C-363/05 JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies

JUDGMENT OF THE COURT (Third Chamber)

28 June 2007 *

In Case C-363/05,

REFERENCE for a preliminary ruling under Article 234 EC, from the VAT and Duties Tribunal, London (United Kingdom), made by decision of 19 September 2005, received at the Court on 26 September 2005, in the proceedings

JP Morgan Fleming Claverhouse Investment Trust plc,

The Association of Investment Trust Companies

v

The Commissioners of HM Revenue and Customs,

THE COURT (Third Chamber),

composed of A. Rosas (Rapporteur), President of the Chamber, J. Klučka, U. Lõhmus, A. Ó Caoimh and P. Lindh, Judges,

* Language of the case: English.

Advocate General: J. Kokott, Registrar: L. Hewlett, Principal Administrator,

having regard to the written procedure and further to the hearing on 13 December 2006,

after considering the observations submitted on behalf of:

— JP Morgan Fleming Claverhouse Investment Trust plc, by K.P.E. Lasok QC and M. Angiolini, Barrister, instructed by A. Khan, Solicitor,

— the United Kingdom Government, by C. Gibbs and R. Hill, acting as Agents,

— the Commission of the European Communities, by R. Lyal and M. Afonso, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 1 March 2007,

gives the following

Judgment

Legal context and the dispute

1This reference for a preliminary ruling relates to the interpretation of Article 13B(d)(6) 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').

2The reference was made in the course of proceedings brought by JP Morgan Fleming Claverhouse Investment Trust plc ('Claverhouse') and the Association of Investment Trust Companies, the applicants in the main proceedings, against the Commissioners of HM Revenue and Customs ('the Commissioners') regarding their refusal to exempt the management services supplied to an investment trust company ('ITC') from value added tax ('VAT').

Legal context

The Community legislation

3Under Article 13B(d)(6) of the Sixth Directive Member States are to exempt the following from VAT under conditions which they are to lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

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

4Article 1 of Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ 1985 L 375, p. 3), as amended several times, inter alia by Directive 2001/108/EC of the European Parliament and of the Council of 21 January 2002 (OJ 2002 L 41, p. 35), and, most recently, by Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 (OJ 2005 L 79, p. 9) ('the UCITS Directive') provides:

'1. The Member States shall apply this Directive to undertakings for collective investment in transferable securities (hereinafter referred to as UCITS) situated within their territories.

2. For the purposes of this Directive, and subject to Article 2, UCITS shall be undertakings:

— the sole object of which is the collective investment in transferable securities and/or in other liquid financial assets referred to in Article 19(1) of capital raised from the public and which operates on the principle of risk-spreading and,

— the units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings' assets. Action taken by a UCITS to ensure that the stock exchange value of its units does not significantly vary from their net asset value shall be regarded as equivalent to such re purchase or redemption.

3. Such undertakings may be constituted according to law, either under the law of contract (as common funds managed by management companies) or trust law (as unit trusts) or under statute (as investment companies)/

5According to Article 2(1) of the UCITS Directive, undertakings for collective investment in transferable securities (undertakings for collective investment') of the closed-ended type are not to be considered to be undertakings for collective investment subject to that directive.

6The sixth recital of the preamble to the UCITS Directive reads as follows:

'Whereas the coordination of the laws of the Member States should be confined initially to collective investment undertakings other than of the closed-ended type which promote the sale of their units to the public in the Community and the sole object of which is investment in transferable securities (which are essentially transferable securities officially listed on stock exchanges or similar regulated markets); whereas regulation of the collective investment undertakings not covered by the Directive poses a variety of problems which must be dealt with by means of other provisions, and such undertakings will accordingly be the subject of coordination at a later stage; ...'

National legislation

7Article 13B(d)(6) of the Sixth Directive was implemented in the United Kingdom by the Value Added Tax Act 1994 ('the VAT Act 1994').

8Items 9 and 10 of Group 5 of Schedule 9 to the VAT Act 1994 exempt the management of an authorised unit trust scheme ('AUT') and the management of the scheme property of an open-ended investment company (OEIC) respectively.

9The terms AUT and OEIC used in the VAT Act 1994 are defined by the Financial Services and Markets Act 2000 which implements part of the UCITS Directive in the United Kingdom.

10According to the court-file ITCs are, in principle, defined according to the criteria appearing in section 842 of the Income and Corporation Taxes Act 1988. That section lays down the conditions which a company must meet in order to qualify, as an ITC, for exemption from capital gains tax.

The main proceedings and the questions referred for a preliminary ruling

11Claverhouse is an ITC which used the management services of a third party, JP Morgan Fleming Asset Management (UK) Limited, to manage its investment portfolios.

12Claverhouse is subject to VAT on the management services which it receives, since the Commissioners refuse to treat the supply of management services to an ITC as a service which is exempt from VAT. Thus, over a period of 10 years ending on 31 December 2003, Claverhouse paid GBP 2.7 million in non-recoverable VAT.

13Against that background, Claverhouse and the Association of Investment Trust Companies, an association representing a number of ITCs operating within the United Kingdom market, lodged an appeal against the Commissioners before the referring court.

14According to the order for reference, AUTs, which are constituted under trust law, and OEICs, which are constituted under statute, are collective special investment funds in which the respective number of units or shares held by investors varies in accordance with their investment. AUTs and OEICs are variable capital funds (or open-ended funds) which are obliged to buy back their units or shares from investors who wish to sell them. ITCs, which are constituted under statute, on the other hand, are fixed-capital funds (or closed-ended funds). ITCs are collective investment schemes constituted as limited liability companies quoted on the stock exchange. An investor who wishes to realise his investment in this type of fund generally sells his shares on a secondary market such as a stock exchange where the price is negotiated on the basis of supply and demand on the market.

15The referring court explains that, unlike AUTs and OEICs, ITCs are not subject to authorisation by the Financial Services Authority under the Financial Services and Markets Act 2000. However, like listed companies, they are regulated by the Financial Services Authority in its capacity as Listing Authority.

16The referring court points out, further, that the management of AUTs and OEICs must be entrusted to an external manager, while ITCs have a Board of Directors which is empowered to manage investments. However, 90% of ITCs entrust the management of investments to external fund managers.

