – Case C‑154/13 (X)

25The dispute in the main proceedings in Case C-154/13 concerns X’s liability to VAT in the Netherlands for the first three quarters of 2008. During that period, X operated a dental practice. It carried out transactions which, in accordance with Article 132(1)(e) of the VAT Directive, were exempt from VAT and it was therefore not entitled to deduct input tax.

26For the purposes of its business, X acquired dental prostheses from a dental technician established in Germany. X takes the view that it does not have to pay VAT on that intra-Community acquisition because of the exemption provided for in Article 140 of the VAT Directive. The Netherlands tax administration, however, considers that exemption to be inapplicable, inter alia because in Germany, unlike in the Netherlands, the supply of dental prostheses is not exempt from VAT, pursuant to Article 370, in conjunction with Annex X, Part (A)(1), of the VAT Directive.

C – Case C‑160/13 (Nobel Biocare Nederland)

27The third case has its origin in a dispute concerning the VAT liability of the Netherlands company Nobel Biocare Nederland BV (‘Nobel’) for December 2008. During that period, Nobel supplied dental prostheses to dental laboratories in the Netherlands. Nobel arranged for those prostheses to be manufactured by its parent company in Sweden.

28The Netherlands tax administration applied VAT to the dental prostheses which Nobel obtained from Sweden as intra-Community acquisitions. Nobel, however, takes the view that the tax exemption provided for in Article 140(a) of the VAT Directive is applicable in this regard.

IV – Procedure before the Court of Justice

29On 21, 27 and 28 March 2013, the Hoge Raad der Nederlanden, before which the actions in the main proceedings are pending, referred to the Court of Justice under Article 267 TFEU three requests for a preliminary ruling on a total of five questions. The questions referred concern two different areas.

30First, in Case C‑144/13 (VDP Dental Laboratory), the referring court raises a question concerning the right to deduct input tax for the 2006 tax period:

Should Article 17(1) and (2) of the Sixth Directive be interpreted to mean that if a national statutory provision, contrary to the Directive, provides for an exemption (in respect of which the right to deduct is excluded), the taxable person is entitled to the right to deduct in reliance on Article 17(1) and (2) of the Sixth Directive?

31Secondly, all three cases raise the following question concerning the exemption for intra-Community acquisitions:

Must Article 140(a) and (b) of the VAT Directive be interpreted as meaning that the exemption from VAT contained in that provision does not apply to the intra-Community acquisition of dental prostheses? If the answer to that question is no, is the application of the exemption then subject to the condition that the dental prostheses are supplied from abroad by a dentist and/or dental technician to a dentist or dental technician?

32In Case C‑144/13 (VDP Dental Laboratory), that question is extended to the interpretation of Article 143(a) of the VAT Directive, which concerns exemptions for imports from third countries.

33Furthermore, in Case C‑154/13 (X), that question is supplemented as follows:

If the exemption from VAT (whether or not under the conditions described in the first question) for which Article 140(a) and (b) of the VAT Directive provides applies to the intra-Community acquisition of dental prostheses, does the exemption therefore apply in Member States, such as the Netherlands, which have complied with the exemption provided for in Article 132 of the VAT Directive, to the intra-Community acquisition of dental prostheses originating from a Member State which has taken advantage of the derogating and transitional arrangements for which Article 370 of the VAT Directive provides?

34Following the joinder of the cases for the purposes of the procedure and the judgment, written observations were submitted by VDP, Nobel, the Republic of Estonia, the Kingdom of the Netherlands and the European Commission. Nobel, the Kingdom of the Netherlands and the Commission took part in the hearing on 19 May 2014.

V – Legal assessment

A – The right to deduct input tax

35As is clear from the grounds of the request for a preliminary ruling in Case C‑144/13, by its question on the right to deduct input tax the referring court wishes in essence to ascertain whether a taxable person can rely on Article 17, in the version of Article 28f(1), of the Sixth Directive in order to exercise a right to deduct input tax even in a situation where he has not paid tax on his transactions because national law, contrary to the provisions of EU law, has provided for a tax exemption.

36In so far as it concerns the interpretation of the VAT Directive, that question had already been the subject of Case C‑319/12 (MDDP), the judgment in which was not delivered until after the present requests for a preliminary ruling had been received.

