C-398/99 Yorkshire Co-operatives

JUDGMENT OF THE COURT (Sixth Chamber)

16 January 2003 *

In Case C-398/99,

REFERENCE to the Court under Article 234 EC by the VAT and Duties Tribunal, Manchester (United Kingdom) for a preliminary ruling in the proceedings pending before that tribunal between

Yorkshire Co-operatives Ltd

and

Commissioners of Customs & Excise,

on the interpretation of Articles 11(A)(1)(a) and 11(C)(1) 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: English.

I - 4 46 THE COURT (Sixth Chamber),

composed of: R. Schintgen (Rapporteur), President of the Second Chamber, acting for the President of the Sixth Chamber, C. Gulmann, V. Skouris, F. Macken and N. Colneric, Judges,

Advocate General: C. Stix-Hackl, Registrar: D. Louterman-Hubeau, Head of Division,

after considering the written observations submitted on behalf of:

— Yorkshire Co-operatives Ltd, by J. Ghosh, Barrister, instructed by KPMG, Accountants,

— the United Kingdom Government, by R. Magrill, acting as Agent, assisted by R. Anderson, Barrister,

— the German Government, by W.-D. Plessing, acting as Agent,

— the Irish Government, by M.A. Buckley, acting as Agent, assisted by D. Moloney, BL,

— the Netherlands Government, by M.A. Fierstra, acting as Agent,

— the Commission of the European Communities, by R. Lyal, acting as Agent,

I - 4 47 having regard to the Report for the Hearing,

after hearing the oral observations of Yorkshire Co-operatives Ltd, represented by J. Ghosh, of the United Kingdom Government, represented by R. Magrill, assisted by K. Parker QC, of the Irish Government, represented by D. Moloney, and the Commission, represented by R. Lyal, at the hearing on 21 June 2001,

after hearing the Opinion of the Advocate General at the sitting on 20 September 2001,

gives the following

Judgment

Grounds

1By order of 12 October 1999, received at the Court on 14 October 1999, the VAT and Duties Tribunal, Manchester, referred to the Court for a preliminary ruling under Article 234 EC two questions on the interpretation of Articles 11(A)(1)(a) and 11(C)(1) 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; the 'Sixth Directive'),

2The questions were raised in proceedings between Yorkshire Co-operatives Ltd ('Yorkshire') and the Commissioners of Customs and Excise ('the Commissioners'), the competent authority in the United Kingdom for collecting value

I - 4 48 YORKSHIRE COO-PERAVTIES

added tax ('VAT'), concerning the repayment of sums paid by Yorkshire by way of VAT.

The Community legislation

3Article 11(A)(1) 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 including subsidies directly linked to the price of such supplies;

...'

4Article 11(A)(2) and (3) lists the elements to be included in the taxable amount and those not to be so included. Under Article 11(A)(3)(b) 'price discounts and rebates allowed to the customer and accounted for at the time of the supply' are not to be included.

5Under the first paragraph of Article 11(C)(1) of the Sixth Directive:

'In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.'

The dispute in the main proceedings and the questions referred to the Court

6Yorkshire is a co-operative society which carries on the business of a retailer of food and non-food goods. Between 1974 and 1996 Yorkshire accepted price-reduction coupons issued by various manufacturers. Those coupons were issued to the public either directly or in the form of cut-out coupons in newspapers and magazines. Each coupon either stated a sum of money or set out a means of calculating a sum of money and its terms enabled the customer to obtain from certain retailers the goods specified on the coupon at their retail price less the price reduction. The coupons also included instructions to the retailers as to the manner in which they were to proceed in order to obtain payment by the manufacturers of a sum equal to the nominal value of the coupons accepted.

7The products covered by the coupons in question were always put on sale at the normal retail price, with the result that a customer without a coupon was required to pay the normal sale price.

8Yorkshire included in its gross daily takings the sums received from manufacturers in exchange for price-reduction coupons collected from customers, thus declaring for VAT purposes the whole of the normal retail price of the products sold without deducting the amount of the price-reduction coupons. The price at which Yorkshire bought the products from the various manufacturers did not take account of the price-reduction coupons, and some products had even been purchased before the manufacturers issued such coupons.

9On 2 December 1996 Yorkshire sought repayment from the Commissioners of a part of the VAT which it had paid in respect of the period from February 1974 to January 1996. Relying on the judgment in Case C-317/94 Elida Gibbs [1996] ECR I-5339, it claimed specifically that only the amounts paid by its customers constituted the consideration for the supply by it of goods during that period and that the amounts received from the manufacturers constituted refunds or reductions allowed by the latter on the initial purchase price. Those sums were therefore not to be included in the taxable amount. Furthermore, since no credit notes had been issued by the manufacturers to it, it was not required to adjust its input tax or to make any compensatory adjustment in its VAT declarations in connection with those supplies.

