C-78/02 Karageorgou and Others

JUDGMENT OF THE COURT (Sixth Chamber)

6 November 2003 *

In Joined Cases C-78/02 to C-80/02,

REFERENCES to the Court under Article 234 EC by the Diikitiko Efetio Athinon (Greece) for a preliminary ruling in the proceedings pending before that court between

Elliniko Dimosio

and

Maria Karageorgou (C-78/02),

Katina Petrova (C-79/02),

Loukas Vlachos (C-80/02),

on the interpretation 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

* Language of the case: Greek.

(OJ 1977 L 145, p. 1) and in particular the rule in Article 21(1)(c) of that directive to the effect that VAT is payable by any person who mentions VAT on an invoice,

THE COURT (Sixth Chamber),

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

Advocate General: L.A. Geelhoed, Registrar: H. von Holstein, Deputy Registrar,

after considering the written observations submitted on behalf of:

— the Greek Government, by M. Apessos and S. Detsis, acting as Agents,

— Mrs Karageorgou, by E. Metaxaki and P. Yatagantzidis, lawyers,

— Mrs Petrova and Mr Vlachos, by A. Koutsolampros, lawyer, — the Commission of the European Communities, by E. Traversa and H. Tserepa-Lacombe, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of the Greek Government, Mrs Karageorgou and the Commission at the hearing on 20 March 2003,

after hearing the Opinion of the Advocate General at the sitting on 15 May 2003,

gives the following

Judgment

Legal context and the dispute

1By orders of 31 January 2002, received at the Court on 11 March 2002, the Diikitiko Efetio Athinon (Administrative Court of Appeal, Athens) (Greece) referred to the Court for a preliminary ruling under Article 234 EC two questions in each case, in the same terms, on the interpretation 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) and in particular the rule in Article 21(1)(c) of that directive to the effect that VAT is payable by any person who mentions VAT on an invoice.

2Those questions were raised in proceedings between Elliniko Dimosio (the Greek State) and translators working for the Greek Ministry of Foreign Affairs who claim to have invoiced VAT in error and are claiming recovery thereof.

Legal framework

Community legislation

3Under Article 2(1) of the Sixth Directive supplies of goods or services effected for consideration within the territory of the country by a taxable person acting as such are subject to value added tax.

4 Article 4 of the Sixth Directive provides

'1. "Taxable person" shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions....

4The use of the word "independently" in paragraph 1 shall exclude employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer's liability.

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

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

In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible.

...'

5Article 21(1)(c) of the Sixth Directive provides:

'The following shall be liable to pay value added tax:

1. under the internal system:

(c) any person who mentions the value added tax on an invoice or other document serving as invoice'.

National legislation

6Pursuant to Article 2(1) of Law 1642/1986 on the application of value added tax and other provisions (A.125), prior to its replacement by Article 1(1)(a) of Law 2093/1992 (A.181), value added tax is payable on, inter alia, 'the supply of goods and services, provided such supply is for taxation purposes within the territory by taxable persons operating in that capacity'.

7Pursuant to Article 3(1) of Law 1642/1986, prior to its replacement by Article 1 of Law 2093/1992, 'every physical or legal person or corporate body, whether national or foreign, shall be subject to the tax, provided they are engaged in independent economic activity, irrespective of the place of establishment, the purpose or the result of such activity. Salaried employees and other physical persons bound to their employer by a contract of employment or any other legal ties creating the relationship of employer and employee as regards conditions of employment, remuneration and employer's liability shall not be regarded as carrying on an independent economic activity'.

8Finally, Article 28(1) thereof, prior to its replacement by Article 1(42) of the abovementioned Law 2093/1992, provides:

'In respect of the supply of goods and services, the following shall be liable to the tax: (a) taxable persons established in the territory in respect of activities performed by those persons,... (d) any other persons who mention the tax on invoices or on other similar documents issued by them...'.

The main proceedings and questions referred

Case C-78/02

9By Decision no F.093.23 of 12 April 1988 of the Secretary-General of the Ministry of Foreign Affairs, Mrs Maria Karageorgou was appointed as a translator from Greek into English to carry out work for the Translation Department of that Ministry.

10In respect of that activity, the plaintiff submitted to Mr Cholargos, the Head of the Dimosia Oikonomiki Ypiresia (Financial Services Directorate, hereinafter the 'DOY'), provisional tax statements and a statement of account for VAT for the 1992 financial year. She subsequently retracted those statements by request No 22240/29.12.1994, and sought reimbursement of the VAT on the basis that it had been unduly paid.

1 11 In support of her retraction she claimed that she had submitted the statements in question on the basis of an error in law given that she is not liable to VAT for income earned as a translator.

