C-235/85 Commission v Netherlands

Judgment of the Court of 26 March 1987. - Commission of the European Communities v Kingdom of the Netherlands. - Taxable persons for VAT purposes - Bodies governed by public law - Notaries and bailiffs. - Case 235/85. European Court reports 1987 Page 01471

Summary Parties Grounds Decision on costs Operative part

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TAX PROVISIONS - HARMONIZATION OF LAWS - TURNOVER TAXES - COMMON SYSTEM OF VALUE ADDED TAX - TAXABLE PERSONS - NOTARIES AND BAILIFFS PERFORMING THEIR OFFICIAL SERVICES - PERSONS WHO PROVIDE SERVICES IN THE EXERCISE OF A LIBERAL PROFESSION - WHETHER INCLUDED

( COUNCIL DIRECTIVE 77/388/EEC, ART . 4 ¹, ² AND ⁵*)

INASMUCH AS NOTARIES AND BAILIFFS, WHEN PERFORMING THEIR OFFICIAL SERVICES, CARRY OUT INDEPENDENTLY ECONOMIC ACTIVITIES CONSISTING IN THE SUPPLY OF SERVICES TO THIRD PARTIES, IN RETURN FOR WHICH THEY RECEIVE FEES FOR THEIR OWN ACCOUNT, THEY MUST BE REGARDED AS TAXABLE PERSONS FOR VAT PURPOSES, WITHIN THE MEANING OF ARTICLE 4 ¹ AND ² OF THE SIXTH DIRECTIVE . EVEN ASSUMING THAT, IN PERFORMING THOSE SERVICES, THEY EXERCISE THE POWERS OF A PUBLIC AUTHORITY BY VIRTUE OF THEIR

APPOINTMENT TO PUBLIC OFFICE, THEY MAY NOT ENJOY THE EXEMPTION PROVIDED FOR IN ARTICLE 4 ⁵ SINCE THEY PURSUE THEIR ACTIVITIES AS MEMBERS OF A LIBERAL PROFESSION, WITHOUT BEING PART OF THE PUBLIC ADMINISTRATION .

IN CASE 235/85

COMMISSION OF THE EUROPEAN COMMUNITIES, REPRESENTED BY ITS LEGAL ADVISER, JOHANNES FOENS BUHL, ACTING AS AGENT, ASSISTED BY MARTEN MEES, OF THE HAGUE BAR, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE OFFICE OF GEORGE KREMLIS, A MEMBER OF ITS LEGAL DEPARTMENT, JEAN MONNET BUILDING, KIRCHBERG,

APPLICANT,

V

KINGDOM OF THE NETHERLANDS, REPRESENTED BY G . M . BORCHARDT, DEPUTY LEGAL ADVISER TO THE MINISTRY OF FOREIGN AFFAIRS, ACTING AS AGENT, WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT ITS EMBASSY,

DEFENDANT,

APPLICATION FOR A DECLARATION THAT BY NOT SUBJECTING TO VALUE ADDED TAX ( VAT ) THE OFFICIAL SERVICES PERFORMED BY NOTARIES AND BAILIFFS, THE KINGDOM OF THE NETHERLANDS HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER THE SIXTH VAT DIRECTIVE,

THE COURT

COMPOSED OF : LORD MACKENZIE STUART, PRESIDENT, C . KAKOURIS AND F . SCHOCKWEILER ( PRESIDENTS OF CHAMBERS ), G . BOSCO, T . KOOPMANS, U . EVERLING, R . JOLIET, J . C . MOITINHO DE ALMEIDA AND G . C . RODRIGUEZ IGLESIAS, JUDGES,

ADVOCATE GENERAL : C . O . LENZ

REGISTRAR : D . LOUTERMAN, ADMINISTRATOR

HAVING REGARD TO THE REPORT FOR THE HEARING AND FURTHER TO THE HEARING ON 2 DECEMBER 1986,

AFTER HEARING THE OPINION OF THE ADVOCATE GENERAL DELIVERED AT THE SITTING ON 12 FEBRUARY 1987,

GIVES THE FOLLOWING

JUDGMENT

Grounds

1BY AN APPLICATION LODGED AT THE COURT REGISTRY ON 30 JULY 1985, THE COMMISSION OF THE EUROPEAN COMMUNITIES BROUGHT AN ACTION UNDER ARTICLE 169 OF THE EEC TREATY FOR A DECLARATION THAT BY NOT SUBJECTING TO THE SYSTEM OF VALUE-ADDED TAX THE OFFICIAL SERVICES PERFORMED BY NOTARIES AND BAILIFFS (" GERECHTSDEURWAARDERS ") AND REMUNERATED BY THE PERSONS WHO HAVE RECOURSE TO THEM, THE KINGDOM OF THE NETHERLANDS HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 2 AND ARTICLE 4 ¹, ² AND ⁴ OF THE SIXTH COUNCIL DIRECTIVE ( NO 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 ( OFFICIAL JOURNAL 1977, L*145, P.1; HEREINAFTER REFERRED TO AS "THE SIXTH DIRECTIVE ").