10By letter dated 10 February 1997 the Commissioners rejected that request on the ground that Yorkshire had misinterpreted the Elida Gibbs judgment. They take the view that the taxable amount for the supply of goods by Yorkshire consists of the cash amounts paid by Yorkshire's customers plus the amounts paid by the manufacturers.

11Yorkshire brought an action against that decision before the referring tribunal.

12Taking the view that the resolution of the dispute before it turned on the interpretation of the Sixth Directive, the VAT and Duties Tribunal, Manchester, decided to stay proceedings and refer the following questions to the Court for a preliminary ruling:

'(1) On the proper construction of Article 11(A)(1)(a) and 11(C)(1) of the Sixth Directive, what is the taxable amount, in relation to a supply of goods by a retailer in the position of the appellant to a customer, where:

(a) the manufacturer of the goods has sold them to the retailer (or, hypothetically, to a wholesaler who has sold them to the retailer),

(b) in the course of a sales promotion the manufacturer procures the issue of a coupon, the terms of which are:

(i) that the holder, on presenting the coupon to the retailer, may buy the goods from the retailer at a price which is less than the retailer's normal selling price by an amount ("the reduction") specified in or ascertainable in accordance with the terms of the coupon, and (ii) that the manufacturer, when the retailer has sold the goods in accordance with the terms of the coupon and has presented the coupon to the manufacturer, will pay to the retailer a sum equal to the reduction,

(c) the retailer sells the goods to a customer on presentation of the coupon and on payment of the reduced price,

(d) the retailer presents the coupon to the manufacturer and is paid a sum equal to the reduction?

Is the taxable amount:

(i) the cash sum paid by the customer, or

(ii) the cash sum paid by the customer together with the sum equal to the reduction paid by the manufacturer?

2. If the answer to question 1 is in sense (i), must the retailer adjust his input tax in his returns of VAT in relation to the supply of the goods by the manufacturer (or, as the case may be, by the wholesaler) to him, where the manufacturer or other supplier has not issued a credit note to the retailer for the reimbursement of the reduction?'

The first question

13It must first be borne in mind that, according to settled case-law, in the context of the cooperation between the Court of Justice and the national courts provided for by Article 234 EC, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, inter alia, Case C-415/93 Bosman [1995] ECR I-4921, paragraph 59, and Case C-340/99 TNT Traco [2001] ECR I-4109, paragraph 30).

14Nevertheless, the Court has also stated that, in exceptional circumstances, it can examine the conditions in which the case was referred to it by the national court, in order to assess whether it has jurisdiction (see, to that effect, Case 244/80 Foglia v Novello [1981] ECR 3045, paragraph 21). The Court may refuse to rule on a question referred for a preliminary ruling by a national court only where it is quite obvious that the interpretation of Community law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Bosman, paragraph 61; and TNT Traco, paragraph 31).

15In this case, as the Advocate General has observed at point 26 of her Opinion, the national tribunal has stated that no wholesalers were involved in the sales of the products for which Yorkshire accepted reduction coupons from the final consumers, so that the part of its first question concerning the participation of a wholesaler in the distribution chain is an irrelevant hypothesis for the purposes of resolving the main dispute. There is therefore no need for the Court to reply to that part of the first question.

I - 4 54

16The first question should therefore be understood as asking essentially whether, on a proper construction of Articles 11(A)(1)(a) and 11(C)(1) of the Sixth Directive, when, on the sale of a product, the retailer allows the final consumer to settle the sale price partly in cash and partly by means of a reduction coupon issued by the manufacturer of that product, and the manufacturer reimburses to the retailer the amount indicated on that coupon, the nominal value of that coupon should be included in the taxable amount in the hands of that retailer, or whether the taxable amount is constituted solely by the part of the price paid in cash by that consumer.

17In order to reply to the question reformulated in that way, it should be noted that, in paragraph 45 of the judgment in Case C-427/98 Commission v Germany [2002] ECR I-8315, which deals inter alia with the determination of the taxable amount in the hands of manufacturers who issue reduction coupons such as those at issue in the main proceedings, the Court held, essentially, that such a manufacturer may be regarded as a third party as regards the transaction between the retailer who receives reimbursement of the value of the coupon and the final consumer who used such a coupon.

18In paragraph 46 of the judgment in Commission v Germany, the Court pointed out that, as regards the supply made by the retailer receiving the reimbursement, the fact that a portion of the consideration received for that supply was not actually paid by the final consumer himself but was made available on behalf of the final consumer by a third party not connected with that transaction is immaterial for the purposes of determining the taxable amount in the hands of that retailer.

19The Court added, in paragraph 57 of Commission v Germany, that assessment of reduction coupons for the purpose of calculating VAT is determined by their legal and financial characteristics, and that the taxable amount in the hands of the trader who accepts them may not be less than the sum of money which he actually receives for the supply by him.