37In MDDP, the Court of Justice held that Article 168 of the VAT Directive does not permit a taxable person both to benefit from an exemption which is provided for in national law but is incompatible with the VAT Directive and to exercise the right to deduct input tax. ¹² In such a situation, therefore, the only choice open to a taxable person is either to avail himself of the national tax exemption, thus ruling out the right to deduct input tax, or to subject his transactions to VAT in accordance with EU law, thus rendering himself eligible to deduct input tax.

38Since none of the parties to the present proceedings has put forward any arguments that have not already been addressed in the context of MDDP, ¹³ there is no reason to call into question the findings of the judgment in MDDP.

39Moreover, the foregoing is not precluded by the fact that the Commission submitted at the hearing that the facts of the present case concerning VDP differ from those in MDDP because VDP has to exercise its right to deduct input tax retrospectively. The Commission is right to point out that this would present VDP with the problem of retrospectively obtaining from its customers a price increased by the value of the VAT, since, in order to exercise its right to deduct input tax, VDP would have to pay tax on transactions which it had originally treated as exempt. However, I have already pointed out in connection with MDDP that, in certain circumstances, a taxable person is able to seek compensation from the Member State concerned if he can no longer pass on to his customers the VAT collected retrospectively. ¹⁴

40The answer to the first question referred for a preliminary ruling must therefore be that Article 17, in the version of Article 28f(1), of the Sixth Directive does not confer a right to deduct input tax on a taxable person who has not paid tax on his transactions because, contrary to the provisions of EU law, national law has provided for an exemption.

B – The exemptions provided for in Article 140(a) and (b) and Article 143(a) of the VAT Directive

41With regard to the exemptions for intra-Community acquisitions of goods provided for in Article 140(a) and (b) and for imports of goods from third countries under Article 143(a) of the VAT Directive, the referring court wishes to ascertain whether, and if so under what conditions, those exemptions apply to dental prostheses. After all, both provisions make the exemption dependent on whether the goods would also be exempt if the goods were supplied in national territory.

42Article 132(1)(e) of the VAT Directive exempts supplies of dental prostheses in national territory. However, that exemption applies only on condition that the supplies are effected by a dentist or dental technician. That said, Article 140(a) and (b) and Article 143(a) respectively of the VAT Directive require, as a condition for the exemption of intra-Community acquisitions or of imports of goods from third countries, that the supplies be exempt ‘in all circumstances’ in national territory. The Kingdom of the Netherlands therefore takes the view — unlike the other parties to the proceedings — that Article 140(a) and (b) and Article 143(a) of the VAT Directive are not applicable to dental prostheses.

43I am of the opinion that the answer to this question calls for a distinction to be drawn. As I shall show, it is true that the exemption provided for in Article 143(a) of the VAT Directive is not applicable to imports of dental prostheses from third countries (see 1 below). The same applies for Article 140(b) of the VAT Directive (see 2 below). A different stance is called for, however, with respect to the exemption provided for in Article 140(a), which, subject to the conditions laid down in Article 132(1)(e) of the VAT Directive, also applies to intra-Community acquisitions of dental prostheses (see 3 below). Moreover, the position is no different where, in accordance with the transitional arrangements under Article 370, in conjunction with Annex X, Part (A)(1), the Member State of origin of the goods does not apply the exemption provided for in Article 132(1)(e) of the VAT Directive (see 4 below).

1. Exemption from tax for the importation of goods under Article 143(a) of the VAT Directive

44Under Article 143(a) of the VAT Directive, Member States are to exempt from VAT the final importation of goods ‘of which the supply by a taxable person would in all circumstances be exempt within their respective territory’.

45The phrase ‘within their respective territory’ refers to the relevant Member State of importation. This is clear from a comparison of that provision with provisions such as Article 88, Article 207 or Article 214(1)(a) of the VAT Directive, which contain the same phrase. As VDP has therefore rightly pointed out, the supply of the goods must be exempt from tax in the Member State of destination, that is to say, the Member State into which the goods are imported.