2REFERENCE IS MADE TO THE REPORT FOR THE HEARING FOR A FULLER ACCOUNT OF THE FACTS, THE COURSE OF THE PROCEDURE AND THE SUBMISSIONS AND ARGUMENTS OF THE PARTIES, WHICH ARE MENTIONED OR DISCUSSED HEREINAFTER ONLY IN SO FAR AS IS NECESSARY FOR THE REASONING OF THE COURT .

3IT SHOULD BE POINTED OUT IN LIMINE THAT THE DISPUTE SOLELY CONCERNS THE QUESTION WHETHER THE OFFICIAL SERVICES PERFORMED BY NOTARIES AND BAILIFFS PURSUANT TO STATUTE ARE SUBJECT TO VALUE-ADDED TAX ( VAT ) AND THAT THE ARGUMENT SET OUT BELOW CONCERNS ONLY THAT ASPECT OF THEIR ACTIVITIES .

THE ECONOMIC CHARACTER OF THE ACTIVITIES IN QUESTION

4THE COMMISSION MAINTAINS THAT NOTARIES AND BAILIFFS IN THE NETHERLANDS SHOULD BE SUBJECT TO VAT IN ACCORDANCE WITH ARTICLE 4 OF THE SIXTH DIRECTIVE SINCE IT IS NOT DISPUTED THAT THEY CARRY OUT INDEPENDENTLY - THAT IS TO SAY, FREE FROM ANY RELATIONSHIP OF SUBORDINATION AND ON THEIR OWN RESPONSIBILITY IN LAW - AN ECONOMIC ACTIVITY IN THE SENSE OF A PERMANENT ACTIVITY OF PROVIDING SERVICES FOR CONSIDERATION .

5IN REPLY TO THAT ARGUMENT THE KINGDOM OF THE NETHERLANDS STATES THAT NOTARIES AND BAILIFFS DO NOT CARRY OUT ACTIVITIES GOVERNED BY NORMAL ECONOMIC LAWS BUT, IN RETURN FOR REMUNERATION FIXED BY STATUTE, PROVIDE SERVICES WHICH INDIVIDUALS ARE REQUIRED TO USE FOR REASONS OF PUBLIC INTEREST .

6IN DETERMINING WHETHER NOTARIES AND BAILIFFS IN THE NETHERLANDS SHOULD BE SUBJECT TO VAT IN RESPECT OF THE OFFICIAL SERVICES WHICH THEY PERFORM FOR REMUNERATION, IT SHOULD BE BORNE IN MIND THAT, BY INCLUDING AMONGST THE TAXABLE TRANSACTIONS DEFINED IN ARTICLE 2 NOT ONLY THE IMPORTATION OF GOODS BUT ALSO THE SUPPLY OF GOODS OR SERVICES EFFECTED FOR CONSIDERATION WITHIN THE TERRITORY OF A COUNTRY AND BY DEFINING A "TAXABLE PERSON" IN ARTICLE 4 ¹ AS ANY PERSON WHO INDEPENDENTLY CARRIES OUT AN ECONOMIC ACTIVITY, WHATEVER THE PURPOSE OR RESULTS OF THAT ACTIVITY, THE SIXTH DIRECTIVE ATTRIBUTES TO VAT A VERY WIDE SCOPE .

7 "ECONOMIC ACTIVITIES" ARE DEFINED IN ARTICLE 4 ² AS ALL ACTIVITIES OF PRODUCERS, TRADERS AND PERSONS SUPPLYING SERVICES, INCLUDING INTER ALIA THE ACTIVITIES OF THE PROFESSIONS .

8THOSE DEFINITIONS SHOW THAT THE SCOPE OF THE TERM "ECONOMIC ACTIVITIES" IS VERY WIDE, INASMUCH AS IT COVERS ALL THE SERVICES PROVIDED BY THE LIBERAL PROFESSIONS, AND THAT THE TERM IS OBJECTIVE IN CHARACTER, IN THE SENSE THAT THE ACTIVITY IS CONSIDERED PER SE AND WITHOUT REGARD TO ITS PURPOSE OR RESULTS .