12In her claim she contends that she was in an employer-employee relationship with the Ministry of Foreign Affairs with regard to her working conditions and pay. First, she did not herself determine her remuneration. Secondly, the Ministry of Foreign Affairs was liable to third parties for any acts or omissions on her part as a translator. Further, the abovementioned VAT paid in accordance with her statements for 1992 was not passed on to the consumer, given that neither she nor the ministry charged those amounts to the private or legal persons for whom those translations were intended, with the result that those amounts constitute part of her earnings and not tax.

13In reply No 22240-22241/9.2.1995, the Head of the DOY rejected the applicant's claim on the ground, first, that her working conditions were not the same as those of salaried staff and, secondly, that the VAT had been lawfully paid by Mrs Karageorgou since she had mentioned it on the receipts which she had issued for the provision of her services to the Ministry of Foreign Affairs and that she was therefore not entitled to reimbursement of the tax paid.

14In its judgment no 275/1995 the President of the Diikitiko Protodikio Athinon (Administrative Court of First Instance, Athens) (Greece) allowed the application by Mrs Karageorgou and her request to retract the VAT statements for 1992, set aside negative reply No 22240-22241/9.2.1995 of the Head of the DOY, and ordered reimbursement of the amount of tax paid by the applicant. That judgment was based on reasoning to the effect that translators operate as organs of the State, which has sole liability for their acts and omissions given that the translations provided by them are public documents, and that Mrs Karageorgou operated, in the performance of her work, under an employer-employee relationship as regards the terms governing her work and remuneration.

15The Greek State appealed against that ruling to the Diikitiko Efetio Athinon, contending, inter alia, as it had done at first instance, that the respondent, irrespective of the nature of her work, was liable to pay the contested tax in compliance with Article 28(1)(d) of Law 1642/1986 on the ground that she had mentioned VAT on the receipts issued in respect of the period in question.

16By judgment no 90/1996, the President of the Diikitiko Efetio Athinon upheld the ruling at first instance and rejected the appeal as unfounded. It did not, however, examine the ground of appeal concerning the fact that Mrs Karageorgou had mentioned VAT on the receipts issued during the period in question.

17The Greek State, relying on the abovementioned omission, sought annulment of the judgment of the Diikitiko Efetio Athinon before the Simvoulio tis Epikratias (Council of State) (Greece).

18By judgment no 1659/1999 the Simvoulio tis Epikratias set aside the judgment of the lower court in so far as it concerned the appeal plea based on the issue of a receipt mentioning VAT, taking the view that that appeal plea was material and that the appellate court therefore had erred in omitting to examine it, and remitted the case to the court below for a fresh determination.

Cases C-79/02 and C-80/02

19In Cases C-79/02 and C-80/02, concerning Mrs Petrova and Mr Vlachos respectively, the facts and main proceedings are analogous to those in Case C-78/02.

Questions referred

20The Diikitiko Efetio Athinon decided to stay the proceedings and to refer to the Court in each of the cases before it the following questions:

'(1) Is it possible to characterise as VAT, within the meaning of the provisions of the Sixth VAT Directive (77/388/EEC), the amount mentioned on an invoice by a person who provides services to the State as a salaried employee, when the person providing those services mistakenly considers that he is providing services to the State as a self-employed person whilst, in reality, he is an employee and, on the recommendation of his employer, charges VAT on the invoices issued by him and not on his total earnings received from the State, which in law constitute the tax basis of assessment to VAT, subsequently collected from his earnings, but where the amount thereof is determined on the earnings by means of an internal deduction method and the earnings are regarded as containing the amount of VAT owed, while the State reduces the amount of legitimate earnings paid to that person by the element of VAT they are calculated to contain?

(2) Can there be a departure from the formal principle governing the tax as set out in Article 21(1)(c) of the Sixth VAT Directive (77/388/EEC) (that is to say, where VAT is mentioned on the invoice or other document serving as invoice, such tax is payable to the State), where the State, in performing that activity in pursuance of its public authority, is under Article 4(5) of the above directive not subject to tax, so as to render the mechanism of deductions inapplicable thereto, and the said tax cannot be and is not passed on to the end consumer (namely, the individual who contracts with the State for the translation of documents), the provider of services being entitled to reimbursement of the tax paid to the tax authority after deduction of any input tax in order to avoid the State's enrichment as a result thereof?'

21By order of the President of the Court of 14 May 2002 Cases C-78/02, C-79/02 and C-80/02 were joined for the purposes of the written and oral procedure and for the judgment.

