C-346/95 Blasi

JUDGMENT OF THE COURT (Fifth Chamber)

12 February 1998 *

In Case C-346/95,

REFERENCE to the Court under Article 177 of the EC Treaty by the Finanzgericht München (Germany) for a preliminary ruling in the proceedings pending before that court between

Elisabeth Blasi

and

Finanzamt München I

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

THE COURT (Fifth Chamber),

composed of: C. Gulmann, President of the Chamber, M. Wathelet (Rapporteur), J. C. Moitinho de Almeida, D. A. O. Edward and J.-R Puissochet, Judges,

* Language of the case: German.

Advocate General: F. G. Jacobs, Registrar: D. Louterman-Hubeau, Principal Administrator,

after considering the written observations submitted on behalf of:

— the German Government, by Ernst Röder, Ministerialrat in the Federal Ministry of Economic Affairs, and Bernd Kloke, Oberregierungsrat in that Ministry, acting as Agents,

— the Commission of the European Communities, by Jürgen Grunwald, Legal Adviser, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Mrs Blasi, represented by Hans-W. Weindl, Rechtsanwalt, Munich; the German Government, represented by Ernst Roder and by Claus-Dieter Quassowski, Regierungsdirektor in the Federal Ministry of Economic Affairs, acting as Agent; and the Commission, represented by Jürgen Grun wald, at the hearing on 5 June 1997,

after hearing the Opinion of the Advocate General at the sitting on 25 September 1997,

gives the following

Judgment

Grounds

1By order of 20 September 1995, received at the Court on 9 November 1995, the Finanzgericht München (Finance Court, Munich) referred for a preliminary ruling under Article 177 of the EC Treaty three questions concerning the interpretation of Article 13B(b)(l) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) ('the Sixth Directive').

2Those questions arose in a dispute between Mrs Blasi and the Finanzamt München I (Munich I tax office) ('the Finanzamt') concerning Mrs Blasi's liability to pay value added tax ('VAT') in respect of the provision of accommodation treated under German law as being short-term because the letting agreements were entered into for periods of less than six months.

3According to the order for reference, the provisions of German legislation applicable to the facts in the main proceedings which correspond to Article 13B(b)(1) of the Sixth Directive are contained in the 1980 version of the Umsatzsteuergesetz (Law on Turnover Tax) ('the UStG').

4Under Paragraph 4(12), first sentence, letter (a), and second sentence, of the UStG:

'Among the transactions referred to in Paragraph 1(1)(1) to (3), the following are exempted:

12.

(a) leasing and letting of immovable property, rights governed by provisions of civil law relating to immovable property, and sovereign rights of the State in regard to immovable goods and property;

(b) ...

(c) ...

The letting of living and sleeping accommodation which a trader keeps available for the short-term accommodation of guests ("Fremden") shall not be exempted ...'.

5Mrs Blasi let a number of buildings in Munich and, from 1984, provided accommodation in those buildings for refugee families from countries of central and eastern Europe sent to her by the municipal social services department.

6It appears from the order for reference that the buildings used for accommodation were normal residential buildings each containing several dwellings. Fully furnished rooms equipped with cooking facilities were made available to the families. The rooms were cleaned by the refugees themselves. Mrs Blasi supplied and washed the bedlinen and also saw to the cleaning of the landings, staircases, bath rooms and lavatories. Occupants were not supplied with meals. There was no reception area in the buildings, nor any lounges or other common amenity rooms.

7The City of Munich did not have any right to allocate accommodation, but acted as an intermediary and sent persons to Mrs Blasi when it learned that she had dwellings available.

8For the accommodation costs, which were met by the City of Munich, the municipal social services department issued Mrs Blasi with certificates attesting that it would pay the costs incurred, which were usually valid for one month and could be extended if necessary. Payment was made on the basis of a daily charge, fixed by agreement between Mrs Blasi and the City of Munich. That charge was DM 25 per person per day in the year at issue, 1984.

