C-8/01 Taksatorringen

JUDGMENT OF THE COURT (Fifth Chamber)

20 November 2003 *

In Case C-8/01,

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

Assurandør-Societetet, acting on behalf of Taksatorringen,

and

Skatteministeriet,

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

* Language of the case: Danish.

THE COURT (Fifth Chamber),

composed of: P. Jann, acting for the President of the Fifth Chamber, A. La Pergola and S. von Bahr (Rapporteur), Judges,

Advocate General: J. Mischo, Registrar: H.A. Rühi, Principal Administrator,

after considering the written observations submitted on behalf of:

— Assurandør-Societetet, acting on behalf of Taksatorringen, by M. Svanholm and R. Philip, advokater,

— the Danish Government, by J. Molde, acting as Agent, assisted by K. Lundgaard Hansen, advokat,

— the United Kingdom Government, by G. Amodeo, acting as Agent, assisted by A. Robertson, Barrister,

— the Commission of the European Communities, by R. Lyal and N.B. Rasmussen, acting as Agents, having regard to the Report for the Hearing,

after hearing the oral observations of Assurandør-Societetet, acting on behalf of Taksatorringen, represented by M. Svanholm and R. Philip, of the Danish Government, represented by K. Lundgaard Hansen, and of the Commission, represented by R. Lyal and T. Fich, acting as Agent, at the hearing on 27 June 2002,

after hearing the Opinion of the Advocate General at the sitting on 3 October 2002,

gives the following

Judgment

Legal context and the dispute

1By order of 20 December 2000, received at the Court on 10 January 2001, the Østre Landsret (Eastern Regional Court) referred to the Court for a preliminary ruling under Article 234 EC five questions on the interpretation of Article 13A(1)(f) and 13B(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) ('the Sixth Directive').

2Those questions have arisen in a dispute between Assurandør-Societetet (association of insurance companies), acting on behalf of Taksatorringen ('Taksatorringen'), and Skatteministeriet (the Danish Ministry of Fiscal Affairs) concerning the latter's refusal to grant exemption from value added tax ('VAT') for the activities of Taksatorringen.

Legal framework

Community legislation

3Article 13A(1)(f) of the Sixth Directive provides as follows:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:...

(f) services supplied by independent groups of persons whose activities are exempt from or are not subject to value added tax, for the purpose of rendering their members the services directly necessary for the exercise of their activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to produce distortion of competition'.

4Article 13B(a) of the Sixth Directive provides:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents'.

5Article 2(1) of Council Directive 77/92/EEC of 13 December 1976 on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of the activities of insurance agents and brokers (ex ISIC Group 630) and, in particular, transitional measures in respect of those activities (OJ 1977 L 26, p. 14) provides as follows:

'This Directive shall apply to the following activities falling within ex ISIC Group 630 in Annex III to the General Programme for the abolition of restrictions on freedom of establishment:

(a) professional activities of persons who, acting with complete freedom as to their choice of undertaking, bring together, with a view to the insurance or reinsurance of risks, persons seeking insurance or reinsurance and insurance or reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim;

(b) professional activities of persons instructed under one or more contracts or empowered to act in the name and on behalf of, or solely on behalf of, one or more insurance undertakings in introducing, proposing and carrying out work preparatory to the conclusion of, or in concluding, contracts of insurance, or in assisting in the administration and performance of such contracts, in particular in the event of a claim;

(c) activities of persons other than those referred to in (a) and (b) who, acting on behalf of such persons, among other things carry out introductory work, introduce insurance contracts or collect premiums, provided that no insurance commitments towards or on the part of the public are given as part of these operations.'

National legislation

6Article 13A(1)(f) and 13B(a) of the Sixth Directive was transposed in Danish law by Paragraph 13(1).10 and 20 of the Momslov (Law on value added tax). Under those provisions, the following are exempt from VAT:

'10. Insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents.

20. Services supplied by independent groups of persons who carry on activities which are exempt from or not subject to value added tax, for the purpose of providing their members with the services directly required for the exercise of their activity. This is subject to the condition that the payment made by individual members for these services corresponds exactly to each member's share of the joint expenses and that the exemption from tax liability cannot give rise to distortions of competition.'

The dispute in the main proceedings and the questions submitted for preliminary ruling

7According to the order for reference, Taksatorringen is an association whose members are small or medium-sized insurance companies authorised to under write motor-vehicle insurance policies in Denmark. The association has approximately 35 members.

8The purpose of Taksatorringen is to assess damage to motor vehicles in Denmark on behalf of its members. The latter are required to use the services provided by Taksatorringen in respect of damage to motor vehicles incurred within Denmark.

9The expenses involved in Taksatorringen's activity are apportioned among the members in such a way that the payments made by each member for the services provided by the association correspond exactly to that member's share of the joint expenses.

10Members may withdraw from Taksatorringen by giving six months' notice.

11In the case where a policy holder's vehicle has been damaged and is to be repaired at the expense of a company affiliated to Taksatorringen, the policy holder draws up a declaration of damage, which he hands over, together with the damaged vehicle, to the car-repair workshop of his choice. The workshop examines the damaged vehicle and, on conclusion of its examination, requests that the vehicle be inspected by an assessor ('the expert') from one of Taksatorringen's local assessment centres.

12The expert estimates the damage to the vehicle after consultation with the workshop. He compiles a detailed report containing a description of the work to be carried out and information on the total expenses involved in repairing the damage. The repair work must be carried out under the conditions laid down in the expert's report. Should the workshop become aware, while carrying out the repair work, of discrepancies between the information contained in the expert's report and the actual damage, it must contact the expert in order to establish exact agreement on any amendments to be made to the assessment.

13If the costs involved in repairing the damage to the vehicle are below DKK 20 000 (approximately EUR 2 700), the insurance company pays the amount calculated in the expert report directly to the workshop immediately after the date of completion of the work. The expert report functions as an invoice for the work in question. Should the repair costs exceed DKK 20 000, the workshop draws up an invoice, which must be approved by the expert before the insurance company makes payment to the workshop.

14In the case of a 'total write-off', that is to say, damage involving repair costs in excess of 75% of the commercial value of the vehicle, the expert agrees with the policy holder on an amount in compensation corresponding to the value of a new purchase. The expert then draws up a compensation report, on the basis of which the insurance company pays compensation to the policy holder. Once the expert has invited tenders for the vehicle wreck, arranged for its disposal and forwarded the proceeds of the sale to the insurance company, the matter is then concluded so far as Taksatorringen is concerned.

15The experts employed by Taksatorringen use a computerised system, known as 'Autotaks', for the purpose of damage assessment. This system has been used in Denmark since 1990 by all insurance companies that underwrite car insurance policies. Although Danish motor vehicle workshops have no right of consultation in respect of the Autotaks system, all of them have, through agreements concluded with the insurance companies, accepted the use of that system.

16The Autotaks system is based on an international computerised system owned by a Swiss company which issues licences to users. In the case of Denmark, the rights of user in respect of the system belong to Forsikring & Pension, a sector-based association covering, inter alia, insurance companies, which took over activities relating to the Autotaks system from Automobilforsikringsselskabernes Fællesråd (joint council of motor vehicle insurance companies) when the latter relinquished its activities on 1 January 1999.

17The Østre Landsret states that there is nothing to prevent an insurance company which is a member of Forsikring & Pension from engaging an independent subcontractor to carry out assessments and from authorising that subcontractor to use the Autotaks system for that purpose, in return, where appropriate, for payment of a fee to Forsikring & Pension.

18The order for reference further states that Taksatorringen originally received, in December 1992, from the Told- og Skattestyrelse (Customs and Tax Authority), provisional authorisation to conduct its activities without being subject to prior registration for VAT purposes. Following complaints by several undertakings, this provisional authorisation was revoked on 30 September 1993. The Østre Landsret does, however, point out that it has transpired that the complainant undertakings did not carry out vehicle assessments and did not specifically plan to offer such a service.

19Taksatorringen thereupon reapplied for VAT exemption, but its application was turned down by the Told- og Skatteregion Hvidovre (Hvidovre regional customs and tax authority) (Denmark). That refusal was confirmed by the Told- og Skattestyrelse, following which Taksatorringen brought the matter before the Momsnævn (VAT Tribunal).

20Before the Momsnævn, Taksatorringen argued that its activity ought to be exempt from VAT on foot of Paragraph 13(1).20 of the Momslov.

21By decision of 4 April 1997 the Momsnævn upheld the refusal by the Told- og Skattestyrelse. It took the view, inter alia, that an exemption could give rise to distortions of competition inasmuch as the assessments carried out by Taksatorringen were not in principle distinguishable from other assessments and the services which it provided could, by virtue of their nature, be offered by other, independent experts. Even if it were accepted that an exemption would not, under the conditions then obtaining, result in distortion of competition, that would be attributable, not to the nature of the services provided by Taksatorringen, but rather to the fact that the affiliated undertakings debarred themselves, pursuant to Taksatorringen's constituent articles, from engaging in such competition.