46By the phrase ‘in all circumstances’, the wording of Article 143(a) of the VAT Directive indicates that the supply of the imported goods must always, that is to say, independently of any further conditions, be exempt from tax. If, however, an exemption for the supply of goods is subject to further conditions, such as, in the present case, that contained in Article 132(1)(e) of the VAT Directive, concerning the characteristics of the supplier, then the supply of certain goods would not be exempt ‘in all circumstances’.

47The drafting history of Article 143(a) of the VAT Directive confirms that interpretation of the wording in question. In the Sixth Directive, the provision corresponding to Article 143(a) of the VAT Directive was Article 14(1)(a). According to that provision, the importation of goods ‘of which the supply by a taxable person would in all circumstances be exempted within the country’ was exempt. Article 14(1)(a) of the Sixth Directive is in turn based on Article 15(1) of the Commission’s proposal. ¹⁵ Unlike Article 14(1)(a) of the Sixth Directive as later adopted by the Council, Article 15(1) of the Commission’s proposal still referred explicitly to individual domestic exemptions. With one exception, ¹⁶ that reference covered only exemptions that were dependent solely on the subject-matter of the supply and were to apply independently of any further conditions. There was no reference to any exemption for supplies of dental prostheses by dentists and dental technicians. ¹⁷

48Against that background, the fact that the exemption provided for in Article 14(1)(a) of the Sixth Directive was ultimately worded differently can best be explained by the fact that the only exemption referred to in Article 15(1) of the Commission’s proposal as being subject to conditions other than the mere object of the supply was not included in the directive as adopted. It therefore made sense to use the phrase ‘in all circumstances’ to summarise what was now a reference exclusively to exemptions that were to apply independently of any further conditions.

49A schematic interpretation leads to the same conclusion. After all, point (k) of Article 143 contains an exemption for ‘the importation of gold by central banks’. The ‘supply of gold to central banks’ is exempt under Article 152 of the VAT Directive. This is therefore an exemption which exempts the supply of gold not in every case but only where gold is supplied to a particular consignee, namely a central bank. If, however, the exemption provided for in Article 143(a) of the VAT Directive were understood as being applicable to all exemptions for the supply of goods where the corresponding conditions are satisfied, then the importation of gold by central banks would necessarily be exempt simply by virtue of that provision, in conjunction with Article 152 of the VAT Directive. Article 143(k) of the VAT Directive, which makes specific provision for such imports, would thus be superfluous.

50The purpose of the exemption provided for in Article 143(a) of the VAT Directive also does not support any arguments that would militate in favour of an extensive understanding of its scope.

51After having stated in the proposal for a Sixth Directive that that exemption required ‘no special explanation’, ¹⁸ the Commission has argued in the present proceedings that its purpose lies in the equal treatment of cross-border and domestic transactions. This sounds plausible at first. However, once the effects of input tax deduction in the supply chain are also taken into account, equal treatment can ultimately no longer be said to obtain.

52If input tax deduction in the supply chain is left out of account, an extensive application of the exemption provided for in Article 143(a) of the VAT Directive means that there is no VAT charge on the acquisition of goods irrespective of whether they are acquired in national territory or from a third country. This is achieved by extending the exemption for domestic supplies to imports from third countries.

53If input tax deduction by the supplier is taken into account, a different picture emerges. After all, the consequence of the exemption applicable to domestic supplies of goods is that the supplier also has no right to deduct input tax, as provided for in Article 168 of the VAT Directive, ¹⁹ in respect of the supplies obtained for the purpose of manufacturing those goods. The non-deductible VAT on those inputs thus operates ultimately as a charge on the exempt supply of the goods inasmuch as it increases the cost of their manufacture.

54The situation is usually different, however, in the case of goods imported from third countries. In this case the supplier established in the third country is in principle entitled to deduct input tax. It is, after all, international fiscal practice for goods that are exported to be relieved of any value added tax. In the case of exports from the EU, this is achieved by the exemption for exports provided for in accordance with Article 146 and, at the same time, the right to deduct input tax provided for in Article 169(b) of the VAT Directive. ²⁰

55If, therefore, it is the norm for a right on the part of the supplier to deduct input tax to obtain in the case of cross-border transactions but not in the case of domestic transactions, then it is also the norm for the exemption provided for in Article 143(a) of the VAT Directive to give rise to a competitive advantage for goods from third countries. The Kingdom of the Netherlands was therefore right to point out that, in the present case, suppliers from third countries, unlike domestic suppliers, would be able to supply dental prostheses without any VAT charge at all if Article 143(a) of the VAT Directive were also applicable to imports of dental prostheses from third countries.