9IN VIEW OF THE WIDE DEFINITION OF THE TERM "ECONOMIC ACTIVITIES", ENCOMPASSING ALL THE ACTIVITIES OF THE PROFESSIONS WITHOUT ANY RESERVATION IN RESPECT OF PROFESSIONS REGULATED BY STATUTE, IT MUST BE CONCLUDED THAT, IN SO FAR AS NOTARIES AND BAILIFFS IN THE NETHERLANDS PROVIDE SERVICES TO PRIVATE INDIVIDUALS ON A PERMANENT BASIS AND IN RETURN FOR REMUNERATION, THEY CARRY OUT AN ECONOMIC ACTIVITY WITHIN THE MEANING OF THE SIXTH DIRECTIVE .

10IN VIEW OF THE NEUTRAL CHARACTER OF THE TERM "ECONOMIC ACTIVITIES", THE FACT THAT THE ACTIVITIES OF NOTARIES AND BAILIFFS CONSIST IN THE PERFORMANCE OF DUTIES WHICH ARE CONFERRED AND REGULATED BY LAW IN THE PUBLIC INTEREST IS IRRELEVANT . INDEED, ARTICLE 6 OF THE SIXTH DIRECTIVE EXPRESSLY PROVIDES THAT CERTAIN ACTIVITIES CARRIED ON IN PURSUANCE OF THE LAW SHALL BE SUBJECT TO THE SYSTEM OF VAT .

11THE EXEMPTIONS FROM VAT EXPRESSLY LAID DOWN IN ARTICLE 13 OF THE SIXTH DIRECTIVE FOR, INTER ALIA, ACTIVITIES IN THE PUBLIC INTEREST, AND THE RIGHT ACCORDED TO THE MEMBER STATES BY ARTICLE 28 ³ ( B ), IN CONJUNCTION WITH ANNEX F, TO CONTINUE TO EXEMPT ON A TRANSITIONAL BASIS CERTAIN ACTIVITIES, INCLUDING SERVICES SUPPLIED BY LAWYERS AND OTHER MEMBERS OF THE LIBERAL PROFESSIONS, CLEARLY DEMONSTRATE THAT ALL SERVICES EFFECTED FOR CONSIDERATION BY MEMBERS OF THE LIBERAL PROFESSIONS OR PROFESSIONS CONSIDERED AS SUCH ARE IN PRINCIPLE SUBJECT TO VAT .

INDEPENDENT PURSUIT OF THE ACTIVITIES

12EVEN IF IT WERE TO BE ACCEPTED THAT NOTARIES AND BAILIFFS CARRY OUT AN ECONOMIC ACTIVITY, THAT ACTIVITY, ACCORDING TO THE KINGDOM OF THE NETHERLANDS, CANNOT BE SAID TO BE ONE THAT IS CARRIED OUT INDEPENDENTLY, SINCE THE PERSONS EXERCISING THOSE PROFESSIONS ARE APPOINTED BY THE CROWN, ARE SUBJECT TO DISCIPLINARY CONTROL BY THE PUBLIC AUTHORITIES AND, IN THE PERFORMANCE OF THEIR OFFICIAL SERVICES, ARE GOVERNED BY STATUTE SO FAR AS THEIR CONDITIONS OF WORK AND REMUNERATION ARE CONCERNED .

13THE COMMISSION SUBMITS IN REPLY THAT NOTARIES AND BAILIFFS IN THE NETHERLANDS CARRY OUT THEIR ACTIVITIES ON THEIR OWN ACCOUNT AND ON THEIR PERSONAL RESPONSIBLITY AND ARE NOT SUBORDINATE TO AN EMPLOYER .

14ARTICLE 4 ⁴ EXCLUDES ALL PERSONS WHO ARE BOUND TO AN EMPLOYER BY A CONTRACT OF EMPLOYMENT OR BY ANY OTHER LEGAL TIES CREATING THE RELATIONSHIP OF EMPLOYER AND EMPLOYEE AS REGARDS WORKING CONDITIONS, REMUNERATION AND EMPLOYER' S LIABILITY . NOTARIES AND BAILIFFS, HOWEVER, ARE NOT BOUND TO THE PUBLIC AUTHORITIES AS EMPLOYEES SINCE THEY ARE NOT INTEGRATED INTO THE PUBLIC ADMINISTRATION . THEY CARRY OUT THEIR ACTIVITIES ON THEIR OWN ACCOUNT AND ON THEIR OWN RESPONSIBILITY; THEY ARE FREE, SUBJECT TO CERTAIN LIMITS IMPOSED BY STATUTE, TO ARRANGE HOW THEY SHALL PERFORM THEIR WORK AND THEY THEMSELVES RECEIVE THE EMOLUMENTS WHICH MAKE UP THEIR INCOME . THE FACT THAT THEY ARE SUBJECT TO DISCIPLINARY CONTROL UNDER THE SUPERVISION OF THE PUBLIC AUTHORITIES ( A SITUATION TO BE FOUND IN OTHER REGULATED PROFESSIONS ) AND THE FACT THAT THEIR REMUNERATION IS DETERMINED BY STATUTE ARE NOT SUFFICIENT GROUNDS FOR REGARDING THEM AS PERSONS WHO ARE BOUND BY LEGAL TIES TO AN EMPLOYER WITHIN THE MEANING OF ARTICLE 4 ⁴.