9Letting agreements were concluded on an individual basis between Mrs Blasi and the tenants sent by the City of Munich social services department. In most cases, the actual duration of the refugees' stay was greater than six months. It appears from the order for reference that, in a number of letters sent to the City of Munich, Mrs Blasi had refused to accept refugees who wished to stay with her for only a short period and expressed her desire to let only to those who wished to stay with her for at least six months. However, the letting agreements concluded between Mrs Blasi and her tenants were always signed for a period of less than six months.

10By a tax assessment notice of 7 April 1987, Mrs Blasi was assessed on the basis of her tax return and VAT was determined in the amount of DM 82 043. Pursuant to the findings of an audit report of 28 December 1990, the Finanzamt, by an amending decision of 13 July 1993, fixed the VAT at DM 151 278, on the ground that Mrs Blasi had failed to declare all her taxable transactions for the period from 1 January 1984 to 30 June 1984.

11After unsuccessfully lodging an objection against that decision, Mrs Blasi instituted proceedings before the Finanzgericht München.

12Mrs Blasi argued that the tax assessment notice, the amending decision and the decision dismissing her objection should be amended and the claim against her for VAT for 1984 consequently set aside. The Finanzamt submitted that the action should be dismissed.

13The Finanzgericht München first of all points out that, according to the case-law of the Bundesfinanzhof (Federal Finance Court) on Paragraph 4(12) of the UStG, the provision of hotel accommodation will be treated as taxable if the operator's intention is to make the premises available for temporary accommodation only. The actual duration of the let is of little importance, since, according to well-established case-law, where accommodation provided for emigrants or asylum-seekers is guaranteed by public authorities, consideration must be given to the duration provided for under the letting agreement. The let is deemed to be short-term if the agreement is for a period of less than six months.

14The Finanzgericht München points out that, if those criteria are applied in the case before it, it would appear that the transactions carried out by Mrs Blasi could not be exempted from VAT because, even if she intended the dwellings in question to be for long-term lets, no long-term agreement was ever concluded. Only in retrospect is it possible to determine that the letting of dwellings through the intermediary of the City of Munich related to several years, the actual average length of a let being, according to Mrs Blasi's calculations, 14.4 months.

15The Finanzgericht München also points out that the exception to the exemption introduced by the second sentence of Paragraph 4(12) of the UStG is based on Article 13B(b)(l) of the Sixth Directive, which provides 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:

(b) the leasing or letting of immovable property excluding:

1. the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;

...'.

16Since Article 13B(b)(l) of the Sixth Directive merely states that the provision of accommodation in sectors with a function similar to that of the hotel sector is excluded from the exemption enjoyed by the leasing or letting of immovable property, without referring specifically to the provision of short-term accommodation, the Finanzgericht München is uncertain whether the second sentence of Paragraph 4(12) of the UStG is compatible with that exclusion. It has accordingly referred the following questions to the Court for a preliminary ruling:

'1. Is Article 13B(b)(1) of the Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes (Sixth VAT Directive) to be interpreted as meaning that the "provision of accommodation ... in the hotel sector or in sectors with a similar function" means no more than the short-term accommodation of guests?

2. If Question 1 is answered in the affirmative:

(a) What period of accommodation can properly be regarded as short-term?

Is it no longer "provision of accommodation in the hotel sector" if the operator keeps rooms available for long-term accommodation and this finds expression in the conclusion of a long-term letting agreement (longer than six months)?

(b) Is a tax exemption under Article 13B(b)(1) for a proportion of the time possible if it transpires that all the accommodation was let on either a short or a long-term basis?

3. If Question 1 is answered in the negative:

On the basis of what temporal, spatial and conceptual criteria must the phrase "provision of accommodation ... in the hotel sector or in sectors with a similar function" be defined and which of them must necessarily be present?'

