C-380/99 Bertelsmann

JUDGMENT OF THE COURT (Sixth Chamber)

Legal context and the dispute

3 July 2001 *

In Case C-380/99,

REFERENCE to the Court under Article 234 EC by the Bundesfinanzhof (Germany) for a preliminary ruling in the proceedings pending before that court between

Bertelsmann AG

and

Finanzamt Wiedenbrück,

on the interpretation of Article HA(1)(a) of the 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),

* Language of the case: German.

THE COURT (Sixth Chamber),

composed of: C. Gulmann, President of the Chamber, V. Skouris (Rapporteur), J.-P. Puissochet, R. Schintgen and N. Colneric, Judges,

Advocate General: C. Stix-Hackl,

Registrar: H.A. Rühi, Principal Administrator,

after considering the written observations submitted on behalf of:

— Bertelsmann AG, by A. Raupach and D. Pohl, Rechtsanwälte,

— the German Government, by W.-D. Plessing and B. Muttelsee-Schön, acting as Agents,

— the United Kingdom Government, by J.E. Collins, acting as Agent, assisted by A. Robertson, barrister,

— the Commission of the European Communities, by E. Traversa and K. Gross, acting as Agents,

having regard to the Report for the Hearing, after hearing the oral observations of Bertelsmann AG and the Commission at the hearing on 25 January 2001,

after hearing the Opinion of the Advocate General at the sitting on 6 March 2001,

gives the following

Judgment

1By order dated 5 August 1999, which was received at the Court on 8 October 1999, the Bundesfinanzhof (Federal Finance Court, Germany) referred to the Court for a preliminary ruling under Article 234 EC a question on the interpretation of Article 11A(1)(a) of the 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, hereinafter 'the Sixth Directive').

2The question was raised in a case between Bertelsmann AG (hereinafter 'Bertelsmann') and the Finanzamt Wiedenbrück (Tax Office, Wiedenbrück, hereinafter 'the Finanzamt'), concerning notices of assessment to value added tax (hereinafter 'VAT') payable by Bertelsmann for the years from 1985 to 1990 on bonuses in kind which it had supplied to its existing customers in return for the introduction of new potential customers.

Legal context

Community legislation

3Article 11A(1)(a) of the Sixth Directive provides:

'The taxable amount shall be:

(a) in respect of supplies of goods and services..., everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies...'

4Article HA(2)(b) of the Sixth Directive provides:

'The taxable amount shall include:

(b) incidental expenses such as commission, packing, transport, and insurance costs charged by the supplier to the purchaser or customer...'

The national legislation

5Paragraph 3 of the Umsatzsteuergesetz (Law on Turnover Tax) of 1980 (hereinafter 'the UStG') specifies the transactions subject to VAT. In particular Paragraph 3(12) of the UStG covers transactions of exchange and provides as follows:

'There is an exchange where the consideration for a supply consists in a supply. There is a transaction akin to an exchange where the consideration for another service consists in a supply or another service'.

6The second sentence of Paragraph 10(2) of the UStG, which concerns the taxable amount of exchanges and transactions akin to exchanges, provides:

'In the case of exchanges, transactions akin to exchanges and surrenders in lieu of payment, the value of one transaction constitutes the consideration for the other transaction'.

The main proceedings and the question referred

7Bertelsmann is the controlling company of a group of companies carrying on business as book and record clubs. During the years 1985 to 1990, group companies gave bonuses in kind, such as books, records and bicycles, to existing club members in return for the introduction of new members. Those companies bought the bonuses in kind from third-party suppliers and bore the costs of delivering those bonuses to the introducing members.

8In the notices of assessment for the years 1985 to 1990, the Finanzamt decided that the supplies of the bonuses in kind constituted transactions akin to an exchange and included in the taxable amount of those transactions the costs of delivering the bonuses borne by those companies besides their purchase price.