22Taksatorringen has challenged the decision of the Momsnævn before the Østre Landsret.

23The Østre Landsret points out that, in support of its action, Taksatorringen contends essentially that services such as those which it provides come within the exemption for insurance activities under Article 13B(a) of the Sixth Directive, or, in the alternative, that they should be exempted as being services provided as part of an insurance transaction performed by an insurance broker or insurance agent pursuant to that provision. Moreover, according to Taksatorringen, an undertaking which meets the other conditions set out in Article 13A(1)(f) of the Sixth Directive cannot be refused VAT exemption if such exemption does not give rise to an actual distortion of competition or involve a genuine threat of such distortion.

24According to the Østre Landsret, the parties are in agreement that, at the time when VAT exemption was refused to Taksatorringen, there was no actual or specific danger that an exemption would have given rise to a distortion of competition.

25It was in those circumstances that the Østre Landsret decided to stay the proceedings and to refer the following five questions to the Court for a preliminary ruling:

'1. Must the provisions of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, and in particular the provision in Article 13B(a) thereof, be interpreted as meaning that assessment services which an undertaking provides for its members are to be regarded as being covered by the term "insurance transactions", within the meaning of that provision, or by the term "related services performed by insurance brokers and insurance agents"?

2. Must Article 13A(1)(f) of the Sixth VAT Directive be interpreted as meaning that exemption from VAT must be granted for services of the type which an undertaking — which otherwise meets the conditions set out in that provision for VAT exemption — provides for its members, in the case where it cannot be demonstrated that the exemption will produce actual or imminent distortion of competition but where there is merely a possibility that this might happen?

3. Does the issue of how remote the possibility of a distortion of competition may be assumed to be, or whether the possibility seems unrealistic, have any bearing on the answer to Question 2?

4. Would it be incompatible with Article 13A(1)(f) of the Sixth VAT Directive to proceed on the basis that under national law it is possible to make a tax exemption that is notified pursuant to that provision limited in time in cases where there is doubt as to whether the exemption might at a later stage distort competition?

5. Does the fact that assessment services are, so far as the largest insurance companies are concerned, provided by assessors employed by those insurance companies themselves and are thus exempt from VAT have any bearing on the answers to Questions 1 and 2?'

The first question

26By this question, the Østre Landsret is in essence asking whether or not Article 13B(a) of the Sixth Directive is to be construed as meaning that motor vehicle damage assessments carried out, on behalf of its members, by an association whose members are insurance companies are insurance transactions or related services performed by insurance brokers or insurance agents. Observations submitted to the Court

27So far as the interpretation of the term 'insurance transactions' is concerned, Taksatorringen contends that it follows from paragraph 17 of the judgment in Case C-349/96 Card Protection Plan [1999] ECR I-973 that this term does not cover solely the risk that a given event may occur but also extends to payment of a premium to the insured party in the event that the risk insured against materialises. As assessment of the damage constitutes a necessary stage in the fixing of the compensation payable to the insured party, it ought to be treated as a necessary and inseparable step in the exercise of insurance activities and thus as coming within the concept of 'insurance transactions' under Article 13B(a) of the Sixth Directive.

28Furthermore, the assessment of damage may be carried out both by an organisation such as Taksatorringen and by the insurance company itself without that having any significance as regards the tax exemption (see, in regard to financial institutions, Case C-2/95 SDC [1997] ECR I-3017).

29With regard to the concept of 'insurance brokers and insurance agents', Taksatorringen submits that reference may be made to Directive 77/92. According to Article 2(1)(b) of that directive, an 'insurance agent or broker' performs an activity which constitutes, inter alia, 'assisting' in the administration and performance of insurance contracts, in particular in the event of a claim, in the name of or on behalf of one or more insurance companies. Taksatorringen argues that the activity in which it engages comes within that definition and that it should for that reason be regarded as an insurance agent or broker for the purposes of that provision.

30Skatteministeriet and the United Kingdom Government take the view that Card Protection Plan, cited above, and Case C-240/99 Skandia [2001] ECR I-1951 establish that assessment services such as those which Taksatorringen provides for its members cannot be treated as 'insurance transactions' within the meaning given to that term in Article 13B(a) of the Sixth Directive.

31They argue that an insurance transaction necessarily implies the existence of a contractual relationship between the provider of the insurance service and the person whose risks are covered by the insurance, that is to say, the insured party (see Skandia, cited above, paragraph 41). No such contractual relationship exists between Taksatorringen and the insured parties inasmuch as Taksatorringen does not undertake any commitment with regard to the risk covered.

32With regard to the concept of 'related services [that is to say, services related to insurance transactions] performed by insurance brokers and insurance agents', Skatteministeriet submits that this covers services which are provided, as part of their everyday activity, by persons acting as intermediaries between the insurer and the insured party during the preparation and signing of insurance contracts and who may participate in the administration and performance of such contracts in the event of a claim. The specialised assessment activities of Taksatorringen, it submits, amount to no more than the provision of a subcontracting service on behalf of its members.

33The United Kingdom Government submits that the activities performed by Taksatorringen do not correspond to those of an insurance broker or insurance agent, within the meaning of Directive 77/92, the characteristic feature of which is that they give rise to a direct relationship with the insured parties.

34The Commission argues that it follows from paragraphs 16 and 17 of Card Protection Plan that an 'insurance transaction' consists in the assumption by the insurer of a risk which would otherwise be borne by the insured party. A service consisting in the assessment of damage does not involve assumption of responsibility for a risk but constitutes a separate service necessary for the exercise of the insurance activity.

35In regard to the concept of 'related services performed by insurance brokers and insurance agents', the Commission submits that an undertaking such as Taksatorringen is neither an 'insurance broker' nor an 'insurance agent' and that its activity is also not covered by the definition in Article 2 of Directive 77/92.

Grounds

Findings of the Court

36It should be noted at the outset that the terms used to specify the exemptions provided for by Article 13 of the Sixth Directive must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, in particular, Case 348/87 Stichting Uitvoering Financiële Acties [1989] ECR 1737, paragraph 13, and Case C-287/00 Commission v Germany [2002] ECR I-5811, paragraph 43).

37It is settled case-law that those exemptions constitute independent concepts of Community law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another (see, in particular, Card-Protection Plan, paragraph 15, Skandia, paragraph 23, and Commission v Germany, cited above, paragraph 44).

38The Sixth Directive does not define either of the terms 'insurance transactions' or 'related services performed by insurance brokers and insurance agents'.

39So far as the term 'insurance transactions' is concerned, the Court has, however, ruled that the essentials of an insurance transaction are, as generally understood, that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded (Card Protection Plan, paragraph 17, and Skandia, paragraph 37).

40The Court has, admittedly, stated that the expression 'insurance transactions' did not cover solely transactions carried out by the insurers themselves but was broad enough in principle to include the provision of insurance cover by a taxable person who was not himself an insurer but, in the context of a block policy, procured such cover for his customers by making use of the supplies of an insurer who assumed the risk insured (Card Protection Plan, paragraph 22, and Skandia, paragraph 38).

41In paragraph 41 of Skandia, however, the Court held that, according to the definition of insurance transactions set out in paragraph 39 of the present judgment, it appears that the identity of the person supplied with the service is relevant for purposes of the definition of the type of services covered by Article 13B(a) of the Sixth Directive and that an insurance transaction necessarily implies the existence of a contractual relationship between the provider of the insurance service and the person whose risks are covered by the insurance, that is to say, the insured party.

42The unavoidable conclusion is that an association, such as Taksatorringen, whose members are insurance companies and which carries out assessments of damage to motor vehicles on behalf of its members does not have any contractual relationship with the insured parties.

43So far as concerns Taksatorringen's argument based on an interpretation by analogy of the judgment in SDC, cited above, which involved financial bodies, suffice it to recall that, in contrast to the case which gave rise to the judgment in SDC, in which the Court had to interpret Article 13B(d) of the Sixth Directive, points 3 and 5 of which refer in a general way to transactions 'concerning' or relating to certain banking operations, rather than solely to banking operations proper, the exemption provided for in Article 13B(a) of the Sixth Directive covers insurance transactions in the strict sense (see Skandia, paragraph 36).

44As to whether such services are 'related services performed by insurance brokers and insurance agents', it must be stated, as the Advocate General has set out in point 86 of his Opinion, that this expression refers only to services provided by professionals who have a relationship with both the insurer and the insured party, it being stressed that the broker is no more than an intermediary.

45With regard to Directive 77/92, without its being necessary to rule on whether the terms 'broker' and 'insurance agent' must necessarily be construed in the same manner in Directive 77/92 as they are in the Sixth Directive, suffice it to note that, for the reasons stated by the Advocate General in points 90 and 91 of his Opinion, the activity of an association such as Taksatorringen fails to satisfy the conditions of Article 2(1)(a) or 2(1)(b) of Directive 77/92. The assistance in the administration and performance of contracts of insurance referred to in Article 2(1)(a) of that directive is in addition to the activities involved in introducing persons seeking insurance and the insurance companies and in preparing and concluding insurance contracts and that referred to in Article 2(1)(b) of that directive involves the power to render the insurer liable in respect of an insured person who has incurred a loss.

