C-16/17 TGE Gas Engineering

JUDGMENT OF THE COURT (Fifth Chamber)

7 August 2018 ( *1 )

(Reference for a preliminary ruling — Value added tax (VAT) — Deduction of input tax — Origin and scope of the right to deduct)

In Case C‑16/17,

REQUEST for a preliminary ruling under Article 267 TFEU from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal), made by decision of 29 June 2016, received at the Court on 13 January 2017, in the proceedings

TGE Gas Engineering GmbH — Sucursal em Portugal

v

Autoridade Tributária e Aduaneira,

THE COURT (Fifth Chamber),

composed of J.L. da Cruz Vilaça, President of the Chamber, E. Levits, 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 March 2018,

after considering the observations submitted on behalf of:

TGE Gas Engineering GmbH — Sucursal em Portugal, by A. Fernandes de Oliveira, advogado,

the Portuguese Government, by L. Inez Fernandes, M. Figueiredo and R. Campos Laires, acting as Agents,

the European Commission, by L. Lozano Palacios and B. Rechena, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 3 May 2018,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Articles 44, 45, Article 132(1)(f), Articles 167 to 169, 178, 179, 192a to 194 and 196 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 2010/45/EU of 13 July 2010 (OJ 2010 L 189, p. 1), (‘the VAT Directive’), of Articles 10 and 11 of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112 (OJ 2011 L 77, p. 1), and of the principle of neutrality.

2The request has been made in the context of proceedings between TGE Gas Engineering GmbH — Sucursal em Portugal (‘TGE Sucursal em Portugal’) and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) (‘the ATA’), concerning that authority’s refusal to grant TGE Sucursal em Portugal a value added tax (VAT) deduction resulting from the re-invoicing of costs from an Economic Interest Group (EIG).

Legal context

EU law

The VAT Directive

3Article 44 of the VAT Directive provides:

‘The place of supply of services to a taxable person acting as such shall be the place where that person has established his business. However, if those services are provided to a fixed establishment of the taxable person located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the taxable person who receives such services has his permanent address or usually resides.’

4Article 45 of that directive provides:

‘The place of supply of services to a non-taxable person shall be the place where the supplier has established his business. However, if those services are provided from a fixed establishment of the supplier located in a place other than the place where he has established his business, the place of supply of those services shall be the place where that fixed establishment is located. In the absence of such place of establishment or fixed establishment, the place of supply of services shall be the place where the supplier has his permanent address or usually resides.’

5Article 132(1)(f) of that directive is worded as follows:

‘Member States shall exempt the following transactions:

…

the supply of services by independent groups of persons, who are carrying on an activity which is exempt from VAT or in relation to which they are not taxable persons, for the purpose of rendering their members the services directly necessary for the exercise of that activity, where those groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to cause distortion of competition.’

6Article 167 of the VAT Directive states:

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

7Article 168(a) of that directive provides:

‘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.’

8Pursuant to Article 169(a) of the VAT Directive:

‘In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following:

transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State.’

9Article 178(a) and (f) of the VAT Directive provides as follows:

‘In order to exercise the right of deduction, a taxable person must meet the following conditions:

for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;

…

when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.’

10Article 179 of that directive provides:

‘The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.

However, Member States may require that taxable persons who carry out occasional transactions, as defined in Article 12, exercise their right of deduction only at the time of supply.’

11According to Article 192a of that directive:

‘For the purposes of this Section, a taxable person who has a fixed establishment within the territory of the Member State where the tax is due shall be regarded as a taxable person who is not established within that Member State when the following conditions are met:

he makes a taxable supply of goods or of services within the territory of that Member State;

an establishment which the supplier has within the territory of that Member State does not intervene in that supply.’

12Article 193 of the VAT Directive states:

‘VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199 and Article 202.’

13Article 194 of that directive provides:

‘1. Where the taxable supply of goods or services is carried out by a taxable person who is not established in the Member State in which the VAT is due, Member States may provide that the person liable for payment of VAT is the person to whom the goods or services are supplied.

2. Member States shall lay down the conditions for implementation of paragraph 1.’

14Article 196 of that directive reads as follows:

‘VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.’

Implementing Regulation No 282/2011

15Pursuant to Article 10 of Implementing Regulation No 282/2011:

‘1. For the application of Articles 44 and 45 of [the VAT] Directive, the place where the business of a taxable person is established shall be the place where the functions of the business’s central administration are carried out.

2. In order to determine the place referred to in paragraph 1, account shall be taken of the place where essential decisions concerning the general management of the business are taken, the place where the registered office of the business is located and the place where management meets.

Where these criteria do not allow the place of establishment of a business to be determined with certainty, the place where essential decisions concerning the general management of the business are taken shall take precedence.

3. The mere presence of a postal address may not be taken to be the place of establishment of a business of a taxable person.’

16Article 11 of the Implementing Regulation provides:

‘1. For the application of Article 44 of [the VAT] Directive, a “fixed establishment” shall be any establishment, other than the place of establishment of a business referred to in Article 10 of this Regulation, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to receive and use the services supplied to it for its own needs.