15IT MUST THEREFORE BE CONCLUDED THAT, INASMUCH AS THEY CARRY OUT INDEPENDENTLY ECONOMIC ACTIVITIES CONSISTING IN THE SUPPLY OF SERVICES TO THIRD PARTIES, IN RETURN FOR WHICH THEY RECEIVE FEES FOR THEIR OWN ACCOUNT, NOTARIES AND BAILIFFS IN THE NETHERLANDS MUST BE REGARDED AS TAXABLE PERSONS FOR VAT PURPOSES, WITHIN THE MEANING OF ARTICLE 4 ¹ AND ² OF THE SIXTH DIRECTIVE .

EXEMPTION FROM VAT FOR BODIES GOVERNED BY PUBLIC LAW

16IN SUPPORT OF ITS CASE, THE KINGDOM OF THE NETHERLANDS FURTHER ARGUES THAT, EVEN ASSUMING THAT THEY CARRY OUT "ECONOMIC ACTIVITIES" WITHIN THE MEANING OF ARTICLE 4 ¹ AND ² OF THE SIXTH DIRECTIVE, NOTARIES AND BAILIFFS SHOULD BE COVERED BY THE EXEMPTION LAID DOWN IN ARTICLE 4 ⁵ FOR BODIES GOVERNED BY PUBLIC LAW - A STATUS WHICH, IN ITS VIEW, MUST BE ATTRIBUTED TO THEM . ARTICLE 4 ⁵ SHOULD NOT, IN ITS VIEW, BE CONSTRUED ACCORDING TO THE FORMAL CRITERION BASED ON THE MANNER IN WHICH THE ACTIVITIES ARE ORGANIZED BUT BY REFERENCE TO THEIR NATURE; IN THIS REGARD, THERE IS NO DOUBT THAT NOTARIES AND BAILIFFS PERFORM ACTS WHICH, BY THEIR NATURE, MUST BE REGARDED AS ACTS OF THE PUBLIC AUTHORITIES .

17THE COMMISSION ARGUES THAT THE VERY PRINCIPLE OF VAT, WHICH IS A GENERAL, AGGREGATED TAX ON CONSUMPTION, DICTATES A RESTRICTIVE INTERPRETATION OF ARTICLE 4 ⁵; THE EXEMPTION THEREFORE APPLIES ONLY TO ACTS WHICH ARE PERFORMED BY BODIES GOVERNED BY PUBLIC LAW AND CONNECTED WITH THE FUNDAMENTAL POWERS OF PUBLIC AUTHORITIES AND NOT TO ACTIVITIES WHICH BY THEIR NATURE MAY BE CARRIED ON BY PRIVATE INDIVIDUALS WITH A VIEW TO MAKING A PROFIT .

18IN ORDER TO DETERMINE WHETHER NOTARIES AND BAILIFFS IN THE NETHERLANDS SHOULD, AS FAR AS THE PROVISION OF THEIR OFFICIAL SERVICES IS CONCERNED, BE COVERED BY THE EXEMPTION SET OUT IN ARTICLE 4 ⁵ OF THE SIXTH DIRECTIVE, THAT EXEMPTION SHOULD BE PLACED IN THE GENERAL CONTEXT OF THE COMMON SYSTEM OF VAT INTRODUCED BY THAT DIRECTIVE .

19AS HAS BEEN STATED IN CONNECTION WITH THE EXAMINATION OF THE TERM "ECONOMIC ACTIVITIES", THE SIXTH DIRECTIVE IS CHARACTERIZED BY ITS GENERAL SCOPE AND BY THE FACT THAT ALL EXEMPTIONS MUST BE EXPRESSLY PROVIDED FOR AND PRECISELY DEFINED .

20IN THAT CONNECTION IT SHOULD BE OBSERVED THAT ARTICLE 4 ⁵ PROVIDES AN EXEMPTION ONLY FOR BODIES GOVERNED BY PUBLIC LAW, AND EVEN THEN ONLY FOR THE ACTIVITIES OR TRANSACTIONS IN WHICH THEY ENGAGE AS PUBLIC AUTHORITIES .