46The answer to the first question submitted must therefore be that Article 13B(a) of the Sixth Directive must be construed as meaning that motor vehicle damage assessments carried out, on behalf of its members, by an association whose members are insurance companies are neither insurance transactions nor services related to insurance transactions that are performed by insurance brokers or insurance agents within the meaning of that provision.

The second and third questions

47By these two questions, which it is appropriate to examine together, the Østre Landsret is asking in substance whether Article 13A(l)(f) of the Sixth Directive is to be interpreted as meaning that the grant under that provision of VAT exemption to an association such as that in issue in the main proceedings, which satisfies all of the other conditions of that provision, must be refused if there is a risk, even a notional risk, that such an exemption may give rise to distortions of competition.

Observations submitted to the Court

48Taksatorringen submits that the argument that, when Article 13A(1)(f) of the Sixth Directive is being applied, account must be taken of the distortion of competition to which an exemption from VAT might give rise in the future has the effect of depriving that provision of its purpose given that the purely hypothetical possibility can never be excluded that there may one day be a distortion of competition, irrespective of whether a damage assessment activity or any other form of activity is involved. That, it argues, could not have been the intention of the Community legislature. A refusal to exempt must be subject to a real and well-founded probability which can be shown to exist only if it is established that the exemption will give rise to an actual or specific risk that competition may be distorted.

49Skatteministeriet argues that the exemption under Article 13A(1)(f) of the Sixth Directive must be refused where it is liable, actually or potentially, to give rise to distortions of competition. It suffices if such an exemption involves a potential risk that independent third parties may refrain from establishing themselves on the market to provide the services in question.

50In the case in the main proceedings, it is manifestly advantageous, for purely economic reasons, to remain a member of Taksatorringen and to have the assessments in question carried out by that association rather than entrusting that task to an independent third party so long as the services which Taksatorringen provides for its members are exempt by reason of provisional authorisations granted by the Danish fiscal authorities. Those authorisations thus have the effect of preventing actual competition on the Danish market for damage assessment reports on motor vehicles and at the same time of dissuading independent third parties from seriously contemplating establishment on that market.

51Although restrictive, this interpretation of Article 13A¹(f) of the Sixth Directive would not, it submits, render the provision meaningless inasmuch as there are always situations in which an exemption would not be regarded as potentially preventing independent third parties from becoming established on the market in question.

52In this regard, Skatteministeriet refers to, inter alia, the situation in which, pursuant to national legislation, specific restrictions exist on the possibility of becoming established on the market, for example because that legislation confers on certain undertakings, in compliance with Community law, special or exclusive rights to provide the services which the Member State concerned wishes to exempt pursuant to Article 13A(1)(f) of the Sixth Directive.

53Skatteministeriet points out that, once it has been confirmed that there is a potential risk that exemption under Article 13A(1)(f) of the Sixth Directive may give rise to distortions of competition, it is not for the national fiscal authorities to consider whether such a distortion of competition is to be treated as being distant. It is particularly difficult for the national fiscal authorities to carry out such an appraisal as it presupposes an in-depth knowledge of the branch of activity concerned and of the conditions of competition on the market in question, knowledge which fiscal authorities do not in general possess.

54The Commission submits that it already follows from the words 'likely to produce distortion of competition' that the exemption provided for in Article 13A(1)(f) of the Sixth Directive is excluded from the outset in situations where there is a potential distortion of competition.

55Furthermore, the provisions that allow a transaction to be removed from the scope of the Sixth Directive must, by reason of their derogating nature, be construed narrowly (with regard to Article 13A(1)(f) of the Sixth Directive, see Stichting Uitvoering Financiële Acties, cited above).

56The final clause in Article 13A(1)(f) of the Sixth Directive thus restricts the scope of that provision to those cases alone in which there is no doubt that an exemption will not, actually or potentially, give rise to a distortion of competition. Independent providers of certain services are thus placed in the same tax situation as are independent groups of persons engaged in an exempted activity.

57Under that interpretation, there is no distortion of competition within the meaning of Article 13A(1)(f) of the Sixth Directive in the case where the type of investment — for example, a scanner for medical purposes — and the limited group of 'customers' who will use it are such as are liable to dissuade potential providers by reason of the economic risk of that activity, even though there may potentially be an additional provider. By contrast, an exemption for cleaning services would be liable to distort competition as there is no particular specialisation or limitation of the clientele to a clearly defined sector.

Findings of the Court

58It is necessary at the outset to state that it is the VAT exemption in itself which must not be liable to give rise to distortions of competition on a market in which competition will in any event be affected by the presence of an operator which provides services for its members and which is prohibited from seeking profits. It is thus the fact that the provision of services by a group is exempt, and not the fact that this group satisfies the other conditions of the provision in question, which must be liable to give rise to distortions of competition in order that this exemption may be refused.

59As the Advocate General has stressed in point 131 of his Opinion, if, irrespective of any taxation or exemption, the groups are assured of keeping their members' custom, there is no reason to take the view that it is the exemption granted them that closes the market to independent operators.

60Moreover, it must be borne in mind that the aim of Article 13A of the Sixth Directive is to exempt from VAT certain activities which are in the public interest. That provision does not, however, provide exemption from the application of VAT for every activity performed in the public interest, but only for those activities which are listed and described in great detail in it (see, in particular, Case C-149/97 Institute of the Motor Industry [1998] ECR I-7053, paragraph 18, and Commission v Germany, cited above, paragraph 45).

61It is, admittedly, true that it follows from the case-law cited in paragraph 36 of the present judgment that the terms used to designate the exemptions referred to in Article 13 of the Sixth Directive must be construed strictly.

62It is, however, also no less true that it is not the purpose of that case-law to impose an interpretation which would make the exemptions set out in that provision more or less inapplicable in practice.

63Consequently, although a comparative examination of the different language versions of Article 13A(l)(f) of the Sixth Directive shows that the expression 'provided that such exemption is not likely to produce distortion of competition' is not directed solely at distortions of competition which the exemption is likely to produce immediately but also at those to which it may give rise in the future, the risk that the exemption will by itself give rise to distortions of competition must none the less be real.

64It follows that the grant of VAT exemption must be refused if there is a genuine risk that the exemption may by itself, immediately or in the future, give rise to distortions of competition.

65The answer to the second and third questions must therefore be that Article 13A(l)(f) of the Sixth Directive must be construed as meaning that the grant of VAT exemption under that provision to an association such as that in issue in the main proceedings and which satisfies all of the other conditions of that provision must be refused if there is a genuine risk that the exemption may by itself, immediately or in the future, give rise to distortions of competition.

The fourth question

Observations submitted to the Court

66Taksatorringen and Skatteministeriet submit that it is clear from the preparatory documents relating to Paragraph 13(1).20 of the Momslov that, where doubt exists as to whether an exemption is liable to give rise subsequently to a distortion of competition, the exemption may be granted subject to a limitation in time.

67Taksatorringen, Skatteministeriet and the Commission are in agreement that the possibility of granting such a temporary exemption is compatible with Article 13A(1)(f) of the Sixth Directive.

Findings of the Court

68There is nothing in the Sixth Directive to justify the conclusion that national legislation which allows a temporary exemption to be granted where doubt exists as to whether that exemption is liable at a later date to give rise to distortions of competition is incompatible with Article 13A(1)(f) of the Sixth Directive, provided that the exemption is renewed only for as long as the person concerned satisfies the conditions of that provision.

69The answer to the fourth question must therefore be that national legislation which allows a temporary exemption to be granted where doubt exists as to whether that exemption, such as that in the case in the main proceedings, is liable at a later date to give rise to distortions of competition is compatible with Article 13A(1)(f) of the Sixth Directive, provided that the exemption is renewed only for as long as the person concerned satisfies the conditions of that provision.

The fifth question

70By this question, the Østre Landsret is essentially asking whether the fact that large insurance companies have the assessments of damage to motor vehicles carried out by their own experts, thereby avoiding liability to VAT, may have a bearing on the answers to be given to the first three questions.

Observations submitted to the Court

71Taksatorringen contends that, from the point of view of VAT, there ought to be no difference according to whether the assessment of damage caused to motor vehicles is carried out within the insurance company or whether the company entrusts a service provider such as Taksatorringen with that task.

72Taksatorringen points out in this regard that the large insurance companies in Denmark themselves carry out the assessment of damage to motor vehicles, whereas this is not financially possible for small and medium-sized undertakings in view of the resources involved. If the latter undertakings were required to pay VAT for the assessment services provided by Taksatorringen, the large insurance companies would enjoy a competitive advantage in view of the fact that they do not have to pay VAT on their assessments.

73In the opinion of Skatteministeriet and the Commission, the fact that VAT does not apply to assessments carried out by the experts employed by large insurance companies has no bearing on the interpretation of the provisions here in issue.