56Such distortions of competition can be prevented only if the third country likewise confers no right to deduct input tax in respect of the export in question. Since this will, however, not normally be the case, that competitive advantage for third-country suppliers can only be remedied, albeit imperfectly, by taxing imports of goods. This is because taxing imports means that VAT is also charged on goods originating in third countries. What is more, that charge is final, unless the purchaser is entitled to deduct input tax in accordance with Article 168(e) of the VAT Directive. ²¹ Such is the case in particular where the purchaser is a consumer or resells the goods tax-free in national territory. It is the latter of those situations with which the three sets of main proceedings are concerned. None of the taxable persons is entitled to deduct input tax on the purchase of dental prostheses since they resell the prostheses tax-free in accordance with Article 132(1)(e) of the VAT Directive.

57However, that VAT charge on goods from third countries will normally be higher than the charge to be borne by domestically supplied goods. While, in the latter case, the charge depends on the value of the inputs, ²² the charge arising from the taxation of goods on importation is determined by the value of the finished article. ²³ Consequently, a refusal to apply the exemption on importation provided for in Article 143(a) of the VAT Directive usually has the effect of creating a competitive disadvantage for dental prostheses from third countries.

58Thus, neither the exemption nor the taxation of imports from third countries of goods the supply of which is exempt in the Member State of destination offers a solution that is neutral from the point of view of competition. Neither route is capable of creating equal conditions of competition as between domestic goods and goods from third countries. A solution that is neutral from the point of view of competition lies outside the regulatory ambit of the VAT Directive, since it would presuppose an influence over the right of a supplier in a third country to deduct input tax. ²⁴

59Against that background, it is important to recall the settled case-law to the effect that the exemptions provided for in the Sixth Directive must be interpreted strictly since they constitute exceptions to the general principle that VAT is to be levied on all goods or services supplied for consideration by a taxable person. ²⁵ That principle also applies to the exemptions on importation. Moreover, a strict interpretation would not render the exemption provided for in Article 143(a) of the VAT Directive ineffective in the present context, ²⁶ since, as we have seen, when the effects of input tax deduction by the supplier are taken into account, the objective of equal treatment cannot be achieved any more successfully by a broad interpretation of that provision.

60Finally, the considerable practical difficulties also militate against a broad interpretation. Both the Kingdom of the Netherlands and the Commission have rightly drawn attention to those difficulties. For example, if the exemption provided for in Article 143(a) of the VAT Directive were interpreted broadly in the present context, it would routinely have to be demonstrated at the time when goods cross the border that the third-country vendor is a dentist or dental technician. Such difficulties are avoided if the exemption provided for in Article 143(a) of the VAT Directive applies only where supplies of imported goods always, that is to say, by virtue of the characteristics of the goods themselves alone, benefit from an exemption. After all, the characteristics of the goods are normally easily verifiable at the time when they cross the border.

61In conclusion, Article 143(a) of the VAT Directive exempts from tax only imports of third-country goods the supply of which is always, that is to say, independently of any further conditions, exempt from tax in the Member State of destination. The answer to the question concerning Article 143(a) of the VAT Directive must therefore be that that exemption is not applicable to imports of dental prostheses.

2. Exemption for intra-Community acquisitions under Article 140(b) of the VAT Directive

62The next issue to be examined is the exemption for intra-Community acquisitions of goods provided for in Article 140(b) of the VAT Directive. That provision is linked to the exemption for imported goods provided for in Article 143(a) of the VAT Directive, just discussed. After all, Article 140(b) of the VAT Directive exempts, inter alia, ‘the intra-Community acquisition of goods the importation of which would in all circumstances be exempt under [point] (a) … of Article 143’.

63Since the exemption referred to is not applicable to imports of dental prostheses, ²⁷ the intra-Community acquisition of dental prostheses is not exempt under Article 140(b) of the VAT Directive either.