20The Court concluded, in paragraph 58 of Commission v Germany, that, where a manufacturer organises a promotional operation by means of reduction coupons, the nominal amount of which it reimburses to the retailers who have accepted them, the subjective consideration within the meaning of Article 11(A)(1)(a) of the Sixth Directive received by the retailer comprises the whole of the price of the goods, which is paid in part by the final consumer and in part by the manufacturer. The coupons substantiate the retailer's right to receive from the manufacturer a reimbursement in the amount of the reduction granted to the final consumer. It follows that the sum represented by the nominal value of those coupons constitutes for the retailer an asset item realised on their reimbursement and that they must be treated, to the extent of that value, as a means of payment.

21In the light of those considerations, the Court held, in paragraph 59 of Commission v Germany, that the taxable amount in the hands of the retailer for the sale to the final consumer was the full retail price, namely the price paid by the final consumer plus the amount reimbursed to the retailer by the manufacturer.

22Since the reduction coupons at issue in Commission v Germany, issued in the context of promotional operations by manufacturers, were similar to those accepted by Yorkshire during the period at issue in the dispute before the referring tribunal, the conclusion must be that the interpretation reached by the Court in paragraph 59 of its judgment in Commission v Germany is transposable to a case such as that in point in the main proceedings.

23The answer to the first question must therefore be that, on a proper construction of Articles 11(A)(1)(a) and 11(C)(1) of the Sixth Directive, when, on the sale of a product, the retailer allows the final consumer to settle the sale price partly in cash and partly by means of a reduction coupon issued by the manufacturer of that product, and the manufacturer reimburses to the retailer the amount indicated on that coupon, the nominal value of that coupon must be included in the taxable amount in the hands of that retailer.

24Having regard to the reply given to the first question, there is no need to answer the second.

Costs

Costs

25The costs incurred by the United Kingdom, German, Irish and Netherlands 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 proceedings pending before the national tribunal, the decision on costs is a matter for that tribunal.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the VAT and Duties Tribunal, Manchester, by order of 12 October 1999, hereby rules:

On a proper construction of Articles 11(A)(1)(a) and 11(C)(1) 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, when, on the sale of a product, the retailer allows the final consumer to settle the sale price partly in cash and partly by means of a reduction coupon issued by the manufacturer of that product, and the manufacturer reimburses to the retailer the amount indicated on that coupon, the nominal value of that coupon must be included in the taxable amount in the hands of that retailer.

Schintgen Gulmann Skouris

Macken Colneric

Delivered in open court in Luxembourg on 16 January 2003.

J.-P. Puissochet R. Grass

President of the Sixth Chamber Registrar

I - 4 58

YORKSHIRE CO - OPERATIVES

OPINION OF ADVOCATE GENERAL STIX-HACKL delivered on 20 September 2001 1

I — Introduction

1The present case concerns the taxable amount in relation to transactions of retailers who allow final consumers price reductions upon presentation of a coupon when they purchase goods and who in return receive from the manufacturer which issued the coupon a refund of an amount equal to the price reduction.

II — Facts, main proceedings and questions referred for a preliminary ruling

2From February 1974 until January 1996 Yorkshire Cooperatives Ltd (hereinafter 'Yorkshire') entered into numerous transactions in North England for the retail sale of food and other goods. In the course of those sales it accepted 'money off' coupons issued by the manufacturers of certain goods sold by it. The coupons were part of specific advertising campaigns by the manufacturers. The manufacturers issued the coupons either directly or in the form of cut-out coupons in newspapers and magazines. Each coupon either stated a sum of money or set out a means of calculating a sum of money (price reduction) and expressly stated that a consumer who presented the coupon to a retailer willing to accept it could buy the specified goods at the normal retail price less the price reduction.

3Yorkshire accepted such coupons from its customers. It bought the corresponding goods from the manufacturers and offered them for sale at the normal retail price. A customer who did not present a coupon had to pay the normal retail price. A customer who presented a coupon paid the normal retail price less the price reduction. Yorkshire then sent the coupon, in accordance with the instructions on it, to the manufacturer, who refunded to it the amount of the price reduction.

4After it had received this refund Yorkshire included it in its gross daily takings and accounted for value added tax to the Commissioners on the basis of the full normal retail price of the goods, without a price reduction in respect of the coupons.

5The price which Yorkshire had to pay to the manufacturer upon the purchase of the goods in question was determined without reference to the coupons. In some cases Yorkshire had bought the goods before the manufacturer issued the relevant coupons to the public.