First question

Observations submitted to the Court

22The Greek Government states that a translation service was set up within the Ministry of Foreign Affairs for the official translation of public and private documents. Any person wishing to obtain a translation would lodge the text to be translated with that service, at the same time paying the appropriate fee laid down by that ministry, and a receipt would be issued to him. The amount of that fee included both remuneration in respect of the translation and the corresponding VAT although the latter is not mentioned separately.

23The Ministry's translation service would then forward the texts to private persons — independent translators. Those translators are not in an employment relationship with the ministry. They also pursue other professions, such as doctor or lawyer, which by nature are unconnected with the status of an official. That is also the reason why they work at the place and time convenient to them and are remunerated in accordance with the quantity of work produced.

24After translation the texts are returned to the Ministry of Foreign Affairs for collection by the individuals concerned. Finally, the fees received in respect of the translations are shared by that ministry between the translators in accordance with the services provided by each of them. On receipt of those amounts each translator issues a receipt on which he indicates the remuneration and the corresponding VAT. The translators account for that amount of VAT to the tax authorities after deduction of the VAT charged to them on the acquisition of goods or services.

25The Greek Government proposes the following reply to the first question: the amount, determined according to the method of internal deduction, which a person providing services on an independent basis, albeit under the supervision of the State, enters on the invoice or on the receipt for the provision of services and which he receives constitutes VAT within the meaning of the Sixth Directive, where the individual recipient of the service and final consumer has paid to the State an amount of VAT which is included in the whole of that remuneration in a single amount.

26Mrs Karageorgou claims that the tax in question does not display the essential characteristics of VAT inasmuch as it corresponds to a part of the remuneration of translators which was not charged to third parties or received from them. Owing to that fact, the tax in question could not be deemed to constitute VAT on the sole ground that it is mentioned as such in the receipts issued by the translators in respect of their provision of services.

27In identical observations Mrs Petrova and Mr Vlachos state that, on submission to the Ministry of Foreign Affairs of documents to be translated, individuals requesting an official translation pay the appropriate fee as indicated by the competent official which is not subject to VAT. When the Greek State authenticates those translations by affixing its official seal to them, it acts pursuant to public powers and cannot therefore impose VAT on that operation. The translators are then paid by the ministry on the basis of translations produced and of the price per page as determined by Ministerial decree. They are requested by the ministry to transmit to it a global receipt in respect of the services provided. That receipt is mandatorily established by the accounts department of the ministry and includes an amount in respect of VAT which is deducted from their statutory remuneration as determined by the ministerial decree in question per page of translation.

28The Ministry of Foreign Affairs does not and could not legally charge VAT to individuals with whom it alone has entered into relations. Consequently, in the present case it is not a tax of a VAT nature since it is not and could not be passed on to the final consumer.

29The Commission of the European Communities recalls that Article 2(1) of the Sixth Directive provides that supplies of goods or services effected for consideration within the territory of the country by a taxable person acting as such are subject to VAT. Consequently, a transaction carried out (even for consideration) by a non-taxable person is not subject to VAT.

30In the present case, the national courts have already held not only that the translators are not taxable persons in regard to translations intended for the Ministry of Foreign Affairs but that there is not even any transaction, in particular for consideration, since the relationship that exists as between the translators and the State is that of employer and employee in regard to their pay and working conditions and the employer's liability, with the result that they may be regarded as forming an integral part of the personnel of the State. It follows that the case cited in the first question does not come within the scope of the Community legislation in force in matters concerning VAT.

31The amount entered in error on an invoice does not therefore have the character of VAT for the purposes of the Sixth Directive, whether or not the State erroneously deemed it to be VAT. Nor for the same reason does Article 21(1)(c) of that directive apply in the present case. That amount could be reimbursed to the person concerned simply as an amount unduly paid.

Grounds

Findings of the Court

32It is apparent from the orders for reference, and has been confirmed by the parties' observations, that the translators' remuneration is deemed to include an amount equal to the VAT payable with the result that the amount actually paid to them is constituted by their statutory remuneration less the amount representing the VAT.

33In order to determine whether the amount thus deducted must be deemed to be VAT, it must be determined whether the translators are subject to the provisions concerning VAT in respect of the services provided by them to the Ministry of Foreign Affairs.

34It is clear from Article 2(1)(c) of the Sixth Directive that supplies of goods or services effected for consideration within the territory of the country by a taxable person acting as such are subject to value added tax.

35Article 4 of the Sixth Directive defines 'taxable person' for the purposes of the directive. Article 4(1) thereof defines 'taxable person' as any person who 'independently' carries out an economic activity. Article 4(4) thereof states that the word 'independently' excludes from the tax not only employed persons but also persons 'bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer's liability.'