2. For the application of the following Articles, a “fixed establishment” shall be any establishment, other than the place of establishment of a business referred to in Article 10 of this Regulation, characterised by a sufficient degree of permanence and a suitable structure in terms of human and technical resources to enable it to provide the services which it supplies:

Article 45 of [the VAT] Directive;

from 1 January 2013, the second subparagraph of Article 56(2) of [the VAT] Directive;

until 31 December 2014, Article 58 of [the VAT] Directive;

Article 192a of [the VAT] Directive.

3. The fact of having a VAT identification number shall not in itself be sufficient to consider that a taxable person has a fixed establishment.’

Portuguese law

17The Regime do Registo Nacional de Pessoas Coletivas (Law on the national register of legal entities), approved by Decree-Law No 129/98 of 13 May 1998 (Diário da República I, Series I-A, No 110, of 13 May 1998), regulates the registration of legal entities in the national register of legal entities.

18In accordance with Article 4(1)(a) and (b) of the Law on the national register of legal entities, that register contains registrations both of legal entities governed by Portuguese law or the law of another State and of representations of legal entities governed by international law or the law of another State which habitually operate in Portugal.

19Article 13 of the Law on the national register of legal entities provides that each legal entity recorded in that register is to receive a tax identification number and that article regulates the detailed rules governing the allocation of that number.

20In accordance with Article 6(2) of the Corporation Tax Code, an EIG must pass on to its constituent parties, in the proportions agreed in the articles of association, the profits made or losses incurred during an accounting year. Those profits or losses are taken into account in the taxable income of the members of the EIG with regard to income tax.

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

21TGE Gas Engineering GmbH, established in Bonn (‘TGE Bonn’), a company incorporated under German law, obtained in Portugal, on 3 March 2009, tax identification number 980410878 corresponding to a non-resident entity without a fixed establishment for the purpose of carrying out an isolated act, namely the acquisition of shares.

22On 7 April 2009, TGE Sucursal em Portugal was registered in Portugal as a non-resident entity with a fixed establishment in the form of a branch and was allocated tax identification number 980412463.

23TGE Bonn went on to form an EIG with Somague Engenharia SA known as ‘Projesines Expansão do Terminal de GNL de Sines, ACE’ (‘the EIG Projesines’). For the purpose of the formation of the EIG Projesines, TGE Bonn used its tax identification number and not that of TGE Sucursal em Portugal. The EIG Projesines received its own tax identification number, namely 508917280.

24The objective of the EIG Projesines was to implement the planned extension of the liquefied natural gas terminal at Sines in Portugal. That terminal belongs to Redes Energéticas Nacionais SA, a Portuguese electricity company.

25EIGs are subject to special arrangements in Portugal. In accordance with Article 6(2) of the Corporation Tax Code, an EIG is required to pass on to its constituent parties, in the proportions agreed in the articles of association, the profits made or losses incurred during an accounting year. Those profits or losses are taken into account in the taxable income of the members of the EIG with regard to income tax.

26The articles of association of the EIG Projesines determine Somague Engenharia’s contribution at 85% and that of TGE Bonn at 15%. In addition, the EIG Projesines’s internal agreement and rules attribute 64.29% of the obligations and liabilities to TGE Bonn, with the remaining 35.71% being attributed to Somague Engenharia.

27On 4 May 2009, TGE Sucursal em Portugal concluded a subcontract with the EIG Projesines. The subcontract provides for reciprocal performance between TGE Sucursal em Portugal and the EIG Projesines, with the latter being obliged to invoice its costs to TGE Sucursal em Portugal.

28The EIG Projesines transferred all of the invoices resulting from the subcontract with TGE Sucursal em Portugal and all of the invoices from Somague Engenharia to Redes Energéticas Nacionais as developer, respecting the full back-to-back general principle in the subcontract with TGE Sucursal em Portugal.

29For the purposes of the attribution and re-invoicing of its costs, the EIG Projesines used the tax identification number of TGE Sucursal em Portugal and not that of TGE Bonn. The EIG Projesines therefore referred, in the debit notes which it sent to TGE Sucursal em Portugal, to the tax identification number of TGE Sucursal em Portugal and charged VAT on that basis. The EIG Projesines attributed 64.29% of its costs to TGE Sucursal em Portugal.

30TGE Sucursal em Portugal then deducted the VAT paid on the debit notes issued by the EIG Projesines.

31During a tax audit of TGE Sucursal em Portugal covering the accounting years 2009 to 2011, the ATA drew up a report stating that TGE Sucursal em Portugal and TGE Bonn are two different entities, each of which has a different tax identification number. According to the ATA, as TGE Sucursal em Portugal was not a constituent member of the EIG Projesines, it could not attribute its costs to it and consequently TGE Sucursal em Portugal could not deduct the VAT relating to those costs.

