C-2/95 SDC

JUDGMENT OF THE COURT (Fifth Chamber)

5 June 1997*

In Case C-2/95,

REFERENCE to the Court under Article 177 of the EC Treaty by the Østre Landsret for a preliminary ruling in the proceedings pending before that court between

Sparekassernes Datacenter (SDC)

and

Skatteministeriet,

on the interpretation of points 3, 4 and 5 of Article 13B(d) of the Sixth Council Directive (77/388/EEC) of 17 May 1977 on the harmonization 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),

THE COURT (Fifth Chamber),

composed of: J. C. Moitinho de Almeida, President of the Chamber, L. Sevón (Rapporteur), D. A. O. Edward, P. Jann and M. Wathelet, Judges,

* Language of the case: Danish.

Advocate General: D. Ruiz-Jarabo Colomer, Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

— Sparekassernes Datacenter, by Bo Vilstrup and Artur Bugsgang, of the Copenhagen Bar,

— the Skatteministeriet (Ministry for Fiscal Affairs), by Karsten Hagel-Sørensen, of the Copenhagen Bar,

— the United Kingdom Government, by Lindsey Nicoli, of the Treasury Solicitor's Department, acting as Agent, and Christopher Vajda, Barrister,

— the Commission of the European Communities, by Hans Peter Hartvig, Legal Adviser, and Enrico Traversa, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Sparekassernes Datacenter, represented by Bo Vilstrup and Artur Bugsgang; of the Skatteministeriet, represented by Karsten Hagel-Sørensen; of the German Government, represented by Ernst Roder, Ministerialrat at the Federal Ministry for Economic Affairs, acting as Agents; of the United Kingdom Government, represented by Stephanie Ridler, of the Treasury Solicitor's Department, acting as Agent, and Christopher Vajda; and of the Commission, represented by Hans Peter Hartvig, at the hearing on 23 May 1996,

after hearing the Opinion of the Advocate General at the sitting on 4 July 1996,

gives the following

Judgment

Grounds

1By judgment of 20 December 1994, received at the Court on 4 January 1995, the Østre Landsret referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a number of questions concerning the interpretation of points 3, 4 and 5 of Article 13B(d) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1, hereinafter 'the Sixth Directive').

2The questions have been raised in proceedings between the association Sparekassernes Datacenter and the Danish Ministry for Fiscal Affairs, the Skatteministeriet, concerning the charging of value added tax (hereinafter 'VAT') on various transactions effected by the association (hereinafter 'SDC').

Relevant legislation

3Article 13B(d) of the Sixth Directive is worded as follows:

'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 the exemptions and of preventing any possible evasion, avoidance or abuse:

(d) the following transactions:

1) the granting and the negotiation of credit and the management of credit by the persons granting it;

2) the negotiation of or any dealings in credit guarantees or any other security for money and the management of credit guarantees by the person who is granting the credit;

3) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and factoring;

4) transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors' items; "collectors' items" shall be taken to mean gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

5) transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding:

— documents establishing title to goods,

— the rights or securities referred to in Article 5(3);

6) management of special investment funds as defined by Member States.'

4During a transitional period which expired on 1 January 1991, the Member States could continue to exempt the transactions listed in Annex F to the Sixth Directive. Those transactions included the management of credit by a person or a body other than the one which granted the credit (point 13) and the safekeeping and management of shares, interests in companies and associations, debentures and other securities or negotiable instruments, excluding documents establishing title to goods or securities referred to in Article 5(3) of the Sixth Directive (point 15).

5In Denmark, Article 2(3)(j) of Law No 204 of 10 May 1978 on value added tax provided that the activities of banks and savings banks and financial transactions were to be exempt from VAT. The Østre Landsret states that the exemption laid down by the 1978 Law was based on Article 13B(d) of the Sixth Directive.

6Subsequently, Law No 802 of 19 December 1989, which amended the 1978 Law, made deposits and management of shares, debentures and other securities, the management of credit and credit guarantees by persons other than those who granted the credits and the renting of safe-deposit boxes subject to VAT as from 1 January 1991. A new VAT Law, reproducing the scheme and terminology of the Sixth Directive, was enacted on 18 May 1994.

The main proceedings

7SDC is an association which is registered for the purposes of VAT. Most of its members are savings banks.

8It provides to its members and to certain other customers who are connected to its data-handling network (hereinafter 'the banks') services relating to transfers, advice on, and trade in, securities, and management of deposits, purchase contracts and loans. SDC also offers services relating to its members' administrative affairs.

9Before 1993 SDC provided the banks with services performed wholly or partly by electronic means. Those supplies of services were analogous to those which the biggest financial institutions carry out themselves using their own data-handling centres.

io A typical SDC supply of service is described by the national court as consisting of a number of components which, added together, made up the service which a bank or its customers (hereinafter 'the customers') wished to have performed. A price was quoted for each service component appearing in SDC's products catalogue. SDC did not receive the remuneration for its supply of services from the customers but from the banks.

n SDC performed services only at the request of a bank, a customer or other persons who were authorized, under a contract concluded with the customer, to require transactions such as payments to be effected. A customer could give information to SDC only after having been authorized to do so by a bank, in particular by the issue of a payment or credit card. SDC's name was not used vis-à-vis customers and SDC had not undertaken any legal obligation in regard to them. The documentation produced by SDC was sent out in the name of the bank.

12The national court states that, in 1993, that is to say after the main proceedings had been initiated, most of SDC's activities and assets were transferred to newly-formed companies which are now controlled by SDC's members. One of those companies performs all the services in question. For organizational reasons, that company invoices SDC which in turn invoices its members.

13The District Customs Office, by decision of 23 September 1986, and the Customs and Tax Directorate, by decision of 20 April 1990, took the view, on an application by SDC, that the services which it provided relating to certain transfers were covered by the exemption provided for by Article 2(3)(j) of the 1978 Law.

i4 However, on 14 February 1992, the Momsnævn (VAT Tribunal) decided that none of the services provided by SDC were covered by the exemption.

is By application of 27 April 1992, SDC appealed against the VAT Tribunal's decision to the Østre Landsret. That court, having concluded that the outcome of the proceedings depended on the interpretation to be given to points 3, 4 and 5 of Article 13B(d) of the Sixth Directive, decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:

'l) Should Article 13B(d) points 3 to 5 of the Sixth VAT Directive be interpreted as meaning that VAT exemption should be granted for services of a type described above in paragraphs 3 and 5 [of the order for reference; essentially, these are supplies of data-handling services to SDC members and to other financial institutions] ?

In that connection, is the granting of exemption from VAT under Article 13B(D) points 3 to 5 precluded where a transaction within the meaning of that provision is effected, wholly or in part, electronically?

2) The wording used in Article 13B(d) points 1 to 2 of the VAT Directive is "by the person granting [the credit]" (ved den person, som har ydet lånene) and "by the person who is granting the credit" (ved den person, der har ydet kreditten). That description is not employed in Article 13B(d) points 3 to 5.

Should any importance be attached to that difference in the interpretation of Article 13B(d) points 3 to 5?

3) A. Is it significant, as far as the application of Article 13B(d) points 3 to 5 is concerned, whether transactions are effected by financial institutions or by others?

B. Is it significant, as far as the application of Article 13B(d) points 3 to 5 is concerned, whether the entire financial service is performed by a financial institution which has a relationship with a customer?

C. If it is unnecessary for the application of Article 13B(d) points 3 to 5 that the financial institution itself should perform the entire service, can the financial institution purchase transactions wholly or in part from another person with the effect that the services performed by that other person are covered by Article 13B(d) points 3 to 5, or may particular requirements be made of that other person?

4) How is the wording used in Article 13B(d) points 3 and 4 "transactions ... concerning" to be interpreted?

This question seeks to ascertain whether the words "transactions ... con cerning" are to be understood as meaning that VAT exemption should also be granted in cases where a person either performs only a part of the service or effects only some of the transactions within the meaning of the Directive that are necessary for the supply of the complete financial service.

5) In interpreting Article 13B(d) points 3 to 5 should significance be attached to the fact that the taxable person who requests tax exemption for transactions within the meaning of the provision effects those transactions on behalf of the financial institution in whose name the service is performed?

6) After the plaintiff's reorganization, is it significant, as far as application of Article 13B(d) points 3 to 5 is concerned, that the services in question are now provided by a company which supplies the services to the associated financial institutions ?