9Since it considered that the inclusion of the costs of delivery in the taxable amount of supplies of bonuses in kind was not in accordance with the Sixth Directive, Bertelsmann brought, without prior administrative procedure, a 'leap frog' action ('Sprungklage') before the Finanzgericht Münster (Finance Court, Munster).

io Its action did not succeed and Bertelsmann appealed on points of law to the Bundesfinanzhof. That court states in its decision to make a reference to this Court that, in its view, the value of the goods supplied cannot be the only element to be taken into account in determining the taxable amount of the supplies in issue in the main proceedings. It considers that the taxable amount must also include the costs of delivery, since the delivery of the bonuses in kind was included in the supply of the bonuses, as an incidental service. However, since it considered that the case could not be definitely decided on the authority of the Court's judgments in Case 230/87 Naturally Yours Cosmetics [1988] ECR 6365 and Case C-33/93 Empire Stores [1994] ECR I-2329, the Bundesfinanzhof decided to stay the proceedings, and to refer the following question to the Court for a preliminary ruling:

'Is Article 11A(1)(a) of the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes (77/388/EEC) to be interpreted as meaning that the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new client, includes not only the purchase price of the bonus but also the delivery costs?'

Grounds

The question referred for a preliminary ruling

11By its question, the referring court is asking, in essence, whether Article 11A(1)(a) of the Sixth Directive should be interpreted as meaning that the taxable amount for the supply of a bonus in kind, which constitutes consideration for introducing a new customer, also includes, besides the purchase price of that bonus, the costs of delivery when they are paid by the party who delivers the bonus.

The arguments put forward in the observations submitted to the Court

12Bertelsmann submits that, since the value of the consideration constituting the taxable amount for the supply of the bonuses in kind is a subjective value which is difficult to determine, only the purchase price of the bonuses should be taken into account. In its view, its argument is confirmed by the judgment in Empire Stores in which the Court did not include delivery costs in the taxable amount, although that judgment concerned a mail-order company. Furthermore, Bertelsmann maintains that delivery costs cannot be regarded as incidental expenses, within the meaning of Article 11A(2)(b) of the Sixth Directive, since it pays them itself and does not seek repayment from its purchasers, that is to say the customers who have acted as middlemen.

13The German Government, the United Kingdom Government and the Commission, on the other hand, submit that the taxable amount for the supply of a bonus in kind includes, besides the cost of purchasing that bonus, the costs of delivering it. Whilst admitting that, by reason of the question referred to the Court, it did not explicitly rule, in its decision in Empire Stores, on the inclusion of the costs of delivery in the taxable amount, they submit that it is clear from that judgment that the costs of similar services incidental to the supply are to be included in the taxable amount.

14The German and United Kingdom Governments also submit that the necessity of including the delivery costs in the taxable amount also follows from the principle by which VAT must be levied in a manner which is uniform and neutral in its effect on competition. The United Kingdom Government argues, in particular, that if it were accepted that the supply by the taxable person of a service consisting of delivery is not to be taken into account in calculating the taxable amount, this would permit the avoidance of tax through the making of supplies in kind which would undervalue the taxable amount. Therefore, the German and United Kingdom Governments submit that the tax on the service of delivery should be put into effect on the economic level as if the introducing customer had acquired the bonus in kind and its delivery in return for the payment of a sum of money also covering the costs of delivery.

Findings of the Court

15It is evident from the judgment in Case C-126/88 Boots Company [1990] ECR 1-1235, paragraphs 15 and 16, that before the application of Article HA(l)(a) of the Sixth Directive can be accepted, the application of Article HA(2)(b) thereof must be excluded.

16It is agreed that the costs of delivery at issue in the main proceedings consist of transport costs. On the other hand, it is also agreed that Bertelsmann did not ask the recipients of the bonuses in kind to pay such costs. It follows that Article HA(2)(b) of the Sixth Directive does not apply to the circumstances in the main proceedings. It is therefore with regard to Article HA(l)(a) of the Directive that the taxable amount for the supply of the bonuses must be determined.

17In order to interpret, for that purpose, the term 'consideration' in Article HA(l)(a) of the Sixth Directive, it should be recalled that, according to settled case-law, the consideration for a supply of goods may consist of a supply of services, and so constitute the taxable amount within the meaning of that provision, if there is a direct link between the supply of goods and the supply of services and if the value of those services can be expressed in monetary terms (see, in particular, Naturally Yours Cosmetics, paragraphs 11, 12 and 16, and Empire Stores, paragraph 12).