36In accordance with the orders for reference the court before which the matter came at first instance in the main proceedings held that the translators carry on their activity under a relationship of employer and employee with the Ministry of Foreign Affairs as regards working conditions and pay. On that point the judgments at first instance were confirmed on appeal and the appellate judgments were not annulled when they were brought before the Simvoulio tis Epikratias. In the national court's view it follows that the facts in that connection are established.

37In its written observations the Greek Government classified the translators as independent and maintained that the nature of their links with the Ministry of Foreign Affairs is still the subject of varying assessments by different Greek courts. None the less, that government stated in its oral observations that it was not seeking to challenge the case-law mentioned in the preceding paragraph in accordance with which the translators carry on their activity within the context of an employer-employee relationship.

38In that connection it should be noted that under Article 234 EC, which is based on a clear separation of functions between the national courts and the Court of Justice, when ruling on the interpretation or validity of Community provisions, the Court is empowered to do so only on the basis of the facts which the national court puts before it (see Case C-435/97 WWF and Others [1999] ECR I-5613, paragraph 31, and judgments cited).

39The Court cannot express a view on the nature of the relationship between the translators and the Ministry of Foreign Affairs. In replying to the questions referred it must rely on the assessment made by the national court pursuant to which the translators perform their activity on the basis of an employer-employee relationship.

40On that premiss, in the present case the translators are not 'independently' carrying on an economic activity as defined in Article 4(4) of the Sixth Directive and are not therefore 'taxable persons' within the meaning of Article 4(1) thereof. Accordingly, under Article 2(1) thereof the services which they provide to the Ministry of Foreign Affairs are not subject to VAT.

41It follows that if such translators mention in error an amount by way of VAT on the invoices which they draw up in relation to such services that amount cannot be described as VAT.

42The reply to the first question must therefore be that the amount mentioned as VAT on the invoice drawn up by a person providing services to the State may not be classified as VAT where that person erroneously believes that he is providing those services as a self-employed person whilst in reality there is an employer-employee relationship.

Second question

Observations submitted to the Court

43The Greek Government claims that the provisions of the Sixth Directive, in particular Article 21(1)(c) thereof, give expression to the principle of formalism of VAT. Where a receipt is issued in respect of the provision of services and the person issuing it mentions on it an amount of VAT which moreover he has received, there is an obligation to pay that amount to the State and reimbursement of that amount on the ground that it was unduly paid is subsequently precluded. That principle essentially seeks to prevent tax fraud which could arise where the amount of VAT mentioned on the invoice or other such document is subject to the deduction mechanism. Even where that amount of tax does not come within the scope of the VAT system and is not subject to the deduction procedure, the principle of the formalism of the tax requires that the VAT mentioned on the receipt be paid to the State because, if it were not, the person issuing the receipt would be unjustly enriched to the detriment of consumers who have paid the VAT in respect of services provided.

44Consequently, the Greek Government proposes that the reply to the second question should be as follows: there can be no departure from the formal principle governing the tax as set out in Article 21(1)(c) of the Sixth Directive, where the State, in performing that activity, acts as intermediary and not as a taxable person where the tax is passed on to the end consumer, namely the recipient of translation services and where the provider of those services pays to the tax authority the amount of VAT received after deduction of any input tax, pursuant to the deduction procedure.

45Mrs Karageorgou claims that Article 21(1)(c) of the Sixth Directive does not preclude the correction of the VAT mentioned in error on an invoice or other such document, particularly where it is not necessary to preclude the possibility of making a correction or requesting reimbursement of the VAT mentioned in error in order to prevent tax fraud or evasion.

46Mrs Petrova and Mr Vlachos consider that the principle of formalism of the tax cannot apply in the present case because in this case it is not VAT. That principle must be left out of account in cases where it could not apply and where the tax has not been passed on and the trader consequently has not been enriched.

47The Commission notes that the Sixth Directive makes no provision concerning adjustment in respect of an amount of VAT mentioned in error on an invoice by the person issuing it. Consequently, it is in principle for the Member State to determine the conditions in which an amount of VAT erroneously mentioned on an invoice may be adjusted.

Findings of the Court

48By its second question the national court is essentially asking whether Article 21(1)(c) of the Sixth Directive, under which VAT is payable to the State if it is mentioned on an invoice or other document serving as invoice, precludes reimbursement of an amount mentioned in error by way of VAT on an invoice where the State is not acting as a taxable person within the meaning of Article 4(5) of that directive and that tax is not passed on to the final consumer.

49The Sixth Directive does not make express provision for the case where the VAT is mentioned in error on an invoice where it is not due. Accordingly, so long as this lacuna has not been filled by the Community legislature, it is for the Member States to provide a solution in that regard (Case C-454/98 Schmeink & Cofreth and Strobel [2000] ECR I-6973, paragraphs 48 and 49).