It will be noted that the said services are invoiced by the company to the plaintiff which in turn invoices its financial institution members [reference is made here to the explanations given in the first paragraph of the order for reference].'

i6 By its questions the national court is asking in effect whether points 3, 4 and 5 of Article 13B(d) of the Sixth Directive are to be interpreted as exempting from VAT supplies of services made to banks and their customers by a data-handling centre set up to serve the common interests of banks where those services contribute to the execution of transfers, to the provision of advice on, and trade in, securities, and to management of deposits, purchase contracts and loans and in the main are performed wholly or partly by electronic means.

i7 It must be observed in this regard that it is not clear from either the order for reference or the observations of the parties whether SDC's services relate to transactions concerning currency, banknotes and coins. Consequently, it is not necessary to consider the interpretation to be given to point 4 of Article 13B(d).

is The national court asks the Court in particular to explain the importance to be attached in this interpretation to the various aspects of the transactions effected by SDC.

i9 Amongst those aspects it is important to distinguish (i) the persons effecting the transactions, (ii) the way in which they are effected, (iii) the contractual links between the provider of the services and the person to whom they are provided and (iv) the nature of the service provided by the data-handling centre.

Preliminary remarks on the interpretation of the exemptions set out in Article 13 of the Sixth Direction

20 Before functions of the kind performed by SDC are examined, it must be pointed out that, according to settled case-law of the Court, the terms used to describe the exemptions envisaged by Article 13 of the Sixth Directive are to be interpreted strictly since these constitute exceptions to the general principle that turnover tax is to be levied on all services supplied for consideration by a taxable person (judgment in Case 348/87 Stichting Uitvoering Financiële Acties [1989] ECR 1737, paragraph 13).

2i Furthermore, as the Court pointed out in its judgment in Case 235/85 Commission v Netherlands [1987] ECR 1471, paragraph 18, and its judgment in Case 348/87 Stichting Uitvoering Financiële Acties, cited above (paragraph 11), it is evident from the 11th recital of the preamble to the Sixth Directive that the exemptions constitute independent concepts of Community law which must be placed in the general context of the common system of VAT introduced by the Directive.

22 Finally, a comparison of the various language versions of point 3 of Article 13B(d) reveals that there are differences in terminology with regard to the phrase 'transactions ... concerning'. In view of those linguistic differences, the scope of the phrase cannot be determined on the basis of an interpretation which is exclusively textual. In order to clarify its meaning, reference must therefore be made to the context in which the phrase occurs and consideration given to the structure of the Sixth Directive (judgment in Case 173/88 Henriksen [1989] ECR 2763, paragraphs 10 and 11).

23 Next, it must be considered whether the two arguments based on the scheme of the Sixth Directive, concerning prevention of tax evasion and avoidance and of the risk of causing distortions of competition, which have been advanced by the parties to the main proceedings, could affect the answers to be given to the questions put by the national court.

24 As regards measures for preventing any possible evasion, avoidance or abuse, the Danish Ministry for Fiscal Affairs, relying on the introductory phrase of Article 13B of the Sixth Directive, argues that if the transactions effected by S DC were covered by the exemptions provided for by points 3 and 5 of Article 13B(d), the M e m b er State concerned would be prevented from taking the necessary measures, because it would be impossible to verify on any objective basis the nature of each of the supplies made by S DC and because of the wholly arbitrary way in which those supplies would be denned in relation to supplies of services made by other subcontractors and in relation to auxiliary services.

25 It is sufficient to state in this regard that the argument put forward by the Danish Ministry for Fiscal Affairs would be relevant only if a very broad interpretation of the concepts in question were adopted, without identifying the various components of the transactions involved. However, as pointed out in paragraph 20 above, such an interpretation is excluded. Consequently, and in view of the discretion which Member States enjoy, by virtue of the introductory sentence of Article 13B, in the choice of measures necessary for preventing any possible evasion, avoidance or abuse, a failure to have adopted the provisions necessary to facilitate application of an exemption may not result in a taxpayer's not being allowed an exemption (see Case 8/81 Becker [1982] ECR 53, paragraph 34).

26 As regards the alleged risk of distortion of competition, the Danish Ministry for Fiscal Affairs argues that, if SDC's supplies of services were exempt in part from VAT, data-handling centres offering the same services or similar services would be at a competitive disadvantage.

27 SDC, on the other hand, submits that the charging of tax on its supplies of services also produces distortions of competition since its members have to pay additional tax in the form of VAT, unlike the big financial institutions which effect the transactions concerned themselves.

28 On this point, it must be emphasized that SDC supplies and invoices services to banks which use its services. In contrast, in the case of financial institutions 'which perform their services directly, there is no exchange of services nor, therefore, any invoicing. As the Advocate General points out in point 57 of his Opinion, the difference involved is one of liability to tax and not one of exemption under points 3 and 5 of Article 13B(d) of the Sixth Directive, which is quite neutral since it arises from the actual nature of the transactions.

29 It must therefore be concluded that none of the arguments concerning the prevention of tax evasion or avoidance and the risk of creating distortions of competition advanced by the parties to the main proceedings can affect the answers to be given to the questions raised.

The persons effecting the transactions concerned and the way in which those transactions are effected

30 The person effecting the transactions in question and the way in which those transactions are actually effected are relevant to the answer to be given to the second part of the first question, the second question, part A of the third question and the sixth question. By these questions, the national court is asking in effect whether points 3 and 5 of Article 13B(d) are to be interpreted as meaning that the exemption is subject to the condition that the transactions be effected by a certain type of institution, by a certain type of legal person or, in whole or in part, in a particular way.

3i As regards the first aspect, all the parties participating in the proceedings consider that it is not excluded a priori that persons other than certain financial institutions could effect the transactions exempted under Article 13B(d). These parties therefore agree that the decisive criterion for the exemption is the type of transaction effected.

32 The transactions exempted under points 3 and 5 of Article 13B(d) are defined according to the nature of the services provided and not according to the person supplying or receiving the services. Those provisions make no reference to that person.

33 The fact that the identity of the persons effecting the transactions is irrelevant in determining the transactions exempt under points 3 and 5 of Article 13B(d) is confirmed by points 1 and 2 of Article 13B(d), which refer to 'the persons granting it' and to 'the person who is granting the credit'.

34 In paragraph 13 of its judgment in Case C-281/91 Muys' en De Winter's Bouw-en Aannemingsbedrijf [1993] E CR 1-5405 the Court stated that where the identity of the lender or the borrower is not specified, the expression 'the granting and the negotiation of credit' in point 1 of Article 13B(d) of the Sixth Directive is in principle sufficiently broad to include credit granted by a supplier of goods in the form of deferral of payment. The C o u rt also considered that the wording of that provision in no way suggested that the scope of that provision was limited only to loans and credits granted by banking and financial institutions.

35 As regards, more specifically, the legal form of the company supplying or receiving services, referred to in the sixth question, it must be concluded that, if the identity of the persons involved is immaterial in determining whether the service in question is exempt from VAT under points 3 and 5 of Article 13B(d), the type of legal person represented by the operators concerned is a fortiori immaterial.

36 As regards the way in which the transactions concerned are effected, the Danish Ministry for Fiscal Affairs, the United Kingdom Government and the Commission point out that the services provided by SDC consist only of electronic services and that they are not therefore covered by points 3 and 5 of Article 13B(d) of the Sixth Directive.

37 It must be stated in regard to this point that the specific manner in which the service is performed, electronically, automatically or manually, does not affect the application of the exemption. The provisions in question make no distinction in this regard. Accordingly, the mere fact that a service is performed entirely by electronic means does not in itself prevent the exemption from applying to that service. If, on the other hand, the service entails only technical and electronic assistance to the person performing the essential, specific functions for the transactions covered by points 3 and 5 of Article 13B(d), it does not fulfil the conditions for exemption. That conclusion follows, however, from the nature of the service and not from the way in which it is performed.

38 The answer to the second part of the first question, the second question, part A of the third question and the sixth question must therefore be that points 3 and 5 of Article 13B(d) of the Sixth Directive are to be interpreted as meaning that the exemption is not subject to the condition that the transactions be effected by a certain type of institution, by a certain type of legal person or wholly or partly by certain electronic means or manually.

The contractual links between the person performing the service and the person receiving it

39 By part B of its third question, the national court asks in effect whether the exemption provided for by points 3 and 5 of Article 13B(d) is subject to the condition that the entire service be performed by an institution which has a relation with the bank's end customer. In the event that the answer to this question is in the negative, the national court wishes to ascertain, by its fifth question, whether the fact that the service provided by a data-handling centre appears, to the end customer of the bank, to be a service supplied by the bank precludes the exemption.