21IT IS CLEAR FROM THAT PROVISION, WHEN EXAMINED IN THE LIGHT OF THE AIMS OF THE DIRECTIVE, THAT TWO CONDITIONS MUST BE FULFILLED IN ORDER FOR THE EXEMPTION TO APPLY; THE ACTIVITIES MUST BE CARRIED OUT BY A BODY GOVERNED BY PUBLIC LAW AND THEY MUST BE CARRIED OUT BY THAT BODY ACTING AS A PUBLIC AUTHORITY . THIS MEANS THAT BODIES GOVERNED BY PUBLIC LAW ARE NOT AUTOMATICALLY EXEMPTED IN RESPECT OF ALL THE ACTIVITIES IN WHICH THEY ENGAGE BUT ONLY IN RESPECT OF THOSE WHICH FORM PART OF THEIR SPECIFIC DUTIES AS PUBLIC AUTHORITIES ( SEE THE JUDGMENT OF 11 JULY 1985 IN CASE 107/84 COMMISSION V FEDERAL REPUBLIC OF GERMANY (( 1985 )) ECR 2663 ) AND, SECONDLY, THAT AN ACTIVITY CARRIED ON BY A PRIVATE INDIVIDUAL IS NOT EXEMPTED FROM VAT MERELY BECAUSE IT CONSISTS IN CARRYING OUT ACTS FALLING WITHIN THE PREROGATIVES OF THE PUBLIC AUTHORITY .

22CONSEQUENTLY, EVEN ASSUMING THAT IN PERFORMING THEIR OFFICIAL SERVICES NOTARIES AND BAILIFFS EXERCISE THE POWERS OF A PUBLIC AUTHORITY BY VIRTUE OF THEIR APPOINTMENT TO PUBLIC OFFICE, IT DOES NOT FOLLOW THAT THEY MAY ENJOY THE EXEMPTION PROVIDED FOR IN ARTICLE 4 ⁵. THE REASON IS THAT THEY PURSUE THOSE ACTIVITIES, NOT IN THE FORM OF A BODY GOVERNED BY PUBLIC LAW, SINCE THEY ARE NOT PART OF THE PUBLIC ADMINISTRATION, BUT IN THE FORM OF AN INDEPENDENT ECONOMIC ACTIVITY CARRIED OUT IN THE EXERCISE OF A LIBERAL PROFESSION .

23IT MUST THEREFORE BE CONCLUDED THAT, BY NOT SUBJECTING TO THE SYSTEM OF VAT THE OFFICIAL SERVICES PERFORMED BY NOTARIES AND BAILIFFS AND REMUNERATED BY THE PERSONS HAVING RECOURSE TO THEM, THE KINGDOM OF THE NETHERLANDS HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 2 AND ARTICLE 4 ¹, ², AND ⁴ OF THE SIXTH DIRECTIVE .

Costs

COSTS

24UNDER ARTICLE 69 ² OF THE RULES OF PROCEDURE THE UNSUCCESSFUL PARTY MUST BE ORDERED TO PAY THE COSTS . SINCE THE KINGDOM OF THE NETHERLANDS HAS FAILED IN ITS SUBMISSIONS, IT SHOULD BE ORDERED TO PAY THE COSTS .

Operative part

ON THOSE GROUNDS,

THE COURT

HEREBY :

¹ DECLARES THAT, BY NOT SUBJECTING TO THE SYSTEM OF VAT THE OFFICIAL SERVICES PERFORMED BY NOTARIES AND BAILIFFS, THE KINGDOM OF THE NETHERLANDS HAS FAILED TO FULFIL ITS OBLIGATIONS UNDER ARTICLE 2 AND ARTICLE 4 ¹, ² AND ⁴ OF 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;

Signatures

² ORDERS THE KINGDOM OF THE NETHERLANDS TO PAY THE COSTS .

OPINION OF MR ADVOCATE GENERAL LENZ delivered on 12 February 1987 Mr President, Members of the Court,

A — Facts of the case

1The present proceedings for a declaration that a Member State has failed to fulfil its Treaty obligations are concerned with the question whether the Kingdom of the Netherlands, the defendant, is obliged under Community law to subject the official services of notaries and bailiffs to value-added tax [hereinafter referred to as 'VAT'].

2The Commission of the European Communities, the applicant, regards the defendant's failure to levy VAT on the services of those professions as an infringement of the Sixth Council Directive of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes. 1 The Commission takes the view that the provision of services by notaries and bailiffs is an 'economic activity' within the meaning of the Sixth Directive, which gives an autonomous definition of that term.