6By letter of 2 December 1996 Yorkshire sought repayment of the allegedly excess VAT it had paid in the accounting period from February 1974 to January 1996 in connection with the refund granted by the manufacturer. It argued that in return for the supply of goods to its customers it had received only the cash sums from those customers and that the amount of the refund represented a rebate or a discount on the price of the original supply of the corresponding goods by the manufacturer to Yorkshire. As Yorkshire had, in respect of the supply of goods to its customers, paid VAT on the amount of the reduced price paid by the customers plus the amount of the coupon, it was entitled to repayment of the part of the VAT in respect of the amount of the coupon, because that amount was not part of the consideration for the supply of goods by Yorkshire to its customers. As the manufacturers had not, however, issued credit notes to it, it did not

I - 4 30 have to adjust its input tax in respect of the supplies of goods and was not therefore obliged to make a corresponding adjustment of the value added tax declarations with regard to such supplies. Yorkshire relied in that regard on the judgment in Elida Gibbs. 2

7By letter of 10 February 1997 the Commissioners rejected Yorkshire's claim. Yorkshire had misinterpreted the decision in Elida Gibbs and the taxable amount in respect of supply of goods to its customers was the cash sum paid by the customers plus the amount in respect of the coupons. If the taxable amount in respect of the transactions between Yorkshire and its customers had, instead, been exclusively the cash sum paid by the customers, Yorkshire would, moreover, have had to adjust the allegedly excess sales value by a correspondingly lower value with respect to the transactions between the manufacturers and Yorkshire.

8In 1998 Yorkshire appealed to the VAT and Duties Tribunal against the Commissioner's decision. The Tribunal has stated in its decision that it is not convinced of the correctness of Yorkshire's interpretation of the effects of the judgment in Elida Gibbs, but cannot reject the submissions of either party in that regard as unfounded. After hearing the parties submissions on the case-law of the Court of Justice, in par

11 The questions arc as follows:

ticular on the judgments in Elida Gibbs, Glaive, Naturally Yours Cosmetics, Boots Company 5 and Empire Stores, it therefore considered it necessary to seek a preliminary ruling from the Court of Justice '(l)On the proper construction of pursuant to Article 177 of the EC Treaty (now Article 234 EC) in order to give its decision.

9Although the supplies in dispute arose partly in the period before the Sixth Directive came into force, the parties have referred exclusively to the Sixth Directive.

10It has also been suggested that a wholesaler might also be involved. The parties both agree that it is necessary to include the hypothetical case where a manufacturer sells goods to a wholesaler who then sells them on to a retailer. Since that is, in the present case, hypothetical but nevertheless, in principle, feasible in certain circumstances, both possibilities are taken into account in the national court's questions.

Article 11A(l)(a) and 11C(1) of the Sixth Directive, what is the taxable amount, in relation to a supply of goods by a retailer in the position of the appellant to a customer, where:

(a) the manufacturer of the goods has sold them to the retailer (or, hypothetically, to a wholesaler who has sold them to the retailer),

(b) in the course of a sales promotion the manufacturer procures the issue of a coupon, the terms of which are:

(i) that the holder, on presenting the coupon to the retailer, may buy the goods from the retailer at a price which is less than the retailer's normal selling price by an amount ("the reduc tion") specified in or ascertain able in accordance with the terms of the coupon, and

(ii) that the manufacturer, when the retailer has sold the goods in accordance with the terms of the coupon and has presented the coupon to the manufacturer, will pay to the retailer a sum equal to the reduction,

(c) the retailer sells the goods to a customer on presentation of the coupon and on payment of the reduced price,

(d) the retailer presents the coupon to the manufacturer and is paid a sum equal to the reduction?

Is the taxable amount:

(i) the cash sum paid by the customer, or

(ii) the cash sum paid by the customer together with the sum equal to the reduction paid by the manufacturer?

2. If the answer to question 1 is in sense (i), must the retailer adjust his input tax in his returns of VAT in relation to the supply of the goods by the manufacturer (or, as the case may be, by the wholesaler) to him, where the manufacturer or other supplier has not

I - 4 32 issued a credit note to the retailer for the reimbursement of the reduction?'

III — Legal background

A — Community law

12Article 11 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 (hereinafter 'the Sixth Directive') lays down the rules regarding the taxable amount.

13Article HA(1)(a) provides:

'1. The taxable amount shall be:

(a) in respect of supplies of goods and services other than those referred to in (b), (c) and (d) below, 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 including subsidies directly linked to the price of such supplies;...'

14Article 11A(2), (3)(a) and (b) provide:

'2. The taxable amount shall include:

(a) taxes, duties, levies and charges excluding the value added tax itself;

(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.

3. The taxable amount shall not include:

(a) price reductions by way of discount for early payment;

(b) price discounts and rebates allowed to the customer and accounted for at the time of the supply;...'

15Article 11C(1) states:

'1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.

However, in the case of total or partial non-payment, Member States may derogate from this rule.'

B — National law

16The Sixth Directive is transposed into national law in the United Kingdom primarily through the Value Added Tax Act 1994.

17Section 19 of the Value Added Tax Act 1994 provides, so far as material, as follows:

'(1) For the purposes of this Act the value of any supply of goods or services shall, except as otherwise provided by or under this Act, be determined in accordance with this section and Schedule 6, and for those purposes subsections (2) and (4) below have effect subject to that Schedule.

(2) If the supply is for a consideration in money its value shall be taken to be such amount as, with the addition of the VAT chargeable, is equal to the consideration.