17Finally, according to the order for reference, in the United Kingdom, an OEIC, which has variable capital and which constitutes a collective investment undertaking within the meaning of the UCITS Directive and which is required to entrust the management of its funds to a third party, is exempt from VAT on the services supplied by its external manager, whereas closed-ended investment companies such as ITCs enjoy no such exemption.

18In those circumstances, the VAT and Duties Tribunal, London, decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

'(1) Are the words "special investment funds" in Article 13B(d)(6) of the Sixth Directive capable of including closed-ended investment funds, such as ITCs?

(2) If the answer to the first question is in the affirmative, does the phrase "as defined by Member States" in Article 13B (d)(6):

(a) allow Member States to select certain of the "special investment funds" within their jurisdiction to benefit from the exemption of the supply of management services and exclude others from the exemption, or

(b) does it mean that the Member States are to identify those funds within their jurisdiction which fall within the definition of "special investment funds" and that the benefit of exemption should extend to all such funds?

(3) If the answer to the second question is that Member States can select which "special investment funds" benefit from the exemption, how do the principles of fiscal neutrality, equal treatment and the prevention of distortion of competition affect the exercise of that discretion?

(4) Does Article 13B(d)(6) have direct effect?'

The questions referred for a preliminary ruling

Preliminary remarks

19According to settled case-law, the exemptions provided for in Article 13 of the Sixth Directive have their own independent meaning in Community law which must be given a Community definition whose purpose is to avoid divergences in the application of the VAT system from one Member State to another (see, to that effect, Case C-428/02 Fonden Marselisborg Lystbådehavn [2005] ECR1-1527, paragraph 27; Case C-498/03 Kingscrest Associates and Montecello [2005] ECR 1-4427, paragraph 22; Joined Cases C-394/04 and C-395/04 Ygeia [2005] ECR 1-10373, paragraph 15; Case C-169/04 Abbey National [2006] ECR 1-4027, paragraph 38; and Case C-401/05 VDP Dental Laboratory [2006] ECR 1-12121, paragraph 26).

20However, the Community legislature may confer the task of defining certain terms of an exemption on the Member States (see, to that effect, Case C-468/93 Gemeente Emmen [1996] ECR 1-1721, paragraph 25, and Abbey National, paragraph 39).

21In such cases it is for each Member State to define the concepts in question in its own domestic law (see to that effect, Joined Cases 0443/04 and 0444/04 Solleveld and van den Hout-van Eijsbergen [2006] ECR 1-3617, paragraph 29), subject to the terms of the exemption laid down by the Community legislature.

22Moreover, it is clear from the case-law of the Court concerning VAT that, when the Member States come to define certain terms of an exemption, they may not prejudice the objectives pursued by the Sixth Directive or the general principles underlying it, in particular the principle of fiscal neutrality (see, to that effect, Gemeente Emmen, paragraph 25; and Case C-246/04 Turn- und Sportunion Waldburg [2006] ECR 1-589, paragraph 31).

The first question

23By its first question the referring court asks whether the term special investment funds' in Article 13B(d)(6) of the Sixth Directive is capable of including closed-ended investment funds, such as ITCs.

24Taking issue with the contention of the United Kingdom Government, the applicants in the main proceedings and the Commission of the European Communities take the view that the words special investment funds' are capable of including closed-ended investment funds such as ITCs.

25In that connection, it must be observed that Article 13B(d)(6) of the Sixth Directive lays down no definition of the words special investment funds'.

26In paragraph 53 of its judgment in Abbey National the Court held that Article 13B(d)(6) of the Sixth Directive covers special investment funds whatever their legal form. Undertakings for collective investment constituted under the law of contract or trust law, and those constituted under statute both come within the scope of that provision.

27Consequently, if the legal form does not determine whether the term special investment funds' in Article 13B(d)(6) of the Sixth Directive applies, the relevance of the mode of operation must be examined in that connection.

28It is not apparent from either the wording or the context of Article 13B(d)(6) of the Sixth Directive that it was the intention of the Community legislature to authorise Member States, when they define the terms of the exemption, to make a distinction according to the mode of operation used by special investment funds.

29An interpretation of Article 13B(d)(6) of the Sixth Directive exempting from VAT the management of open-ended funds, and not the management of closed-ended funds, would be contrary to the principle of fiscal neutrality on which, in particular, the common system of VAT established by the Sixth Directive is based, and which precludes economic operators carrying out the same transactions being treated differently in relation to the levying of VAT (see, to that effect, Case C-382/02 Cimber Air [2004] ECR 1-8379, paragraphs 23 and 24; Case C-280/04 Jyske Finans [2005] ECR 1-10683, paragraph 39; and Abbey National, paragraph 56).

30As the Advocate General observed in point 21 of her Opinion, closed-ended funds present no relevant difference which would preclude, a priori, their classification as special investment funds within the meaning of Article 13B(d)(6) of the Sixth Directive, along with open-ended funds.

31Contrary to the contention of the United Kingdom Government, the provisions of the UCITS Directive cannot be relied on to derive a restricted interpretation of the term special investment funds' from Article 13B(d)(6) of the Sixth Directive.

32Although it follows from the recitals in the preamble to and the terms of the UCITS Directive that its objective is to coordinate national legislation governing collective investment undertakings, the fact remains, as the Advocate General observed in point 22 of her Opinion, that, when the Sixth Directive was adopted, Community terminology in the field of special investment funds was not yet harmonised, since the UCITS Directive, Article 1(3) of which gives a Community definition of collective investment undertakings, was not adopted until 1985 (see Abbey National, paragraph 55).

33Moreover, even if certain language versions, such as, in particular, the Spanish, French, Italian and Portuguese versions of Article 1(3) of the UCITS Directive, when they designate undertakings for collective investment constituted under the law of contract, as opposed to funds constituted under trust law or under statute, use the same expression as that which appears in Article 13B(d)(6) of the Sixth Directive, that is not the case in other language versions, such as the English, Danish and German versions (see, to that effect, Abbey National, paragraph 55).

34Finally, it cannot be argued that the harmonisation introduced by the UCITS Directive does not extend to closed-ended funds. In that connection, it must be observed that, as the Commission points out, closed-ended funds are not excluded definitively from the coordinating measures laid down by that directive. It is apparent from the sixth recital of the preamble to the directive that those funds are merely temporarily excluded from the coordinating measures laid down in the directive. Thus it is not ruled out that closed-ended funds might be harmonised at a later stage.