-to SDC considers that points 3 and 5 of Article 13B(d) of the Sixth Directive also apply -where the complete service is performed by a number of persons, even though they do not all have a direct relation with the customer of a financial institution.

4i The Danish Ministry for Fiscal Affairs, on the other hand, considers that the transactions envisaged in points 3 and 5 of Article 13B(d) must be effected by the taxable person on the basis of a contract concluded with the final consumer, in regard to whom he is directly responsible for performance of the final service. It follows that the services performed by SDC for the banks are excluded from the scope of the provision. Those services are in fact performed on the basis of a contract concluded with the banks, with SDC acting as subcontractor.

42 The United Kingdom Government, whose observations on this point are confined to transfers, submits that the transactions are covered by the exemption, whether they are effected by the banks themselves or by an undertaking to which they have recourse, provided that the undertaking is responsible for the conduct of the transactions, which are identifiable as separate, individual services.

43 The German Government considers that the decisive criterion for application of the exemption depends on how the financial service is characterized, irrespective whether there is a contract or a direct link between the person providing it and the final consumer. In its view, no such requirement is to be found in the wording of points 3 and 5 of Article 13B(d).

44 The Commission considers that the provisions in question are to be interpreted as meaning that the exemption provided for by points 3 and 5 of Article 13B(d) of the Sixth Directive applies only to services of a financial character concerning the matters mentioned in those provisions and supplied under a contract concluded directly with the recipient with regard to whom the provider of the service assumes responsibility for effecting the transactions.

45 It must first be pointed out in this regard that, according to settled case-law on the concept of supply of services for consideration contained in point 1 of Article 2 of the Sixth Directive, taxable transactions, within the framework of the VAT system, presuppose the existence of a legal relationship between the provider of the service and the recipient pursuant to which there is reciprocal performance, the remuneration received by the provider of the service constituting the value actually given in return for the service supplied to the recipient (see, in particular, Case C-16/93 Tolsma [1994] ECR 1-743, paragraph 14).

46 In the present case, most of the services provided by SDC involve no legal relationship between it and the end recipient, namely the customer of a member bank of SDC. In such a situation the legal relations which are formed are between the bank and its customer and between the bank and SDC.

47 The services in point in the main proceedings are the services which SDC has performed for its own customers, namely the banks, and in return for which the banks have paid remuneration. Having regard to that relationship, the services which SDC provides to the customers of the banks are therefore significant only as descriptors and as parts of the services provided by that body to the banks.

48 As is clear from paragraph 32 of this judgment, the identity of the provider of the service and the recipient does not affect the application of the provisions in question, except where they cover services which, by their nature, are provided to the customers of financial institutions. During the proceedings it was contended, in particular, that transfer and payment services are of that nature.

49 It is therefore necessary to consider first of all whether the provision which allows transfers to be exempt requires the exempt service to be provided directly to the end customer of the bank.

so It must be added that the considerations relating to transfers, set out below, are also applicable to transactions concerning payments in so far as the factual circumstances and the contractual links are similar. Moreover, no distinction in this regard has been raised by the parties in the proceedings before the Court.

si SDC contests the interpretation according to which the provision covers only the service provided to the end customer of the bank and points out that customers of banks may themselves effect transfers, or have them effected, by shops for example, without any action on the part of the bank.

52 The Danish Ministry for Fiscal Affairs, on the other hand, submits that even in the situations referred to by SDC the link between the end customer and his bank is decisive. In support of that submission it maintained that, in the situation in point in the main proceedings, it is the bank which has authorized the customer to give it orders and that the service is, on any view, provided to the customer in the bank's name.

53 On this point, it must be noted first of all that a transfer is a transaction consisting of the execution of an order for the transfer of a sum of money from one bank account to another. It is characterized in particular by the fact that it involves a change in the legal and financial situation existing between the person giving the order and the recipient and between those parties and their respective banks and, in some cases, between the banks. Moreover, the transaction which produces this change is solely the transfer of funds between accounts, irrespective of its cause. Thus, a transfer being only a means of transmitting funds, the functional aspects are decisive for the purpose of determining whether a transaction constitutes a transfer for the purposes of the Sixth Directive.

54 In cases where the customer effects a transfer or causes a transfer to be effected without any action by the bank, the specific acts which constitute the transfer are carried out either by the data-handling centre and the customer or by the data-handling centre and a third party, the latter acting at the customer's request, or by the data-handling centre acting alone pursuant to a standing order from the customer.

55 The contractual links between the bank and its customer do not diminish the role of the data-handling centre. It is from those links that the customer derives the right to have transactions effected, even if they are invoiced as services provided to the bank and also alter the bank's financial situation.

56 Moreover, if point 3 of Article 13B(d) of the Sixth Directive covered only the service which a financial institution provides to the end customer, only certain acts concerning transfer transactions could be exempt. Such an interpretation would restrict the exemption in a way which is not supported by the wording of the provision in question. That wording does not restrict the exemption to that relation and it is sufficiently broad to include services provided by operators other than banks to persons other than their end customers.

57 It follows from the foregoing that an interpretation restricting application of the exemption provided for by point 3 of Article 13B(d) to services provided directly to an end customer is unfounded.

58 As far as SDC's other functions are concerned, its role in relations with the banks and end customers is comparable to its role in a transfer. Furthermore, the other exemptions provided for by points 3 and 5 of Article 13B(d) are, like the exemption for transfers, also defined according to the nature of the services provided and not according to the identity of the persons to whom they are provided.

59 The answer to part B of the third question and to the fifth question must therefore be that the exemption provided for by points 3 and 5 of Article 13B(d) is not subject to the condition that the service be provided by an institution which has a legal relationship with the end customer. The fact that a transaction covered by those provisions is effected by a third party but appears to the end customer to be a service provided by the bank does not preclude exemption for the transaction.

Data-handling services and their character

eo By its fourth question the national court seeks to ascertain whether the VAT exemption must be granted where a person either performs only part of a complete service or carries out only certain operations necessary for the supply of a complete exempt financial service. Given that the first question concerns the exemption of the data-handling element in the services envisaged by points 3 and 5 of Article 13B(d), these questions can be examined together.

Transfers and payments

6i It is necessary to consider first of all whether the operations carried out by a data-handling centre such as SDC in the effecting of a transfer can in themselves be described as transactions concerning transfers within the meaning of point 3 of Article 13B(d) of the Sixth Directive.

62 The Danish Ministry for Fiscal Affairs argues that the services provided by SDC are in fact composed of various administrative or technical components which are invoiced individually. No price is fixed in advance for the transfer, the transfer of funds or the services in their entirety. Consequently, the services provided by SDC are different from those covered by point 3 of Article 13B(d) of the Sixth Directive.

63 SDC, on the other hand, states that, in order for the exemption to apply, it is not necessary for the services supplied to be complete services but it is sufficient that the supply in question should be an element of a financial service in which various operators participate and which, taken as a whole, constitutes a complete financial service.

64 Given this difference of view, it must be noted first of all that the wording of point 3 of Article 13B(d) of the Sixth Directive does not in principle preclude a transfer from being broken down into separate services which then constitute 'transactions concerning transfers' within the meaning of that provision and which are invoiced by specifying the elements of those services. The invoicing is irrelevant for the application of the exemption in question, provided that the actions necessary for effecting the exempt transaction can be identified in relation to the other services.

65 However, since point 3 of Article 13B(d) of the Sixth Directive must be interpreted strictly, the mere fact that a constituent element is essential for completing an exempt transaction does not warrant the conclusion that the service which that element represents is exempt. The interpretation put forward by SDC cannot therefore be accepted.

66 In order to be characterized as exempt transactions for the purposes of points 3 and 5 of Article 13B, the services provided by a data-handling centre must, viewed broadly, form a distinct whole, fulfilling in effect the specific, essential functions of a service described in those two points. For 'a transaction concerning transfers', the services provided must therefore have the effect of transferring funds and entail changes in the legal and financial situation. A service exempt under the Directive must be distinguished from a mere physical or technical supply, such as making a data-handling system available to a bank. In this regard, the national court must examine in particular the extent of the data-handling centre's responsibility vis-à-vis the banks, in particular the question whether its responsibility is restricted to technical aspects or whether it extends to the specific, essential aspects of the transactions.