(3) If the supply is for a consideration not consisting or not wholly consisting of money, its value shall be taken to be such amount in money as, with the addition of the VAT chargeable, is equivalent to the consideration.

(4) Where a supply of any goods or services is not the only matter to which a consideration in money relates, the supply shall be deemed to be for such part of the consideration as is properly attributable to it....'

IV — The first question

A — The submissions of the parties

18By way of introduction, Yorkshire describes the operation of the coupon system and states that the coupons at issue in the main proceedings correspond to those in the Elida Gibbs case. The manufacturers' aim in issuing the coupons is to ensure that the final consumer obtains the benefit. By requiring the retailer to sell at a reduced price, the manufacturers are reducing the consideration for the supplies.

First, with regard to determining the taxable amount, Yorkshire states that it is apparent from the explanatory memorandum to the proposal for the Sixth Directive that such determination must be applicable to each individual transaction. Moreover, according to the case-law of the Court of Justice, the consideration for tax purposes is the consideration actually received, not the objective value, and must be capable of being valued in money. Furthermore, there must be a direct link between the supply of the goods or services and the consideration received. Finally, the consideration constituting the taxable amount for any person in the chain of production and distribution prior to the final consumer cannot exceed the price paid by the final consumer.

Further, Yorkshire submits that both the manufacturer and the retailer must account for VAT only on the amount actually received, namely the net amount. Alternatively, the refund by a manufacturer should be regarded as a price reduction after the supply takes place, within the meaning of Article 11C(1) of the Sixth Directive.

Secondly, Yorkshire submits that only the consideration from a final consumer can be included in a retailer's taxable amount. A payment made by a person forming part of the chain of production and distribution cannot be taken into account. A price reduction coupon issued by a manufacturer cannot be regarded as third-party consideration. Although the coupon has value to the retailer, the value merely consists in the fact that it enables him to obtain a refund in respect of the price paid to the manufacturer.

Third, the contention that the manufacturer is to be regarded as a third-party in regard to the refund given by him is contrary to the principle that VAT must be levied at each stage of the production and distribution chain in proportion to the amount actually received. It also contravenes the principle that no one in that chain should pay VAT on an amount greater than the price paid by the final consumer. In that regard Yorkshire submits that there is a difference between the price reduction coupons at issue in the main proceedings and the cash-back coupons at issue in Elida Gibbs. In the case of cash-back coupons, the manufacturer refunds a certain amount directly to the final consumers. That does not alter the acquisition price or the sales price.

Unlike in the case of cash-back coupons, in the case of a price reduction coupon the refund is made by the manufacturer to the retailer. Consequently the sales price paid by the final consumer to the retailer must be adjusted. If wholesalers were involved in the chain, they would not, however, have to make any price adjustments because only the acquisition price paid by the retailer is adjusted following the refund by the manufacturer.

Fourthly, Yorkshire submits that the Court of Justice has held, in relation to the supply of services, that in order for the supply of the service to be deemed to be made for consideration within the meaning of the Sixth Directive there must be a legal relationship between the provider and the recipient of the service pursuant to which there is a reciprocal performance. By analogy therewith, in order to determine the taxable amount in the case of supplies of goods, regard must be had to the legal relationship between the participants. In the case of the sale of goods to a final consumer there is basically a legal relationship only between him and the retailer. The relationship between manufacturer and retailer is relevant only if the retailer accepts a coupon from a final consumer in part payment. It is precisely that acceptance, and not the supply of the goods to the consumer, which is the performance by the retailer to the manufacturer in consideration of the refund of a sum by the manufacturer to the retailer.

In the light of those considerations, Yorkshire submits that the taxable amount can only be the sum paid by the final consumer.

19The German Government submits that price reduction coupons are in the nature of a rebate for the supply by the retailer. The acceptance of the coupon should be irrelevant to determination of the taxable amount in respect of the supply of the goods. The German Government does not share Yorkshire's view that a limitation of the taxable amount follows from the judgment in Elida Gibbs. That judgment concerns a supply by a manufacturer to a retailer and is silent on the question of how the taxable amount is to be determined in the case of the supply by a retailer to a final consumer. In the case of the coupon system at issue in the main proceedings, there is a reversal in the relationship in the supply chain (manufacturer — retailer — end consumer) in respect of part of the consideration.

There can be a reduction in the taxable amount for the purposes of Article 11A(3)(b) of the Sixth Directive only as a result of an event (rebate, discount, refund) relating to

I - 4 36 the taxable amount of the transaction between supplier and customer. That there is such an event in this case follows from the fact that, on the basis of the refund by the manufacturer, the retailer can grant the final consumer a price reduction. The refund is therefore a rebate on the acquisition price paid by the retailer to that very manufacturer. That rebate from the manufacturer is passed on to the next transaction stage, that is to say the supply to the final consumer, and consequently affects the size of the taxable amount in respect of that supply.

In the light of those submissions, the German Government proposes that the taxable amount is only the amount paid by the final consumer.