17In its questions, which should be examined together, the national court is in substance asking whether Article 13B(b)(l) of the Sixth Directive may be construed as meaning that what is defined in German law as the provision of short-term accommodation for guests constitutes, within the meaning of Community law, the provision of accommodation in sectors with a function similar to that of the hotel sector, thus being subject to VAT. The national court is also asking whether it is compatible with Article 13B(b)(l) of the Sixth Directive to draw a distinction between taxable transactions and transactions that are exempted on the basis of the duration of the accommodation, such exemption being reserved for those letting transactions that involve the conclusion of a letting agreement for more than six months, irrespective of the actual total duration of the let.

18It must first be noted that the Court has consistently held that the terms used to specify the exemptions provided for by Article 13 of the Sixth Directive are to be interpreted strictly, since they constitute exceptions to the general principle that turnover tax is to be levied on all services supplied for consideration by a taxable person (Case 348/87 Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën [1989] ECR 1737, paragraph 13, and Case C-453/93 Bulthuis-Griffioen v Inspecteur der Omzetbelasting [1995] ECR 1-2341, paragraph 19).

19The phrase 'excluding ... the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function' in Article 13B(b)(l) of the Sixth Directive introduces an exception to the exemption which Article 13B provides for the leasing or letting of immovable property. It thus subjects the transactions to which it refers to the general rule laid down in the Directive, namely that VAT is to be charged on all taxable transactions, except in the case of derogations expressly provided for. That phrase cannot therefore be interpreted strictly.

20It should be added that, as the Advocate General has noted at paragraph 18 of his Opinion, the words 'sectors with a similar function' should be given a broad construction since their purpose is to ensure that the provision of temporary accommodation similar to, and hence in potential competition with, that provided in the hotel sector is subject to tax.

21In defining the classes of provision of accommodation which are to be taxed by derogation from the exemption for the leasing or letting of immovable property, in accordance with Article 13B(b)(l) of the Sixth Directive, the Member States enjoy a margin of discretion. That discretion is circumscribed by the purpose of the derogation, which, in regard to making dwelling accommodation available, is that the — taxable — provision of accommodation in the hotel sector or in sectors with a similar function must be distinguished from the exempted transactions of leasing and letting of immovable property.

22It is consequently a matter for the Member States, when transposing Article 13B(b)(l) of the Sixth Directive, to introduce those criteria which seem to them appropriate in order to draw that distinction.

23Where accommodation in the hotel sector (as a taxable transaction) is distinguished from the letting of dwelling accommodation (as an exempted transaction) on the basis of its duration, that constitutes an appropriate criterion of distinction, since one of the ways in which hotel accommodation specifically differs from the letting of dwelling accommodation is the duration of the stay. In general, a stay in a hotel tends to be rather short and that in a rented flat fairly long.

24In this connection, as the Advocate General has stated at paragraph 20 of his Opinion, the use of the criterion of the provision of short-term accommodation, being defined as less than six months, appears to be a reasonable means by which to ensure that the transactions of taxable persons whose business is similar to the essential function performed by a hotel, namely the provision of temporary accommodation on a commercial basis, are subject to tax.

25Furthermore, in regard to the definition of the concept of 'short-term' in German law, the requirement derived from the case-law of the Bundesfinanzhof, to the effect that, in order to qualify for the exemption, it is necessary to prove the intention, evidenced by a letting agreement or other contract, to let property for a minimum period of six months, appears to be a criterion that is easily applied and appropriate to attain the objective sought by Article 13B of the Sixth Directive, which is to ensure a correct and straightforward application of the exemptions for which it provides.

26It must, however, be recognised that, in certain circumstances, which will probably be exceptional, it is possible that some clauses in a letting agreement, including that relating to duration, will not fully reflect the reality of the contractual relations, the taxable person being, for instance, unable to fix the duration of the let freely with his tenants where it depends on certificates from the public authorities attesting that they will pay the costs incurred. In such circumstances, it is ultimately for the national court to determine whether, for those reasons, reflected in particular in the automatic renewal of letting agreements, it might not be appropriate to take into consideration the actual total duration of the accommodation rather than that specified in the letting agreement.