35It follows from all the foregoing that a closed-ended investment company such as an ITC, which uses external management services, is liable to fall within the definition of special investment funds' in Article 13B(d)(6) of the Sixth Directive.

36That interpretation is not undermined in any way by the fact that closed-ended funds are not required to use external management but can opt to manage themselves. The fact that, unlike OEICs, closed-ended funds such as ITCs have the option of self-management and are not required to have recourse to external management has no effect on the position of an ITC which decides to use external management. Where such a fund chooses to use external management, it is objectively in the same position as an open-ended fund such as an OEIC which is required to use external management.

37Therefore, the answer to the first question must be that Article 13B(d)(6) of the Sixth Directive must be interpreted as meaning that the words special investment funds' in that provision are capable of including closed-ended investment funds, such as ITCs.

The second and third questions

38By its second and third questions the referring court seeks essentially to ascertain the scope of the phrase as defined by Member States' in Article 13B(d)(6) of the Sixth Directive.

39The applicants in the main proceedings and the Commission consider that the Member States alone are empowered to identify, amongst the funds on their territory, those which meet the definition of special investment funds'. According to the Commission, once a fund has been identified as a special investment fund, it must be eligible for the exemption from VAT provided for by Article 13B(d)(6) of the Sixth Directive. The discretion of the Member States does not, therefore, extend to the question whether the VAT scheme actually applies. The Commission adds that the funds have to be identified in the light of the provisions of the UCITS Directive.

40The United Kingdom Government, for its part, argues that a wide interpretation of the words special investment funds' in Article 13B(d)(6) of the Sixth Directive must necessarily be combined with an interpretation of the phrase as defined by Member States' according to which Member States are given a wide discretion to select the funds eligible for the exemption.

41At the outset it must be observed that the task of defining the meaning of the words special investment funds' does not in any way permit the Member States to select certain funds located on their territory and grant them exemption and exclude other funds from that exemption. It follows from paragraph 21 of this judgment that the terms special investment funds' must be the starting point for the discretion conferred on the Member States.

42The interpretation according to which it is for the Member States to select the investment funds which are eligible for the exemption and exclude others would negate the significance of the terms special investment funds' in Article 13B(d)(6) whose objective is to prevent discrepancies in the application of VAT to such funds.

43Article 13B(d)(6) of the Sixth Directive thus only grants the Member States the power to define, in their domestic law, the funds which meet the definition of special investment funds'. That power should, according to paragraph 22 of this judgment, be exercised subject to the objective pursued by the Sixth Directive and the principle of fiscal neutrality of the common system of VAT.

44Accordingly it is necessary to consider whether the limits of the discretion allowed to the Member States by Article 13B(d)(6) of the Sixth Directive are respected where a taxable person seeks to have the management services supplied to him recognised as relating to the management of a special investment fund in order to enjoy the exemption from VAT provided for thereby .

45In that regard it must be observed, first, that the purpose of the exemption, under Article 13B(d)(6) of the Sixth Directive, of transactions connected with the management of special investment funds is, particularly, to facilitate investment in securities by means of investment undertakings by excluding the cost of VAT. That provision is intended to ensure that the common system of VAT is fiscally neutral as regards the choice between direct investment in securities and investment through undertakings for collective investment (Abbey National, paragraph 62).

46Second, the principle of fiscal neutrality, on which the common system of VAT established by the Sixth Directive is based, precludes economic operators carrying out the same transactions from being treated differently in relation to the levying of VAT. That principle does not require the transactions to be identical. According to settled case-law that principle precludes, in particular, treating similar goods and supplies of services, which are thus in competition with each other, differently for VAT purposes (see Case C-109/02 Commission v Germany [2003] ECR 1-12691, paragraph 20; Joined Cases C-453/02 and C-462/02 Linneweber and Akritidis [2005] ECR I-1131, paragraph 24; Kingscrest, Associates and Montecello, paragraph 54; Case 0106/05 L.u.p. [2006] ECR 1-5123, paragraph 32; Turn- und Sportunion Waldburg, paragraph 33; and Solleveld and van den Hout-van Eijnsbergen, paragraph 39).

47The principle of fiscal neutrality includes the principle of elimination of distortion in competition as a result of differing treatment for VAT purposes (see, to that effect, Case C-481/98 Commission v France [2001] ECR 1-3369, paragraph 22). Therefore, distortion is established once it is found that supplies of services are in competition and are treated unequally for the purposes of VAT (see, to that effect, Case C-404/99 Commission v France [2001] ECR 1-2667, paragraphs 45 to 47). It is irrelevant, in that connection, whether the distortion is substantial.

48It follows from the foregoing that any application of national legislation which excludes the management of special closed-ended investment funds from the exemption provided for by Article 13B(d)(6) of the Sixth Directive is contrary to the objective of that provision and to the principle of fiscal neutrality where those closed-ended funds are collective investment undertakings which allow investors to invest in securities and where those funds are in competition with funds exempt from VAT.

49It is for the national court to verify whether the application of the national legislation at issue in the main proceedings is consistent with the objective of Article 13B(d)(6) of the Sixth Directive and with the principle of fiscal neutrality in the light of the guidelines given in this judgment.

50In that regard, it is possible to provide the referring court with some further guidelines in the light of the information it sent to the Court. Thus, it must be held that, in any event, the management of AUTs and OEICs, which are collective investment undertakings as defined in the UCITS Directive, is exempt from VAT in the United Kingdom. Although, at present, ITCs are not collective investment undertakings within the meaning of the UCITS Directive, the fact remains that, as the referring court observes, AUTs, OEICs and ITCs are three forms of special investment which spread risk. In addition, the referring court considers that ITCs, like AUTs and OEICs, involve investment in securities through the intermediary of a collective investment undertaking which allows private investors to invest in wide-ranging investment portfolios and thus reduce the stock market risk.

51Thus, according to the statements put before the court, the management of ITCs falls within the objective of the Sixth Directive and ITCs constitute investment funds comparable to AUTs and OEICs which fall within the definition of special investment funds'. In those circumstances, the exclusion of ITCs from the exemption provided for by Article 13B(d)(6) does not appear justified in the light of the objective of that provision and the principle of fiscal neutrality.