Findings of the Court

74It should be noted in this regard that, in its analysis for the purpose of replying to the first three questions, the Court took account of all aspects of the provision in question and the VAT system in its totality. It follows that the fact that large insurance companies have the assessments of damage to motor vehicles carried out by their own experts, thereby avoiding VAT liability in respect of the provision of such services, cannot have any independent bearing on the interpretation of the provisions of Article 13A(1)(f) and 13B(a) of the Sixth Directive.

75The answer to the fifth question must therefore be that the fact that large insurance companies have the assessments of damage to motor vehicles carried out by their own experts, thereby avoiding VAT liability in respect of the provision of such services, is not such as to have any bearing on the answers to be given to the first three questions.

Costs

Costs

76The costs incurred by the Danish and United Kingdom Governments and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Østre Landsret by order of 20 December 2000, hereby rules:

1. Article 13B(a) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be construed as meaning that motor vehicle damage assessments carried out, on behalf of its members, by an association whose members are insurance companies are neither insurance transactions nor services related to insurance transactions that are performed by insurance brokers or insurance agents within the meaning of that provision.

2. Article 13A(1)(f) of Sixth Council Directive 77/388 must be construed as meaning that the grant of exemption from value added tax under that provision to an association such as that in issue in the main proceedings and which satisfies all of the other conditions of that provision must be refused if there is a genuine risk that the exemption may by itself, immediately or in the future, give rise to distortions of competition.

3. National legislation which allows a temporary exemption to be granted where doubt exists as to whether that exemption, such as that in the case in the main proceedings, is liable at a later date to give rise to distortions of competition is compatible with Article 13A(1)(f) of Sixth Directive 77/388, provided that the exemption is renewed only for as long as the person concerned satisfies the conditions of that provision.

4. The fact that large insurance companies have the assessments of damage to motor vehicles carried out by their own experts, thereby avoiding liability for value added tax in respect of the provision of such services, is not such as to have any bearing on the answers to be given to the first three questions.

Jann La Pergola von Bahr Delivered in open court in Luxembourg on 20 November 2003.

R. Grass

V. Skouris

Registrar President

OPINION OF ADVOCATE GENERAL MISCHO delivered on 3 October 2002 1

1Although most unusual for a new system of tax, when the Community system of value added tax (hereinafter 'VAT') was introduced, it succeeded in securing a large degree of support.

2This support can no doubt be ascribed in part to the manifest shortcomings of most of the outdated fiscal systems which it replaced.

3Its fundamental justification, however, is to be found in the advantages inherent in VAT and especially in the neutrality which is of its essence. VÁT is structured in such a way that liability for the tax falls on the end customer and is the same, however complicated the route taken by the goods or services in question before they reach him.

4This result is achieved by bringing all transactions within the scope of the tax, while at the same time incorporating a mechanism for deduction, whereby a taxable person is required to pay to the fiscal authorities only the difference between the amount of tax he himself has paid to his suppliers and the amount of tax paid to him by his customers when making payment of sums invoiced.

5However, this pleasant harmony may be broken if the principle of general application of the tax is departed from, whether in the area of defining those who are taxable persons or in that of setting out those transactions which are taxable.

6The risk of distortion is material when there is a break, irrespective of its circumstances, in the chain which, in linking taxation and deductibility, leads to the end customer.

7A trader who is not a taxable person or who undertakes an exempt transaction cannot deduct VAT because he does not receive any. Save only where he carries on business in a sector operating wholly outside the VAT system, both as regards purchases as well as sales, the carrying on of his activities will mean that when he purchases goods or services from third parties he will have to pay VAT without being able to recover it.

8To mention these difficulties is not, however, to dismiss exceptions to the general scope of the tax under the guise of a form of purism which cannot replace the role of the political authorities in structuring the taxation system.

9Specific transactions may be exempted from VAT and certain categories of persons may be declared not to be taxable in order to address perfectly understandable concerns, particularly where these relate to the end cost payable by customers, for example in the field of medical and hospital services.

10However understandable and justifiable they may be, it is not surprising that the exemptions specified by the Community legislature in the Sixth Council Directive 77/388/EEC of 17 May 1997 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment 2 (hereinafter the 'Sixth Directive') have none the less been subject to challenge. This applies particularly to the question of their application, as they may affect different operators in different ways, some being able to benefit fully from them, and others, for various reasons, being unable to do so to the same extent.

11This is precisely the situation that has arisen in the case relating to the exemptions specified in Article 13A(1)(f) and 13B(a) of the Sixth Directive brought by Assurandør-Societetet (Association of Insurance Companies), acting on behalf of Taksatorringen (hereinafter 'Taksatorringen'), before the Østre Landsret (Eastern Regional Court) (Denmark), against Skattenministeriet (The Ministry of Fiscal Affairs).

12Taksatorringen is an association established by small and medium-sized insurance companies authorised to underwrite motor-vehicle insurance policies in Denmark. The association has approximately 35 members.

13The purpose of the association is to assess damage caused to motor vehicles in Denmark on behalf of its member companies, its members being required to allow Taksatorringen to assess damage to motor vehicles insured with them throughout Denmark.

14The expenses involved in Taksatorringen's activity are apportioned among its members in such a way that an individual member's payment for services provided by the association corresponds exactly to that member's share of the joint expenses.

15Members may terminate their membership of Taksatorringen by giving six months' notice.

16Where a policy holder's vehicle has been damaged and is to be repaired at the expense of a company affiliated to Taksatorringen, the policy holder draws up a damage declaration which, along with the damaged vehicle, is brought to a car-repair workshop of the policy holder's own choice. The workshop examines the dam aged vehicle and, on conclusion of the examination, requests that the vehicle be inspected by an assessor (hereinafter 'the expert') from one of Taksatorringen's local assessment centres.

17The expert estimates the damage to the vehicle after consultation with the work shop. He prepares a detailed assessment report which contains a description of the work and information on spare parts, wages and paintwork, together with the total expenses involved in repairing the damage. This must be repaired in compliance with the expert's report. Should the workshop become aware, while carrying out the repair work, of discrepancies between the information contained in the expert's report and the actual damage, the expert must be contacted so that possible amendments to the prepared assessment report can be discussed.

18If the expenses involved in repairing the damage to the vehicle are below DKK 20 000, the insurance company pays the amount calculated in the expert's report directly to the workshop immediately after the date on which the repair work is completed. The expert's report functions as an invoice for the work in question. Should the costs involved in repairing the damage exceed DKK 20 000, the workshop draws up an invoice, to be approved by the expert, and the invoice is then sent to the insurance company, which arranges payment to the workshop.

19In the case of a 'total write-off', that is to say, damage in respect of which the repair costs exceed 75% of the commercial value of the vehicle, the expert agrees on cash compensation with the policy holder corresponding to the vehicle's replacement value. The expert prepares a compensation report, on the basis of which the insurance company arranges payment of the agreed compensation to the policy holder. The expert then invites tenders for the vehicle wreck and arranges for its disposal. The expert sends the proceeds to the insurance company, and the case can then be concluded for Taksatorringen's purposes.

20When assessing damage caused to vehicles that have been in an accident, experts employed by Taksatorringen use a computer-based system which, by agreement with the car repair trade, covers all insurance companies in Denmark that underwrite car insurance policies.

21The system is adapted from an international system, owned by a Swiss company which grants licences to use it. Rights of use in Denmark are held by Forsikring & Pension, which is a sector-based association representing insurance companies operating within the area of damage insurance. There is nothing to prevent an insurance company which is a member of Forsikring & Pension from engaging an independent subcontractor to provide assessment services and from authorising that subcontractor to use the system for that purpose in return for payment of a fee.

22In 1992, Taksatorringen was initially authorised by the tax authorities to carry on its activities without being obliged to register for VAT purposes. This authorisation was subsequently withdrawn in 1993.

23Taksatorringen thereupon reapplied for VAT exemption, basing its application on Paragraph 13(1).20 of the national law on VAT, which implements the Sixth Directive. This provides that there is to be a VAT exemption for:

'services supplied by independent groups of persons who carry on activities which are exempt from or not subject to value added tax, for the purpose of providing their members with the services directly required for the exercise of their activity. This is subject to the condition that the payment made by individual members for these services corresponds exactly to each member's share of the joint expenses and that the exemption from tax liability cannot give rise to distortions of competition.'

24As this application was unsuccessful, Taksatorringen brought proceedings before the Østre Landsret. As that court took the view that an interpretation of the Sixth Directive was required in order to answer the matter, it made use of the procedure under Article 234 EC to refer the following questions to the Court for a preliminary ruling:

'(1) Must the provisions of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, and in particular the provision in Article 13B(a) thereof, be interpreted as meaning that assessment services which an undertaking provides for its members are to be regarded as being covered by the term "insurance trans actions", within the meaning of that provision, or by the term "related services performed by insurance brokers and insurance agents"?

(2) Must Article 13A(1)(f) of the Sixth VAT Directive be interpreted as meaning that exemption from VAT must be granted for services of the type which an undertaking — which otherwise meets the conditions set out in that provision for VAT exemption — provides for its members, in the case where it cannot be demonstrated that the exemption will produce actual or imminent distortion of competition but where there is merely a possibility that this might happen?