18In the present case, a supply of goods was made in consideration for a supply of services consisting in the introduction of new customers. In this regard, it is to be observed, first, that there is a direct link between the supply of the bonuses in kind and the introduction of new customers and, second, that since the services rendered to Bertelsmann were remunerated by supplies of goods, their value can BERTE LSMANN

be expressed in monetary terms (see the judgment in Empire Stores, paragraphs 16 and 17).

19The question is, then, whether a direct link exists not only between the supply of the bonuses in kind and the introduction of new customers but also between the delivery of the bonuses and that provision of a service.

20It is clear from the case-law of the Court that, with regard to VAT, a supply must be regarded as incidental to a principal supply when it does not constitute for the customer an end in itself but a means of better enjoying the principal service of the supplier (see, in particular, Case C-349/96 CPP [1999] ECR I-973, paragraph 30, and Case C-76/99 Commission v France [2001] ECR I-249, paragraph 27).

21In the present case, having regard to its circumstances, it must be concluded that the delivery of the bonuses in kind constitutes a service incidental to the principal supply, which is the supply of the bonuses. In effect, the customers who have introduced new customers are entitled to the supply of the bonus in kind and to its delivery. Therefore, the supply and the delivery of the bonus in kind together form a single transaction, remunerated by consideration which consists in the introduction of new customers.

22As for determining the value of such transaction for the purposes of the taxable amount, it must be pointed out that, according to settled case-law, it is a subjective value, since the taxable amount is the consideration actually received and not a value estimated according to objective standards (see, in particular, Naturally Yours Cosmetics, paragraph 16, and Empire Stores, paragraph 18).

23Furthermore, as the Court held at paragraph 19 of the judgment in Empire Stores, that value, in order to be subjective, must be the value which the recipient of the supply of services attributes to the services which he seeks to obtain and correspond to the amount which he is prepared to spend to that end.

24It must be held that, on application of the principle thus stated in the judgment in Empire Stores, all the expenses borne by the recipient to obtain the supply in question, including the costs of incidental services which are connected to the supply of the goods, make up the value of the supply of services. It follows that, in the present case, because the recipient has not only paid the purchase price of the bonuses in kind but also paid the costs of their delivery, those costs must be included in the taxable amount of the said supply.

25The answer to be given to the question referred by the national court must therefore be that, in application of Article HA(1)(a) of the Sixth Directive, the taxable amount for the supply of a bonus in kind constituting consideration for the introduction of a new customer includes, besides the purchase price of that bonus, the costs of delivery, when they are paid by the supplier of the bonus.

Costs

Costs

26The costs incurred by the German and United Kingdom Governments, and by the Commission, 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.

BERTE LSMANN

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the question referred to it by the Bundesfinanzhof, by order of 5 August 1999, hereby rules:

Article HA(1)(a) of the 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, is to be interpreted as meaning that the taxable amount for the supply of a bonus in kind constituting consideration for the introduction of a new customer includes, besides the purchase price of that bonus, the costs of delivery, when they are paid by the supplier of the bonus.

Gulmann Skouris Puissochet

Schintgen Colneric

Delivered in open court in Luxembourg on 3 July 2001.

R. Grass

C. Gulmann

Registrar President of the Sixth Chamber

I - 5 1 87

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 6 March 2001 1

I — Introduction

1In the instant case, the Bundesfinanzhof (Federal Finance Court), Germany has referred to the Court the question as to whether, under the 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 (hereinafter, 'the Sixth Directive'), 2 the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new customer, includes not only the purchase price of the bonus but also the delivery costs.

II — Legal framework

A — Community law

2Under Article HA(1)(a) of the Sixth Directive, the taxable amount in respect of supplies of goods and services is, 'everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies'.

3Subparagraph 2 of this provision specifies various items that must be included in the taxable amount, including in particular under (b), 'incidental expenses such as commission, packing, transport and insurance costs charged by the supplier to the purchaser or customer. Expenses covered by a separate agreement may be considered to be incidental expenses by the Member States'.

B — National law

4Paragraph 3 of the Umsatzsteuergesetz (Law on Turnover Tax) of 1980 (hereinafter, 'the UStG') specifies what transactions are subject to value added tax. Subparagraph 12 of this provision gives the following rule in relation to transactions of exchange: 'There is an exchange where the consideration for a supply consists in a supply. There is a transaction akin to an exchange where the consideration for another service consists in a supply or another service'.