3. Exemption for intra-Community acquisitions under Article 140(a) of the VAT Directive

64The intra-Community acquisition of dental prostheses might, however, be exempt from tax under the conditions laid down in Article 140(a) of the VAT Directive. That exemption concerns the intra-Community acquisition of goods the supply of which by taxable persons is exempt ‘in all circumstances’ in the Member State of destination.

65Although the wording of Article 140(a) of the VAT Directive is recognisably modelled on the exemption for imports of goods from third countries provided for in Article 143(a) of the VAT Directive, the two provisions cannot be interpreted in the same way. Rather, the intra-Community acquisition of dental prostheses is exempt if the supply is effected by a dentist or a dental technician. ²⁸ There are two reasons for my view, which differs from the interpretation of Article 143(a) of the VAT Directive and is shared by VDP, Nobel, the Republic of Estonia and the Commission.

66First, an identical interpretation of the two provisions would rob the exemption for intra-Community acquisitions provided for in Article 140(a) of the VAT Directive of any independent content. For, in those circumstances, the prescriptive content of that provision would extend no further than the exemption provided for in Article 140(b) of the VAT Directive, in so far as the latter itself refers to the exemption provided for in Article 143(a) of the VAT Directive.

67Secondly, an interpretation differing from that of Article 143(a) of the VAT Directive is required by Articles 90 EC and 93 EC (now Articles 110 TFEU and 113 TFEU). This is because an EU legislative act such as the VAT Directive must be interpreted in conformity with primary law as a whole. ²⁹

68Under Article 90 EC (now Article 110 TFEU), Member States are not to impose on the products of other Member States any internal taxation in excess of that imposed on similar domestic products. That provision is intended to ensure the free movement of goods between the Member States in normal conditions of competition by the elimination of all forms of protection which may result from the application of internal taxation that discriminates against products from other Member States. ³⁰

69That guarantee of equal conditions of competition is also the ratio legis of Article 93 EC (now Article 113 TFEU), on the basis of which the VAT Directive was adopted. According to that article, the harmonisation of Member States’ turnover taxes serves to ensure the establishment and the functioning of the internal market and in particular to avoid distortions of competition.

70It follows from those two Treaty provisions that Article 140(a) of the VAT Directive is to be interpreted so far as is possible in such a way as to prevent distortions of competition between Member States. In this regard, intra-Community competition differs from competition with third countries in two respects.

71On the one hand, tax exemptions within the EU are in principle subject to the unform rules of the VAT Directive. An exemption must therefore, in principle, be applied in the same way both in the Member State of origin and in the Member State of destination.

72On the other hand, cross-border supplies of goods that would be exempt from tax if they were effected within national territory do not confer a right to deduct input tax either. After all, the Court held in Eurodental that the transactions exempted under Article 13 of the Sixth Directive do not give rise to the right to deduct input VAT even where those transactions are of an intra-Community nature. ³¹ Consequently, an intra-community supply that is exempt under Article 138 of the VAT Directive does not — as would otherwise be the case under Article 169(b) of the VAT Directive ³² — give rise to the right to deduct input tax where such a supply is the subject of a special exemption, including that provided for in the present Article 132 of the VAT Directive.

73This effectively serves to ensure that value added tax is in principle neutral from the point of view of competition in the trade in dental prostheses in the European Union. This is because the conditions governing the deduction of input tax by the supplier are the same in the case of both domestic and intra-Community transactions. If the exemptions are applied uniformly throughout the European Union, there will be no right on the supplier’s part to deduct input tax in either case. It is for this reason that dental prostheses obtained both in national territory and from another Member State are subject in the same circumstances to non-deductible input tax incurred in the course of manufacturing. ³³ Accordingly, unlike in the case of imports from third countries, ³⁴ an exemption for intra-Community acquisitions of goods in circumstances where the domestic supply of those goods would also be exempt is actually conducive to the equal treatment of domestic and cross-border transactions.