(3) Does the issue of how remote the possibility of a distortion of competition may be assumed to be, or whether the possibility seems unrealistic, have any bearing on the answer to Question 2?

(4) Would it be incompatible with Article 13A(1)(f) of the Sixth VAT Directive to proceed on the basis that under national law it is possible to make a tax exemption that is notified pursuant to that provision limited in time in cases where there is doubt as to whether the exemption might at a later stage distort competition?

(5) Does the fact that assessment services are, so far as the largest insurance companies are concerned, provided by assessors employed by those insurance companies themselves and are thus exempt from VAT have any bearing on the answers to Questions 1 and 2?'

25The reference was received at the Court Registry on 10 January 2001 and was allocated case number C-8/01. Written observations were lodged by the two parties to the main action, and by the United Kingdom Government and the Commission.

26Before addressing these questions, reference should be made to the provisions of the Sixth Directive, to which the questions put by the national court refer.

27Article 13A(1)(f) of the Sixth Directive provides as follows:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of such exemptions and of preventing any possible evasion, avoidance or abuse:

(f) services supplied by independent groups of persons whose activities are exempt from or are not subject to value added tax, for the purpose of rendering their members the services directly necessary for the exercise of their activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, provided that such exemption is not likely to produce distortion of competition.'

28Article 13B(a) of the Sixth Directive provides that:

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

(a) insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents'.

The first question

29The first question referred by the national court in effect comprises two questions, as it asks the Court to consider Taksatorringen's activities in relation to two concepts appearing in Article 13B(a) of the Sixth Directive, namely those of 'insurance transactions' and 'related services performed by insurance brokers and insurance agents'.

30I shall start by attempting to define the concept of insurance transactions, and note immediately that, as was pointed out by the Court in the CPP case, which Taksatorringen cites and which also related to the exemption afforded to insurance transactions, the Sixth Directive does not define it in any way.

31In its judgment in the CPP case, the Court held that 'the essentials of an insurance transaction are, as generally understood, that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded' (paragraph 17).

32Taksatorringen claims that it follows from this that the concept of an insurance transaction is not restricted to the covering of a risk, but includes the payment of compensation to an insured party if the risk materialises. It argues that an assessment of the damage suffered by an insured party, without which compensation cannot be paid, cannot be separated from the carrying on of insurance activities and falls to be treated as an insurance transaction.

33At the very least, Taksatorringen's activities should be considered to be services ancillary to the covering of a risk. As such, and as the Court held at paragraph 30 of the CPP judgment, and confirmed in its judgment in Commission v France, 4 they should be subject to the same fiscal regime as that which applies to the covering of a risk, in other words, they should benefit from the exemption set out in Article 13B(a) of the Sixth Directive.

34Taksatorringen further argues in support of its position that the logic underlying the exemption for insurance transactions extends to providing an exemption for the services which it provides. As the Court held in the CPP case, the underlying intent is that the end customer, who already has to bear the cost of the special tax on insurance policies that may be levied by Member States, should not be penalised.

35Were the services provided by Taksatorringen to be subject to VAT, this would have a cost implication which, in one way or another, would result in the cost of insurance being increased.

36Taksatorringen relies on the CPP judgment for another reason. The Court there observed that 'a taxable person, not being an insurer, who, in the context of a block policy of which he is the holder, procures for his customers, who are the insured, insurance cover from an insurer who assumes the risk covered performs an insurance transaction within the meaning of [Article 13B(a) of the Sixth Directive]' (paragraph 25). It follows that the fact that Taksatorringen is not itself an insurance company does not prevent services provided by it from being exempted.

37Furthermore, a similar approach was 5 followed in the SD C case in relation to the exemptions laid down under points 3 and 5 of Article 13B(d) of the Sixth Directive, namely transactions, including negotiations, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments and transactions in shares.

38In that case, the Court held that the exemption provided for under these provisions 'is not subject to the condition that the transactions be effected by a certain type of institution, by a certain type of legal person or wholly or partly by certain electronic means or m a n u a l l y' (paragraph 38), and that 'the exemption... is not subject to the condition that the service be provided by an institution which has a legal relationship with the end customer. The fact that a transaction covered by those provisions is effected by a third party but appears to the end customer to be a service provided by the bank does not preclude exemption from the transaction' (paragraph 59).

39Taksatorringen does not seek to deny the fact that in the later Skandia judgment the Court, while basing its analysis on the CPP judgment, defined the concept of insurance transaction in a manner that does not support its position.

40In that judgment, the Court held 'that the identity of the person supplied with the service is relevant for the purposes of the definition of the type of services covered by Article 13B(a) of the Sixth Directive and that an insurance transaction necessarily implies the existence of a contractual relationship between the provider of the insurance service and the person whose risks are covered by the insurance, namely the insured' (paragraph 41). This led it to conclude that 'a commitment assumed by an insurance company to carry out, in return for remuneration at market rates, the business activities of another insurance company, which is its 100% subsidiary and which would continue to conclude insurance contracts in its own name, does not constitute an insurance transaction within the meaning of Article 13B(a) of the Sixth Directive' (paragraph 44).

41However, Taksatorringen claims that the reasoning underlying this judgment does not apply in the present case, because it does not invoice its services at market rates, but instead recovers its overheads from its member companies, with each of them being charged a contribution based on the average price of providing the services multiplied by the number of times it has called upon Taksatorringen to provide them.

42This analysis of the case-law is disputed in the other observations submitted to the Court.

43These are unanimously of the opinion that, as Article 13B(a) of the Sixth Directive represents an exception to the principle that tax is assessed on the provision of services, it should not be broadly construed. The Commission points out in this regard that in the case of D. the Court held that the exemption under Article 13A(1)(c) of the Sixth Directive which relates to the provision of medical and paramedical services does not extend to medical services which do not consist in providing medical care but in establishing the genetic affinity of individuals through biological tests, as their purpose is not to prevent, diagnose or treat a disease and accordingly they do not consist in the provision of care to a person.

44They all refer to the fact that both the CPP and the Skandia cases held that the identity of the recipient of a service is of fundamental importance, as is the existence of a legal relationship between the person who provides services under an insurance transaction and the recipient of those services, in this case the insured party. They point out that Taksatorringen not only does not provide cover to insured parties but also does not have any legal relationship with them.

45In their view, Taksatorringen is merely a provider of services to which insurance companies subcontract the task of assessing damage in respect of which compensation may fall to be paid. While this is an essential part of the underwriting operation, it is none the less distinct from it.

46Even if the services which Taksatorringen provides were to be considered to be services related to insurance transactions, Taksatorringen would still require to be an insurance broker or agent in order for the exemption to apply. This is also disputed, as will be seen below.

47The Commission also suggests that, for the purposes of the Sixth Directive, Taksatorringen's activities should be treated as being a supply of valuations of movable tangible property, expressly referred to by Article 9(2)(c) of the Sixth Directive, which determines the place of supply. They should therefore not be confused with the insurance transactions referred to in Article 13B(a) of the Directive.

48The United Kingdom Government argues that Article 28(3)(b) of the Sixth Directive also makes it clear that the Community legislature sought to distinguish assessment transactions from insurance transactions.

49That article provided for a transitional exemption, terminated by Eighteenth Council Directive 89/465/EEC of 18 July 1989 on the harmonisation of the laws of the Member States relating to turnover taxes — Abolition of certain derogations provided for in Article 28(3) of the Sixth Directive, 77/388, relating to the 'services of experts in connection with insurance claim assessments'.

50If these transactions were insurance transactions within the meaning of Article 13B(a) of the Sixth Directive, it would not have been necessary to have a special provision exempting them.

51As to which of the opposing submissions should be preferred, I am of the view that the argument that Article 13B(a) of the Sixth Directive should be interpreted narrowly because it provides for an exception to the general application of VAT to services provided for consideration (see Skandia, at paragraph 32) is not conclusive.

52As Advocate General Fennelly pointed out at paragraph 24 of his Opinion in CPP, this rule of interpretation does not mean that an exemption which has been unambiguously laid down must be given a particularly narrow interpretation.

53On the other hand, I am of the view that the judgments in CPP and Skandia are conclusive. Although they reached opposite views as to the existence in concreto of the right to an exemption sought by the respective applicants before the national courts, they adopt the same reasoning and form a perfectly coherent whole.

54The concept of an insurance transaction is construed in the same way in both judgments. It requires that there be in place an undertaking given by the party claiming the exemption in favour of the insured.

55In the CPP case, the Court held that 'CPP is the holder of a block insurance policy under which its customers are the insured. It procures for those customers, for payment, in its own name and on its own account... insurance cover by having recourse to an insurer' (paragraph 21).

56In the Skandia case, by contrast, the Court stated that 'Skandia would have no contractual relationship with persons insured with Livbolaget and would assume no liability in respect of the insurance business carried out, since all risks would devolve wholly upon Livbolaget, which would preserve its status of insurer' (paragraph 40).