3The therefore that the applicant claims Court should:

(1) Declare that by not subjecting to the system of value-added tax the official services performed by notaries and bailiffs for remuneration, the defendant has failed to fulfil its obligations under Community legislation, in particular under Article 2 and Article 4 (1), (2) and (4) of the Sixth Council Directive of 17 May 1977;

* Translated from the German.

1478 (2) Order the Kingdom of the Netherlands to pay the costs.

4The defendant claims that the Court should dismiss the application and order the applicant to bear the costs.

5The defendant argues that, in view of the statutory organization of the two professions and their statutory functions, it is clear that their activities consist in official acts, performed by a public institution in the public interest. Activities of that kind are not covered by the concept of 'economic activity', because the normal laws of economics do not apply to them.

6In the alternative, the defendant contends that the exemption laid down in Article 4 (5) of the Sixth Directive, which provides that States, regional and local government authorities and other bodies governed by public law are not to be considered taxable persons, is applicable to the official acts of notaries and bailiffs in any event.

7At the hearing the parties stated that the activities of lawyers in the Netherlands are subject to VAT.

8The activities of notaries and bailiffs are subject to VAT in all the Member States in which those activities are carried out by self-employed persons, with the exception of Belgium. 2

9The disputed turnover of Netherlands notaries and bailiffs is not taken into account when the amount of VAT to be remitted to the Community as own resources is calculated. As regards Belgium, it makes a compensatory payment to the Community in respect of the turnover of notaries and bailiffs in Belgium which is not subject to VAT.

10Where necessary I will examine further points of the parties' arguments in the rest of my Opinion. For the rest, I refer to the Report for the Hearing.

B — Opinion

11I shall deal first with the question whether the services in question supplied by notaries and bailiffs fall within the scope of the common system of VAT and then the question whether those professional bodies might be regarded as 'bodies governed by public law' and therefore treated as non-taxable persons. I shall go on to consider the question whether the defendant was entitled, at least during a transitional period, to exempt the contested services from VAT pursuant to Article 28 (3) (b).

The scope of VAT

12Article 2 (1) of the Sixth Directive provides that 'the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such' is subject to VAT.

13According to Article 4 (1), a 'taxable person' means any person who independently carries out any economic activity, whatever the purpose or results of that activity.

14Article 4 (2) of the Sixth Directive defines economic activities as comprising 'all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions'.

15Article 4 (4) provides that a person who 'independently' carries out an economic activity is understood as excluding employed or other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer's liability.

(a) 16. In the applicant's view, it is unquestionable that the services of notaries and bailiffs are 'economic activities' within the meaning of Article 4 (2) of the Sixth Directive. That provision does not require the exercise of a profit-making activity or one subject to market forces, but only a permanent activity, pursued for consideration. Like the analogous activities of lawyers or doctors, the services provided by notaries and bailiffs cannot be exempted from VAT on the grounds that they are exercising public powers. Notaries and bailiffs cannot be equated with court clerks or tax bailiffs since the latter are officials or servants of the State or of other public bodies and provide services as subordinates of and for the account of their employers. Notaries and bailiffs, on the other hand, pursue their activities for their own account, independently, and on their own responsibility in law. Even though the professions concerned are subject to the supervision of State authorities — and this they have in common with other categories of taxable persons — they are not subordinate to an employer, as would be the case if they performed their functions as officials of a public body.

17The first points out that defendant notaries and bailiffs, whose offices go back to a time when the role of a legal person governed by public law was hardly developed, have a special, independent position. An analysis of the functions of notaries and bailiffs and of the statutory organization of those professions shows, according to the defendant, that their activities consist of official acts carried out by a public body in the public interest.

18In assessing whether the provision of a service may be regarded as an economic activity, the nature of the service must be examined and the manner in which the activities are organized. In any event, no economic activity exists if the activity in question is not governed by the normal laws of economics, the remuneration for the activity is laid down by statute and it does not entail the provision of a true service for individuals but the services must, as a matter of public policy, be solicited by them.

(b) 19. The first point to be borne in mind with regard to the scope of VAT is that under Article 2 (1) of the Sixth Directive all supplies of goods or services effected for consideration within the territory of the

1480 country by a taxable person acting as such are in principle subject to VAT. That broad formulation suggests that VAT has a wide comprehensive application. Indications to that effect are to be found in the preamble to the First Council Directive of 11 April 1967 3on the harmonization of legislation of Member States concerning turnover taxes, in which it is stated that:

'a system of value-added tax achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all stages of production and distribution and the provision of services;

20In that connection it should be noted that, in implementation of Council Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources, 4 the budget of the Communities is financed completely out of the Communities' own resources irrespective of other sources of revenue. Those resources include VAT, which is yielded by the application of a common rate to a basis of assessment which is uniformly defined in accordance with Community provisions.