67 It is for the national court, which is acquainted with all the facts of the case, to determine whether the operations carried out by SDC have such a distinct character and whether they are specific and essential.

68 In view of all foregoing considerations the reply to be given to the first and fourth questions concerning point 3 of Article 13B(d) of the Sixth Directive must be that this provision is to be interpreted as meaning that transactions concerning transfers and payments include operations carried out by a data-handling centre if those operations are distinct in character and are specific to, and essential for, the exempt transactions.

SDC's other functions

69 SDC's operations entitled 'Advice on, and trade in, securities' cover two types of different services. The first type consist of separate information services characterized by the supply of financial information to the banks, whilst the second type form an integral part of the system of the market in marketable securities.

70 It is apparent from the actual wording of points 3, 4 and 5 of Article 13B(d) of the Sixth Directive that none of the transactions described by those provisions concerns operations involving the supply of financial information. Such operations cannot therefore be covered by the exemption provided for by that provision.

7i On the other hand, it is not excluded that some operations belonging to the second group are to be considered as transactions in 'shares, interests in companies or associations, debentures and other securities' within the meaning of point 5 of Article 13B(d) of the Sixth Directive. The national court points out here that SDC carries out stock exchange transactions for its members' customers by purchasing or selling securities held in customers' portfolios.

72 It is undisputed that the transactions in shares and other securities covered by point 5 of Article 13B(d) of the Sixth Directive, which excludes only management and safekeeping of securities, include transactions on the market in marketable securities.

73 Furthermore, trade in securities involves acts which alter the legal and financial situation as between the parties and are comparable to those involved in the case of a transfer or a payment.

74 However, the description provided in this regard by the national court is not sufficient to enable the Court to determine the precise nature of SDC's services concerning advice on, and trade in, securities.

75 The answer to be given to the first and fourth questions concerning operations entitled 'Advice on, and trade in, securities' must therefore be that services consisting in making financial information available to banks and other users are not covered by points 3 and 5 of Article 13B(d) of the Sixth Directive. As regards, more specifically, trade in securities, point 5 of that provision is to be interpreted as meaning that transactions in shares, interests in companies or associations, debentures and other securities include operations carried out by a data-handling centre if they are separate in character and are specific to, and essential for, the exempt transactions.

76 The same applies to the management of deposits, purchase contracts and loans. As was stated in paragraph 4 of this judgment, such operations are no longer covered by the exemption since 1 January 1991, the date on which the transitional period during which the Member States could, by way of exception, maintain exemptions for the specific cases provided for in Annex F to the Sixth Directive expired.

77 The answer to the questions concerning the management of deposits, purchase contracts and loans must therefore be that the mere fact that the operations are carried out by a data-handling centre does not prevent them from constituting services covered by points 13 and 15 of Annex F to the Sixth Directive. It is for the national court to determine whether, before 1 January 1991, those operations were separate in character and specific to, and essential for, those services.

The new organizational structure

78 By its last question the national court seeks to ascertain in particular whether the fact that the services provided to the banks are performed by a company which invoices the services to SDC which in turn invoices them to the banks is significant for the purposes of the application of points 3 and 5 of Article 13B(d) of the Sixth Directive.

79 As far as this question is concerned, the importance of a legal relationship between the person providing a service and the person receiving it and the principle of mutual performance must be emphasized. However, if the service supplied is specified, if it fulfils the criteria for exemption and if the invoicing concerns only that service, the mere fact that for organizational reasons the invoicing is done through a third party does not prevent the transaction effected from being regarded as an exempt transaction.

so There may be such invoicing if the data-handling centre which effects the transactions and the third party which invoices them in reality constitute a unit created to serve the common interests of the persons for whom its services are intended.

si The reply to be given to the sixth question must therefore be that the mere fact that a service is invoiced by a third party does not prevent the transaction to which it relates from being exempt under points 3 and 5 of Article 13B(d) of the Sixth Directive.

Costs

Costs

82 The costs incurred by the German and the United Kingdom Governments and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions submitted to it by the Østre Landsret by judgment of 20 December 1994, hereby rules:

1. Points 3 and 5 of Article 13B(d) of the Sixth Council Directive (77/388/EEC) of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, are to be interpreted as meaning that the exemption is not subject to the condition that the transactions be effected by a certain type of institution, by a certain type of legal person or wholly or partly by certain electronic means or manually.

2. The exemption provided for by points 3 and 5 of Article 13B(d) of the Sixth Directive is not subject to the condition that the service be provided by an institution which has a legal relationship with the end customer. The fact that a transaction covered by those provisions is effected by a third party but appears to the end customer to be a service provided by the bank does not preclude exemption for the transaction.

3. Point 3 of Article 13B(d) of the Sixth Directive is to be interpreted as meaning that transactions concerning transfers and payments and transactions in shares, interests in companies or associations, debentures and other securities include transactions carried out by a data-handling centre if those transactions are distinct in character and are specific to, and essential for, the exempt transactions.

4. Services consisting in making financial information available to banks and other users are not covered by points 3 and 5 of Article 13B(d) of the Sixth Directive.

5. The mere fact that transactions concerning the management of deposits, purchase contracts and loans are carried out by a data-handling centre does not prevent them from constituting services covered by points 13 and 15 of Annex F to the Sixth Directive. It is for the national court to determine whether, before 1 January 1991, those transactions were separate in character and specific to, and essential for, those services.

6. The mere fact that a service is invoiced by a third party does not prevent the transaction to which it relates from being exempt under points 3 and 5 of Article 13B(d) of the Sixth Directive.

Moitinho de Almeida Sevón Edward

Jann Wathelet

Delivered in open court in Luxembourg on 5 June 1997.

R. Grass J. C. Moitinho de Almeida

Registrar President of the Fifth Chamber

O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95

OPINION OF ADVOCATE GENERAL RUIZ-JARABO COLOMER delivered on 4 July 1996 *

Introduction

1The Østre Landsret, Denmark, has referred to the Court six questions for a preliminary ruling on the interpretation of Article 13B(d)3, 4 and 5 of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (77/388/EEC) > (hereinafter *the Sixth Directive').

2The purpose of the proceedings before the Danish Court is to determine whether or not certain services performed by the plaintiff for a number of financial institutions (savings banks and banks) attract value added tax (hereinafter 'VAT'). To be specific, the court of reference -wishes to know whether the rules on exemption from VAT set out in Article 13B(d)3, 4 and 5 of the Sixth Directive can apply to such services.

The facts and the main proceedings according to the order for reference

3Sparekassernes Datacenter (hereinafter 'SDC') is a VAT-registered legal person founded by Danmarks Sparekasseforening

* Original language: Spanish.

(Danish Association of Savings Banks). Under Danish legislation it is not itself a credit establishment or a financial institution. Prior to 1993 it carried out a whole range of services, primarily for the said savings banks but also for other undertakings in the financial sector.

4Following the restructuring carried out in 1993, SDC established a limited company (SDC af 1993 A/S) which carries out all the transactions previously carried out by the plaintiff, and which therefore took over the services supplied to the financial institutions. For organizational reasons, SDC af 1993 A/S invoices the plaintiff which in turn makes out invoices for the members of the SDC association.

5The facts of the dispute relate to the situation existing until the plaintiff's activities were reorganized in 1993. The last question referred to the Court (Question 6) deals with the possible effects which restructuring might have for services supplied thereafter.

6The members of the plaintiff institution 4 are savings banks and banks. According to the balance-sheet for the 1992 financial year, SDC's gross turnover amounted to DKR 650.2 million, of which DKR 378.2 million was 'income from data-handling'.

7In July 1986 the plaintiff asked the appropriate authorities (Distriktstoldkammer) whether the part of its activities which might be defined as 'pure' credit transfers was exempt from VAT. Until then it had paid VAT on all its services.

8On 23 September 1986 the Distriktstold kammer decided that that part of the plaintiff's operations which consisted in effecting transfers between two financial institutions was exempt from VAT.

9On 18 July 1988 the applicant applied for a refund of some DKR 229 million corresponding to the amount of VAT which, in its view, it had overpaid between 1 October 1981 and 31 March 1988, in respect of transfer of funds.

10The Distriktstoldkammer, having regard to the large sum involved and the importance of the case, submitted the question to the higher administrative authority, the Told-og Skattestyrelse (Customs and Tax Directorate).

11The latter decided on 20 April 1990 that only the credit transfer service 'as such' set out in Paragraph 4.7 of the plaintiff's 'products catalogue' (user's guidelines) could be regarded as covered by the VAT exemption rules set out in Paragraph 2(3)(j) of the Danish VAT Law transposing into Danish domestic law Article 13B(d) of the Sixth Directive.