27In the light of the foregoing, the answer to be given to the national court must be that Article 13B(b)(1) of the Sixth Directive may be construed as meaning that the provision of short-term accommodation for guests is taxable, as constituting the provision of accommodation in sectors with a function similar to that of the hotel sector. In that regard, Article 13B(b)(1) does not preclude taxation in respect of agreements concluded for a period of less than six months, if that duration is deemed to reflect the parties' intention. It is, however, for the national court to determine whether, in a case before it, certain factors (such as the automatic renewal of the letting agreement) suggest that the duration stated in the letting agreement does not reflect the parties' true intention, in which case the actual total duration of the accommodation, rather than that specified in the letting agreement, would have to be taken into consideration.

Costs

Costs

28The costs incurred by the German Government 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 referred to it by the Finanzgericht München by order of 20 September 1995, hereby rules:

Article 13B(b)(l) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment may be construed as meaning that the provision of short-term accommodation for guests is taxable, as constituting the provision of accommodation in sectors with a function similar to that of the hotel sector. In that regard, Article 13B(b)(l) does not preclude taxation in respect of agreements concluded for a period of less than six months, if that duration is deemed to reflect the parties' intention. It is, however, for the national court to determine whether, in a case before it, certain factors (such as the automatic renewal of the letting agreement) suggest that the duration stated in the letting agreement does not reflect the parties' true intention, in which case the actual total duration of the accommodation, rather than that specified in the letting agreement, would have to be taken into consideration.

Gulmann Wathelet Moitinho de Almeida

Edward Puissochet

Delivered in open court in Luxembourg on 12 February 1998.

R. Grass C. Gulmann

Registrar President of the Fifth Chamber

OPINION OF ADVOCATE GENERAL JACOBS delivered on 25 September 1997

Introduction

1The present case, referred to the Court by the Finanzgericht (Finance Court) München, raises the question whether Article 13B(b) of the Sixth VAT Directive ('the Directive') permits a Member State to impose VAT on the provision of temporary accommodation for asylum-seekers and emigrants.

Relevant Community and national provisions

2In so far as is relevant Article 13B of the Directive provides:

'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:

* Original language: English.

(b) the leasing or letting of immovable property excluding:

1. the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;

Member States may apply further exclusions to the scope of this exemption.'

3It is clear from the ruling in Henriksen that, while a Member State may restrict the scope of the exemption laid down in Article 13B(b) by applying further exclusions, it may not exempt from tax the transactions which are excluded from exemption. The transactions mentioned in Article 13B(b)(1) are therefore compulsorily taxable.

4The relevant provisions of German law are to be found in the Umsatzsteuergesetz 1980 (Law on Turnover Tax, 'the UStG')· Under Paragraph 4(12), first sentence, letter (a), of the UStG, as interpreted by the German courts, the leasing of immovable property, including individual parts of a property such as living and sleeping rooms, is exempt from tax. However, under Paragraph 4(12), second sentence, of the UStG the letting of living and sleeping accommodation which a trader keeps available for the short-term accommodation of guests is taxable. The referring court states that, according to the case-law of the Bundesfinanzhof (Federal Finance Court), the criterion of short-term accommodation refers not to the actual length of stay but to the trader's intention. If a trader lets rooms to a public authority which uses them for the accommodation of third parties, what is decisive is whether the trader intends that the rooms be used for longer-term letting and has implemented that intention by entering into a long-term agreement with the public authority. According to the case-law of the Bundesfinanzhof, the practice of the tax authorities and academic opinion, a letting is to be regarded as short-term if it is for a period of less than six months.