21Since VAT is therefore to be charged as generally as possible, the term 'economic activities' in Article 4 cannot be construed as restrictively as the defendant construes it. Even though Article 4 does not define 'economic activities' comprehensively, the definition given none the less suggests that it is intended to be an extensive one; that is demonstrated by the examples given in Article 4 (2), all of which are treated as economic activities.

22It is not therefore necessary for services to be primarily or exclusively orientated towards the market or economic life in order to come within the scope of VAT; it is sufficient that they are actually connected with economic life in some way or other.

23For that reason, it cannot be relevant that the areas of activity of notaries and bailiffs are regulated or prescribed by statute. The same may be said of, for instance, lawyers and auditors, whose activities are indisputably subject to VAT.

24The decisive point, however, is that the Sixth Directive deals expressly with this question in Article 6 (1), in which it provides that a 'supply of services' may include inter alia

'the performances of services in pursuance of an order made by or in the name of a public authority or in pursuance of the law'.

25When considered in the light of those criteria, the whole range of activities pursued by notaries and bailiffs in the Netherlands must be regarded as the activities of taxable persons.

26Whilst it is true that notaries and bailiffs are appointed by the State and that their activities are regulated and supervised by the State, it must nevertheless be borne in mind that they carry on their activities independently, without being integrated into the organization of the State. They pursue their activities for their own account and in particular they themselves collect the fees and charges due to them. They pursue their activities as members of a legal partnership or firm and do not therefore differ substantially from lawyers, accountants or tax advisers. The purpose of their activities is to generate revenue for their own account, so as to cover their overheads and provide themselves with income. To that end they supply services to third parties, on their own responsibility, thus acting 'independently' within the meaning of Article 4 of the Sixth Directive.

27Notaries and bailiffs, who pursue their activities as independent persons, therefore fall within the scope of VAT to which they are subject under Articles 2 (1) and 4 (1) and (2) of the Sixth Directive.

The exemption of public bodies from payment of VAT

28It now remains to examine whether Netherlands notaries and bailiffs are still not to be regarded as taxable persons because the derogation laid down in Article 4 (5) of the Sixth Directive could be applied to them.

29The relevant part of Article 4 (5) of the Sixth Directive reads as follows:

'States, regional and local government authorities and other bodies governed by public law shall not be considered taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with these activities or transactions.

However, when they engage in such activities or transactions, they shall be considered taxable persons in respect of these activities or transactions where treatment as non-taxable persons would lead to significant distortions of competition.'

(a) 30. In the applicant's view, it is not the purpose of Article 4 (5) to exempt from VAT all acts connected with the exercise of public authority, but only those acts relating to the fundamental powers and functions of States and other bodies governed by public law in the field of public administration, the administration of justice, security and national defence.

31The applicant maintains that activities which by their nature are carried out by independent undertakings with a view to making a profit, or by members of the liberal professions in consideration for a fee from those instructing them, cannot be regarded as being carried on in the exercise of public authority; private individuals carrying out such activities do not meet the definition of a 'body governed by public law'.

32According to the applicant, the very principle that VAT must be a general and comprehensive tax on consumption dictates a narrow interpretation of a transaction engaged in by a public authority acting as such.

33The defendant contends that, amongst the activities reserved to public authorities or bodies governed by public law, a distinction must be drawn between economic activities which meet the real needs of consumers and the public services which consumers are obliged by law to use for reasons of public policy and for which a

1482 fixed fee is laid down by statute. Article 4 (5) of the Sixth Directive must be interpreted according to the nature of the activities carried out and not according to their appearance (or the manner in which they are organized).

34According to the defendant, the concept of a body governed by public law covers all forms of public body existing in the various Member States. The independence of such a body and the absence of a hierarchical relationship do not preclude the application of Article 4 (5). Annex D to the Sixth Directive, to which the third subparagraph of Article 4 (5) refers, expressly subjects to VAT certain activities often carried out by bodies which are legally independent of the public authorities. On the other hand, the last subparagraph of Article 4 (5) authorizes the Member States to regard certain activities set out in Article 13 as activities of public authorities even if they are carried out by legally independent bodies. The argument that notaries and bailiffs perform their functions as private individuals overlooks the fact that they occupy official positions and exercise fundamental powers and functions in the legal system.