12As a result of that decision the Told-og Skattestyrelse ordered the repayment to the plaintiff of the VAT overpaid (DKR 61 022 170), to which was added interest amounting to DKR 13 376 520.

13The plaintiff appealed against that decision to the Momsnævn (VAT appeal tribunal) which, as the administrative tribunal of last instance, decided by a decision of 14 February 1992 that none of the services performed by the plaintiff was exempt from VAT.

14On 27 April 1992 the plaintiff appealed against the Momsnævns decision to the Østre Landsret, the court of reference, which referred to the following questions to the Court of Justice:

(2) The wording used in Article 13B(d)l and 2 of the VAT Directive is "by the person granting [the credit]" (ved den person, som har ydet lånene) and "by the person who is granting the credit" (ved den person, de har ydet kreditten). That description is not employed by Article 13B(d)3, 4 and 5.

Should any importance be attached to that difference in the interpretation of Article 13B(d)3, 4 and 5?

(3) A. Is it significant as far as the applica '(1) Should Article 13B(d)3, 4 and 5 of the Sixth VAT Directive be interpreted as meaning that VAT exemption should be granted for services of a type described in Paragraphs 3 and 5 of the order for reference?

In that connection, is the granting of exemption from VAT under Article 13B(d)3, 4 and 5 precluded where a transaction within the meaning of that provision is performed, wholly or in part, electronically?

tion of Article 13B(d)3, 4 and 5 is concerned whether transactions are performed by financial institutions or by others?

B. Is it significant as far as the application of Article 13B(d)3, 4 and 5 is concerned whether the entire financial service is performed by a financial institution which has links with a customer?

C. If it is unnecessary for the application of Article 13B(d)3, 4 and 5 that the financial institution itself should perform the entire service, can the financial institution buy in transactions wholly or in part from another person, with the effect that the services performed by that other person are covered by Article 13B(d)3, 4 and 5, or may particular requirements be made of that other person?

(4) How is the wording used in Article 13B(d)3, 4 and 5 "transactions ... con cerning" to be interpreted?

This question seeks to ascertain whether the words "transactions ... concerning" are to be understood as meaning that VAT exemption should also be granted in cases where a person either performs only a part of the service or performs only some of the transactions within the meaning of the directive which are necessary for supplying the complete financial service.

(5) In the interpretation of Article 13B(d)3, 4 and 5, should significance be attached to the fact that the taxable person who requests tax exemption for transactions within the meaning of the provision performs those transactions on behalf of the financial institution in whose name the service is performed?

(6) Following the plaintiff's reorganization, is it significant, as far as application of Article 13B(d)3, 4 and 5 is concerned, that the services in question are now provided by a company which supplies the services to the associated financial institutions?

It will be noted that the said services are invoiced by the limited company to the plaintiff which in turn invoices its financial institution members.'

Preliminary observation concerning the

nature of the services performed by SDC and the scope of the questions raised

15The court of reference has expressed in the order for reference its view of the characteristics of the services which the plaintiff provides for its members or their customers. That view, elaborated after an analysis of the evidence before the Court (above all documentary), is the point of departure for a legal classification of the services performed to establish whether or not they fall within the basis of assessment to tax.

16In a system of judicial cooperation such as that laid down by Article 177 of the EC Treaty, the duty of evaluating the evidence produced in the main proceedings devolves logically and exclusively upon the national court. The Court of Justice accordingly 'may assume', as the order for reference literally states, that the plaintiff's services have the following characteristics:

— the plaintiff performs the services only upon request from a member savings bank, one of such bank's customers or others who, by agreement with the customer, are authorized to requisition, for example, specific payments;

— the request is made by the electronic transmission of information which may result in the immediate performance of a service or involve several successive services over a shorter or longer period;

— a customer can only transmit information after authorization by the financial institution, for example in the form of the issue of a cash card or a credit card;

— the plaintiff's name is not made known to the individual savings bank customers and the plaintiff has not entered into any legal obligation towards them;

— the plaintiff does not demand payment from the individual customers but only from its members;

— the plaintiff's services are essentially performed wholly or in part electronically.

17The following are, according to the order for reference, the four spheres of activity in which the SDC performs its services:

— credit transfers;

— advice on management of securities; — management of deposits, purchase contracts and loans;

— tasks concerning members' internal administration.

18The purpose of the main proceedings at various instances before the Danish administrative and judicial bodies concerned only the repayment of the tax paid by the plaintiff by way of VAT in relation to the activity of 'transfers' of funds.

19It is clear that the final decision of the Momsnævn, as the administrative tribunal of last instance, was to the effect that the plaintiff was not entitled to tax exemption for any of its services in general. However, that decision was the final response — at administrative level — to an initial application claiming only repayment of the tax payments made by way of VAT applied to fund transfers.

20In other words, SDC had not disputed before the Danish authorities (at least, so it seems from the account given by the court of reference of the background to the proceedings) that it was obliged to pay VAT for the services concerning the spheres of activity other than the fund transfers.

21In such circumstances, I do not think that an answer from the Court of Justice as to whether activities other than the said credit transfers of funds are subject to, or exempt from, VAT will be of much use to the court of reference.

22In particular if, throughout the main proceedings, SDC did not claim reimbursement of the VAT payments relating to advice on management of securities, management of loans or deposits or transactions relating to its members' internal administration, I cannot see how a reply from the Court of Justice on the tax system relating to such transactions could help the Danish court.

23In any event, the impact of this objection is limited, since the purport of the questions raised by the court of reference would, as I see it, make it possible to give a general answer of principle without the need to detail separately each one of the various transactions mentioned.

24For the sake of clarity, I shall set out the actual wording of the Community rule to be interpreted and then analyse the questions referred to the Court by dividing them into three groups:

(a) those referring to the persons covered by exemption (Questions 2, 3A and 6);

(b) those referring to the subject of transactions which are exempt (Questions 3B, 3C, 4 and 5);

(c) the one referring to the inclusion of SDC's specific transactions in the category of exempt transactions (Question 1).

The Community provision to be interpreted

25Article 13 of the Sixth Directive sets out the exemptions which the Member States are required to introduce in their VAT legislation. The sections of the article requiring interpretation are as follows:

'B. Other exemptions

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 the exemptions and of preventing any possible evasion, avoidance or abuse:

[...]

(d) the following transactions:

1) the granting and negotiation of credit and the management of credit by the person granting it;

[···]

3) transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and factoring; 4) transactions, including negotiation, concerning currency, bank notes and coins used as legal tender, with the exception of collectors' items; "collectors' items" shall be taken to mean gold, silver or other metal coins or bank notes which are not normally used as legal tender or coins of numismatic interest;

5) transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding:

— documents establishing title to goods,

— the rights or securities referred to in Article 5(3).'

26It should, however, be pointed out that Article 28(3)(b) of the Sixth Directive allowed Member States, during the transitional period referred to in Article 28(4), to continue to exempt certain activities set out in Annex F under conditions existing in the Member State concerned.

27The said activities — which, but for the last-mentioned provision would necessarily have attracted VAT — were:

(a) management of credit and credit guarantees by a person or a body other than the one which granted the credits (item 13 of Annex F);

(b) debt collection (item 14 of Annex F);

(c) the safekeeping and management of shares, interests in companies and associations, debentures and other securities or negotiable instruments, excluding documents establishing title to goods or securities referred to in Article 5(3) (item 15 of Annex F).

28The transitional period during which the States were entitled by way of exception to continue the exemption finally came to an end either on 1 January 1990 (in the case of debt collection) or on 1 January 1991 (in the O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95 ,1 case of the two other types of transaction). As from those dates, therefore, the said transactions have been subject to the general rule set out in the Sixth Directive and therefore attract tax in the same way as the other taxable transactions.

The persons covered by the transactions

exempted by Article 13B(d)3, 4 and 5 of the Sixth Directive

29Three of the questions raised in the order for reference ask the Court of Justice about the persons covered by the exemptions in question and, as they deal with related matters I think it is appropriate to deal with them together.

30The key question with regard to these aspects is Question 3A in which the court of reference asks whether there is any difference in the application of the exemptions according to whether the exempted transactions were performed by financial institutions or by others. Question 2 relates to the same problem, enquiring whether the fact that certain expressions in Article 13B(d)l and 2 (referring to those effecting the transactions), which are not to be found in indents 3, 4 and 5, is of any relevance to this matter. Finally, Question 6 enquires whether it is significant that the services supplied by SDC are now provided through the intermediary of a limited company.