52As the Commission argues, the question whether that interpretation results in the exemption provided for by Article 13B(d)(6) of the Sixth Directive being extended to cover funds other than those at issue in the main proceedings is not one of the questions referred to the Court for a preliminary ruling.

53It must be added that the classification in national law of special investment funds cannot suffice to justify their qualifying for a Community exemption such as that at issue in the main proceedings. They must also be funds covered by the notion of special investment funds' within the meaning of Article 13B(d)(6) of the Sixth Directive and liable to be exempt in the light of the objective of that directive and the principle of fiscal neutrality.

54In the light of the foregoing considerations, the answer to the second and third questions must be that Article 13B(d)(6) of the Sixth Directive must be interpreted as meaning that it allows Member States a discretion in defining the funds located on their territory which are covered by the notion of special investment funds' for the purposes of the exemption provided for by that provision. However, in the exercise of that power, the Member States must respect the objective pursued by that provision, which is to facilitate investment in securities for investors through investment undertakings, while guaranteeing the principle of fiscal neutrality from the point of view of the levying of VAT on the management of special investment funds which are in competition with other special investment funds such as funds falling within the scope of the UCITS Directive.

The fourth question

55By its fourth question the referring court asks whether Article 13B(d)(6) of the Sixth Directive has direct effect.

56The applicants in the main proceedings consider that they are entitled to rely on that provision. The mere fact that it appears to allow Member States a certain discretion in their definition of special investment funds cannot preclude the possibility of reliance on it where the national measures implementing it exceed the limits of that discretion in that they are contrary to the principle of fiscal neutrality and/or the objective pursued by the exemption provided for by that provision. The Commission shares that view and adds that Article 13B(d)(6) of the Sixth Directive can be relied on directly since the limits imposed on the discretion of the Member States are clear, precise and sufficiently unconditional.

57The United Kingdom Government, on the other hand, takes the view that Article 13B(d)(6) of the Sixth Directive does not have direct effect in that it requires further implementation by the Member States.

58On that point, it is clear from settled case-law that wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may, in the absence of implementing measures adopted within the prescribed period, be relied on against any national provision which is incompatible with the directive or in so far as they define rights which individuals are able to assert against the State (see, inter alia, Case 8/81 Becker [1982] ECR 53, paragraph 25; Case C-141/00 Kügler [2002] ECR 1-6833, paragraph 51; Joined Cases C-465/00, C-138/01 and C-139/01 Österreichischer Rundfunk and Others [2003] ECR 1-4989, paragraph 98; and Linneweber and Akritidis, paragraph 33).

59As regards the subject-matter of Article 13B(d)(6) of the Sixth Directive, it must be held that it indicates sufficiently precisely and unconditionally that the management of special investment funds must be exempted.

60The fact that that provision confirms the existence of a discretion for Member States is not such as to call that interpretation into question if, according to objective evidence, the supply at issue meets the criteria for that exemption (see, by analogy, Case C-45/01 Dornier [2003] ECR 1-12911, paragraph 81).

61Consequently, the fact that Article 13B(d)(6) of the Sixth Directive allows Member States a discretion, indicating that they are responsible for defining special investment funds, does not prevent the persons concerned from relying directly on that provision (see, by analogy, Dornier, paragraph 81), where a Member State exercising that discretion has adopted national measures which are incompatible with that directive (see, to that effect, Linneweber and Akritidis, paragraphs 36 and 37).

62The answer to the fourth question must, therefore, be that Article 13B(d)(6) of the Sixth Directive has direct effect, in that it can be relied on by a taxable person before a national court in order to challenge the application of national legislation alleged to be incompatible with that provision.

Costs

63Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

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

1. Article 13B(d)(6) 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 must be interpreted as meaning that the words 'special investment funds' in that provision are capable of including closed-ended investment funds, such as Investment Trust Companies,

2. Article 13B(d)(6) of Sixth Directive 77/388 must be interpreted as meaning that it allows Member States a discretion in defining the funds located on their territory which are covered by the notion of 'special investment funds' for the purposes of the exemption provided for by that provision. However, in the exercise of that power, the Member States must respect the objective pursued by that provision, which is to facilitate investment in securities for investors through investment undertakings, while guaranteeing the principle of fiscal neutrality from the point of view of the levying of VAT on the management of special investment funds which are in competition with other special investment funds such as funds falling within the scope of Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS), as amended by Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005.

3. Article 13B(d)(6) of Sixth Directive 77/388 has direct effect, in that it can be relied on by a taxable person before a national court in order to challenge the application of national legislation alleged to be incompatible with that provision.

[Signatures]

OPINION OF ADVOCATE GENERAL

KOKOTT delivered on 1 March 2007 1

I — Introduction

1Under the Sixth VAT Directive 77/388/ EEC ('the Sixth Directive), 2 the management of investment funds is exempt from VAT. In Abbey National, 3 the Court — likewise on a reference from the VAT and Duties Tribunal, London — has already specified what activities are covered by the concept of management of investment funds and under what conditions management services which third parties supply to a fund are to be exempted from VAT.

2The Abbey National case concerned open-ended funds constituted under trust law (authorised unit trusts — AUTs') and investment companies constituted under statute (open-ended investment companies — 'OEICs'). In the present proceedings, the question now arises whether the exemption also applies to certain closed-ended funds, namely investment trust companies (ITCs'). Open-ended and closed-ended funds are essentially distinguished by the fact that the capital of open-ended funds varies through the issue and repurchase of shares by the fund, whereas the capital of closed-ended funds is fixed.

3The uncertainty regarding the treatment of ITCs results from the fact that the Sixth Directive refers to national law for the definition of a special investment fund entitled to exemption from VAT. Although there are general rules governing ITCs in the United Kingdom, ITCs do not enjoy exemption from VAT under national law. It must therefore be established how far the Member States' powers of definition extend and what limits are placed on them in that regard by, in particular, the principle of the neutrality of VAT.

II — Legal context

A — Community law

4Under Article 13(B) of the Sixth Directive,

'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:

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

5Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) 4 harmonises the national rules for investment funds. Under the second indent of Article 1(2) of that directive, however, only open-ended funds the units of which are, at the request of holders, repurchased or redeemed, directly or indirectly, out of those undertakings' assets fall within its scope. Closed-ended funds, by contrast, are expressly excluded from the scope of the directive (first indent of Article 2(1) of Directive 85/611).