74In the light of the foregoing, it is not surprising that, in Eurodental, the Court pointed out en passant that the exemption provided for in Article 140(a) of the VAT Directive is also applicable to dental prostheses ³⁵ and the Advisory Committee on Value Added Tax had previously expressed itself along similar lines. ³⁶

75That exemption is subject to the condition that the supplier must be a dentist or dental technician in the Member State of origin because this is the only way of ensuring equal treatment for national and intra-Community supplies. It is true that this also gives rise to a number of practical difficulties when it comes to verifying that the conditions for exemption have actually been satisfied. However, a check will be more easily carried out within the EU than at the time of importation from a third country. ³⁷ The reasons for this are, first of all, that the EU operates a system of administrative cooperation in matters of taxation, ³⁸ and, secondly, that the check does not have to be carried out at the border but can take place as a stage of the normal taxation procedure.

76Unlike Article 143(a), therefore, Article 140(a) of the VAT Directive must be interpreted as meaning that it is applicable to the intra-Community acquisition of dental prostheses where the supplier is a dentist or dental technician within the meaning of Article 132(1)(e) of the VAT Directive.

4. Impact of the derogation provided for in Article 370 of the VAT Directive

77It remains to be clarified, finally, whether Article 140(a) of the VAT Directive is also applicable in the case where the dental prostheses are supplied from a Member State which, on the basis of Article 370, in conjunction with Annex X, Part A(1), of the VAT Directive, does not apply the exemption provided for in Article 132(1)(e) of the VAT Directive but always taxes supplies of dental prostheses.

78In this regard, the Kingdom of the Netherlands takes the view that the exemption cannot in any event be applicable in such a case if distortions of competition are to be avoided.

79Such a derogation cannot be based on the wording of the exemption provided for in Article 140(a) of the VAT Directive. As we have seen, this refers only to the existence of an exemption in the Member State of destination, but not in the Member State of origin. ³⁹

80However, a Member State which, in accordance with Article 370, in conjunction with Annex X, Part A(1), of the VAT Directive, taxes supplies of dental prostheses in all circumstances is effectively in the same competitive situation as a third country. Since the supplier in such a Member State benefits not from the exemption provided for in Article 132(1)(e) of the VAT Directive but only from the exemption for intra-Community supplies provided for in Article 138 of the VAT Directive, he can, when making supplies to another Member State, deduct the full amount of tax that he has paid on his inputs, in accordance with Article 169(b) of the VAT Directive. ⁴⁰ Dental prostheses from such a Member State can therefore be supplied without any VAT charge at all. As in the case of a supply from a third country, ⁴¹ this gives rise to a competitive advantage for taxable persons who are established in such a Member State.

81It is with a view in particular to offsetting that competitive advantage that I have proposed a strict interpretation of the exemption for imports from third countries in the context of the examination of Article 143(a) of the VAT Directive. ⁴² I do not, however, consider it appropriate to transpose that strict interpretation to the exemption for intra-Community acquisitions provided for in Article 140(a) of the VAT Directive in the case where the Member State of origin, availing itself of the derogation under Article 370 of the VAT Directive, does not apply an exemption for supplies of dental prostheses.

82First of all, the consequence of doing so would ultimately be to place the Member State of origin at a competitive disadvantage. As I have already demonstrated in relation to third countries, ⁴³ if intra-Community acquisitions were taxable, dental prostheses from such a Member State would as a rule carry a higher VAT charge than prostheses from another Member State which are subject only to non-deductible input tax. For Member States (unlike third countries), however, such discrimination against imported goods is problematic from the point of view of the prohibition laid down in this regard in Article 90 EC (now Article 110 TFEU). ⁴⁴

83Secondly, the Court has already held in Eurodental, in the context of the distortions of competition resulting from the different rules governing the right to deduct input tax, ⁴⁵ that that situation is the consequence of an as yet incomplete harmonisation of value added taxation. ⁴⁶ The distortions of competition of which the Kingdom of the Netherlands rightly complains are therefore the consequence of the derogation under Article 370 of the VAT Directive and not of an excessively broad interpretation of the exemption provided for in Article 140(a) of the VAT Directive.