5Apart from that, Paragraph 10(2)(2) of the UStG, which relates to the calculation of the taxable amount in the context of transactions of exchange and transactions akin to exchange, provides as follows: 'In the case of exchanges (first sentence of Paragraph 3(12)), transactions akin to exchanges (second sentence of Paragraph 3(12)) and in respect of surrender in lieu of payment, the value of one transaction constitutes the consideration for the other transaction'.

Ill — Facts and proceedings

6The plaintiff in the proceedings, Bertelsmann AG (hereinafter, 'Bertelsmann'), is a company controlling several other companies which are engaged in the business of book and record clubs. In the years 1985 to 1990, the Bertelsmann companies gave bonuses payable in kind, such as books, records and bicycles, to long-standing customers who recruited new customers as new members. These bonuses for introducing members were obtained by the companies from third-party suppliers and were sent to the introducers at the companies' own cost.

7The Finanzamt (Tax Office) Wieden-briick, the defendant in the proceedings, included in the taxable amount for the purposes of the tax assessments for the years 1985 to 1990 not only the purchase price of the bonuses but also the delivery costs paid by the companies.

8As Bertelsmann considered that the inclusion in the taxable amount of the delivery costs of the supply of the bonuses infringed the Sixth Directive, it raised a 'leap-frog' action (Sprungklage) in the Finanzgericht (Finance Court). The Finanzgericht dismissed the action on the ground that in the assessment to be undertaken for the purpose of determining the taxable amount of the transactions akin to exchange in accordance with Paragraph 10(2)(2) of the UStG, account must be taken not only of the purchase price of the bonuses but also of the delivery costs for the supply of the bonuses. It was moreover the case, therefore, that, contrary to the submission of the plaintiff, there was no breach of Article HA(2)(b) of the Sixth Directive either.

9Bertelsmann appealed against the judgment of the Finanzgericht to the Bundesfinanzhof on the ground that the interpretation placed on Paragraph 10(1) and (2)(2) of the UStG by the Finanzgericht infringed Article 11A(1)(a) and (2)(b) of the Sixth Directive and was also irreconcilable with the judgment of this Court in the case of Empire Stores, in which it was decided that only the purchase price of the bonuses, but not, however, the incidental expenses, should be included in the taxable amount.

10Since the Bundesfinanzhof did not consider the question as to the inclusion of incidental expenses in the taxable amount as it arose in the instant case of transactions akin to exchange to have received a clear answer in the cases Naturally Yours Cosmetics and Empire Stores, it stayed the appeal proceedings and by order of 5 August 1999 referred the following question to the Court for a preliminary ruling:

11Is Article 11A(1)(a) of the Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes (77/388/ EEC) to be interpreted as meaning that the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new client, includes not only the purchase price of the bonus but also the delivery costs?

IV — Arguments of the parties

12Bertelsmann submits that the taxable amount for the supply of a bonus that is sent to the recipient in exchange for recruiting a new customer includes only the purchase price of the bonus, and not the delivery costs. This follows from the judgment in Empire Stores, in which the Court held that the purchase price alone, and not any other amount such as, for example, the purchase price plus delivery costs, determined the taxable amount. Although the case of Empire Stores concerned a mail order business and delivery costs were incurred as a necessary consequence of that, the Court did not include them in the taxable amount.

Bertelsmann argues furthermore that only taking into account the purchase price under Article 11A(1)(a) of the Sixth Directive is also justified as a matter of substance, because the instant case concerns a transaction akin to an exchange, in which the consideration for the supply of bonuses that functions as the taxable amount is, according to Empire Stores and Naturally Yours Cosmetics, a subjective value, that is to say, the consideration actually received, being in the instant case the supply of the introduction. As the subjective value can only be determined with difficulty, only the purchase price of the bonuses ought to be taken into account. In this way, bonuses are given not just for recruiting new customers: they also serve to cultivate and maintain the existing customer base. Bertelsmann also points out that mail-order businesses do not necessarily on-charge postage costs and most indeed do not charge delivery costs, at least on orders of more than a specified amount.

Finally, Bertelsmann argues that delivery costs are not to be taken into account as incidental expenses under Article HA(2)(b) of the Sixth Directive either, because in the instant case it incurs them itself as the supplier of the service and does not charge them to its consumers, the existing customers who do the recruiting.