57As the Court held, these two radically different legal situations, involving on the one hand a contract between the service provider and the insured party, and on the other a service provider who contracted only with an insurance company, had to be treated differently when it came to defining the scope of an exemption limited to insurance transactions.

58The first should be considered to be an insurance transaction, as the service provider procures insurance for consumers seeking cover for certain risks. The second cannot be an insurance transaction, because it involves a provider who supplies to an insurer a service which facilitates the carrying out of the latter's activities while remaining entirely outside the actual contract of insurance itself.

59If one applies this distinction to Taksatorringen, it is clear that its activities bear no resemblance to those of CPP, but are very similar to those of Skandia.

60It has no legal relationship with persons insured by the companies to which it provides services in order to enable them efficiently to meet the obligations they alone have undertaken in relation to the insured persons who make up their customers.

61Taksatorringen is merely a subcontractor of the insurance companies which are its members. The subcontracting arrangement does not relate to the essence of an insurance contract, that is to say, the provision of a guarantee against a risk in exchange for payment.

62Furthermore, Taksatorringen's argument that, unlike Skandia, it does not charge for its services at market rates, is without merit.

63It is true that this point is referred to in the operative part of the Skandia judgment, but that is only because the Court, following its settled practice, intended to provide an interpretation of Community law in the precise factual and legal context of the question referred by the national court for a preliminary ruling.

64The inclusion of this reference in no way means that the actual way in which Skandia was remunerated for its services had any bearing on the Court's analysis, and indeed there is no stage at which a reading of the judgment would suggest that this was the case.

65It is also not possible to understand in what way this point could have been of any significance in the context of the implementation of the Community VAT regime, the scope of which extends, subject to certain express exemptions, to the provision of all services for consideration, without drawing any distinction according to the method of calculating the amount invoiced by the provider of the services.

66The fact that the provider does not make a profit does not mean in any way that the service is not provided for consideration.

67I am also not persuaded by the support Taksatorringen seeks to draw from the SDC judgment.

68The terms of the SDC judgment, which is concerned with establishing the scope of the exemption laid down under Article 13B(d) of the Sixth Directive, admittedly appear less strict than the CPP and Skandia judgments, which relate to the exemption under Article 13B(a) of the Directive. However, this does not justify calling into question the approach taken by the CPP and Skandia judgments, as there is no question of following the same reasoning in relation to a provision exempting 'insurance transactions' as in relation to a provision exempting 'transactions concerning transfers', the wording of which itself suggests the possibility of an interpretation allowing an exemption for transactions the only purpose of which is to effect a transfer.

69Furthermore, in the SDC judgment the Court noted that the text of Article 13B(d) of the Sixth Directive was 'sufficiently broad to include services provided by operators other than banks to persons other than their end customers' (paragraph 56).

70Lastly, the argument that as Taksatorringen provides services ancillary to insurance transactions it should be subject to the same fiscal regime as those transactions also falls to be rejected. Even though the CPP judgment held that where ancillary services are provided they should receive the same tax treatment as the principal supply (see paragraph 32), it was envisaging services that were in each case provided to the end customer by the same provider.

71I would again stress that Taksatorringen does not provide its services to insured parties but to insurance companies. This is quite different from the situation addressed in the CPP judgment, and means that its services cannot be considered to be ancillary to the services which those companies provide to the parties whom they insure.

72It must therefore be held that the case-law developed by the Court in relation to the concept of an insurance transaction within the meaning of Article 13B(a) of the Sixth Directive means that the services provided by Taksatorringen to its members cannot come within the definition of insurance transactions and so be entitled to exemption from VAT. It is unnecessary to rely on the arguments put forward a contrario by the United Kingdom Government and the Commission in that regard.

73These arguments none the less confirm, should it be necessary to do so, that the Sixth Directive distinguishes clearly between transactions involving the assessment of damage and insurance transactions.

74This leads to the second possibility which the national court had in mind, namely whether, though it does not carry out insurance transactions, Taksatorringen should nevertheless be treated as coming within the category of insurance brokers or insurance agents, whose services are exempted by Article 13B(a) of the Sixth Directive when they relate to insurance transactions.

75Taksatorringen argues that this is the case. As the Sixth Directive does not provide any definition, it relies instead on Council Directive 77/92/EEC of 13 December 1976 on measures to facilitate the effective exercise of freedom of establishment and freedom to provide services in respect of the activities of insurance agents and brokers (ex ISIC Group 630) and, in particular, transitional measures in respect of those activities. 9

76Article 2(1) of Directive 77/92 states that:

'This Directive shall apply to the following activities falling within ex ISIC Group 630 in Annex III to the General Programme for the abolition of restrictions on freedom of establishment:

(a) professional activities of persons who, acting with complete freedom as to their choice of undertaking, bring together, with a view to the insurance or reinsurance of risks, persons seeking insurance or reinsurance and insurance or reinsurance undertakings, carry out work preparatory to the conclusion of contracts of insurance or reinsurance and, where appropriate, assist in the administration and performance of such contracts, in particular in the event of a claim;

(b) professional activities of persons instructed under one or more contracts or empowered to act in the name and on behalf of, or solely on behalf of, one or more insurance undertakings in introducing, proposing and carrying out work preparatory to the conclusion of, or in concluding, contracts of insurance, or in assisting in the administration and performance of such contracts, in particular in the event of a claim;

(c) activities of persons other than those referred to in (a) and (b) who, acting on behalf of such persons, among other things carry out introductory work, introduce insurance contracts or collect premiums, provided that no insurance commitments towards or on the part of the public are given as part of these operations.'

77Taksatorringen claims that the services which it provides to insurance companies are precisely those contemplated by Article 2(1)(b) of Directive 77/92 when it refers to assisting in the administration and performance of insurance contracts, in particular in the event of a claim. It follows that Taksatorringen should be treated as an insurance broker or agent for the purposes of both Directive 77/92 and the Sixth Directive. Nothing suggests that it was intended that definitions set out in the former should not apply to the latter.

78As the definitions of insurance broker and agent are matters of Community law, it is of no relevance that Danish law would not hold Taksatorringen to be an insurance broker or agent.

79The Danish Government rejects this claim. It argues that the terms of Directive 77/92 in no way affect the requirement that in order to benefit from the exemption set out in Article 13B(a) of the Sixth Directive for services which are not insurance transactions but are none the less related to those transactions, the services must be provided by a party who is an intermediary between the insurance company and the insured.

80According to the Danish Government, Taksatorringen cannot claim to be a broker within the meaning of Article 2(1)(a) of Directive 77/92, as even though this provision contemplates that a broker will assist in the performance of an insurance contract in the event of a claim, it is of the nature of such an entity that its activities comprise the bringing together of insurance companies and persons seeking insurance. Taksatorringen does not do this in any way. Its task is solely to provide insurance companies with its opinion on the cost of repairing damage suffered by a vehicle.

81According to the Danish Government, this approach to the nature of a broker's activities may be found both in Commission Recommendation 92/48/EEC of 18 December 1991 on insurance intermediaries, with which the Danish Government complied, and in the proposal for a Directive 2001/C 29 E/10 of the European Parliament and of the Council on insurance mediation presented by the Commission on 20 September 2000, 11 which also makes it clear that the role of an intermediary requires there to be in place an independent legal relationship between the intermediary and persons seeking insurance.

82This requirement of a legal relationship with the insured party also applies to those activities referred to in Article 2(1)(b) of Directive 77/92, as the use in that provision of the expressions 'in the name of' and 'on behalf of' means that the intermediary must be authorised to bind the insurance company in arrangements entered into with the insured party. Without this authority, assistance provided in the administration or performance of an insurance contract would simply be provided in the capacity of subcontractor.

83Lastly, the Danish Government rejects Taksatorringen's argument based on the exemption from VAT that exists in the United Kingdom for assessors giving opinions relating to compensation for damage caused to vehicles on the basis that they are providing services as insurance agents. It points out that it is only when these assessors have been appointed as the insurance company's agents for the purpose of handling claims for compensation that this exemption is available; this is fully compatible with its submissions relating to the concept of an insurance intermediary.

84The United Kingdom Government puts forward a similar argument. It observes that even if Taksatorringen were to carry on certain of the activities of an insurance broker or agent, that does not mean that it is an insurance broker or agent for the purposes of Directive 77/92 or the Sixth Directive unless at the same time it carries on those activities which distinguish this type of undertaking from other categories, that is to say, the bringing together of insurance companies and persons seeking insurance, and unless it has a direct relationship with persons insured.

85The Commission also disputes Taksatorringen's claim that it carries on activities which mean that it should be treated as an insurance broker or agent for the purposes of Article 2(1) of Directive 77/92. It points out in addition that Article 13B(a) of the Sixth Directive should be narrowly interpreted, referring to the judgment in Commission v Germany, in which the Court held that the exemption for public postal services did not apply to services provided to them by other undertakings.