32The ATA therefore requested TGE Sucursal em Portugal to reimburse the amounts corresponding to the improperly deducted VAT. TGE Sucursal em Portugal brought an action before the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration), Portugal) in order to obtain the annulment of the decision by which the ATA requested that reimbursement.

33Before the referring court, the ATA submits that TGE Sucursal em Portugal was a fixed establishment with a different legal personality and tax capacity to those of TGE Bonn. Since TGE Bonn alone was part of the EIG Projesines, TGE Sucursal em Portugal, in its view, was not entitled to assume the costs of the EIG Projesines and to deduct the VAT relating to those costs. The fact that the EIG Projesines’s invoices apply the apportionment rates provided for in that company’s articles of association is irrelevant in that regard.

34According to the ATA, each of the two entities had its own personality for tax purposes and, therefore, they were two separate entities for VAT purposes. If TGE Bonn had wished to attribute the results of the EIG Projesines to TGE Sucursal em Portugal as a non-resident entity with a fixed establishment, it could and should have used the tax identification number of TGE Sucursal em Portugal at the time of the formation of the EIG Projesines.

35Furthermore, the ATA considers that there was no immediate and direct link between the debit notes charged to TGE Sucursal em Portugal and its transactions. There is, therefore, in its view, no right to deduct VAT.

36In those circumstances, the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration)) decided to stay the proceedings and to refer the following question to the Court for a preliminary ruling:

‘Must Articles 44, 45, 132(1)(f), 167 [to] 169, 178, 179, [192a to 194] and 196 of [the VAT] Directive …, Articles 10 and 11 of Implementing Regulation No 282/2011 and the principle of neutrality be interpreted as precluding the Portuguese tax authorities from refusing the right to deduction of VAT by a branch of a German company, in circumstances where:

the German company obtained a tax identification number in Portugal to carry out an isolated act, namely “acquisition of shares”, corresponding to a non-resident entity without a fixed establishment;

subsequently, the branch of that German company was registered in Portugal and was assigned its own tax identification number, as a fixed establishment of that company;

later, the German company, using the first identification number, entered into a contract with another company to establish an [EIG] to carry out a works contract in Portugal;

subsequently, the branch, using its own tax identification number, entered into a subcontract with the EIG setting out the reciprocal services between the branch and the EIG and agreeing that the latter would invoice the subcontractors, in the agreed proportions, for the costs which it incurred;

the EIG indicated the branch’s tax identification number in the debit notes which it issued to invoice costs to that branch, and charged VAT;

the branch deducted the VAT charged in the debit notes;

the transactions of the EIG consist (by way of subcontracting) of the transactions of the branch and of the other company forming part of the EIG, those entities having invoiced to the EIG the entire revenue that the EIG invoiced to the developer?’

Consideration of the question referred

37By its question, the referring court asks, in essence, whether, inter alia, Articles 167 and 168 of the VAT Directive and the principle of neutrality must be interpreted as precluding the tax authority of a Member State from regarding a company which has its headquarters in another Member State and the branch that it holds in the first of those States as constituting two separate taxable entities on the ground that each of those entities has a tax identification number, and from refusing, for that reason, the branch the right to deduct the VAT charged on the debit notes issued by an EIG of which that company, and not its branch, is a member.

38It is apparent from the file submitted to the Court that the dispute in the main proceedings has its origin essentially in the conclusions drawn by the competent tax authority from the fact that TGE Bonn and TGE Sucursal em Portugal have different tax identification numbers and from the fact that, at the time of the formation of the EIG Projesines, the tax identification number of TGE Bonn was used, whereas, for the issuing of invoices relating to the allocation of costs concerning that group, the latter used the tax identification number of TGE Sucursal em Portugal.

39In that regard, it should be recalled, on the one hand, that, according to Article 168(a) of the VAT Directive, in so far as goods or services are used for the purposes of taxable transactions, the taxable person is to be entitled to deduct, from the amount which he is liable to pay, the VAT due or paid on those goods or services if they are delivered or supplied by another taxable person. The recipient of the services in question must therefore be a taxable person within the meaning of that directive.

40Article 9 of the VAT Directive defines ‘taxable person’ as being any person who carries out any economic activity ‘independently’. It is especially important for the uniform application of the VAT Directive that the notion of ‘taxable person’, defined in Title III thereof, should be given an autonomous and uniform interpretation (judgment of 17 September 2014, Skandia America (USA), filial Sverige, C‑7/13, EU:C:2014:2225, paragraph 23).

41With regard to a company established in one Member State and its branch located in another Member State, it is apparent from the case-law of the Court that those two entities constitute a single taxable person subject to VAT (see, to that effect, judgments of 23 March 2006, FCE Bank, C‑210/04, EU:C:2006:196, paragraph 37; of 16 July 2009, Commission v Italy, C‑244/08, not published, EU:C:2009:478, paragraph 38; and of 12 September 2013, Le Crédit Lyonnais, C‑388/11, EU:C:2013:541, paragraph 34), unless it is established that the branch carries out an independent economic activity. It is necessary in that regard to determine whether that branch may be considered to be independent, in particular in that it bears the economic risk arising from its business (judgment of 23 March 2006, FCE Bank, C‑210/04, EU:C:2006:196, paragraph 35).