B — National law

6In the United Kingdom, the exemption laid down in the Sixth Directive for the management of investment funds and investment companies was implemented by Items 9 and 10 of Group 5 of Schedule 9 to the Value Added Tax Act 1994 ('the VAT Act 1994'). The rules apply in particular to AUTs (Item 9) and OEICs (Item 10), but not to ITCs.

7The provisions of the VAT Act 1994 as since amended refer for the definition of exempt undertakings to the provisions on collective investment schemes in Part XVII of the Financial Services and Markets Act 2000 ('the FSMA). The FSMA transposes Directive 85/611 into national law. ITCs are not collective investment schemes within the meaning of the FSMA. Unlike AUTs and OEICs, they do not need to be authorised as investment funds by the Financial Services Authority ('the FSA') but are regulated by it as the listing authority.

8In order for a company to be recognised as an ITC within the meaning of income and corporation tax law, a number of conditions are set out in Section 842 of the Income and Corporation Taxes Act 1988. That provision is referred to in other legislation. In addition, the rules on investment companies laid down in the Companies Act 1985 also apply to ITCs.

III — Facts and questions referred for a preliminary ruling

9ITCs are risk-spreading pooled investment vehicles which are listed as public limited companies on the stock exchange and invest in a portfolio of investments. The investors hold shares in the company. In contrast to AUTs and OEICs, the number of shares remains unchanged (subject to any increases in share capital). The investors have no right to have their shares repurchased by the company, unlike in the case of the other types of fund. Instead, where appropriate, they have to sell their shares on the stock exchange. The stock market value of the shares depends on supply and demand, the value of the ITCs portfolio of investments being a significant, but not the only, factor in the valuation.

10JP Morgan Fleming Claverhouse Investment Trust plc is an ITC. It receives supplies of management services in relation to its investments from a third party, JP Morgan Fleming Asset Management (UK) Limited, in respect of which it currently pays VAT. It appealed to the VAT and Duties Tribunal against the charge of VAT on the supplies of fund management which it receives. By order of 19 September 2005, the VAT and Duties Tribunal referred the following questions to the Court of Justice for a preliminary ruling:

'(1) Are the words "special investment funds" in Article 13B(d)(6) of the Sixth Directive capable of including closed-ended investment funds, such as ITCs? (2) If the answer to the first question is in the affirmative, does the phrase "as defined by Member States" in Article 13B(d)(6):

(a) allow Member States to select certain of the "special investment funds" within their jurisdiction to benefit from the exemption of the supply of management services and exclude others from the exemption, or

(b) does it mean that the Member States are to identify those funds within their jurisdiction which fall within the definition of "special investment funds" and that the benefit of exemption should extend to all such funds?

(3) If the answer to the second question is that Member States can select which "special investment funds" benefit from the exemption, how do the principles of fiscal neutrality, equal treatment and the prevention of distortion of competition affect the exercise of that discretion? (4) Does Article 13B(d)(6) have direct effect?'

IV — Legal assessment

A — Preliminary observations

11The concept of 'management of special investment funds' is not defined more precisely in Article 13B(d)(6) of the Sixth Directive itself. The phrase nevertheless contains two elements which require definition, namely 'management 'and 'special investment funds'.

12As the Court held in Abbey National, the definition of what constitutes management within the meaning of the abovementioned provision is a question solely of Community law. According to settled case-law, the exemptions provided for in Article 13 of the Sixth Directive are in fact concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another. 5

13According to the express wording of the Sixth Directive, it is, by contrast, for the Member States to define more precisely the special funds in question. In Abbey National the Court stated in this regard as follows:

'While, consequently, the Member States may not alter their content, in particular in laying down conditions of application [meaning "of the Sixth Directive"], that cannot however be so where the Council has specifically conferred on them the task of defining certain terms of an exemption.' 6

14That wording is misleading. The Court appears to allow the Member States discretion to alter the content of the Sixth Directive, which in general is the prerogative of the Community legislature.

15What the Court must in fact have meant is that the Sixth Directive refers, in certain specified cases, to the more precise definition of a concept by the national legal systems and thus leaves it to the Member States to flesh out those concepts. Such references to national definitions are to be found in numerous places in the Sixth Directive. Thus, for example, it is for Member States to define the medical and paramedical professions whose services are to be exempt from VAT pursuant to Article 13A(1)(c) of the Sixth Directive. In addition, exemption for services supplied by public welfare or charitable organisations is dependent on the appropriate status having been conferred on them by Member States. 7

16It is true that, as a consequence of that legislative technique, the conditions for the application of the Sixth Directive may differ from Member State to Member State. It nevertheless creates, in spheres which the Community legislature has not harmonised down to the finest detail, a degree of legal certainty because the relevant rules of the Member States can still be used. The latter retain a discretion which enables them to make the granting of an exemption dependent on compliance with certain standards laid down in national law in the light of the circumstances existing in the Member State in question.

17The Member States' discretion is limited, first, by the wording, meaning and purpose of the relevant provision of the Sixth Directive itself. 8 Accordingly, the Member States are precluded from classifying undertakings as special investment funds within the meaning of Article 13B(d)(6) of the Sixth Directive if, a priori, having regard to the meaning and purpose of the provision, those bodies do not fall within the scope of that concept. Secondly, the Member States must also observe certain general principles underlying the Sixth Directive, such as, in particular, the principle of the neutrality of VAT. 9

B — The first question

18The first question seeks to ascertain whether closed-ended funds such as ITCs can actually constitute special investment funds' within the meaning of Article 13B(d)(6).

19In Abbey National, which was delivered after the order for reference was made in the present case, the Court has already held that the exemption of management of special investment funds applies irrespective of their legal form and applies both to undertakings for collective investment constituted under the law of contract or trust law and to those constituted under statute.

20It is true that funds without legal personality, that is, funds constituted under the law of contract or trust law, are primarily reliant on management services supplied by an external fund manager. On the other hand, investment companies constituted under statute may in principle be self-managed without making use of a third party. 11 However, if investment funds constituted under statute do make use of an external fund manager, they are in the same position as funds without legal personality. As the Court has already held in Abbey National, it would be contrary to the principle of fiscal neutrality if the management services supplied to funds constituted under statute were subject to VAT, whereas the management of funds in other legal forms were exempt.