20The Irish Government submits primarily that the taxable amount for the supply of the goods is made up of both the money received from the final consumer and the refund received from the manufacturer. The taxable amount within the meaning of Article 11A(1)(a) of the Sixth Directive is made up of everything which constitutes the consideration which has been or is to be obtained by the supplier for his transactions. Regard must be had to the consideration actually received. Moreover, the following three tests laid down in the Court's case-law should be applied: direct link between the supply and the consideration; consideration capable of being expressed in money; subjective value of the consideration. In the present case, those tests have been met.

As regards the judgment in Elida Gibbs, the Irish Government points out, inter alia, that the Court did not express a view in that case on the taxable amount for a retailer.

If the taxable amount were restricted to the amount paid by the final consumer, the principle of the neutrality of the VAT system would require an adjustment to be made to the supply by the manufacturer to the retailer. However, in Elida Gibbs the Court considered that there was no need for an adjustment to the taxable amount for the intermediate transactions between manufacturer, wholesaler and retailer.

The Irish Government also emphasises that the tax authorities may not levy an amount exceeding the amount paid by the final consumer. Nor may the amount be less than the amount paid by the final consumer, which would be the case if the refund for the coupon were not included. The Irish Government therefore submits that the taxable amount is the amount paid by the final consumer plus the refund received from the manufacturer.

21The United Kingdom Government maintains that it follows from the judgment in Elida Gibbs that a reduction in the manufacturer's taxable amount does not entail a reduction in the acquisition price of the manufacturer's immediate customer or in the taxable amount of the manufacturer's immediate customer.

The United Kingdom Government submits that the approach adopted by the Court of Justice in its judgment in Elida Gibbs is incorrect and that a manufacturer's taxable amount should not be reduced by the value of the coupons in respect of which it makes refunds. It follows from this that the taxable amount for a retailer includes both the amount paid by the final consumer and also the value of the coupons, because both amounts are directly connected to the supply by the retailer.

However, even if the judgment in Elida Gibbs is regarded as correct, the United Kingdom Government submits that the argument advanced by Yorkshire is contrary to paragraph 33 of that judgment. It is clear from that judgment that the fact that the manufacturer's taxable amount is reduced by the value of the coupon does not mean that the retailer's acquisition price and his taxable amount must necessarily be reduced by the same amount. That conclusion applies equally to price reduction coupons. The price reduction coupon has no effect on the price between the manufacturer and the retailer or on the amount ultimately received by the retailer for the supply of the goods. That price is always the normal retail price.

The incorrectness of Yorkshire's view becomes clear in cases in which a retailer has not bought the goods from a manufacturer but from a wholesaler. In such a situation the price at which the retailer purchased the goods does not depend on the presence of coupons and whether or not the manufacturer subsequently makes a refund.

It claims that its submission is supported by the judgment in Boots, which also concerned a system of coupons, under which the manufacturer refunded to the retailer all or part of the price reduction. The Court held that the refunds had to be included in the taxable amount.

In the light of those considerations, the United Kingdom Government suggests that the taxable amount is the amount paid by the final consumer together with the sum equal to the refund paid by the manufacturer.

22The Netherlands Government concludes, on the basis of an analysis of the coupon system at issue in the main proceedings and the relevant case-law of the Court of Justice, that the consideration for the sale of a particular product consists of the price paid for it by the final consumer plus the refund from the manufacturer, if the purchase has been made using a coupon.

Pursuant to the principle of the neutrality of the VAT system, the retailer's taxable amount must not be lower than the amount which he actually received for the supply.

The approach adopted by the Court in its judgment in Elida Gibbs cannot be transposed to the present case, because the present case concerns the retailer's taxable amount. Each link in the supply chain must account for the VAT on the value it has added to the product. A reduction in the taxable amount by the manufacturer does not alter the added value created by the retailer.

Consequently the Netherlands Government suggests that the taxable amount is the price paid by the final consumer plus the amount equal to the price reduction which is refunded by the manufacturer.

23The Commission submits that the consideration within the meaning of Article 11A(1)(a) of the Sixth Directive which a retailer receives in a situation such as that at issue in the main proceedings is the full price of the goods. That price is paid in part by the final consumer and in part by the manufacturer. With regard to that provision, the manufacturer must be regarded as a third-party, which is why the refund paid by him must be included in the retailer's taxable amount.

The Commission considers that it is arguable that the refund by the manufacturer could be regarded as a refund of part of the original acquisition price paid by the retailer. However, that makes no difference to the amount of VAT for which the retailer is liable. That amount is unchanged, irrespective of how the amount refunded by the manufacturer is appraised.

Furthermore, the argument raised by Yorkshire according to which a reduction in the retailer's input tax depends on the issue of a credit note by the manufacturer, is incorrect.

As regards the judgment in Elida Gibbs, in particular paragraph 33 thereof, the Commission emphasises that the reasoning of the Court applies not only to 'cash-back' coupons but also to the 'money-off' coupons at issue in the main proceedings.