The facts and the national court's questions

5Since 1984 Mrs Blasi has provided accommodation in three buildings situated in Munich for emigrant families from Eastern European countries. The rooms in the buildings are fully furnished and equipped with cooking facilities and fridges. They are cleaned by the emigrants themselves, who in some cases install telephones at their own expense.

6Every 14 days Mrs Blasi provides fresh bedding and cleans the landings, staircases, baths and lavatories. The emigrants are not supplied with meals or drinks. There are no lounges or common rooms in any of the buildings, nor is there a hotel reception.

7The emigrants are put in contact with Mrs Blasi by the City of Munich, which at the material time paid her DM 25 per day for each guest. It appears that Mrs Blasi informed the City of Munich that she was not interested in taking emigrants who wanted to stay for short periods only and that, according to Mrs Blasi's calculations, the average length of stay is 14.4 months. However, there is no contractual provision requiring the lettings to be of a minimum length.

8Having received an assessment to VAT in respect of the lettings for the year 1984 Mrs-Blasi brought proceedings before the referring court, claiming that she had no liability to VAT. In its order for reference, the referring court raises doubts as to whether Paragraph 4(12), second sentence, of the UStG is compatible with Article 13B(b)(1) of the Directive. It notes that, whereas the Directive excludes from the exemption applicable to the leasing or letting of immovable property, the 'provision of accommodation ... in the hotel sector or in sectors with a similar function', the UStG refers only to the short-term provision of accommodation. The referring court has therefore put the following questions to this Court:

'1. Is Article 13B(b)(1) of the Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes (Sixth VAT Directive) to be interpreted as meaning that the "provision of accom modation" in the hotel sector or in sectors with a similar function means no more than the short-term accommodation of guests?

2. If Question 1 is answered in the affirmative:

(a) What period of accommodation can properly be regarded as short-term? Is it no longer "provision of accommodation in the hotel sector" if the operator keeps the rooms ready for long-term accommodation and this finds expression in the conclusion of a long-term letting agreement (longer than six months)?

(b) Is a tax exemption under Article 13B (b)(1) for a proportion of the time possible if it transpires that all the accommodation can be let on a short or long-term basis according to choice?

3. If Question 1 is answered in the negative:

On the basis of what temporal, spatial and conceptual criteria must the phrase "provision of accommodation" in the hotel sector or in sectors with a similar function be defined and which of them must necessarily be present?'

Appraisal of the issues

9The referring court's questions, which may be considered together, are posited on the basis that, if Article 13B(b)(l) is inapplicable to Mrs Blasi's services, there would be no basis in the Directive for taxing them. In particular the German provision could not be based on the last sentence of Article 13B(b), which allows Member States to 'apply further exclusions to the scope of this exemption'. That finding is based on the Court's statement in Henriksen that the last sentence of Article 13B(b) merely permits a Member State to add to the exclusions from exemption and not to restrict such exclusions; the referring court concludes that Germany cannot rely on that provision in order to restrict the exclusion from exemption in Article 13B(b)(l) to short stays.

10However, that reasoning is plainly erroneous. It may be that, by failing to tax long stays in the hotel and similar sectors, the German provision is narrower than Article 13B(b)(l). If that were so, the provision would exempt from taxation transactions that are compulsorily taxable under the Directive, contrary to the Court's ruling in Henriksen.

11However, that has no relevance to the present case. The issue here is not whether Germany may exempt Mrs Blasi's services but whether it may tax them. In so far as her services were not compulsorily taxable under Article 13B(b)(l), the German provision, by taxing them, would be adding to, rather than limiting, the exclusions from exemption.

12The last sentence of Article 13B(b) is broadly worded so as to allow the Member States a large degree of discretion in placing limits on the scope of the exemption in Article 13B(b). As the Court stated in Henriksen, 'Member States are free to limit the scope of the exemption by providing for additional exclusions'. Unlike exemptions, which generally fall to be construed narrowly because they constitute exceptions to the general principle that turnover tax is levied on all supplies for consideration made by a taxable person, the exclusion of transactions from exemption is in conformity with that general principle. I see no Community interest in seeking to interpret narrowly the discretion granted to Member States by that provision to bring further transactions within the scope of the charge to tax.