21ITCs are public limited companies, that is, special investment funds with legal personality which are established by their statutes. There are no obvious relevant differences between funds in that legal form and other investment companies established by their statutes — such as OEICs — which would preclude, a priori, classification of the abovementioned closed-ended funds as special investment funds within the meaning of Article 13B(d)(6) of the Sixth Directive.

22That conclusion is not undermined by the fact that Directive 85/611 does not apply to closed-ended funds. It is true that in Abbey National the Court referred, in answer to the question of what is to be regarded as VAT-exempt management of an investment fund, to certain provisions of Directive 85/611. However, the Sixth Directive was adopted long before Directive 85/611 and covers a different field from that directive. Directive 85/611 therefore does not permit any compelling inferences as to which undertakings can be covered by the exemption in Article 13B(d)(6) of the Sixth Directive.

23Moreover, closed-ended funds were not excluded from the scope of Directive 85/611 for reasons which were capable of being applied to the interpretation of the Sixth Directive. Rather, the legislature proceeded gradually in harmonising the rules on investment funds and reserved legislation on closed-ended funds for a later date.

24The answer to the first question must therefore be that the words special investment funds' in Article 13B(d)(6) of the Sixth Directive are capable of including closed-ended investment funds, such as ITCs.

C — The second and third questions

25The second and third questions, which should be discussed together, seek to ascertain the extent of the Member States' powers in defining special investment funds whose management is exempt from VAT under Article 13B(d)(6) of the Sixth Directive.

26The referring tribunal considers two possible interpretations. According to the first, a Member State may select certain special investment funds within its jurisdic¬ tion for the purposes of exemption from VAT of management services pursuant to Article 13B(d)(6) of the Sixth Directive and exclude others from exemption. According to the second, the management of all special investment funds which Member States have defined as such is exempt from VAT.

27It must first be observed in this connection that the concept of the special investment fund' itself is not a legal concept of national law, as is also pointed out by the Commission. The fact that a form of investment is recognised as an investment fund under national law is therefore not automatically sufficient in itself to permit the inference that such a fund is also a special investment fund within the meaning of the Sixth Directive. On the contrary, in exercising their discretion, Member States must specify which bodies are to be regarded as special investment funds whose management is exempt from VAT. In so doing, they may, in principle, also exclude certain kinds of investment fund from the exemption, even if certain aspects of those investment funds are governed by specific rules under national law.

28The mere fact that ITCs are recognised as investment funds under United Kingdom law does not therefore mean that it must be concluded that the management of funds of that category is to be exempted from VAT. On the contrary, it must be considered whether the national legislature exercised its discretion correctly in not extending the exemption to include the management of ITCs.

29When exercising their discretion, the Member States must have regard to the objectives pursued by exemption and to the principle of fiscal neutrality.

30The objective of the exemption of the management of special investment funds from VAT is in particular to avoid making access to that form of investment more difficult for small investors. If the exemption did not exist, the owners of units in investment funds would have a greater tax burden than investors who invest their money directly in shares or other securities and do not have recourse to the services of a fund management. 8 It is precisely small investors for whom investment in invest¬ ment funds is particularly important. Because of the small volume of investment available to them, they have only a restricted opportunity of investing their money directly in a wide spread of securities. In addition, they often do not have the necessary knowledge for comparing and selecting securities.

31As the United Kingdom Government does indeed correctly point out, the exemptions envisaged in 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. However, the interpretation of the terms used in that provision must be consistent with their objectives. This means that Member States must not circumscribe the special investment funds whose management is exempt from VAT too narrowly. Otherwise the objective of not making the investment of money in common funds more difficult would not be achieved.

32In particular, they must not exclude from the exemption any common funds which fall within the scope of Directive 85/611, by which the Member States' power of definition is now overlaid. Since that directive approximates the national provisions on certain types of common fund at a high level for the protection of investors, the common funds covered by the Directive are in fact especially suitable for investment by small investors.

33Member States are entitled to exclude other forms of investment funds which do not fall within the scope of Directive 85/611 from the exemption, provided that this is consistent with the principle of fiscal neutrality.

34The principle of fiscal neutrality is first alluded to in the fifth recital in the preamble to the First VAT Directive, which states: 'Whereas 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 ...'

35The Court has attached importance to that principle in various situations. In connection with the right to deduct input tax, that principle requires neutrality in terms of value, that is to say, the tax on inputs must be deductible in full from the tax which is payable on supply to the final customer. This prevents multiple taxation of a supply being dependent on the number of preceding input stages.

36In other contexts, there is greater emphasis on the aspect of equal treatment of all supplies or all taxpayers as regards the levying of VAT and the applicable rate of VAT. The forms of words which the Court has chosen to describe that application of the principle of neutrality vary.

37In a number of decisions it has stated: 'The principle of fiscal neutrality precludes ... economic operators carrying on the same activities from being treated differently as far as the levying of VAT is concerned.' 27

38In other judgments, the Court has stated that the principle of fiscal neutrality precludes, in particular, 'treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes'. The Court has frequently added by way of clarification in this regard that the identity of the manufacturer or the provider of the services and the legal form by means of which they exercise their activities are, as a rule, irrelevant in assessing whether products or services supplied are similar.

39Those formulations each emphasise different aspects: in some cases equal treatment for economic operators and in others equal treatment for the services supplied by them. However, they are based on the same understanding of the principle of neutrality. Its scope would, in particular, be too restricted if, on the basis of the phrase quoted in point 37, only identical services had to be treated equally for tax purposes, as the United Kingdom Government contends. Rather, in addition to that, the principle of neutrality also requires equal treatment for supplies which serve the same purpose, are interchangeable and are therefore in competition with each other.

40The United Kingdom fears that, on that interpretation of the principle of neutrality, the scope of the exemption from VAT for special investment funds would become boundless. Exemption would then also have to be extended to the management of numerous other forms of pooled investments, such as pension funds, unit-linked life assurance policies, investment clubs and venture capital trusts.