13The other participants in the proceedings — the German Government, the United Kingdom Government and the Commission — contend, by contrast, that, in short, the taxable amount for the bonus includes the delivery costs as well as the purchase price.

14The Commission, like Bertelsmann, contends that Article HA(2)(b) of the Sixth Directive, which must be considered first, is not applicable.

Article HA(l)(a), which, according to the Commission, is alone determinative, points to the 'consideration' in connection with the taxable amount. This concept must be interpreted in conformity with the judgments in Naturally Yours Cosmetics, Coöperatieve Aardappelenbewaarplaats 6 and Empire Stores. According to the Commission, this case-law decides that the following are the requirements for determining the taxable amount corresponding to the value of the service: first, the existence of a direct link between the supply of the goods and the supply of the service provided as consideration; second, the possibility of expressing the value of the service received in a monetary amount; third, the subjective value of the consideration is to be used as the taxable amount, since the taxable amount must correspond to the consideration actually received.

According to the Commission, the first two criteria are, in the light of the decision in Empire Stores, fulfilled in the instant case. The recruitment of customers is the consideration within the meaning of Article HA(1)(a) of the Sixth Directive for the supply of the bonus.

As regards the determination of the subjective value of the consideration — the third criterion — the sole determining factor is the expense the supplier incurred in order to receive the service sought in the exchange in return for his supply. It follows from the decision in Naturally Yours Cosmetics that this expense includes all costs that the supplier has to incur in order to attain this objective, including, in the instant case, the delivery costs borne by the supplier.

Furthermore, the Commission argues that in the case of Empire Stores, the Court, because of the way the question was formulated, did not explicitly rule on the inclusion of delivery costs, and that its judgment therefore does not gainsay the Commission's contention. On the contrary, what undoubtedly does emerge from the judgment is that such ancillary services are to be included in the taxable amount.

15The German Government and the United Kingdom Government agree in substance with these submissions of the Commission.

16The German Government further submits, referring to the case-law of the Bundesfinanzhof, that the consideration for the successful recruitment of customers consists of a principal supply (the bonus) and an ancillary supply (the delivery), such that the requisite direct link also exists between the supply of the introduction and the delivery. This submission finds support in the judgment of the Court in Card Protection Plan, from which it appears that an ancillary service must be treated in the same way as the principal service. What is due is a unitary consideration and it would be unrealistic, in the legal analysis, to make an 'artificial' distinction between the supply of delivery and the transfer of the object.

That merger with the principal supply means that the same measures of value are to be applied to the supply of the delivery as to the supply of the bonus. For the supply of the delivery there must also be determined a value that the dispatcher attributes to it, and, according to the judgment in Empire Stores, this value must correspond to the costs incurred by the person making the delivery.

17Finally, the German Government and the United Kingdom Government also contend that it is necessary to include the delivery costs on the basis of the principle that value added tax must be levied in a manner that is neutral in its effects on competition and non-discriminatory. Otherwise, the result would be an end use that was not taxed. Value added tax must in economic terms apply as if the person who made the introduction received the bonus, including its delivery, in return for a monetary payment that covered the delivery costs as well.

18According to the United Kingdom Government, the subjective value of the supply of the introduction for the taxable person is comprised of the acquisition and the delivery costs, the aggregate of which is therefore the taxable amount. If one were, in contrast to this, to accept the argument of Bertelsmann, the taxable amount would not reflect the whole of the subjective value of the consideration given by the taxable person for the supply of the introduction. This would distort the value added tax regime under the Sixth Directive and would provide an opportunity for tax avoidance in supplying goods, in that the taxable amount would be fixed too low.

19In respect of the taxable amount, the United Kingdom Government further argues that Article HA(2)(b) of the Sixth Directive confirms that transport and dispatch costs are to be included and disputes to that extent the view Bertelsmann puts forward of the judgment in Empire Stores, a view which, it claims, is not reconcilable with that provision. In Empire Stores the Court was only asked how to value a supply of goods provided as the consideration for the supply of services, whereas the present case concerns a composite supply, namely, the supply of the bonuses and their delivery.

While it is for the national court to decide whether there is a composite supply, it is none the less clear on the facts set out by that court that there is such a supply here. Accordingly, the taxable person supplies goods that are to be valued in accordance with the principles in Empire Stores. The taxable person moreover supplies its existing customers with the service of the delivery of these goods. It follows that it is the combined value of the two elements of the composite supply that equals the taxable amount.