31In general it seems clear to me that the provisions already quoted do not relate to any personal aspects concerning the exempt transactions. They are in fact rules drafted solely to take account of the objective nature of the transactions in question irrespective of who effects them.

32It is clear that some of the transactions exempted (particularly some of those described in Article 13B(d)3 and 4) normally correspond to the field of banking which, in certain Member States, has been reserved by law exclusively to specified banking institutions or to financial intermediaries. But that is a matter of politico-economic choices made by the Member States in question and not of the application of the Sixth Directive. „

33In so far as persons other than banking institutions or financial intermediaries may, according to their own domestic law, effect the transactions envisaged in the indents already quoted, the exemptions in question will be fully applicable to them. There is, therefore, no reason why any natural or legal person, whether or not engaged in banking, should not enjoy the exemption concerned.

34The Court reached the same conclusion in the judgment in Case C-281/91 Mays with regard to another of the transactions covered by Article 13B(d) of the Sixth Directive, namely the granting of credits. The fact that such a transaction is exempt under indent 1 and not indents 3, 4 and 5 is immaterial here as the grounds of the judgment are entirely applicable by analogy to this case.

35In paragraph 13 of the Muys judgment the Court stated that 'although the exemptions provided for in Article 13 are to be interpreted strictly (see Case 348/87 Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën [1989] ECR 1737), nevertheless, in the absence of any specification of the identity of the lender or the borrower, the expression "the granting and the negotiation of credit" is in principle sufficiendy broad to include credit granted by a supplier of goods in the form of deferral of payment. Contrary to the Commission's view, the wording of that provision in no way suggests that there is any limitation on the scope of Article 13B(d)l only to loans and credits granted by banking and financial institutions'.

36Moreover, to return to the analysis of Article 13B(d)3, 4 and 5, a considerable number of the exempted transactions, according to those indents, does not even pre-suppose that a banking institution is involved. Although it is clear that, in the present legislation, deposit and current accounts or cheques are normally dealt with by banking institutions, they may be quite distinct from certain normal commercial transactions, as, for example, the issue of negotiable instruments. Similarly certain transactions relating to shares and debentures are frequently effected without banking institutions' being involved.

37That being the case, it is understandable why indents 3, 4 and 5 contain no reference to the grantor, which occurs in other indents providing for exemption for 'the management of credit by the person granting it' (indent 1) or 'the management of credit guarantees by the person who is granting the credit' (indent 2).

38Indents 1 and 2 deal with restriction of exemption to certain types of transaction: it is only when the management of credit or credit guarantees is performed by the person granting them that a right to exemption arises. That right does not exist therefore •when the management is effected by a third party other than the one who granted the credit.

39The fact that indents 3, 4 and 5 do not include a similar reference to the grantor confirms, if such confirmation is needed, the conclusion that these provisions do not have regard to the persons involved in the transactions, but set out the tax advantage only in objective terms by reference to the transactions as such.

40Finally, the fact that those effecting the transactions in question may be associations, companies, natural persons or any other type of entity with legal personality makes no difference to the explanation I have just given. The problems concerning the involvement of a company, which the last question referred to the Court mentions, may be considered from the point of view of the purpose of the complex services and the interweaving of undertakings (to which I shall refer later) but disappear if viewed subjectively.

The purpose of the exempted transactions

according to Article 13B(d)3, 4 and 5 of the Sixth Directive

41The 'transactions' to which subparagraph (d) refers are true legal operations of a contractual nature, either of a purely civil or — in the majority of cases — of a commercial character. If they involve a financial institution, a savings bank or a bank as a party to the relevant legal operations, their commercial nature is undeniable.

42The Community legislature has granted the exemption at issue to a series of 'transactions' frequendy encountered in legal dealings, since otherwise tax would have fallen upon both normal commercial activity effected by means of the commercial instruments mentioned (cheques, negotiable instruments, current accounts and so on) and upon transfer of shares, interests in companies, debentures and other securities.

43Exempted 'transactions', when those involved are financial institutions and their customers — and that is the hypothesis to which the order for reference repeatedly refers —, are in reality bank contracts of a very different nature. In all of them the institution is required to perform a service for the customers in return for a certain remuneration. The services may be performed once only or repeatedly without affecting entitlement to the exemption.

44The important feature for settling the dispute is, in my view, that the exemption is granted to the 'transaction' effected between the institution and its customer, the only legal operation in which both take part. In principle, that transaction would be subject to VAT so that the amount of the tax would be passed on to the customer as the final consumer. The exemption is granted precisely in order to avoid such a clog on economic activity.

45It must be stressed that the 'transaction' subject to VAT (and then exempted) is the legal operation effected between the customer and the banking institution. When there is, for example, an order for payment or a transfer the parties to the legal relationship are the customer who gives the order and the savings bank — or, in general, the financial institution — which accepts the order and performs a service for the customer consisting in the transfer of the funds to a third person.

46That being so, it is irrelevant for the purpose of applying the exemption by what means or instruments the banking institution carries out its obligations derived from the legal operation entered into with the customer. Similarly it is irrelevant 'whether, in using such measures or instruments, the financial institution is in turn assisted by third parties.

47In other words, the 'transaction', that is, the legal operation between the bank or savings bank and its customer, is one thing and the way in which the financial institution materially complies with its obligation to perform the service agreed is quite another. The only allusion to that legal operation in the Sixth Directive is the reference in Article 13B to 'exempt ... transactions'.

O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95

48Through a number of the questions 17 raised by the court of reference there seems to be a certain ambiguity 'which needs to be clarified: there is not in the 'transactions' analysed an 'entire financial service' which may be broken down into various 'parts' or independent ancillary services so that each one of them may be attributed to different persons. On the contrary, there is a single financial service arising from the legal operation, binding the customer to his bank or savings bank, and that is the case irrespective of the procedures, whether internal or not, by which the banking institution in fact performs the service.

49The court of reference itself recognizes that there is no legal link of any kind between the plaintiff and the customers of the financial institutions. SDC therefore supplies its services to those institutions alone and is under an obligation only to them, whilst the customers are not even aware of its name. There are therefore no 'transactions' of any kind between the plaintiff and the customers of the banking institutions.

50The part played by the plaintiff is reduced to providing the associated banks and savings banks •with a given electronic service which, in view of the present state of computer technology, greatly facilitates the management of the business of banking: SDC therefore provides the associated banking institutions with a service basically consisting in the handling and electronic trans I9 mission of data.

51That 'service' is merely one of the instruments available to the banks and savings banks for carrying out the obligations agreed with their customers. But the genuine banking 'transactions' to which the exemption relates must not be confused with those I have just referred to. On the contrary, we are dealing with one technical method, amongst other possible ones, used by the financial institution for its own convenience.

52The banks and savings banks have two choices for effecting electronic data-handling and transmission for the purpose of the actual execution of transactions of transfer, payment, management of current accounts and the like: either they use their own staff and equipment, as is done for other bank transactions, or they make a contract with a third party for the actual performance of some of those tasks.

53In the second case, with which these proceedings are concerned, the legal relationship between the customer and the savings bank continues unaltered, just as if the bank had actually performed those tasks with its own resources. All that changes is the internal method of working of the financial institution itself, but that has no significance for the customer whose contract is exclusively with the bank or savings bank, which is solely liable to him.

54Choosing one option or the other is a business policy decision which has the same fiscal consequences in this sector as in any other. If an undertaking engages the services of another undertaking to perform certain tasks instead of performing them itself with its own staff and equipment, it will have to pay the VAT relating to the performance of those services.

55Consequendy, it is impossible to accept the plaintiff's argument as to the alleged tax discrimination between banking undertakings which have their own data-handling resources and the others which are obliged to engage the services of a third person for such purposes. As I shall explain later, that is the logical consequence resulting from the tax structure specific to VAT.

56The principle of fiscal neutrality, which is at the basis of VAT, is not affected by the exercise of that option. In fact, the chargeable event for VAT, as affecting 'supply of services', is that there should be two independent taxable persons, in a legal relationship, one of whom performs an action on behalf of another.

57So, paid employees who, under the direction of their employer and remunerated by him, perform their services for the company which engages them are not taxable persons. In the performance of such services there is no chargeable event subject to VAT: strictly speaking that is a phenomenon of non-liability, resulting a sensu contrario from the positive configuration of the chargeable event for VAT and even from the very nature of that tax.