41As the Commission correctly points out, however, the only issue in these proceedings is whether the management of closed-ended investment funds such as ITCs falls under the exemption referred to in Article 13B(d) (6) of the Sixth Directive. How certain other investment vehicles should be assessed having regard to the objectives of that provision and to the principle of fiscal neutrality remains a hypothetical question.

42The United Kingdom Government further submits that, even if the existence of a competitive relationship is the decisive factor, the difference in tax treatment has no effect on it, because the amount of the extra tax burden borne by ITCs is in practice too small.

43That cannot be accepted. The principle of fiscal neutrality precludes unequal treatment of similar and therefore competing goods or services as regards exemption from VAT. Breach of that principle does not require the unequal taxation actually to van den Hout-van Eijnsbergen, cited in footnote 8, paragraph result in a demonstrable distortion of com¬ petition. Otherwise exemption would apply on a case-by-case basis. That is because the actual influence of the taxation of fund management on competition depends on the underlying circumstances of the individual case, such as, for example, the cost structure of the particular type of fund and the price sensitivity of the fund segment concerned.

44However, in the context of assessing observance of the principle of neutrality, the comparability of the management activities themselves or the equal treatment of the external fund managers is not in issue in this case. The decisive factor is, rather, the comparability of the investment funds whose market position may affect the tax burden on the fund management. In that situation, the principle of fiscal neutrality therefore precludes any difference in the tax treatment of supplies depending on the recipient of the supply in so far as the recipients of the supplies are for their part comparable and in competition with each other.

45In its order for reference, the referring tribunal states that ITCs, in the same way as AUTs and OEICs, enable private investors to invest in widely spread portfolios of investments and thus reduce stock market risk. Moreover, with all types of fund, private investors benefit from professional fund management, the expenses of which are shared, and from reduced overall dealing and administrative costs. ITCs also fulfil the same functions for institutional investors. This indicates that ITCs are comparable to the types of fund (AUTs and OEICs) which are entitled to exemption from VAT and in competition with them. Consequently, their management should also be exempted from VAT.

46Unequal treatment would be permissible only if the various types of fund did not serve in the same way to achieve the objectives of the exemption. The exemption is intended inter alia to facilitate access for small investors to investment in securities through collective investment. That group of investors is scarcely able to monitor the activities of a fund itself and is therefore particularly reliant on statutory protection mechanisms.

47In so far as Article 13B(d)(6) of the Sixth Directive refers to the definition of special investment funds by Member States, the provision leaves it to them to establish the legal framework for the structure and management of the investment vehicles entitled to exemption from VAT. It would be consistent with the objectives of the exemption if, in exercising that power of definition, Member States also allowed themselves to be guided by the extent to which investor protection is ensured in the case of a given type of fund.

48In the case of funds covered by Directive 85/611, the Member States no longer retain any discretion in that respect; in their case an adequate level of investor protection must be assumed. Other forms of investment fund, on the other hand, may be excluded from the exemption if they do not ensure a level of investor protection comparable to that ensured by funds whose management is exempt.

49It is for the referring tribunal to establish whether the level of investor protection afforded by ITCs is comparable to that afforded by AUTs and OEICs. Depending on the type of fund, quite different mechanisms, leading in effect to a comparable level of protection, can be employed for that purpose.

50The answer to the second and third questions must therefore be that Article 13B(d)(6) of the Sixth Directive confers on Member States the power to determine the special investment funds whose management is exempt from VAT. In exercising that power, Member States must have regard to the wording and objectives of the provision and to the principle of fiscal neutrality which requires all similar and therefore competing special investment funds to be treated equally as regards the levying of VAT.

D — The fourth question

51If, in exercising its power to define exempt special investment funds within the meaning of Article 13B(d)(6), a Member State has failed to have regard to the principle of fiscal neutrality and wrongly omitted to include certain funds, the question arises as to whether the Sixth Directive has direct effect in favour of the persons concerned.

52It should be recalled in this connection that, wherever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or in so far as the provisions define rights which individuals are able to assert against the State.

53Article 13B(d)(6) of the Sixth Directive describes sufficiently precisely and unconditionally which activity is to be exempted from VAT, so that individuals may rely directly on that provision.

54That is not contradicted by the fact that the Member States have a discretion in defining the special investment funds whose management is exempt. If the national legislature has exceeded the limits of that discretion, an individual can in any event then demand, in direct reliance on Article 13B(d)(6) of the Sixth Directive, exemption from VAT if, according to objective criteria, it can be ascertained that he should in fact have been included among those entitled to exemption. In the case of breach of the principle of neutrality, the taxpayer must demonstrate that the fund concerned is similar to the funds enjoying exemption under national law and in competition with them.

55In reply to a taxpayer in that situation a Member State is not entitled to raise the fact that it has not adopted provisions defining the type of fund concerned as a special investment fund. A Member State cannot a fortiori refer to national provisions which it has adopted in exercising that power of definition but which are contrary to the principle of fiscal neutrality.

56The answer to the fourth question must therefore be that Article 13B(d)(6) of the Sixth Directive has direct effect in favour of those who, under national law, in breach of the principle of fiscal neutrality, do not enjoy the exemption from VAT laid down in that provision.

V — Conclusion

57In the light of the foregoing considerations, I propose that the Court should reply as follows to the questions referred by the VAT and Duties Tribunal:

(1) The words special investment funds' in Article 13B(d)(6) 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 are capable of including closed-ended investment funds, such as investment trust companies.

(2) Article 13B(d)(6) of the Sixth Directive confers on Member States the power to determine the special investment funds whose management is exempt from VAT. In exercising that power, Member States must have regard to the wording and objectives of the provision and to the principle of fiscal neutrality which requires all similar and therefore competing special investment funds to be treated equally as regards the levying of VAT.

(3) Article 13B(d)(6) of the Sixth Directive has direct effect in favour of those who, under national law, in breach of the principle of fiscal neutrality, do not enjoy the exemption from VAT laid down in that provision.

Notes

(1) Original language: German.

(2) 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). That directive was repealed with effect from 1 January 2007 and replaced by Council Directive 2006/112/EC of 28 November

(200) 6 on the common system of value added tax (OJ 2006 L 347, p. 1).

(3) Case C-169/04 Abbey National [2006] ECR I-4027.