V — Analysis

20The question in the instant case is whether the costs of delivery of bonuses, that delivery being itself a supply of a service, are to be included in the taxable amount under Article IIA of the Sixth Directive where the only possible consideration is the supply of a service.

21Before Article HA(l)(a) can be considered, it is necessary, in accordance with the judgment of the Court in Boots Company, first to examine the applicability of Article HA(2)(b). 8

22The delivery costs in the instant case are indeed transport costs within the meaning of Article HA(2)(b), but that provision requires the supplier to charge them to the purchaser or customer. This rule would appear to serve two purposes. In the first place, it is intended to ensure that what is included in the taxable amount is only the value that the taxable person actually receives, without further qualification; in the second place, a particular act is required of the taxable person, as is indicated by the word 'charged'.

23Since in the instant case Bertelsmann does not 'charge' the transport costs to the recipient, Article HA(2)(b) of the Sixth Directive cannot be the legal basis for calculating the taxable amount.

24Under the Sixth Directive, the taxable amount in the case of the supply of goods or services is the consideration actually received for that supply. Article HA(l)(a) provides that what is included is, 'everything which constitutes the consideration which has been or is to be obtained by the supplier from the purchaser, the customer or a third party for such supplies'. In respect of the service of delivery, what must be considered is whether the person making the delivery has received consideration for it and, if so, in what amount. If the introduction is not the consideration for the delivery as well, then the latter is a gratuitous service which is not a taxable supply within the meaning of Article 2(1) of the Sixth Directive and which is furthermore irrelevant to the taxable amount under Article HA(l)(a).

25In respect of the inclusion of delivery costs, all the parties made submissions on Empire Stores, though the effect of the judgment was disputed.

26In the first place, it must be noted that according to the documents in the main proceedings in Empire Stores the parties did not make submissions as to the delivery of the bonuses or the costs of delivery, but only as regards the bonuses themselves. Whereas the plaintiff only included the cost price to it of the bonuses, the defendant tax authority used the price that the plaintiff would have charged for the articles in question if they had been offered in its sales catalogue. 9

27It is against this background that the first question put to the Court in Empire Stores is to be understood. What the national court wanted to know by this question was what represents the consideration for the supply of the bonuses if it is not the amount in monetary terms to be paid to the supplier for goods ordered from his catalogue. It was only the second question that referred to the taxable amount and specified a number of alternatives: the purchase price paid, the hypothetical sale price or 'some other and if so what amount'.

28Where the Court refers in its judgment in Empire Stores to the 'supply' of goods, it refers exclusively to the supply of the object. Because the Court had not up to that point considered the delivery, it had no reason to speak itself on the costs of delivery.

29Therefore, the Court has to this extent spoken neither for nor against the inclusion of the costs of delivery in the taxable amount.

30What must next be considered is the question as to what, in the instant case, is to be regarded as the value of the consideration that serves as the taxable amount. As the Court held in its judgment in Empire Stores, referring to its judgment in Naturally Yours Cosmetics, 'the consideration for a supply of goods may consist in a provision of services, and so constitute the taxable amount within the meaning of Article HA(1)(a) of the Sixth Directive in respect of such supply, if there is a direct link between the supply of goods and the provision of services and if the value of those services can be expressed in money'. As the Sixth Directive treats goods and services in the same way, these criteria must also apply to services.

31Therefore, the first point to examine is whether the introduction, that is, the service supplied by the existing customers, is directly linked to the bonus and its delivery. As appears from the judgment in Naturally Yours Cosmetics, a service can in principle be the consideration for a supply of goods.

32As the Court has consistently held, two supplies are directly linked where they stand as regards one another in such a way that one supply is conditional on the other. 11

33As the Court has already held in Empire Stores, there is a direct link between the supply of a bonus and the activity of recruitment.

34What has still to be clarified is whether the supply of the delivery is also made for a consideration, that is to say, whether it too is directly linked to the supply of the introduction.

35In that regard it may be assumed that the delivery is an ancillary supply of a principal supply consisting of the bonus. According to the judgment in Card Protection Plan, a service must, 'be regarded as ancillary to a principal service if it does not constitute for customers an aim in itself, but a means of better enjoying the principal service supplied'. In this way, the bonus and delivery constitute a single supply, the consideration for which takes the form of the supply of an introduction.