86I am of the opinion that the weight of these arguments against Taksatorringen's submissions is sufficient to dispose of the matter. Even if Article 13B(a) of the Sixth Directive is not particularly well drafted, in that it distinguishes between insurance brokers and insurance agents, whereas a broker is truly an insurance agent in that his task is to act on behalf of a person seeking insurance in finding an insurance company that will offer cover exactly suited to his needs, it remains clear that this provision applies only to services provided by those professionals who have a relationship with both the insurance company and persons seeking insurance.

87Taksatorringen itself does not contend that it has any kind of relationship with insured persons, in other words it does not claim to act as an intermediary.

88That is why it argues that in order to establish whether its activities may none the less be treated as being those of an insurance broker or insurance agent it is necessary to have regard to Directive 77/92.

89This point appears reasonable, even though it is not absolutely clear that a directive concerning VAT should necessarily be interpreted in the light of a directive relating to the free movement of persons. However, it is not necessary to reach a view on this matter, as Directive 77/92 provides no support for Taksatorringen's submissions.

90Admittedly, the activities set out in Article 2(1)(a) of Directive 77/92, which under paragraph 2 of that article correspond to those of an insurance broker, include those of assisting in the administration and performance of insurance contracts, particularly in the event of a claim, but it is stated clearly that this assistance is to be provided 'where appropriate' in conjunction with the activities which are distinctive of the carrying on of the business of an insurance broker, namely the bringing together of insurers and persons seeking insurance and the preparation of insurance contracts.

91As far as the activities described in Article 2(1)(b) of Directive 77/92 are concerned, which by paragraph 2 of that article correspond to those of an insurance agent, the wording itself of the Community legislation does not refer to assistance given in the administration and performance of insurance contracts, particularly in the event of a claim, as being an ancillary activity, as this form of assistance is prefaced by the conjunction 'or', and thus within the same category as the introduction, proposing and carrying out of insurance contracts. In order for this assistance to be provided by an insurance agent, however, it must be given within the context of a contract or an authority to act and 'in the name and on behalf of, or solely on behalf of, one or more insurance undertakings'. There must therefore be a power to bind the insurance company in relation to an insured person who has submitted a claim. Once again, this requirement is not met by Taksatorringen.

92My conclusion on the first question referred by the national court is therefore that the assessments carried out by Taksatorringen on behalf of its members cannot be exempted from VAT by virtue of Article 13B(a) of the Sixth Directive.

The second, third and fourth questions

93This leads to the interpretation to be given to Article 13A(1)(f) of the Sixth Directive, which is the subject of the second, third and fourth questions referred by the Østre Landsret. These may conveniently be examined together.

94All of the observations submitted to the Court agree that Taksatorringen is an independent group of persons whose activity is exempt from or not subject to VAT, the purpose of which is to render its members the services directly necessary for the exercise of their activity, and that it only claims from its members exact reimbursement of their share of the joint expenses.

95Furthermore, the national court states that 'the parties are in agreement that, when VAT exemption was refused, there was no actual or imminent possibility that an exemption at that point in time would have produced a distortion of competition'.

96The issues may therefore be focused on the question of whether the Community legislature had sought to restrict the exemption to groups whose activities not only do not in fact produce distortion of competition, but also whose activities by their nature are never likely to produce distortion.

97The Commission argues forcefully for the latter interpretation. It submits in this regard that:

'An interpretation of the expression "likely to produce" based on the type of activity (that is to say, by asking whether an activity is of a type that does not per se produce distortion of competition) and not on an assessment of circumstances which have the result that, notwithstanding exemption from VAT, there is no actual distortion of competition at the relevant time, better reflects the aims of measures of harmonisation intended to impose a uniform basis of assessment throughout the Member States.'

98Taksatorringen argues on the other hand that it is never possible to exclude a risk of distortion with total certainty, and that if one were to take into account purely hypothetical possibilities of distortion of competition this would result in Article 13A(1)(f) of the Sixth Directive being stripped of all meaning.

99However, the Community legislature, it contends, intended to provide for an exemption that would be available to certain groups, and not to create an exemption in the form of a mirage that could never have any practical reality.

100That is why, in Taksatorringen's view, it is the duty of an authority which proposes to refuse an exemption sought by a group which otherwise meets all the requirements of this provision to establish that there is a real and well-founded probability that the grant of the exemption would distort competition.

101An analogy may usefully be drawn with competition law, more precisely with Article 81 EC, which prohibits all agreements which may affect trade between Member States and which the Court has consistently interpreted as meaning that, as the judgment in Ferriere Nord v Commission records, 'in order that an agreement, decision or concerted practice may affect trade between Member States it must be possible to foresee with a sufficient degree of probability on the basis of a set of factors of law or fact that it may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States such as to give rise to the fear that the realisation of a single market between Member States might be impeded (see Case 54/65 Société Technique Minière v Maschinenbau Ulm [1966] ECR 235 and Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck and Others v Commission [1980] ECR 3125, paragraph 170)' (paragraph 20).

102Lastly, Taksatorringen argues that the existence of a risk of distortion of competition was taken into account in providing an exception to the rules relating to exemption under Article 13A(1)(f) of the Sixth Directive, and that the exception should therefore be narrowly construed.

103Against this, the Danish Government submits that the interpretation supported by it, according to which there are sufficient grounds for refusing the exemption if there is a possible risk that independent third parties would fail to enter the market for the provision of the relevant services, not only reflects the literal and usual meaning of the text, but is also necessary to achieve the purpose of allowing collaboration between undertakings providing exempt services without preventing third parties from entering the market for services subcontracted by those undertakings.

104The Danish Government does not deny that its interpretation would mean that exemption under Article 13A(1)(f) of the Sixth Directive would be limited in its scope, but submits that this does not deprive the provision of all meaning. It would remain applicable, for example, where the existence of exclusive rights in itself resulted in access to the market being closed.

105Lastly, it argues that it would be wrong to require national authorities, which do not have the means at their disposal, to undertake complex assessments in order to establish the precise degree of likelihood of distortion of competition arising.

106As well as the argument already mentioned, the Commission submits that the use of the term 'likely' means that distortions of a purely potential kind are intended to be covered, that as an exemption is involved the circumstances in which it is to be granted should be narrowly construed, that the background to the provision confirms that the insertion subsequent to the initial proposal of a condition requiring the absence of any distortion of competition was intended to restrict the circumstances in which an exemption should be permitted, that the closing of the market to independent operators risks being to the detriment of customers and, lastly, that the need for a strict interpretation is supported by the purpose of the Sixth Directive, which is to establish a uniform basis of assessment, in particular with a view to the recovery of resources belonging to the Community, and to put the Member States on an equal footing in relation to such recovery.

107As regards the last of these arguments, I would, however, allow myself to point out that the realisation of the purpose of establishing a uniform basis of assessment for VAT is not affected by whether one adopts a strict or a narrow interpretation of the provision in question. As far as this object is concerned, the only thing that counts is that the provision is applied in a uniform manner throughout the Member States.

108Nor is the argument relating to the background to the provision very convincing. The Commission states that it had proposed that the exemption under Article 13A(1)(f) of the Sixth Directive should read as follows:

'services supplied to their members by independent groups of persons carrying on medical or paramedical activities, necessary for the exercise of their exempted activities'.

109The Commission explains that the text adopted differs from that set out above in two ways.

110First, its scope was widened, as it is not restricted to independent groups carrying on medical or paramedical activities.

111Secondly, the scope of the provision was reduced, as the statement that exemption should not be granted where it was 'likely to produce distortion of competition' was added.

112But when it comes to providing an example of a situation where the exemption might legitimately apply, the Commission could only suggest 'the purchase of a scanner for medical purposes'. In my view, it is not wholly out of the question that a doctor practising independently could purchase a scanner and thereby in fact compete with a scanner bought jointly by several hospitals because the waiting lists for access to the scanner belonging to the group of hospitals was too long.

113It is therefore difficult to identify, in the abstract, 'cases where it is clear that an exemption would not give rise to any distortion of competition, whether actual or potential'.

114As regards the interests of consumers, I would point out that the legislature wished to act in such a way that insurance contracts would not be unduly costly. With this in mind, it exempted not only 'insurance transactions' but also services provided by brokers and agents, whose intervention is after all not essential. There would be an immediate benefit to consumers if this approach were applied to the assessment of damage.

115On the other hand, if the Commission's submissions were to be followed, the benefits of freedom of competition for consumers would not become a reality where, as in the present case, no independent undertaking had effectively established itself in the market, nor had it shown any intention of establishing itself, and where it was doubtful whether such an undertaking, were it to exist, could provide the same service at a lower cost, so as to be in a position to exercise an influence on prices charged by the group. It may be assumed that if small and medium-sized undertakings have grouped together, this is precisely in order to be able to take advantage of assessments carried out at a lower cost than if they had been required to use the services of independent assessors (or to employ their own assessors).

116Far from benefiting consumers, the result of taxing the group would, in such a case, be to penalise them for no purpose.

117In my opinion, the proper starting point is to consider the reason why the exemption under Article 13A(1)(f) of the Sixth Directive was introduced and the market conditions created by the presence of an entity which provides services to its members while only claiming exact reimbursement of its share of the joint expenses.