58Business policy decisions may lead an undertaking to opt to carry out certain tasks with its own resources using its paid staff. In such a case, there is no chargeable event subject to VAT. It may, on the other hand, choose to contract with third persons, legally distinct from the undertaking, for the supply of its services: in that case, the transaction is subject to VAT.

59That system, which, moreover, is quite fundamental in the operation of VAT, is fully applicable to the case before the Court. A savings bank may materially execute legal operations agreed with its customers relating to transfer of funds or the like, either with its own employees, computers and electronic transmission systems or else by resorting for those purposes to another company to assist it. In the first case, no VAT at all is payable; in the second case, the performance of services supplied to the savings bank by an outside firm attracts VAT.

60In relation to a similar problem, although with different aspects, the Court, in its judgment in Case C-4/94 BLP Group came to a similar decision, distinguishing the tax consequences of traders' choices between exempt transactions and taxable transactions. Identical considerations may be applied to the cases, such as that now before the Court, in which the choice is not between exempt transactions and taxable transactions but between transactions not liable to tax and taxable transactions.

61In other respects, the fact that the tasks performed by the outside undertaking on behalf of the banking institutions may be carried out in relation to the latter's commercial operations has no effect on the position I have just explained. All undertakings which supply their services to banking institutions to ease the normal course of their commercial business (that is, of their transactions with the customers) 'collaborate' in short in the financial operations of the banks and savings banks but that does not exonerate them from the payment of VAT.

62The Danish Government rightly emphasizes that if the plaintiff's line of argument were to be followed any independent undertaking contracting with a banking institution to provide it with a service more or less linked to typical banking 'transactions' which the Sixth Directive regards as exempt would also be able to claim exemption, such as the telephone undertaking which is instrumental in transmitting the orders for transfer or the transport and security company which physically transports the funds from one branch to another and so on.

63Such examples, and similar ones which might be added, show the need to keep the exemption within the confines of what constitutes its legal object: the financial operations and transactions agreed between commercial entities. The use by a banking institution of the services of third persons to assist it (whether electronic data-handling or telephone, transport or courier undertakings) for the purpose of carrying out its own obligations derived from contracts signed with its customers, is a phenomenon which, by its very nature, is foreign to the exemption at issue.

The inclusion of SDC's various transactions in the category of exempt transactions

64The description of the services supplied by SDC to its members, as previously summarized, means, if the conclusions I put forward are accepted, that they cannot be included in the category of exempt transactions at issue.

65In fact, I have emphasized that SDC does not, properly speaking, effect transactions with the individuals and companies which are customers of the banks or savings banks. On the contrary, it merely supplies those financial institutions with certain technical resources or services for the better accomplishment of the typical banking transactions which they effect with their customers.

66SDC's auxiliary or instrumental role as an undertaking external to the banks or savings banks is analogous to that of any other undertaking contracting with a financial institution to provide it with its expert services in the electronic data-handling sector. In so far as such services do not, in themselves, constitute any of the 'transactions' or legal operations referred to in Article 13B(d) of the Sixth Directive, they cannot benefit from the exemption granted by that provision.

67These considerations must be applied to the specific case and related to each of the four types of transaction described in detail in section 3.1 of the order for reference.

68With regard to credit transfers (section 3.1. A of the order for reference), which constitute the major part of SDC's operations, I have indicated that the transaction which is exempt is the legal operation agreed between the customers and the financial institution and not the instrumental services which third companies or persons make available to the savings bank or bank for effecting such a legal operation.

O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95

69Bank credit transfers, whose importance in the realization of the internal market has resulted in a legislative initiative from the Commission, originate in an order given to a financial institution by a natural or legal person in favour of a beneficiary (who may be the person giving the order) for the purpose of putting a sum of money at the disposal of the latter.

70Such a transaction constitutes, as I have said, a true contract with obligations for the customer and the financial institution, a contract whose conditions (as regards adequate financial coverage, time of performance, commissions due, interest and compensation in the event of breach of contract or excessive delay, the rates of exchange applicable to cross-border transactions and the like) are legally binding on both parties.

71The creditors and debtors in the credit transfers to which the order for reference refers are the customers (individuals and companies in their capacity of those giving the orders or beneficiaries) and institutions effecting the payments, accepting the risks and obligations appropriate to this type of contract.

72The institutions effecting the transfers offer their customers a specific financial service consisting in facilitating a movement of capital, a service which is exempted by the Sixth Directive. The fact that, for performing that service they are obliged to use certain technical or material means or the services of third persons (undertakings providing telecommunications, transport of money, postal services, computer services, legal advice and other services) must not lead to confusion between the exempt transaction as such and the technical or auxiliary services which make possible the accomplishment of this aspect of banking activity, to which that exemption does not extend.

73In particular, the description of the credit transfers given in the order for reference makes it clear that SDC's instrumental function is data-handling on behalf of the financial institutions, but that it does not itself, legally speaking, effect the credit transfer. It is therefore inappropriate to apply the exemption under discussion to these instrumental functions.

74As regards the transactions involving advice on trade in securities (section 3.1. B of the order for reference), the explanation of SDC's operations made by the court of reference contains a certain ambiguity:

(a) in the summary list of transactions, section 3.1. B of the order for reference is limited, as I stated, to covering only transactions involving 'advice' on securities;

(b) on the other hand, in detailing the content of section 3.1. B, the order for reference mentions 'advice on and trade in securities', adding that 'the plaintiff sets up stock exchange transactions for the members' customers. Such transactions take place by way of purchase or sale of the members' own holdings'.

75If SDC's operations in this field are confined to providing banks and savings banks with information or advice on the stock market, that service just is not included in the transactions which the Sixth Directive regards as exempt.

76In fact, a type of service such as is described in the order for reference ('The plaintiff gives its members access to an advanced information and advice system concerning Danish bonds. The plaintiff enables its members to prepare investment proposals for customers on the basis of specific criteria, for example the amount to be invested and the terms involved') is not entitled to exemption under the Sixth Directive.

77On the other hand, if SDC negotiated, purchased and sold securities for its customers' account, such a transaction would indeed be entitled to the exemption provided for in Article 13B(d)5 of the Sixth Directive.

78However, that does not seem to be the position. Once again, SDC seems merely to provide its members (banks and savings banks) with the necessary technical support to enable them in their turn to effect the transactions of acting as intermediaries in the purchase and sale of securities for their customers' account.

79In those circumstances and subject to a final legal clarification of those activities which it is for the court of reference to effect, it must again be stated that there is no possibility of declaring exempt the instrumental services which SDC puts at the disposal of the financial institutions in order that they may act as intermediaries in the purchase and sale of their customers' portfolios of securities.

80With regard to the transactions of management of deposits, purchase contracts and loans (section 3.1. C of the order for reference), SDC accepts that such transactions have not been entitled to exemption since 1 January 1991, the date of expiry of the transitional period during which the States might by way of exception maintain the exemptions for the specific items referred to in Annex F to the Sixth Directive.

81The characteristics of these transactions (during the period prior to 1 January 1991) as described in the order for reference, raise certain doubts and do not make it possible to decide with certainty what legal system is applicable.

82The court of reference in fact states that the transactions of 'management of deposits' carried out by SDC, referred to in section 3.1. C of the order for reference, involve keeping a register of customers' securities, checking and effecting entries and cancella tions, transferring to customers' accounts income accrued and informing them in writing of any movements.

83However, the legal person who appears to the customers as performing such operations is not SDC but the financial institution to which the customers have entrusted the management of their securities. SDC's function therefore seems to be providing the financial institutions with the technical support necessary for them to effect the management according to the conditions agreed with their customers.

84The same may be said with regard to the 85. Finally, as regards what is referred to as management of purchase contracts and loans, 'tasks concerning members' internal adminis where the legal relationship established is tration' (section 3.1. D of the order for refer that between the customers and the financial ence), the answer given by SDC to the ques institutions. The latter retain responsibility tion put to it by the Court of Justice for the management towards their customers, regarding the content of its application for who are not even aware of SDC's action, exemption confirms that the association at which is restricted to supplying the banking no time claimed to qualify for such exemp institutions with the relevant data. tion regarding those transactions. That makes it unnecessary to give any reply regarding the tax system applicable to them.