Finally, only a manufacturer can rely on Article 11C(1) of the Sixth Directive in order to reduce his taxable amount and thus the amount of VAT for which he is liable.

The Commission therefore submits that the taxable amount is the full retail price, made up of the amount paid by the final consumer plus the amount refunded by the manufacturer to the retailer.

B — Assessment

24First of all it is necessary to clarify certain matters relating to the first question.

25Thus, 'customer' is to be understood as meaning 'final consumer' within the meaning of the Sixth Directive. Moreover, it should be noted that the price reduction is granted by the retailer. The payment of the reduction by the manufacturer to which the national court refers is therefore more precisely a refund by the manufacturer to the retailer. It is only because the amount of that refund is the same as the amount of the price reduction that one can say that the manufacturer pays the price reduction.

26Furthermore, the additional situation referred to in the national court's questions, in which the goods are sold by the manufacturer to a wholesaler should not be dealt with in these proceedings. It is, as expressly stated, a hypothetical factual situation and thus a hypothetical question. It is settled case-law of the Court of Justice that such questions are inadmissible. Moreover, it is not necessary to examine such a set of circumstances in order to provide an answer in the case in point.

27It is first of all necessary to call to mind the defining principle of the Sixth Directive, namely that of tax neutrality. That includes the principle that the taxable amount may not be lower than the consideration actually received. According to Article 11A(1)(a) of the Sixth Directive, the taxable amount is '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'.

28As the present case concerns the taxable amount of the retailer, it is therefore necessary to determine the value of the consideration which he receives.

29As consideration, the retailer receives, first, the amount which the final consumers, his customers, pay to him. That amount is either the 'normal' final sales price or — if a coupon is presented — the price reduced by the amount of the price reduction.

30Second, the retailer receives — if he passes on to the manufacturer the coupon presented to him — a refund from the manufacturer equal to the value of the coupon. The coupon therefore has a value not only for the final consumer, in that it obtains a price reduction for him, but also for the retailer. For the retailer, the coupon represents the right to a refund of part of the purchase price he has paid to the manufacturer. That value which the coupon has for the retailer makes the coupon a kind of means of payment. That follows from the judgment in Boots, in which the Court held that 'where the coupon sur rendered to Boots is then recovered by its supplier,... the coupon has monetary value for Boots equal to the amount actually paid by the supplier to Boots...'.

31That is so in the present case. The manufacturers refund to the retailer, upon presentation of the voucher, the difference between the price actually paid by the final consumer and the 'normal' unreduced price.

32Also favouring characterisation of a coupon as a consideration is the judgment of the Court in Argos Distributers, according to which 'the subjective consideration... is constituted wholly or in part by the vouchers presented by the buyer of the goods'. 1

33It already follows from the wording of Article HA(l)(a) of the Sixth Directive that the consideration can be paid not only by the purchaser but also by a third-party. Thus, in the Bally case the Court recognised that the payment of the price through the 'intervention' of a third-party, in that case the intervention of a credit card company, was 'consideration' within the meaning of Article HA(l)(a) of the Sixth Directive. In the present case, a third-party is also used, namely the manufacturer, who pays part of the 'normal' price — that is to say, the price reduction — to the retailer, in the form of a refund.

34It can be deduced from the judgment in Elida Gibbs that not only price reductions which are granted directly between two parties to a contract, as for example between manufacturer and final consumer, are of relevance to determining the taxable amount, but also such reductions which are granted 'through retailers'. "

35Just as the amount of the price reduction and the corresponding refund must be taken into account with regard to the manufacturer, so it must also be taken into account with regard to the retailer. However, as the retailer is not the payer, but the recipient of that amount, that amount cannot be taken into account in the same way as it is with regard to the manufacturer. It cannot be that not only the supplier, but also the recipient of a supply, had either not to include that amount or could include that amount but then deduct it again.

36As the Irish Government correctly states, in the present case the following three requirements for characterisation as consideration arc satisfied: the direct link between the supply of the goods and the consideration, the consideration capable of being expressed in money, and the subjective value of the consideration.

37The direct link, required by the case-14 law, between the supply of goods to the final consumer on the one hand and — in the instant case — both parts of the consideration on the other hand, is constituted in the coupon system at issue in the main proceedings by the fact that the supply takes place at the reduced price only if the coupon is also presented.

38The requirement that both parts of the consideration be capable of expression in money is also fulfilled. That applies both to the cash amount paid by the final consumer and to the coupon, that is to say, to the value which it represents. That is because each coupon indicates the amount of the price reduction which the retailer grants to the final consumer and which the manufacturer refunds to the retailer.

39Finally, each part of the consideration fulfils the requirement that it should have a subjective value. While that is obvious in

I - 4 42 the case of the cash amount paid by the final consumer, in the case of the coupon it is because it represents a value for the retailer inasmuch as he receives a refund from the manufacturer equal to the amount of the price reduction.