84If, therefore, the cause of the problem lies in the derogation provided for in Article 370 of the VAT Directive, then this is also the only place to find a solution. In this connection, I would raise the question whether that provision satisfies the requirements of primary law, in particular the principle of equal treatment. I have in mind both the general principle of equality enshrined in Article 20 of the Charter of Fundamental Rights, applicable to taxable persons, and the particular principle of equality laid down in Article 4(2) TEU, applicable between the Member States. After all, Article 370 of the VAT Directive does not fall into the traditional category of a provision subject to a process of only gradual harmonisation that gives all Member States the scope to apply different national rules. On the contrary, that provision allows only very specific Member States ⁴⁷ to derogate from the VAT Directive’s provisions on exemptions, which are, however, binding on the other Member States. ⁴⁸ Such differences in the treatment of Member States and the consequential differences in the treatment of the taxable persons established in them may be justified for a transitional period with a view to the attainment of an objective of harmonisation. ⁴⁹ In the present case, however, no time-limit is prescribed for the derogation provided for in Article 370 of the VAT Directive. Consequently, the different powers exercised by the Member States in relation to the application of the exemption provided for in Article 132(1)(e) of the VAT Directive have been in place since the Sixth Directive first came into force, in other words for more than 36 years. ⁵⁰

85However, the question of the compatibility of Article 370 of the VAT Directive with Article 20 of the Charter of Fundamental Rights and Article 4(2) TEU goes beyond the subject-matter of the present requests for a preliminary ruling. It could be examined before the Court only as part of a differently structured set of proceedings. None the less, in the light of the distortions of competition pointed out by the Kingdom of the Netherlands, it is incumbent on the EU legislature to satisfy the requirements of Article 113 TFEU by formulating the VAT Directive accordingly.

86So far as the present question is concerned, it remains to be stated in conclusion that Article 140(a) of the VAT Directive is also applicable where the dental prostheses are supplied from a Member State which, availing itself of Article 370, in conjunction with Annex X, Part A(1), of the VAT Directive, does not apply the exemption provided for in Article 132(1)(e) of the VAT Directive.

VI – Conclusion

Conclusion

87In the light of all of the foregoing, I propose that the questions referred for a preliminary ruling by the Hoge Raad der Nederlanden should be answered as follows:

Article 17, in the version of Article 28f(1), of the Sixth Directive does not confer a right to deduct input tax on a taxable person who has not paid tax on his transactions because, contrary to the provisions of EU law, national law has provided for an exemption.

The tax exemption provided for in Article 140(a) of the VAT Directive is applicable to intra-Community acquisitions of dental prostheses where the supplier is a dentist or dental technician in accordance with Article 132(1)(e) of the VAT Directive. This holds true irrespective of whether the Member State of origin avails itself of the derogating rule in Article 370, in conjunction with Annex X, Part A(1), of the VAT Directive.

The importation of dental prostheses is under no circumstances exempt from tax under Article 143(a) of the VAT Directive.

The intra-Community acquisition of dental prostheses is under no circumstances exempt from tax under Article 140(b), in conjunction with Article 143(a), of the VAT Directive.

¹ Original language: German.

² See, previously, Eurodental (C‑240/05, EU:C:2006:763) and VDP Dental Laboratory (C‑401/05, EU:C:2006:792).

³ Eurodental (C‑240/05, EU:C:2006:763).

⁴ VDP Dental Laboratory (C‑401/05, EU:2006:792).

⁵ MDDP (C‑319/12, EU:C:2013:778).

⁶ OJ 1977 L 145, p. 1.

⁷ OJ 2006 L 347, p. 1.

⁸ See point 5 above.

⁹ See point 15 above.

¹⁰ See point 14 above.

¹¹ See VDP Dental Laboratory (C‑401/05, EU:C:2006:792).

¹² Judgment in MDDP (C‑319/12, EU:C:2013:778, paragraph 45).

¹³ See, in this connection, my Opinion in MDDP (C‑319/12, EU:C:2013:421, points 37 to 51).

¹⁴ See my Opinion in MDDP (C‑319/12, EU:C:2013:421, point 72).

¹⁵ Proposal for a Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: Uniform basis of assessment of 20 June 1973, COM(73) 950 final.