13It might therefore have been possible for Germany to justify the provision on the basis of the last sentence of Article 13B(b). It argues however that the provision can be based on Article 13B(b)(1). I shall therefore turn to the referring court's questions, which concern that provision.

14By its first and second questions the referring court asks in effect whether the short-term provision of accommodation is a sufficient criterion for the purposes of Article 13B(b)(1), and, if so, what period is to be regarded as short-term.

15Under the Directive the supply and leasing of immovable property are in principle exempt from VAT. 6 Those exemptions reflect the particular difficulties in applying VAT to such goods. Unlike ordinary goods, land is not the result of a production process; moreover, buildings, once constructed, may change hands many times during their life, often without being subject to further economic activity. Under the Directive the charge to VAT is therefore limited in principle to the supply of building land or of new buildings and the land on which they stand. The preparation of land for development entails economic activity enhancing the value of the land; and the supply of a new building marks the end of a production process. Thereafter repeated taxation of immovable property each time it is sold would not be justified. The same applies to the letting of such property, which is normally a comparatively passive activity not entailing significant added value; although an economic activity for the purposes of Article 4 of the Directive, the letting of immovable property is therefore in principle exempt from tax.

16However, while generally exempting the leasing or letting of immovable property, Article 13B(b) also provides for exclusion of certain transactions from exemption. The common feature of those transactions is that they entail more active exploitation of the immovable property justifying further taxation in addition to that levied upon its initial sale.

17With more particular reference to Article 13B(b)(l), it may be noted, first, that its terms, in particular the phrases 'accommodation, as defined in the laws of the Member States' and 'sectors with a similar function', are somewhat imprecise. It seems to me that the intention was to leave the Member States some latitude in defining the precise limits of the exclusion.

18Secondly, as already noted, Article 13B(b)(l) lays down an exclusion from the exemption and therefore does not fall to be construed strictly. Indeed it seems to me that the words 'sectors with a similar function' should be given a broad construction since their purpose is to ensure that the provision of temporary accommodation similar to, and hence in potential competition with, that provided in the hotel sector is subject to tax.

19As regards the German provision, it is true that the short-term letting of residential property may not entail all of the additional supplies of goods and services, such as provision of meals and drinks, cleaning of rooms, provision of bed linen etc., normally provided in hotels. Nevertheless, there can be no doubt that a taxable person offering, for example, short-term holiday lets of residential property fulfils essentially the same function as — and is in a competitive relationship with — a taxable person in the hotel sector. The essential distinction between such lettings and exempt lettings of residential property is the temporary nature of the accommodation. In any event, short-term lets are more likely to involve additional services such as provision of linen and cleaning of common parts of buildings or even of the accommodation itself (indeed a number of such services are provided by Mrs Blasi); moreover, they involve more active exploitation of the property than long-term lets in so far as greater supervision and management is required.

20Against that background it seems to me that, although — unlike Article 13B(b)(l) — the German provision does not expressly focus on the nature of the establishment providing the accommodation or the sector in which it is provided, the criterion of the provision of short-term accommodation to guests which it employs represents a reasonable means of achieving the underlying aim of the provision. It ensures that the transactions of taxable persons whose business is similar to the essential function performed by a hotel, namely the provision of temporary accommodation on a commercial basis, are subject to tax. While it may be true that it is not unknown for persons to stay for long periods in hotels, any inadequacies of the German provision in that respect are not material to the present case and may in any event be of minimal practical significance.