(b) 35. In construing Article 4 (5) of the Sixth Directive reference should be made to the preamble to the First Council Directive on turnover taxes, according to which a system of VAT achieves the highest degree of simplicity and of neutrality when the tax is levied in as general a manner as possible and when its scope covers all stages of production and distribution and the provision of services. Reference should also be made to the eleventh recital of the Sixth Directive, according to which a common list of exemptions should be drawn up so that the Communities' own resources may be collected in a uniform manner in all the Member States.

36The exemptions contained in particular in Articles 13 and 28 of the Sixth Council Directive cover inter alia a whole series of activities which are carried on by bodies governed by public law. Accordingly, the State and other bodies governed by public law are not, as a matter of principle, excluded from VAT but exempt only in respect of those activities in which they engage as public authorities. 5

37Thus, public bodies should be regarded as non-taxable persons only when they act as public authorities in the strict sense of the term. However, even public bodies are to be subject to tax when the activities in which they engage as public authorities would lead to significant distortions of competition if they were not taxed.

38The Sixth Directive therefore tends to enlarge the category of taxable persons and thus the scope of VAT itself, by allowing even public bodies to be treated as taxable persons if the competitive situation so requires. On the other hand, it provides no possibility for exempting from VAT taxable transactions conducted by private individuals performing functions similar in nature to the activities of public bodies. That leaning towards a tax system which is as general as possible suggests that the tax must also be charged in marginal or dubious cases.

39At this stage it may therefore be stated that the very wording of the relevant provisions of the Sixth Directive shows that the exclusion of public authorities from the application of VAT is a limited one. Not every activity carried on by a public authority is exempted from VAT but only a certain core of activities. In addition, the activities of public bodies may be subject to VAT if this is necessitated by the threat of significant distortions of competition.

40In view of that conclusion and since it is accepted that the derogating provisions laid down in Article 2 of the Sixth Directive must in principle be construed restrictively, it is not possible to give a broad interpretation to the derogation contained in Article 4 (5) by extending its scope to persons engaged in activities in the private sector, even if they act partly in performance of public functions or in the public interest.

41Thus, as long as the offices of notary and bailiff in the Netherlands are performed by persons engaged in private enterprise and those offices are thus not performed by bodies governed by public law, there are no grounds for regarding those professions as non-taxable persons within the meaning of Article 4 of the Sixth Directive.

42Moreover, there is no need to extend the derogation in Article 4 (5) of the directive. As is shown by the Belgian practice mentioned at the hearing, it was quite possible under the Sixth Directive, at least at the time of its adoption, for the activities of notaries and bailiffs to continue to be exempted from turnover tax under Article 28 (3) (b) read in conjunction with Commissionof the European Communities Federal Republic of Germany [1985] ECR 2663, at paragraph 15. Annex F, Item 2.

43The defendant, however, did not rely on or use that provision because it had taken the view that notaries and bailiffs are not to be regarded as taxable persons on account of their official activities. Above all, however, the defendant failed, as it conceded at the hearing, to draw the correct inferences from the application of the transitional provision contained in Article 28 of the Sixth Directive: under Article 2 (2) of Council Regulation No 2892/77 of 19 December 1977 implementing in respect of own resources accruing from value-added tax the Decision of 21 April 1970 on the replacement of financial contributions from Member States by the Communities' own resources, 6the 'VAT own-resources basis'

C — Conclusion

is to be determined by reference to inter alia transactions which Member States continue to exempt pursuant to Article 28 (3) (b) of the Sixth Directive. In other words, the defendant ought to have taken into account, as Belgium did, the 'official' transactions of notaries and bailiffs when calculating and remitting the Communities' own resources. This, however, the defendant indisputably failed to do.

44Since, therefore, the defendant did not invoke Article 28 of the Sixth Directive or draw the correct inferences from it, Article 28 must be disregarded in these proceedings.

45In conclusion, I propose that the Court should grant the application and order the defendant to pay the costs of the proceedings.

Notes

(1) Official Journal 1977, L 145, p. I.

(2) No comment was made concerning the situation in Greece. There, the directives on turnover tax did not need to be applied until 1 January 1986 (see Fifteenth Council Directive No 83/648 of 19 December 1983, Official Journal 1983, L 360, p. 49).

(3) Official Journal, English Special Edition 1967, p. 14.

(4) _ Official Journal, English Special Edition 1970 (I), p. 224.

(5) See the judgment of the Court of 11 July 1985 in Case

(107) /84 v

(6) Council Regulation No 2892/77 of 19 December 1977 on the implementation of the Decision of 21 April 1970, Official Journal 1977, L 336, p. 8.