42In the case in the main proceedings, TGE Bonn obtained an initial tax identification number in Portugal for the purposes of an isolated act consisting in the formation of the EIG Projesines. TGE Bonn subsequently obtained a second tax identification number for the registration of TGE Sucursal em Portugal, which was used in all of the activities carried out, by TGE Bonn and by that branch, in Portugal. It is clear that the two tax identification numbers of TGE Bonn and of TGE Sucursal em Portugal are attributable to one single entity, namely TGE Bonn.

43It follows that TGE Bonn and TGE Sucursal em Portugal constitute a single taxable person within the meaning of the VAT Directive.

44It should be recalled, on the other hand, that, according to settled case-law, the right to deduct laid down in Articles 167 and 168 of the VAT Directive is an integral part of the VAT mechanism and in principle may not be limited (see, inter alia, judgments of 8 May 2008, Ecotrade, C‑95/07 and C‑96/07, EU:C:2008:267, paragraph 39 and the case-law cited; of 12 July 2012, EMS-Bulgaria Transport, C‑284/11, EU:C:2012:458, paragraph 44; and of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 30).

45In the present case, as TGE Bonn and TGE Sucursal em Portugal must be regarded as constituting a single legal entity and, therefore, a single taxable person, the principle of fiscal neutrality requires the deduction of input VAT to be allowed if the substantive requirements governing that deduction are satisfied (see, by analogy, judgment of 27 September 2007, Collée, C‑146/05, EU:C:2007:549, paragraph 31).

46Consequently, where the tax authority has the information necessary to establish that the taxable person, as the recipient of the supplies in question, is liable to VAT, it cannot, in relation to the right of that taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes (judgments of 1 April 2004, Bockemühl, C‑90/02, EU:C:2004:206, paragraph 51, and of 8 May 2008, Ecotrade, C‑95/07 and C‑96/07, EU:C:2008:267, paragraph 64).

47It follows that, in a situation such as that at issue in the main proceedings, the tax authority of a Member State cannot refuse the deduction of input VAT to a taxable person on the sole ground that that taxable person used a tax identification number as a non-resident entity without a fixed establishment at the time of the formation of an EIG and used the tax identification number of its branch located in that State for the re-invoicing of the costs of that group.

48That conclusion is not called into question by the fact that TGE Bonn is established in Germany and that TGE Sucursal em Portugal is its fixed establishment in Portugal.

49In that regard, it should be recalled that, in accordance with the first sentence of Article 44 of the VAT Directive, the place of supply of services to a taxable person acting as such is the place where that person has established his business. The EU legislature used that point of reference principally because, as an objective criterion that is simple and practical, it offers great legal certainty (judgment of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraphs 53 to 55). By contrast, the connection to the taxable person’s fixed establishment, referred to in the second sentence of Article 44 of the VAT Directive, is a secondary point of reference which is an exception to the general rule (judgment of 16 October 2014, Welmory, C‑605/12, EU:C:2014:2298, paragraph 56).

50It is thus for the referring court to assess, in the context of the dispute in the main proceedings, whether the other conditions giving rise to the right to deduct input tax, as set out in Article 168(a) of the VAT Directive, are satisfied.

51In the light of the foregoing, the answer to the question referred is that Articles 167 and 168 of the VAT Directive and the principle of neutrality must be interpreted as precluding the tax authority of a Member State from regarding a company which has its headquarters in another Member State and the branch which it has in the first of those States as constituting two separate taxable entities on the ground that each of those entities has a tax identification number, and, for that reason, from refusing that branch the right to deduct the VAT on the debit notes issued by an EIG of which that company, and not its branch, is a member.

Costs

52Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Fifth Chamber) hereby rules:

Articles 167 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010, and the principle of neutrality must be interpreted as precluding the tax authority of a Member State from regarding a company which has its headquarters in another Member State and the branch which it has in the first of those States as constituting two separate taxable entities on the ground that each of those entities has a tax identification number, and, for that reason, from refusing that branch the right to deduct value added tax (VAT) on the debit notes issued by an economic interest group of which that company, and not its branch, is a member.

Signatures

[Signatures]

( *1 ) Language of the case: Portuguese.

OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 3 May 2018 ¹

(Request for a preliminary ruling — Law on value added tax — Deduction of input tax — Concept of supply of services — Apportionment of the general costs of a company’s business activity among its members)

I. Introduction

1It is a well-known phenomenon that supplies can be exchanged between a company and its members not only within the framework of the corporate relationship but also on the basis of a separate legal relationship that is independent of the corporate relationship.

2The Court has already dealt several times with the effects of this phenomenon on the system of value added tax. ²

3The request for a preliminary ruling in the present case provides the Court with an opportunity to clarify the consequences for the right of deduction in the case where an economic interest group formed by undertakings apportions its general costs among its members.