¹⁶ See Article 14(B)(c) of the proposal for a Sixth Directive (cited in footnote 15), which exempted from tax supplies to ‘organisations responsible for constructing, installing and maintaining cemeteries, graves and monuments commemorating war dead’; see now in this regard Annex X Part (B)(6) to the VAT Directive.

¹⁷ Article 14(A)(1)(e) of the proposal for a Sixth Directive (cited in footnote 15).

¹⁸ Proposal for a Sixth Directive (cited in footnote 15), p. 16.

¹⁹ Or Article 17(2), in the version of Article 28f(1), of the Sixth Directive.

²⁰ Or Article 17(3)(b), in the version of Article 28f(1), of the Sixth Directive.

²¹ Or Article 17(2)(b), in the version of Article 28f(1), of the Sixth Directive.

²² See Article 73 of the VAT Directive.

²³ See Article 85 of the VAT Directive in conjunction with Article 29 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302, p. 1).

²⁴ See points 55 and 56 above.

²⁵ See, inter alia, Velker International Oil Company (C‑185/89, EU:C:1990:262, paragraph 19) and Granton Advertising (C‑461/12, EU:C:2014:1745, paragraph 25).

²⁶ On this requirement, see, inter alia, Dornier (C‑45/01, EU:C:2003:595, paragraph 42) and Klinikum Dortmund (C‑366/12, EU:C:2014:143, paragraph 27).

²⁷ See points 44 to 61 above.

²⁸ See my Opinion in VDP Dental Laboratory (C‑401/05, EU:C:2006:537, point 44).

²⁹ See Sturgeon and Others (C‑402/07, EU:C:2009:716, paragraph 48); Chatzi (C‑149/10, EU:C:2010:534, paragraph 43); and Commission v Strack (C‑579/12 RX-II, EU:C:2013:570, paragraph 40).

³⁰ Stadtgemeinde Frohnleiten and Gemeindebetriebe Frohnleiten (C‑221/06, EU:C:2007:657, paragraph 30) concerning Article 90 EC.

³¹ Eurodental (C‑240/05, EU:C:2006:763, paragraph 37).

³² Or Article 17(3)(b), in the version of Article 28f(1), of the Sixth Directive.

³³ The only remaining differences stem from the fact that the input tax charge may vary depending on where the inputs have come from, on account of the different rates of tax applied by the Member States. In accordance with Articles 96 to 105 of the VAT Directive, tax rates are only partially harmonised.

³⁴ See points 53 to 55 above.

³⁵ See Eurodental (C‑240/05, EU:C:2006:763, paragraph 40) concerning the predecessor provision of Article 28cB(a) of the Sixth Directive.

³⁶ See the guidelines resulting from the 56th meeting of 13 to 14 October 1998 of the VAT Advisory Committee established pursuant to Article 29 of the Sixth Directive relating to the predecessor provision of Article 28cB(a) of the Sixth Directive.

³⁷ See point 60 above.

³⁸ See Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax (recast) (OJ 2010 L 268, p. 1).

³⁹ See point 45 above.

⁴⁰ Or Article 17(3)(b), in the version of Article 28f(1), of the Sixth Directive.

⁴¹ See point 55 above.

⁴² See point 56 above.

⁴³ See point 57 above.

⁴⁴ See point 68 above.

⁴⁵ See point 72 above

⁴⁶ Judgment in Eurodental (C‑240/05, EU:C:2006:763, paragraphs 48 to 53).

⁴⁷ On the strict conditions applicable to reliance on the derogations provided for in the VAT Directive by Member States which acceded to the European Union at a later stage, see Commission v Poland (C‑49/09, EU:C:2010:644, paragraph 42) in relation to Article 115 of the VAT Directive.

⁴⁸ This fact is overlooked in Jetair and BTW-eenheid BTWE Travel4you (C‑599/12, EU:C:2014:144, paragraphs 44 to 51) which concerned Article 370 of the VAT Directive in another context.

⁴⁹ On the different treatment of economic operators, see Arcelor Atlantique et Lorraine and Others (C‑127/07, EU:C:2008:728, paragraph 69); see also, to the same effect, Eurodental (C‑240/05, EU:C:2006:763, paragraph 52).

⁵⁰ See Article 28(3)(a) and (4), in conjunction with Annex E(2), of the Sixth Directive.