36Once the supply of the introduction has been effected, the existing customer is entitled to the bonus as well as its delivery. Therefore, there is a direct link not only between the bonus and the introduction, but also between the delivery and the introduction.

37The inclusion of delivery is also suggested by the commercial considerations that are fundamental to value added tax. For in the commercial world it must generally be assumed that supplies are not provided gratuitously.

38In conclusion it must therefore be affirmed that the value of the bonus and the value of the delivery together comprise the taxable amount within the meaning of Article 11A(1)(a).

39As the requirement that the value of the service, in this case the delivery, is capable of being expressed in money is satisfied, what remains to be determined is the subjective value of the consideration, which is, according to the judgment in Naturally Yours Cosmetics, decisive.

40According to the judgment in Empire Stores, this subjective value is the value 'which the recipient of the services constituting the consideration for the supply of goods attributes to the services which he is seeking to obtain'. This value 'must correspond to the amount which he is prepared to spend for that purpose'.

41In the first place, one must start from the position of the recipient of the service in order to determine what the supplier of the service has actually given as consideration. In the second place, the basis of the value of this consideration is in principle at least the expenses of the supply.

42Moreover, this approach is not alien to the Sixth Directive. It is, for example, applicable to the supply of services that are not provided in return for payment of a monetary amount, that is to say, for so-called equivalent services within the meaning of Article 6(2). In respect of these, Article HA(1)(c) provides that the taxable amount is the amount of the expenses incurred by the taxable person in providing the service.

43In the instant case, the expenses of delivery, that is to say, the delivery costs, are to be ascribed to the supply of the delivery.

44In support of this finding, there is, finally, the view put forward by the German Government and the United Kingdom Government that leaving delivery costs out of the taxable amount would breach the principle that the levy of value added tax must be neutral in its effects on competition and non-discriminatory. For the delivery of a bonus in exchange for which the recipient has supplied a service is not, in a question of tax, to be treated differently from the delivery of goods for which the recipient has paid.

45Article HA(1)(a) of the Sixth Directive is therefore to be interpreted as meaning that the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new customer, includes not only the purchase price of the bonus but also the delivery costs.

VI — Conclusion

46For these reasons, I suggest that the question referred by the national court should be answered as follows:

Article 11A(1)(a) of the 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 is to be interpreted as meaning that the taxable amount in respect of the supply of a bonus payable in kind, which is sent to the recipient in exchange for recruiting a new customer, includes not only the purchase price of the bonus but also the delivery costs.

Notes

(1) Original language: German.

(2) OJ 1977 L 145, p.l.

(3) Case C-33/93 Empire Stores [1994] ECR I-2329.

(4) Case C-230/87 Naturally Yours Cosmetics [19881 ECR 6365.

(5) For this analysis, see Case C-126/88 Boots Company [1990] ECR 1-1235.

(6) Case 154/80 Coöperatieve Aardappelenbewaarplaats [1981] ECR 445.

(7) Case C-349/96 Gard Protection Plan [1999] ECR I-973.

(8) Case C-126/88 (above, footnote 5), paragraph 16.

(9) See Case C-33/93 (above, footnote 3), paragraph 5.

(10) Judgment in Case C-33/93 (above, footnote 3), paragraph 12.

(11) Sec Case C-258/95 Filhbeck [1997] ECK I-5577. paragraph 16 and Case C-16/93 Tolsma |1994] ECU I- 43, paragraph 13.

(12) See the judgment in Case C-33/93 (above, footnote 3), paragraph 16.

(13) Judgment in Case C-349/96 (above, footnote 7), paragraph 30.

(14) Judgment in Case C-230/87 {above, footnote 4), paragraph 16.

(15) Judgment in Case C-33/93 (above, footnote 3), paragraph 19.

(16) On the point that in Article HA(1)(a) no distinction is made between consideration in the form of monetary payments and consideration in the form of the supply of goods, see the judgment in Case C-330/95 Goldsmiths [1997] ECR I-3801, paragraph 23: '[S]ince the two situations are, economically and commercially speaking, identical, the Sixth Directive treats the two kinds of consideration in the same way'.