II. Legal framework

A. EU law

4The EU-law framework for this case is provided by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ³ (‘the VAT Directive’). Article 167 of that directive provides:

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

5Article 168 of the VAT Directive provides:

‘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;

…’

6The first sentence of Article 44 of the VAT Directive, in the version applicable since 1 January 2010, stipulates that the place of supply of services to a taxable person is the place where that person has established his business. If, however, the service is provided to the fixed establishment of the taxable person, the place of supply of services under the second sentence of Article 44 of the VAT Directive is the place where that fixed establishment is located.

7Measures for the implementation of that provision are contained in Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax, which has applied since 1 July 2011. ⁴ More precise definitions of the concepts of the place where the business is established and of a fixed establishment are set out in Articles 10 and 11 of that regulation respectively.

B. National law

8The Portuguese legislature has transposed the abovementioned provisions of the VAT Directive.

9The Regime do Registo Nacional de Pessoas Coletivas (Law on the national register of legal entities; ‘the RNPC Law’) regulates the registration of legal entities in the Registo Nacional de Pessoas Coletivas (national register of legal entities; ‘the RNPC’).

10Under Article 4(1)(a) and (b) of the RNPC Law, that register contains registrations both of legal entities governed by Portuguese or foreign law and of representations of legal entities governed by international law or foreign law which habitually operate in Portugal.

11Article 13 of the RNPC Law provides that each legal entity registered in the RNPC is to receive a Número de Identificação de Pessoa Coletiva (legal entity identification number; ‘NIPC’) and regulates the detailed arrangements for its allocation.

III. Facts and main proceedings

12TGE Gas Engineering GmbH (‘TGE Bonn’) is a German company established in Bonn. On 3 March 2009, it was allocated NIPC 980410878 in Portugal for the purpose of carrying out an isolated act (acquisition of shares) as a non-resident entity without a fixed establishment.

13The applicant in the main proceedings is the Portuguese branch of TGE Bonn, which is called ‘TGE Gas Engineering GmbH — Sucursal em Portugal’ (‘TGE Portugal’). On 7 April 2009, it was allocated NIPC 980412463 as a non-resident entity with a fixed establishment in Portugal.

14On 17 April 2009, TGE Bonn, together with Somague Engenharia SA (‘Somague’), formed an economic interest group of undertakings (Agrupamento Complementar de Empresas) known as ‘Projesines Expansão do Terminal de GNL de Sines, ACE’ (‘the EIG’).

15The articles of association define the members’ contributions to the EIG at 85% for Somague and at 15% for TGE Bonn. By way of derogation, under an internal agreement of the economic interest group, TGE Bonn assumes 64.29% of the economic interest group’s operating result and expenditure and Somague 35.71%.

16When the EIG was formed, TGE Bonn used NIPC 980410878, which had been allocated to it as a non-resident entity without a fixed establishment, and not the NIPC allocated to TGE Portugal.

17The EIG itself is a contractor for Redes Energéticas Nacionais (REN), a Portuguese electricity company, and carries out for that company the Sines Terminal Expansion Project, which concerns a liquefied natural gas terminal.

18On 4 May 2009, the EIG entered into a subcontracting agreement with TGE Portugal. A similar agreement was also entered into with Somague.

19Under those agreements TGE Portugal and Somague made supplies of goods and services as subcontractors to the EIG. Pursuant to the provisions of the subcontracting agreement between the EIG and TGE Portugal (‘full back-to-back general principle’), the EIG invoiced all of those supplies of goods and services made to it by TGE Portugal to REN as the client.

20The EIG invoiced the costs incurred for its own business activity to TGE Portugal in the order of 64.29% using the NIPC which had been allocated to TGE Portugal. Somague was invoiced for 35.71% of the costs by the EIG. The sole purpose of invoicing was to apportion the EIG’s costs among its members. Thus, the costs were shared in accordance with the internal members’ agreement on meeting the EIG’s liabilities. Nevertheless, the EIG showed the VAT on invoices and paid it to the Portuguese tax authority, which at no point raised any objection.

21TGE Portugal subsequently claimed deduction of the VAT shown on those invoices.

22In the context of a tax audit of TGE Portugal by the Autoridade Tributária e Aduaneira (tax and customs authority; ‘the ATA’) for the assessment periods 2009, 2010 and 2011, a tax inspection report was drawn up. In that report, the ATA found that, because of the different NIPCs, TGE Portugal and TGE Bonn would have to be treated as separate legal entities. As TGE Bonn was a member of the EIG, but TGE Portugal was not, the EIG had acted unlawfully in invoicing its costs to TGE Portugal. The deduction of input tax by TGE Portugal for those costs had, it found, been unlawful.

23On the basis of those findings, the ATA issued assessments of VAT and compensatory interest to TGE Portugal. On 28 March 2014, TGE Portugal lodged an internal administrative objection to those assessments for the assessment periods 2010 and 2011, which was rejected by the ATA.