(4) OJ 1985 L 375, p. 3, last amended by Directive 2005/1/EC of the European Parliament and of the Council of 9 March 2005 amending Council Directives 73/239/EEC, 85/611/EEC,

(91) /675/EEC, 92/49/EEC and 93/6/EEC and Directives 94/19/ EC, 98/78/EC, 2000/12/EC, 2001/34/EC, 2002/83/EC and

(200) 2/87/EC in order to establish a new organisational structure for financial services committees (OJ 2005 L 79, p. 9).

(5) See Case C-358/97 Commission v Ireland [2000] ECR I-6301, paragraph 51; Case C-428/02 Fonden Marselisborg Lystbådehavn [2005] ECR I-1527, paragraph 27; and Abbey National, cited in footnote 3, paragraph 38.

(6) Abbey National, cited in footnote 3, paragraph 39, with reference to Case C-468/93 Gemeente Emmen [1996] ECR I-1721, paragraph 25.

(7) See, for example, Article 13A(1)(b), (g), (h), (i), (1) and (n) of the Sixth Directive.

(8) See Gemeente Emmen, cited in footnote 6, paragraph 25; Case C-346/95 Blasi [1998] ECR I-481, paragraph 21; and my Opinion in Joined Cases C-443/04 and C-444/04 Solleveld and van den Hout-van Eijnsbergen [2006] ECR I-3617, point 23.

(9) See Case C-141/00 Kügler [2002] ECR I-6833, paragraph 55 et seq.; Case C-45/01 Dornier [2003] ECR I-12911, paragraph 69; Solleveld and van den Hout-van Eijnsbergen, cited in footnote 8, paragraphs 35 and 36; and points 23 and 37 et seq. of the Opinion in that case.

(10) Cited in footnote 3, paragraph 53.

(11) See for more detail in that regard the Opinion of Advocate General Poiares Maduro in Case C-8/03 BBL [2004] ECR

(1) 10157, point 26, and my Opinion in Abbey National, cited in footnote 3, point 29 et seq.

(12) See Opinion in Abbey National, cited in footnote 3, point 32, and Opinion in BBL, cited in footnote 11, point 27.

(13) Abbey National, cited in footnote 3, paragraph 56.

(14) See Opinion in Abbey National, cited in footnote 3, point 79. 15 — See the sixth recital in the preamble to Directive 85/611.

(16) As held by the Court in Solleveld and van den Hout-van Eijnsbergen, cited in footnote 8, paragraph 33, in regard to the power of the Member States to define the paramedical professions falling within the scope of the exemption from VAT under Article 13A(1)(c) of the Sixth Directive.

(17) See the case-law cited in footnotes 8 and 9.

(18) See Abbey National, cited in footnote 3, paragraph 62; points

(27) and 68 of the Opinion in that case; and Opinion in BBL, cited in footnote 11, point 26.

(19) Opinion in Abbey National, cited in footnote 3, point 28.

(20) See inter alia Case C-8/01 Taksatorringen [2003] ECR I-13711, paragraph 36; Case C-498/03 Kingscrest and Montecello [2005] ECR I-4427, paragraph 29; Abbey National, cited in footnote 3, paragraph 60; and Case C-401/05 VDP Dental Laboratory [2006] ECR I-12121, paragraph 23.

(21) See Dornier, cited in footnote 9, paragraph 42, and Kingscrest and Montecello, cited in footnote 20, paragraph 29.

(22) See Case C-76/99 Commission v France [2001] ECR I-249, paragraph 23. The Court holds in that paragraph that Article

(13) A(1)(b) of the Sixth Directive does not call for an especially narrow interpretation since the exemption of activities closely related to hospital and medical care is designed to ensure that the benefits flowing from such care are not hindered by the increased costs of its provision that would follow if it, or closely related activities, were subject to VAT.

(23) See Opinion in Abbey National, cited in footnote 3, point 38.

(24) Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967 (I), p. 14). That directive was repealed with effect from 1 January 2007 and replaced by Council Directive 2006/112/EC of

(28) November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).

(25) See in this regard, for example: Case 268/83 Rompelman [1985] ECR 655, paragraph 19; Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR 1-1577, paragraph 44; Case C-16/00 Cibo Participations [2001] ECR

(1) 6663, paragraph 27; and Case C-465/03 Kretztechnik [2005] ECR 1-4357, paragraph 34.

(26) Solleveld and van den Hout-van Eijnsbergen, cited in footnote 8, paragraph 35. See also Dornier, cited in footnote

(9) , paragraph 74, in which the Court bases its finding directly on the principle of equal treatment.

(27) Case C-216/97 Gregg [1999] ECR 1-4947, paragraph 20. See also Case C-404/99 Commission v France [2001] ECR 1-2667, paragraph 45; Kügler, cited in footnote 9, paragraph 30; and Abbey National, cited in footnote 3, paragraph 56.

(28) Case C-109/02 Commission v Germany [2003] ECR 1-12691, paragraph 20; Joined Cases C-453/02 and C-462/02 Linne¬ weber and Akritidis [2005] ECR 1-1131, paragraph 24; Case C-246/04 Turn- und Sportunion Waldburg [2006] ECR 1-589, paragraph 33; and Solleveld und van den Hout-van Eijnsbergen, cited in footnote 8, paragraph 39. The Court emphasised the importance of the neutral levying of VAT for competition as long ago as 1979 in Case 126/78 Nederlandse Spoorwegen [1979] ECR 2041, paragraph 12.

(29) Linneweber and Akritidis, cited in footnote 28, paragraph 25, with further references. However, in other situations, certain characteristics of the supplier, such as, for example, his professional qualifications, may constitute a difference that is relevant to the tax treatment of the supply (see Solleveld and

(40) et seq.).

(30) See Case 8/81 Becker [1982] ECR 53, paragraph 25; Kügler, cited in footnote 9, paragraph 51; and Linneweber and Akritidis, cited in footnote 28, paragraph 33.

(31) See, to that effect, Dornier, cited in footnote 9, paragraph 81, and Kügler, cited in footnote 9, paragraphs 55 to 57.

(32) See, to that effect, Linneweber and Akritidis, cited in footnote

(28) , paragraph 35.

(33) See Linneweber and Akritidis, cited in footnote 28, paragraph

(36) et seq.