40It follows from the principle of the neutrality of the value added tax system that 'the tax authorities may not... charge an amount exceeding the tax paid by the final consumer'. That would however be the case if neither the manufacturer nor the retailer could adjust his share of value added tax.

41According to the judgment in Elida Gibbs, the taxable amount for the manufacturer in accordance with Article 11A(1)(a) and C(l) of the Sixth Directive is the 'selling price charged by the manufacturer, less the amount indicated on the coupon and refunded'.

42However, it also follows from the judgment in Elida Gibbs that the retailer may not readjust his value added tax. According to that judgment 'there is no need to readjust the taxable amount for the intermediate transactions'.

43If the retailer were allowed a corresponding adjustment, not all of his receipts would be subject to tax and the value added tax would have an effect on his operating profit because it would represent an income item for him.

44However, according to the judgment of the court in the Freemans case, a taxable person may not receive 'a sum corresponding to a part of the sales price that is the consideration for the goods delivered' without 'that sum... [being] part of the taxable amount'. That would, however, be precisely the case if the amount of the coupon were not included by the retailer in the taxable amount.

45The rule that the amount of the coupon reduces the taxable amount only of the manufacturer but must be included in that of the retailer ensures that the amount is neither totally left out of account nor taken into account twice. It ensures that the amount is instead taxed only once. It also prevents the tax authority from losing VAT or collecting too much tax.

46Finally, this result is in accordance with the Sixth Directive's value added tax system, whose underlying idea is that at each stage of the supply chain the added value produced at that stage should be taxed.

47The answer to the first question should therefore be that in a case such as that at issue in the main proceedings the taxable amount is the cash amount paid by the customer plus the amount which corresponds to the price reduction paid by the manufacturer.

V — The second question

A — The parties' submissions

48Yorkshire submits that the VAT element of the refund must be deducted

I - 4 43 from its input tax and that repayment of output tax does not depend upon the issue of a credit note or debit note. The issue of such notes is even precluded by national law in a situation such as that in the main proceedings. Yorkshire therefore submits that the retailer does not have to readjust his input VAT.

49The German Government does not consider that the obligation to adjust input tax follows from the judgment in Elida Gibbs. It refers in that connection rather to Article 20(l)(b) of the Sixth Directive under which the retailer has an obligation to adjust. There can be a reduction in the taxable amount only by virtue of the fact that the amount of the refund paid by the manufacturer to the retailer is to be regarded as a price refund to the retailer. Only such a system ensures the neutrality of the VAT, in that the amount deductible as input tax corresponds to the amount which the manufacturer owed as output tax.

50The United Kingdom Government submits that the retailer must adjust his input tax, because only the added value is to be taxed.

I - 4 44

51The Netherlands Government submits that the principle of the tax neutrality of VAT requires that an adjustment takes place if the taxable amount is only the amount paid by the final consumer.

52Having regard to their submissions concerning the answer to the first question, the Irish Government and the Commission consider that there is no need to answer the second question.

B — Assessment

53The second question is posed in the event that the answer to the first question is that the taxable amount is only the cash sum paid by the customer.

54As I am here proposing that the Court's answer to the first question should be that the taxable amount is the sum paid by the final consumer plus the amount of the refund paid by the manufacturer, there is no need to go into the second question in any more detail.

VI — Conclusion

55In the light of those considerations I propose that the Court should answer the national court's questions as follows:

(1) The answer to the first question — leaving aside the hypothetical case of the involvement of a wholesaler — is that, in a case such as that at issue in the main proceedings, the taxable amount is the cash sum paid by the customer together with the sum equal to the reduction paid by the manufacturer.

(2) Having regard to my proposed answer to the first question, there is no need to answer the second question.

I - 4 45

Notes

(1) Original language: German.

(2) Case C-317/94 [1996] ECR I-5339.

(3) Case C-38/93 [19941 ECR I-1679.

(4) Case 230/87 [1988] ECR 6365.

(5) Case 126/88 |1990] ECR I-1235.

(6) Case C-33/93 |1994| ECR i-2329.

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

(8) Cited in footnote 2 above.

(9) See Case C-340/99 TNT Traco [2001] ECR 1-4109 and the case-law cited there.

(10) Case 126/88 (cited in footnote 5), paragraph 13.

(11) Case C-2S8/94 |1996| ECR I-5311, paragraph 18.

(12) Case C-18/92 |1993| ECR I-2871, paragraph 17.

(13) Case C-317/94 (cited in footnote 2), paragraph 31.

(14) Case 154/80 Coöperatieve Aardappelenbewaarplaats [1981] ECR 445 and the judgments in Case 126/88 (cited in footnote 5) and in Case C-33/93 (cited in footnote 6).

(15) Case C-317/94 (cited in footnote 2), paragraph 24.

(16) Ibid., paragraph 34. YORKSHIRE CO-OPERATI VES

(17) Ibid., paragraph 33.