24On 19 September 2014, TGE Portugal brought an administrative appeal against the decision rejecting the internal administrative objection, which was dismissed by a decision notified to it on 25 September 2015.

25On 22 December 2015, TGE Portugal submitted the application for arbitration in respect of that appeal to the referring court.

IV. Request for a preliminary ruling and procedure before the Court of Justice

26By arbitral decision of 29 June 2016, received on 16 January 2017, the Tribunal Arbitral Tributário (Tax Arbitration Tribunal, Portugal) referred the following question to the Court for a preliminary ruling pursuant to Article 267 TFEU:

Must Articles 44, 45, 132(1)(f), 167, 168, 169, 178, 179 and 192a, 193, 194 and 196 of the VAT Directive (Directive 2006/112), Articles 10 and 11 of Implementing Regulation (EU) No 282/2011 and the principle of neutrality be interpreted as precluding the Portuguese tax authorities from refusing the right to deduction of VAT by a branch of a German company, in circumstances where:

the German company obtained a tax identification number in Portugal to carry out an isolated act, namely ‘acquisition of shares’, corresponding to a non-resident entity without a permanent establishment;

subsequently, the branch of that German company was registered in Portugal and was assigned its own tax number, as a permanent establishment of that company;

later, the German company, using the first identification number, entered into a contract with another company to establish an economic interest group (Agrupamento Complementar de Empresas) (EIG) to carry out a works contract in Portugal;

subsequently, the branch, using its own tax number, entered into a subcontract with the EIG, setting out the reciprocal services between the branch and the EIG and agreeing that the latter would invoice the subcontractors, in the agreed proportions, for the costs which it incurred;

the EIG indicated the branch’s tax identification number in the debit notes which it issued to invoice costs to that branch, and charged VAT;

the branch deducted the VAT charged in the debit notes;

the transactions of the EIG (by way of subcontracting) consist of the transactions of the branch and of the other company forming part of the EIG, these latter having invoiced to the EIG the entire revenue that the EIG invoiced to the developer?

27In response to a request for information from the Court, the referring court — and the applicant in the main proceedings — made it clear that the sole purpose of the EIG’s debit notes had been to apportion the general costs of its business among the members.

28In the proceedings before the Court, TGE Portugal, the Portuguese Republic and the European Commission submitted written observations and also took part in the hearing held on 19 March 2018.

V. Assessment

A. Capacity of the referring court to submit a request for a preliminary ruling

29As the Court has already ruled, the Tribunal Arbitral Tributário (Tax Arbitration Tribunal) is to be considered a court or tribunal of a Member State for the purposes of Article 267 TFEU and thus has the capacity to make a reference to the Court. ⁵

B. Interpretation of the question referred

30In its question, the referring court mentions the different NIPCs which were allocated to TGE Bonn and TGE Portugal and used in connection with the EIG, namely the NIPC for TGE Bonn when the agreement forming the EIG was concluded and the NIPC for TGE Portugal when the subcontracting agreement with the EIG was concluded.

31In essence, however, the referring court’s question seeks clarification as to whether TGE Bonn or TGE Portugal has a right of deduction if the EIG invoices its general costs, showing VAT, to TGE Portugal. The referring court thus wishes to know, in essence, whether the conditions for deduction of input tax are satisfied in a case such as the present.

C. Right to deduct input tax

32The conditions for the right to deduct input tax are set out in Article 168(a) of the VAT Directive: a person is entitled to deduct the VAT due or paid at the preceding stage if he is himself a taxable person and has received a supply of goods or services from another taxable person, which he uses for the purposes of his own business.

33It is not disputed that in the present case the EIG paid the VAT which it had invoiced to TGE Portugal. It is also not disputed that the EIG is in principle a taxable person within the meaning of the VAT Directive.

34However, it is necessary to clarify whether TGE Portugal is the recipient of a supply of services in respect of payment of the costs.

1. Taxable person as recipient of the supply of services

35Under Article 168 of the VAT Directive, only a taxable person is entitled to deduct input tax. The recipient of the supply of services must therefore be a taxable person within the meaning of the directive.

36The first subparagraph of Article 9(1) of the VAT Directive provides that a taxable person is any person who, independently, carries out any economic activity.

37With regard to a company’s relationship with its branch in another Member State, the Court has already ruled that the branch does not carry out an independent economic activity because it does not itself bear the economic risk of its economic activity, in particular because it has no endowment capital. ⁶ Instead, the economic risk is borne solely by the company to which the branch belongs.

38Even though the concept of a taxable person in EU law must be given an autonomous and uniform interpretation ⁷ and thus covers not only natural and legal persons but also entities which are not legal persons, ⁸ a company and its branch in another Member State form a single legal entity within which there are not two separate taxable persons. ⁹

39By this standard, TGE Bonn and TGE Portugal form one taxable person (TGE) for the purposes of the VAT Directive.