50In that connection the Court has held that, in order to ensure VAT neutrality, it is for the Member States to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith (Case C-342/87 Genius Holding [1989] ECR 4227, paragraph 18). However, where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss of tax revenues, VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional upon the issuer of the relevant invoice having acted in good faith (Schmeink & Cofreth and Strobel, cited above, paragraphs 60 and 63).

51As is clear from paragraphs 40 and 41 hereof, the services at issue in the main proceedings are not subject to VAT and the amount mentioned in error by way of VAT on the invoices relating to those services cannot therefore be classified as VAT.

52In the event of adjustment of the amount thus mentioned, which can in no event constitute VAT, there is no risk of a loss of tax revenue in the context of the VAT regime. Consequently, in accordance with the case-law cited at paragraph 50 hereof, it is not necessary to show that the issuer of the invoice acted in good faith in order that the amount unduly invoiced may be adjusted.

53It follows that the reply to the second question must be that Article 21(1)(c) of the Sixth Directive does not preclude reimbursement of an amount mentioned in error by way of VAT on an invoice or other document serving as invoice where the services at issue are not subject to VAT and the amount invoiced cannot therefore be classified as VAT.

Costs

54The costs incurred by the Commission, which submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions submitted to it by the Diikitiko Efetio Athinon, by orders of 31 January 2002, hereby rules:

1. The amount mentioned as value added tax on the invoice drawn up by a person providing services to the State may not be classified as value added tax where that person erroneously believes that he is providing those services as a self-employed person whilst in reality there is an employer-employee relationship.

2. Article 21(1)(c) 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 does not preclude reimbursement of an amount mentioned in error by way of value added tax on an invoice or other document serving as invoice where the services at issue are not subject to value added tax and the amount invoiced cannot therefore be classified as value added tax.

Puissochet Schintgen Skouris

Colneric Cunha Rodrigues

Delivered in open court in Luxembourg on 6 November 2003.

R. Grass V. Skouris

Registrar President

OPINION OF ADVOCATE GENERAL GEELHOED delivered on 15 May 2003

I — Introduction

1In the first question submitted for a preliminary ruling in the three identical cases here at issue the Diikitiko Efetio Athinon (Administrative Court of Appeal, Athens) asks whether the amount which translators, on the recommendation of the Elliniko Dimosio (Greek State), include in their invoices in connection with translation services provided for the State should be regarded as VAT within the meaning 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'), given that, on the one hand, they provide their services not as self-employed persons but as employees and, on the other hand, the amount concerned is not calculated on their total earnings, but is considered to have already been included in those earnings, the remuneration actually paid therefore consisting of earnings minus the VAT they include (internal deduction method).

2The Diikitiko Efetio Athinon also asks whether there can be a departure from the formal principle governing the tax as set out in Article 21(1)(c) of the Sixth Directive where the State, in performing a translation activity in pursuance of its public authority, does not act as a taxable person within the meaning of Article 4(5) of the Sixth Directive with respect to the application of the deduction mechanism, and the said tax cannot be and is not passed on to the private individuals who contract with the State for the translation of documents and, on the other hand, the provider of the service claims the reimbursement of the tax paid to the tax authority after deduction of any input tax in order to avoid the State's enrichment as a result thereof.

II — Legislative background

A — Community law

3Pursuant to Article 2(1) of the Sixth Directive the following is subject to value added tax: the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such.

4 Article 4 of the Sixth Directive provides:

'1. "Taxable person" shall mean any person who independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity.

2. The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.

4The use of the word "independently" in paragraph 1 shall exclude employed and other persons from the tax in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer's liability.

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

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

In any case, these bodies shall be considered taxable persons in relation to the activities listed in Annex D, provided they are not carried out on such a small scale as to be negligible.

5Article 17(2)(a) of the Sixth Directive reads as follows:

'2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person'.

6Article 18(1)(a) of the Sixth Directive states:

'1. To exercise his right to deduct, the taxable person must:

(a) in respect of deductions under Article 17(2)(a), hold an invoice, d r a wn up in a c c o r d a n ce with Article 22(3);'

7The formal principle governing the tax is laid down in Article 21(1)(c) of the Sixth Directive:

'The following shall be liable to pay value added tax:

1. under the internal system:

(c) any person who mentions the value added tax on an invoice or other document serving as invoice.'

B — National law

8Pursuant to Article 2(1) of Law 1642/1986 on the application of value added tax (A. 125), prior to its replacement by Article 1(1)(a) of Law 2093/1992 (A.181), value added tax is payable on, inter alia, 'the supply of goods and services, provided such supply is for taxation purposes within the territory by taxable persons operating in that capacity.'