Conclusion

Conclusion

86In view of the foregoing considerations, I suggest that the Court of Justice should reply as follows to the questions referred to it by the Østre Landsret:

(1) The exemptions provided for in Article 13B(d)3, 4 and 5 of the Sixth Council Directive on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (77/388/EEC) do not make the transactions concerned necessarily dependent upon a part being played by a financial institution, bank or savings bank.

(2) When a financial institution which provides its customers with financial services plays a part in transactions which are exempt by virtue of the said provisions, the scope of the exemption is restricted to the corresponding legal operations carried out by the said institution with its respective customers but does not extend to the performance of auxiliary or instrumental services with which an external undertaking, distinct from the credit institution, may supply it in the form of electronic data-handling or, in general, of electronic transmission of information for the performance of the institution's own banking transactions.

(3) In particular, the exemption at issue does not extend to the performance of services of electronic transmission of information with which an external undertaking distinct from the financial institution may supply the latter to allow the performance of transactions of transfer of funds or other transactions referred to in Article 13B(d)3 and 4 of the said Sixth Directive or the transactions relating to securities covered by Article 13B(d)5 of the said directive.

(4) It is for the court of reference to determine whether, during the transitional period referred to in Article 28(3)(b) of the Sixth Directive with reference to Article 28(4) thereof, the plaintiff undertaking actually performed financial services consisting in the management of deposits of securities, the management of purchase contracts and the management of loans, or whether, on the contrary, it confined itself to supplying the financial institutions with the technical support necessary for carrying out such management tasks for their customers. Only in the case of the first of the two alternatives would it be entitled to the exemption at issue.

Notes

(1) OJ 1977 L 145, p. 1.

(2) Nevertheless, as the Danish Government admits in its observations (point 22), it is subject to Order No 820 of 12 December 1991, on the carrying out of systems auditing in joint data centres.

(3) The plaintiff provides services for 99% of Danish savings banks (percentage calculated on the basis of all the savings banks' balance-sheets) and for some banks.

(4) In Denmark, according to the parties' written observations, the banks and savings banks arc subject to the same legislation.

(5) For greater clarity I shall use 'members' of SDC to mean the banks and savings banks. I shall use 'customers' to mean the persons, legal or natural, who have commercial relations with those banks or savings banks.

(6) The basic document is the one entitled 'General description of SDC's activities'.

(7) As to the scope of this heading, see points 74 to 79 of this Opinion.

(8) Translator's note: The phrase used in the Danish text is 'Råd givning om handel med værdipapirer'.

(9) The Monunzvn's decision is an example of reformatio in pejus since, on the basis of an administrative appeal brought by a party who has obtained only partial satisfaction of his claim and considers himself aggrieved thereby, it makes the appellant's legal situation worse to the extent of depriving him even of the advantages allowed him by virtue of that partial satisfaction.

(10) Section 2 of the order for reference regarding the procedure followed before the national administrative authorities describes the various stages of SDC's claim in the terms I have summarized in points 7 to 13 of this Opinion.

(11) That was provided by Article 1(2) of the Eighteenth Council Directive of 18 July 1989 on the harmonization of the laws of the Member States relating to turnover taxes — Abolition of certain derogations provided for in Article

(28) (3) of the Sixth Directive 77/388/EEC (89/465/EEC) (OJ

(198) 9 L 226, p. 21).

(12) [1993] ECR 1-5405.

(13) The Court reinforces its argument by adding in paragraph

(14) of the judgment: That interpretation is borne out by the objective of the common system introduced by tbc Sixth VAT Directive, which aims in particular to secure equal treatment for taxable persons. That principle would be disregarded if a purchaser were to be taxed on credit granted by his supplier, whereas a purchaser seeking credit from a bank or another lender received an exempted credit.' O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95

(14) The Spanish, French and Italian versions use the expressions 'operaciones siguientes', 'operations suivantes' and 'operazione seguenti'; the English and Danish versions use the expressions 'followingtransactions' and 'følgende tran saktioner' respectively. The German version uses the expression 'folgenden Umsätze'. The word 'transacción', of Latin origin, used in its meaning of contract or business deal (not in its meaning of result or action of settlement) is perhaps legally more precise than the generic expression 'operación' to describe what types of act are entitled to the exemption in question.

(15) In summarizing the SDC's arguments (section 6.1 of the order for reference), the court of reference states: The plaintiff claims that a very large part of the services (transactions) which it performs for the customers of financial institutions on behalf of the association's members (that is to say, financial institutions) arc free of VAT .„'.

(16) It is immaterial whether the payment is made directly or indirectly: in any case the decisive feature in the operation is whether it is still performed in return for payment.

(17) To be specific, in Questions 1, 3 and 4.

(18) In its observations the Commission emphasizes that according to Article 2 of the SDC's statutes its object is to handle data for its members and other associated institutions or companies by designing and operating automatic dau processing systems.

(19) According to the order for reference (section 3.1) the services provided by SDC consist in a number of components which together make up the services which each individual financial institution wishes to have performed. The document entitled Overall description of SDC's business' states that 'each element of the service consists in activities intended for obtaining data, processing them and transmit ting them by electronic means (my emphasis).

(20) It is not therefore a mere exemption. Properly speaking, there is tax exemption only when there is an event previously chargeable, that is, subject to tax. The concept of exemption presupposes an initial obligation to pay tax for which the legislature grants, for various reasons, a dispensation from paying. It depends therefore on there being an express reference in the law to an exemption from the duty to pay the tax. Before examining whether a given transaction meets the requirements for benefiting from exemption, it is necessary to ascertain that it falls within the field of application of the tax. O P I N I ON OF MR RUIZ-JARABO COLOMER — CASE C-2/95

(1) ,1

(21) In paragraph 26 of that judgment [1995] ECR I-9S3 at p. 1-1011 the Court stated: "... a trader's choice between exempt transactions and taxable transactions may be based on a range of factors, including tax considerations relating to the VAT system. The principle of the neutrality of VAX as defined in the case-law of the Court, does not have the scope attributed to it by BLP. That the common system of VAT ensures that all economic activities, whatever their purpose or results, are taxed in a wholly neutral way, presupposes that those activities are themselves subject to VAT (see in particular Case 268/83 Rompelman v Minister van Financiën [1985] ECR 655, paragraph 19).'

(22) In the sense mentioned in footnote 13.

(23) Proposal for a European Parliament and Council Directive on EU credit transfers (OJ 1994 C 360, p. 13, as amended by OJ 1995 C 199, p. 16). This has now taken the form of Common Position (EC) No 32/95 adopted by the Council on 4 December 1995 in accordance with the procedure laid down in Article 189b of the Treaty with a view to adopting a directive of the European Parliament and of the Council on cross-border credit transfers (OJ 1995 C 353, p. 52).

(24) The Commission adopted Recommendation 90/109/EEC of 14 February 1990 on the transparency of banking conditions relating to cross-border financial transactions (OJ

(199) 0 L 67, p. 39) laying down a number of principles in order to provide greater transparency in customer information and standards of invoicing such transactions.

(25) During the hearing certain interveners tried to emphasize that the description of exempt transactions in Article

(13) B(d)3, 4 and 5 of the Sixth Directive was couched in purely objective terms and that such provisions did not require a nexus or direct link between the customers and the banking institutions. As I have already emphasized earlier in this Opinion on the subjective aspect of the exemptions at issue, there would be nothing from the point of view of the Sixth Directive to prevent undertakings other than financial institutions (including SDC) from effecting genuine payment transactions, that is to say, from performing the relevant financial service, assuming the appropriate duties and risks. It happens, however, that the part played by SDC, according to the background set out in the order for reference, is not that of a financial intermediary but of a data-processing undertaking providing the financial institutions with technical assistance.

(26) The subject of the procedure does not extend to actual bank clearing transactions which may be carried out by electronic exchange of information. Inter-bank settlements arc in fact often organized by a joint system of electronic clearance. The United Kingdom emphasized at the hearing triat in that event payment transactions effected by and between banks, distinct in this respect from relations between financial institutions and customers, also have the benefit of the exemption at issue.

(2) ? 2S

(27) My emphasis. By the expression 'management' used in this section of trie order, trie court of reference appears to be referring not to the typical operations of managing securities (including normally portfolio management and safe keeping, the collection of dividends or interest and similar tasks) but to negotiation and buying and selling. Management operations, properly so called, are referred to in section 3.1. C of the order for reference under the heading 'management of deposits'.

(28) Translator's note: The phrase used in the Danish text is 'Rådgivning om handel med vxrdipapirer'.

(29) Sec paragraph 28 of this Opinion.