40This conclusion is not affected by the fact that TGE Bonn and TGE Portugal have different NIPCs and that the NIPC for TGE Bonn was used when the EIG was formed, whereas the NIPC for TGE Portugal was used for invoicing with a view to apportioning costs.

2. Existence of a supply of services

41Article 168(a) of the VAT Directive requires that a supply (supply of goods within the meaning of Article 14 or supply of services within the meaning of Article 24(1) of the VAT Directive) be made to the taxable person entitled to deduct input tax.

42According to the Court’s settled case-law, a supply is taxable only if there exists between the supplier and the recipient a legal relationship in which there is a reciprocal performance, the remuneration received by the supplier constituting the value actually given in return for the goods or service supplied to the recipient. ¹⁰

43Accordingly, the basis of assessment for a supply of services is everything which makes up the consideration for the service and a supply of services is therefore taxable only if there is a direct link between the service provided and the consideration received. ¹¹

44In the present case, the EIG would therefore have had to have provided a specific service of which TGE is the recipient. Only then would the sums invoiced by the EIG to TGE and paid by TGE constitute consideration for a supply of services for which VAT is actually due.

45However, as the referring court and the applicant in the main proceedings state in their replies to the request for information from the Court, the sums in question relate to the general costs of the EIG’s business activity. The sole purpose of the invoices was to apportion those costs to TGE as a member. The sums were not paid in return for any supply by the EIG to TGE and did not therefore constitute consideration.

46Accordingly, no specific supply of services was made to the taxable person in this case. Instead, the sums invoiced to and paid by TGE represent an apportionment of the general costs of the EIG among its members stemming from their duty to share in profits and to bear losses, but do not represent consideration for a specific activity.

47This conclusion is confirmed by the Court’s decision in Cibo Participations. In that case, the Court ruled that the payment of a dividend does not constitute consideration for a service, but is merely the result of ownership of the share and thus of status as a shareholder. In particular, the existence of distributable profits is generally a prerequisite of paying a dividend and that payment is thus dependent on the company’s year-end results. ¹² In the present case, the EIG does not, it is true, distribute dividends, that is to say, shares in profits, to members. Instead, the members pay a sum to the EIG. However, as the tax authority asserted in the main proceedings, at issue here are the general costs of the EIG’s business activity. The way in which these costs are borne is ultimately like a mirror image of the distribution of dividends in Cibo Participations. The amount of the sum invoiced by the EIG depends on its profit situation, just as the amount of dividends distributed depended on the profit situation of the companies in which Cibo Participations had a shareholding. By virtue of its status as a member, a member is not only entitled to share in profits, but is also required in the present case to cover expenditure incurred. While the Cibo Participations case concerned participation in profits, the present case relates to coverage of expenditure incurred. In both cases the payments made are the result of status as a member and do not therefore constitute consideration for a supply of services.

48The absence of consideration distinguishes the present case from the situation in Heerma. In that case, the partner in a partnership had let a property to the partnership, in respect of which the partnership paid him a rent that was independent of his share in its profits and losses. The Court ruled in that case that the letting of the property constituted a VAT-taxable supply because it was effected for a specific consideration. ¹³

49Lastly, the situation at issue in the present case also cannot be compared to the membership fee paid by a member of an association. The Court did, it is true, rule in Kennemer Golf that the membership fee forms the basis of assessment for VAT if it is the consideration for the possibility of using items of the association’s property. ¹⁴ First, the duty to pay membership fees does not stem directly from the fact that the association makes a profit or loss, but is based on the association’s freedom to establish its own articles of association. Furthermore, in that case the fee related to a specific right of members to use the association’s sports facilities. In the present case, by contrast, the amount of the sums invoiced to and paid by TGE depends solely on the economic result of the EIG. Second, the EIG does not give TGE the opportunity to use items of its property and charge a consideration in return. Instead, the invoiced sum is the result of TGE’s status as a member and the ensuing duty to share in profits and to bear losses.

50Contrary to the submission made by the Commission at the hearing, this is not a case in which services are commissioned for the purposes of Article 28 of the VAT Directive. The subject matter of the main proceedings is solely the invoicing of expenditure incurred by the EIG in purchasing supplies of goods and services from third parties. Those third-party supplies were made to the EIG itself, however. They were used for its business and were not passed on to its members, since, as the referring court has expressly stated, there is no supply made by the EIG to its members in this regard. The conditions laid down in Article 28 of the VAT Directive (‘takes part in a supply of services’) are therefore not satisfied.

51The same conclusion follows from the principle of neutrality.

52According to the Court’s settled case-law, the right to deduct is a fundamental principle which underlies the common system of VAT and serves to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. ¹⁵

53The common system of VAT consequently ensures neutrality in regard to taxation of all economic activities. This is, however, subject to the condition that those activities are themselves in principle subject to VAT. ¹⁶

54As, in the light of the foregoing, there is no supply of services within the meaning of Article 24(1) of the VAT Directive, the EIG did not owe any VAT for ‘charging on’ the general costs of its business activity which it apportioned among its members. The VAT was therefore wrongly paid. Because the tax was not payable, from the point of view of EU law, there is no scope for applying the principle of neutrality. In the present case, that principle does not require TGE to be relieved of the burden of the VAT on the sums paid to the EIG if the tax is not even payable under EU law.