9Pursuant to Article 3(1) of Law 1642/1986, prior to its replacement by Article 1 of Law 2093/1992, 'every physical or legal person or corporate body, whether national or foreign, shall be subject to the tax, provided they are engaged in independent economic activity, irrespective of the place of establishment, the purpose or the result of such activity. Salaried employees and other physical persons bound to their employer by a contract of employment or any other legal ties creating the relationship of employer and employee as regards conditions of employment, remuneration and employer's liability shall not be regarded as carrying on an independent economic activity.'

10Moreover, pursuant to Article 23(1) of the same law, prior to its amendment by Articles 1(34) and 2(18) of Law 2093/1992, 'taxable persons shall be entitled to deduct from the tax payable on the supply by them of goods or services the tax levied on goods and services supplied to them....'

11Pursuant to Article 25(1) of the same law, prior to its amendment by Article 1(38) of the abovementioned Law 2093/1992, 'The right to deduct tax may be exercised on condition that taxable persons liable to tax are in possession of: (a) an invoice or other document constituting evidence of an invoice in respect of the goods supplied or services provided by them, (b)....'

12Finally, Article 28(1) of Law 1642/1986, prior to its replacement by Article 1(42) of the abovementioned Law 2093/1992, provides that: 'In respect of the supply of goods and services, the following shall be liable to the tax: (a) taxable persons established in the territory in respect of activities performed by those persons, (b)... , (c)... , (d) any other persons whatsoever who mention the tax on invoices or on other similar documents issued by them, (e)....'

III — Facts of the main proceedings and questions referred for a preliminary ruling

13Apart from a few minor differences that have no bearing on the material assessment, the three joined cases are identical as regards facts and proceedings. I will therefore confine myself to a generalised description of the facts and of the procedure adopted.

14Mrs Karageorgou (Case C-78/02), Mrs Petrova (Case C-79/02) and Mr Vlachos (Case C-80/02) (hereinafter 'the translators') are employed as translators from Greek into English or from Greek into German by the Translation Department of the Ministry of Foreign Affairs.

15After submitting provisional VAT statements and a final VAT statement for 1992 and/or 1993 in respect of this activity to the Head of the Dimosia Oikonomiki Ypiresia (Financial Services Directorate; hereinafter 'the DOY') at Cholargos, the translators retracted these statements, requesting the reimbursement of the VAT for which they were not liable.

16In support of these requests for reimbursement the translators all contended that the statements concerned were based on an error in law, in that the remuneration which they had received as translators was not subject to VAT. In particular, they pointed out that throughout 1992 and/or 1993 they had been in an employer-em ployee relationship with the Ministry of Foreign Affairs with regard to their conditions of employment and remuneration since, on the one hand, they had not determined their remuneration themselves and, on the other hand, the Ministry of Foreign Affairs was liable towards third parties for any acts or omissions on their part as translators. Further, they contended that the VAT which, according to their statements for 1992 and/or 1993, was paid on their gross earnings was not passed on by them, given that the natural and legal persons using the services of the Translation Department of the Ministry of Foreign Affairs do not include VAT in the total amount which they pay to the Ministry of Foreign Affairs for the translation of their official documents and so do not pay VAT.

17The Head of the DOY at Cholargos rejected the requests for reimbursement on the grounds that the conditions of employment applicable to translators were different from those applicable to other salaried employees and that the VAT was mentioned in the statements concerning the services provided for the Ministry of Foreign Affairs. They were not therefore entitled to reimbursement.

18In consecutive judgments the President of the Diikitiko Protodikio Athinon (Athens Administrative Court of First Instance) allowed the translators' applications and declared the requests for the retraction of the VAT statements which they had submitted for 1992 and/or 1993 to be well founded, set aside the negative decisions of 9 February 1995 of the Head of the DOY at Cholargos and ordered that the amount of tax unduly paid by the translators be repaid to them. These judgments were partly based on the finding that the translators work as organs of the State, which has sole liability for their acts and omissions, given that the translations provided by them are public documents. The President of that court also ruled that the translators undertake their activities under an employer-employee relationship with the State as regards the manner in which they perform their work and their remuneration. The income from this activity cannot therefore be subject to VAT.

19The Greek State appealed against these rulings first to the President of the Diikitiko Efetio Athinon. Its appeals were based, inter alia, on the argument which had been advanced in all the cases at first instance, namely that the translators, irrespective of the nature of their work, were liable to pay the contested tax in compliance with Article 28(1)(d) of Law 1642/1986 on the ground that they had mentioned VAT in the statements issued in respect of the services they provided for the period in question (1992 and/or 1993).