21Moreover, it seems to me that the requirement flowing from the case-law of the Bundesfinanzhof that, in order for the letting of an immovable property to qualify for exemption, there must be an intention, evidenced by a lease or other agreement, to let the property for a minimum period of six months is not unreasonable. It provides a workable and legally certain means of distinguishing between short-term accommodation similar to that provided in the hotel sector and the longer-term letting of residential property for which the Directive provides exemption. A hotel or hostel will be willing to accept guests for potentially short stays, whereas a landlord interested in more passive longer-term lets will require an agreement providing confirmation of the tenant's intention to stay for a longer period. I see no reason to interpret the Directive as imposing a maximum of three months as the Commission suggests.

22It may be noted that the opening words of Article 13B require Member States to lay down conditions for ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse. Germany is in my view entitled to consider that the other criteria suggested by Mrs Blasi, such as whether the accommodation is the centre of interests of the persons concerned or whether additional services are provided, would be too uncertain and difficult to apply. For example, a residential caravan on a camping site in Spain might be regarded as the centre of interests of a retired person who sells his house and goes to live there throughout the year; it would be difficult for the camping site owner to apply such a criterion. Moreover, the level of services and facilities provided by hotels, hostels and camping sites varies considerably. There are hotels which offer no more than a room and camping sites which provide little more than a camping field. Moreover, the German Government might reasonably consider that such criteria would be less likely than one based on the period of stay to achieve the aim of competitive neutrality.

23In so far as Mrs Blasi's genuine intention is to provide longer-term lets of residential property it would be open to her to enter into an agreement to that effect. If, on the other hand, the inherently temporary nature of the stays prevents her from doing so, then it is not unreasonable that the tax authorities should take the view that what is at issue is short-term commercial exploitation of immovable property and equate the accommodation which she provides with the taxable accommodation provided by a hostel or cheaper hotel. Indeed it is conceivable that of a long-term nature and qualifies for the City of Munich might equally use such exemption only if there is evidence of an establishments for the temporary accommo intention from the beginning that accommodation of asylum-seekers and emigrants. dation is to be provided for a period of at least six months.

24With reference to question 2(b) put by the national court, I do not think the Ger 25. Finally, as I have already explained, in so man authorities are obliged to grant exemp far as the German rule were considered to go tion in respect of part of the period of a let beyond the terms of Article 13 B(b)(l) by ting where a letting happens to exceed six taxing accommodation such as that provided months. The German authorities are in my by Mrs Blasi, it could in any event be based view justified in considering that a letting is on the last sentence of Article 13 B(b).

Conclusion

26Accordingly, I am of the opinion that the questions referred by the Finanzgericht München should be answered as follows:

A national rule subjecting to VAT the provision of short-term accommodation to guests, that is to say, the provision of accommodation otherwise than under an agreement providing for a minimum stay of six months, is compatible with Article 13 B(b)(l) of the Sixth VAT Directive.

Notes

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

(2) Case 173/88 Skatteministeriet v Henriksen [1989] ECR 2763, paragraph 21 of the judgment.

(3) Cited in note 2.

(4) Paragraph 21 of the judgment.

(5) See, for example, Case 348/87 Stichting Uitvoering Financiële Acties v Staatssecretaris van Financiën [1989] ECR 1737, paragraph 13 of the judgment.

(6) Article 13B(b), (g) and (h).

(7) Supplies consisting in the alteration or repair of buildings are in any event separately taxable as supplies of services.

(8) Member States are permitted to grant taxable persons the right to opt to tax the supply or letting of immovable property under Article 13C of the Directive. The option is provided for with commercial property in mind. A vendor or lessor may prefer taxation of the supply or letting of commercial property to a taxable person who uses the property for the purposes of his economic activity and therefore has the right to deduct the tax charged. The vendor or lessor will then himself have the right to deduct any VAT incurred on the purchase, leasing, alteration or refurbishment of the property. The incurring of irrecoverable VAT by taxable persons in relation to the property is thereby avoided.

(9) It may be noted however that it was thought necessary to include an express provision in Article 4(2) of the Directive to make it clear that the 'exploitation of tangible ... property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity' within the meaning of the Directive.