55It must therefore be stated that the EIG does not make a supply of services to TGE which would give the latter a right to deduct.

3. Place of supply

56The referring court also requests the Court to interpret Articles 44 and 45 of the VAT Directive, which define the place of supply of services.

57Under the first sentence of Article 44 of the VAT Directive, the place of supply of services is the place where the recipient of the supply of services has established his business. The EU legislature opted for this as the primary point of reference because, as a criterion that is objective, simple and practical, it offers great legal certainty. ¹⁷

58On the other hand, the point of reference of the fixed establishment of the recipient of the supply of services in the second sentence of Article 44 of the VAT Directive is subordinate and an exception to the general rule. ¹⁸

59Even though the Court clarified the relationship between these two points of reference in Welmory, the relevant factor under both the first sentence of Article 44 and the second sentence of Article 44 of the VAT Directive is, of course, receipt of a supply of services by the taxable person.

60As was stated above, however, there is no supply of services in the present case. In the absence of a supply of services, it is not therefore possible to determine the place of supply of services.

61Consequently, the referring court’s question in this regard cannot be answered.

VI. Conclusion

Conclusion

62In the light of the foregoing considerations, I propose that the Court answer the request for a preliminary ruling from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa) (Tax Arbitration Tribunal (Centre for Administrative Arbitration)) as follows:

Article 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in the absence of a taxable supply of goods or services, there is no right of deduction in the case where an Agrupamento Complementar de Empresas (Economic Interest Group) apportions the general costs of its business activity to a foreign company, which is a member, even though value added tax was wrongly paid on that sum and that sum was invoiced to the domestic branch of the member.

¹ Original language: German.

² Judgments of 27 January 2000, Heerma (C‑23/98, EU:C:2000:46), and of 27 September 2001, Cibo Participations (C‑16/00, EU:C:2001:495).

³ OJ 2006 L 347, p. 1.

⁴ OJ 2011 L 77, p. 1.

⁵ Judgment of 12 June 2014, Ascendi Beiras Litoral e Alta, Auto Estradas das Beiras Litoral e Alta (C‑377/13, EU:C:2014:1754, paragraphs 23 to 34).

⁶ Judgments of 23 March 2006, FCE Bank (C‑210/04, EU:C:2006:196, paragraphs 33 to 37), and of 17 September 2014, Skandia America Corp. (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraphs 25 and 26).

⁷ Judgment of 17 September 2014, Skandia America Corp. (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraph 23).

⁸ Judgment of 27 January 2000, Heerma (C‑23/98, EU:C:2000:46, paragraph 8).

⁹ Opinion of Advocate General Léger in FCE Bank (C‑210/04, EU:C:2005:582, point 38).

¹⁰ Judgments of 3 March 1994, Tolsma (C‑16/93, EU:C:1994:80, paragraph 14); of 21 March 2002, Kennemer Golf (C‑174/00, EU:C:2002:200, paragraph 39); of 23 March 2006, FCE Bank (C‑210/04, EU:C:2006:196, paragraph 34); and of 17 September 2014, Skandia America Corp. (USA), filial Sverige (C‑7/13, EU:C:2014:2225, paragraph 24).

¹¹ Judgments of 3 March 1994, Tolsma (C‑16/93, EU:C:1994:80, paragraph 13), and of 21 March 2002, Kennemer Golf (C‑174/00, EU:C:2002:200, paragraph 39).

¹² Judgment of 27 September 2001, Cibo Participations (C‑16/00, EU:C:2001:495, paragraphs 42 and 43); this means that the distribution of dividends is dependent on the company’s economic result.

¹³ Judgment of 27 January 2000, Heerma (C‑23/98, EU:C:2000:46, paragraphs 13 and 19).

¹⁴ Judgment of 21 March 2002, Kennemer Golf (C‑174/00, EU:C:2002:200, paragraph 40).

¹⁵ Judgments of 27 September 2001, Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 27); of 12 September 2013, Le Crédit Lyonnais (C‑388/11, EU:C:2013:541, paragraphs 26 and 27); and of 15 September 2016, Barlis 06 — Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraphs 37 to 39).

¹⁶ Judgment of 27 September 2001, Cibo Participations (C‑16/00, EU:C:2001:495, paragraph 27); of 12 September 2013, Le Crédit Lyonnais (C‑388/11, EU:C:2013:541, paragraph 27); and of 15 September 2016, Barlis 06 — Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 39).

¹⁷ Judgment of 16 October 2014, Welmory (C‑605/12, EU:C:2014:2298, paragraphs 53 to 55).

¹⁸ Judgment of 16 October 2014, Welmory (C‑605/12, EU:C:2014:2298, paragraph 56).