20The President of the Diikitiko Efetio Athinon dismissed these appeals by the Greek State as unfounded and upheld the judgments at first instance and the reasoning on which they were based. However, it failed to examine the ground of appeal cited by the Greek State in the three cases regarding the fact that the translators were liable to pay the contested tax because they had mentioned it on the invoices which they had issued in connection with the services provided in the period in question.

21The Greek State then appealed against these judgments to the Simvoulio tis Epik-ratias (Council of State) (Greece) and sought to have them set aside, citing the aforementioned omission.

22The Greek Council of State definitively held in its rulings that the translators were not liable to VAT in respect of the activities which they had undertaken for the Ministry of Foreign Affairs in a relationship of employer and employee. However, it set aside the judgments of the Diikitiko Efetio Athinon in so far as that court had omitted in the various cases to examine the ground which concerned the mention of VAT on the invoice. It took the view that this ground of appeal was essential and that the appellate court had wrongly omitted to consider it. The cases were therefore referred back to the Diikitiko Efetio Athinon for the purpose of partial reappraisal.

23The Diikitiko Efetio Athinon notes that there is a difference of opinion within the Greek Council of State over the interpretation of Article 28(1)(d) of Law 1642/1986, another chamber of the Greek Council of State having delivered in a case similar to the three here under consideration a judgment which differed from that delivered by the chamber of the Greek Council of State which has considered the present cases. As the interpretation of this article of the law is linked to the relevance of some provisions of the Sixth Directive, the Diikitiko Efetio Athinon believes it necessary for a final judgment on the undecided issue in the present three cases not to be delivered for the time being and total earnings received from the State, which in law constitute the tax basis of assessment to VAT, subsequently collected from his earnings, but where the amount thereof is determined on the earnings by means of an internal deduction method and the earnings are regarded as containing the amount of VAT owed, while the State reduces the amount of legitimate earnings paid to that person by the element of VAT they are calculated to contain?

(b) Can there be a departure from the for the following questions to be referred to the Court of Justice of the European Communities for a preliminary ruling:

(a) Is it possible to characterise as VAT, within the meaning of the provisions of the Sixth VAT Directive (77/388/EEC), the amount mentioned on an invoice by a person who provides services to the State as a salaried employee, when the person providing these services mistakenly considers that he is providing services to the State as a self-employed person whilst, in reality, he is an employee and, on the recommendation of his employer, charges VAT on the invoices issued by him and not on his formal principle governing the tax as set out in Article 21(1)(c) of the Sixth VAT Directive (77/388/EEC) (that is to say, where VAT is mentioned on the invoice or other document serving as an invoice, such tax is payable to the State), where the State, in performing that activity in pursuance of its public authority, is under Article 4(5) of the above directive not subject to tax, so as to render the mechanism of deductions inapplicable thereto, and the said tax cannot be and is not passed on to the end consumer (namely, the individual who contracts with the State for the translation of documents), the provider of services being entitled to reimbursement of the tax paid to the tax authority after deduction of any input tax in order to avoid the State's enrichment as a result thereof?

24The translators, the Greek Government and the Commission have submitted written comments. Mrs Karageorgou (Case C-78/02), the Greek Government and the Commission explained their views in greater depth orally at the Court's hearing of 20 March 2003.

IV — Assessment

25The first question submitted by the national court seeks to establish whether the amount mentioned in error on the invoice as VAT must be regarded as VAT in a situation where the service provider concerned wrongly believes that he has provided services for the Greek State as a self-employed person, whereas those services are in fact provided in a relationship of employer and employee. The said amount is calculated by the internal deduction system. This means that it is assumed that the legitimately determined earnings already include the VAT owed, the amount actually paid out therefore being the legitimately determined earnings minus the amount of VAT.

26To determine whether the amount concerned should be regarded as VAT, it should first be said that in respect of the service they provide for the Greek State the translators are subject to the provisions on VAT.

27It is clear from Article 2 of the Sixth Directive that the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such is subject to VAT.

28Article 4 of the Sixth Directive then defines the persons who are to be regarded as 'taxable persons' within the meaning of that directive. The basic requirement set out in Article 4(1) is that they must be persons who independently carry out an economic activity. Article 4(4) then states that the term 'independently' excludes not only employed persons from the tax but also persons who are bound 'by any other legal ties creating the relationship of employer and employee as regards working c o n d i t i o n s, r e m u n e r a t i on and the employer's liability.'

29The Greek Government has pointed out that Greek case-law obviously does not give a clear ruling on the nature of the ties between the translators and the Greek Ministry of Foreign Affairs. The translators and the Commission, on the other hand, point out that it has in fact already been determined in the main proceedings that the translators undertake their activities in a relationship of employer and employee.

30It is settled case-law that within the framework of the procedure relating to preliminary rulings as set out in Article 234 EC the Court is empowered to rule on the interpretation or validity of Community provisions only on the basis of the facts which the national court puts before it. It is not, in other words, for the Court of Justice, but for the national court, to ascertain the facts which have given rise to the dispute and to establish the consequences which they have for the judgment which it is required to deliver. 3

31As the Commission and the translators have contended, it has been irrevocably established within the national legal system that the translators are working in an employer-employee relationship with the Ministry of Foreign Affairs. This relationship is evident, inter alia, from the fact that they are not free to determine their remuneration and conditions of employment, that the Ministry is liable to third parties for the quality of the translations and that the translators are subject to an internal system of sanctions with respect to compliance with their obligations.

32In these circumstances it is clear that the translators do not perform an economic activity as self-employed persons and are not therefore 'taxable persons' within the meaning of Article 4(1) of the Sixth Directive. Consequently, the services they provide do not fall within the scope of the Sixth Directive.

33It follows from this that, as the amount mistakenly mentioned on the invoice issued by the translators cannot be regarded as VAT, the first question submitted by the national court must be answered in the negative.

34The conclusion that the situation described in the first question submitted for a preliminary ruling does not fall within the scope of the Sixth Directive means that the second question no longer serves any purpose. Strictly speaking, it does not therefore need to be answered to enable the dispute to be resolved. None the less, I will comment on it as follows for the sake of completeness, though superfluously.

35In the second question it submits for a preliminary ruling the national court asks whether the formal principle governing the tax as set out in Article 21(1)(c) of the Sixth VAT Directive must be declared inapplicable where under Article 4(5) of the Sixth Directive the authorities are deemed not to be taxable persons, the tax has not been passed on to the end consumer and the provider of the service calls for the reimbursement of the VAT mistakenly paid. Or, conversely, where the State acts as a non taxable provider of a service, are amounts which are formally (though mistakenly) mentioned as VAT on the invoice within the meaning of Article 21(1)(c) of the Sixth Directive nevertheless not owed as VAT?

36The Sixth Directive does not explicitly provide for a situation in which VAT has been mistakenly included on an invoice when it is not owed. This means that, until this gap has been filled by the Court, it is for the Member States to find a solution in this regard. 4 In the judgment in Genius Holding, which concerned the right to deduct VAT mentioned on an invoice without being owed, the Court also indicated that — as a result of the need to ensure the neutrality of VAT — it is for the Member States to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the person who issued the invoice shows that he acted in good faith.

37In the judgment in Schmeinck & Cofreth the Court added that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional upon the issuer of the relevant invoice having acted in good faith where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues.

38These observations do not, however, lead to a separate, definite answer to the second question referred for a preliminary ruling. As I have already concluded above that the situation underlying the questions submitted for a preliminary ruling does not fall within the scope of the Sixth Directive, the loss of tax revenue is not under discussion and the question of the good faith of the issuer of the invoice is irrelevant. What is relevant in these circumstances, on the other hand, is whether or n ot the p r i n c i p le laid d o wn in Article 21(1)(c) must be declared inapplicable.

V — Conclusion

39Having regard to the above, I propose that the Court should answer the first question submitted by the Diikitiko Efetio Athinon as follows:

The amount mentioned on an invoice by a person who provides services to the State as a salaried employee is not VAT within the meaning 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 where the person providing these services mistakenly considers that he is providing services to the State as a self-employed person whilst, in reality, he is an employee and, on the recommendation of his employer, charges VAT on the invoices issued by him and not on his total earnings received from the State, which in law constitute the tax basis of assessment to VAT, subsequently collected from his earnings, but where the amount thereof is determined on the earnings by means of an internal deduction method and the earnings are regarded as containing the amount of VAT owed, while the State reduces the amount of legitimate earnings paid to that person by the element of VAT they are calculated to contain.

Notes

(1) Original language: Dutch.

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

(3) See, inter alia, the judgments in Case C-30/93 AC-ATEL Electronics [1994] ECR I-2305, paragraphs 16 and 17, Case C-326/96 Levez [1998] ECR I-7835, paragraphs 25 and 26, and Case C-435/97 WWF and Others [1999] ECR I-5613, paragraphs 31 and 32.

(4) Judgment in Case C-454/98 Schmeinck & Cofreth [2000] ECR I-6973, paragraphs 48 and 49.

(5) J u d g m e nt in Case C-342/87 Genius Holding [1989] ECR 4227, paragraph 18.

(6) Judgment in Schmeinck & Cofreth (cited in footnote 4, paragraphs 60 to 63).