118It appears that the exemption was introduced in order to avoid a situation where the cost of providing services which the Community legislature had intended to exempt for legitimate and diverse reasons was none the less burdened with a charge to VAT because in order to provide them the operator, probably because the size of its undertaking required it so to do, found it necessary to enter into arrangements with other organisations making available the same services by means of a jointly owned entity set up to undertake certain activities essential to the provision of the service.

119It was thought that the fiscal treatment of a service made available to a provider in such a group should, provided certain conditions were met, be the same as that of a transaction carried out using internal resources.

120From one point of view, and however paradoxical this may appear, the purpose of this exemption is to unify conditions of competition in a market covered simultaneously by large undertakings, capable of offering their services through the use of their internal resources alone, and other, smaller, undertakings, obliged to call upon external assistance in order to offer the same services.

121There are two fundamental requirements that must be met in order to qualify for an exemption. First, the independent external service provider must consist only of operators carrying out an activity which is exempt from, or not subject to, value added tax. Secondly, it is essential that the group does not exist for purposes of gain, in the sense that it only charges its members for expenses incurred by it in order to meet their requirements, and makes no profit whatsoever out of doing so.

122This means that the group must be entirely transparent and that, from an economic point of view, it must not have the characteristics of an independent operator seeking to create a customer base in order to generate profits.

123The provisions relating to the absence of distortion of competition appear to me to have been added only in order to avoid a situation arising in which the arrangements intended to benefit groups, which aim to create a level playing field as far as conditions of competition among operators providing exempted services are concerned, do not create distortion at another level, namely that of the market for services which these providers themselves require.

124In other words, a remedy was provided against certain inequalities in the area of competition that might arise by reason of undertakings being of different sizes, while at the same time care was taken to ensure that this did not give rise to symptoms whose result might be that the remedy was worse than the disease.

125If one turns to consider the market for services necessary for the carrying on of the exempt activities, it must be said that it is a thoroughly unusual one.

126The buyers in this market do not include the biggest consumers, namely large companies which make use of their own internal resources. The sellers are operators, namely the groups referred to in Article 13A(1)(f) of the Sixth Directive, which are not allowed to make a profit of any kind, and in relation to which it may be assumed that those who control them do so in such a way as to ensure that they carry on business at the lowest possible cost.

127In order to achieve their aim, and as their structure reflects, these groups are intended to have a captive customer base, namely their members.

128Plainly, this is a most unusual market in the context of an ideal conceptualisation of the notion of competition. If one accepts a situation in which certain operators, namely groups, carry on business without any view of gain, what is the place of an independent operator seeking to generate profits?

129As mentioned above, such an operator can hope to enter the market and to remain there only if he is able to offer services at a lower price than groups that are prohibited from making a profit.

130Admittedly, the possibility cannot be entirely excluded that these groups might operate in a cumbersome and inefficient manner and provide their services at a high price, albeit invoiced at cost-price and even though their overheads are spread over a large number of transactions. What the legislature intended to avoid, in my opinion, was a situation in which such groups would nevertheless be able to exclude all competition by reason of the exemption from VAT set out in Article 13A(1)(f) of the Sixth Directive.

131But if, independently of all questions of taxation or exemption, these groups are assured of retaining their members' customer base because they carry out their operations efficiently, it could not be suggested that it is the exemption from which they benefit that closes the market to independent operators.

132In my view, it is in this way that the condition requiring the absence of a risk of distortion of competition laid down under Article 13A(1)(f) of the Sixth Directive should be understood. I suggest that this analysis reflects, mutatis mutandis, the provisions of Article 81 EC, and to which Taksatorringen rightly refers.

133Exemption should not be refused because of a hypothetical possibility that there may be a situation in which, by exempting a group while at the same time requiring an independent operator to pay tax, distortion of competition would be likely to arise.

134The proper approach is to consider, on the basis of the actual circumstances of the case, whether an exemption given to one party and the imposition of liability to tax on another is the determining cause of independent operators being excluded from the market.

135If this is the case, exemption must be refused, as it has, of itself, produced a distortion of competition. If this is not the case, there is no reason to refuse it, as in reality it does not modify the market conditions.

136In light of this conclusion, the other arguments of the Danish Government and the Commission have little weight, and some are even untenable. There is thus no reason why exemption should be refused because an assessment of the risk of distortion would impose a heavy burden on the authorities, a heavy burden which it would be easier to discharge by allowing them to invoke any risks, however hypothetical, of distortion. If the Commission can carry out such assessments when considering the application of Articles 81 EC and 82 EC, there is no obvious reason why national authorities should not be able to undertake the same type of assessments.

137Nor is it clear why, on the pretext that exemptions should be strictly interpreted, limitations on the exemptions should, conversely, be particularly widely construed. This loses sight of the point that the legislature created an exemption because it considered it appropriate to do so, while at the same time taking care to ensure that its purpose would not be distorted. This does not mean that it should be strictly construed.

138Given the conclusion thus reached in relation to the second question, namely that exemption should not be refused unless it appears with at least a strong degree of probability that the exemption would, of itself, exclude independent operators from carrying on business on the market in which the group is operating, it is unnecessary to answer the national court's third question separately.

139As regards the national court's fourth question, the answer to it is now clear. If national legislation permits the granting of an exemption that is limited in time, there is no reason to suppose that the Sixth Directive prevents such a facility being made use of. The effectiveness of a group which can, at a given time, exclude potential competitors for reasons that have nothing to do with their being treated differently for fiscal purposes may very well be reduced over time, with the result that the group enjoys a benefit from a situation which is entirely due to an exemption granted to it. Such an exemption would then be the sole cause of distortion of competition, to which it would then be necessary to put an end.

140Given that it is in principle easier to reconsider periodically whether an exemption granted for a limited period should be renewed than to revoke a decision to exempt that is not accompanied by a temporal limitation, in the absence of any prohibition in the Directive against this method of proceeding, I see nothing to prevent the grant of an exemption that is limited as to time.

141My opinion on the second, third and fourth questions is therefore that the exemption under Article 13A(1)(f) of the Sixth Directive should not be refused on the grounds that it might produce distortion of competition unless it appears with at least a high degree of probability that the granting of an exemption would of itself exclude independent operators from carrying on business in the market in which the group is operating. The exemption may be granted on a merely temporary basis.

The fifth question

142It remains to consider the fifth question, in which the Østre Landsret asks whether the fact that the largest insurance companies make use of assessors employed by them and do not have to account for VAT on the services provided by them internally has any bearing in the case in question.

143Subject to what has been stated above in relation to the second question, namely the interpretation to be given to Article 13A(1)(f) of the Sixth Directive, this question should be answered in the negative. In reply to a similar question asked in the SDC case, the Court held that the difference between operators which effect transactions with their own resources using their own staff and those which purchase their services from another economic operator 'is one of liability to tax and not one of exemption under points 3 and 5 of Article 13B(d) of the Sixth Directive, which is quite neutral since it arises from the actual nature of the transactions' (paragraph 28 of the SDC judgment, cited above).

144The Court thus adopted the reasoning of Advocate General Ruiz-Jarabo Colomer, who explained in the clearest possible way in his Opinion that:

'[I]t is impossible to accept the plaintiff's argument as to the alleged tax discrimination between banking undertakings which have their own data-handling resources and the others which are obliged to engage the services of a third person for such purposes.... that is the logical consequence resulting from the tax structure specific to VAT.

The principle of fiscal neutrality, which is at the basis of VAT, is not affected by the exercise of that option. In fact, the chargeable event for VAT, as affecting supply of services, is that there should be two independent taxable persons, in a legal relationship, one of whom performs an action on behalf of another.

So, paid employees who, under the direction of their employer and remunerated by him, perform their services for the company which engages them are not taxable persons. In the performance of such services there is no chargeable event subject to VAT; strictly speaking that is a phenomenon of non-liability, [ ] resulting a sensu contrario from the positive configuration of the chargeable event for VAT and even from the very nature of that tax.

Business policy decisions may lead an undertaking to opt to carry out certain tasks with its own resources using its paid staff. In such a case, there is no chargeable event subject to VAT. It may, on the other hand, choose to contract with third persons, legally distinct from the undertaking, for the supply of its services; in that case, the transaction is subject to VAT' (points 55 to 58).

Conclusion

Conclusion

145In view of all the foregoing considerations, I propose that the Court of Justice should reply as follows to the questions referred to it by the Østre Landsret:

— The provisions of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, and in particular Article 13B(a) thereof, should be interpreted as meaning that assessments carried out by an undertaking on behalf of its members are not insurance transactions within the meaning of that provision and are also not related services performed by insurance brokers and insurance agents.

— Article 13A(1)(f) of Sixth Directive 77/388 should be interpreted as meaning that exemption from value added tax under that provision should not be refused for services provided by independent groups of persons whose activities are exempt from or are not subject to value added tax for the purpose of rendering their members the services directly necessary for the exercise of their activity, where these groups merely claim from their members exact reimbursement of their share of the joint expenses, on the grounds that the exemption might produce distortion of competition, unless it appears with at least a high degree of probability that it would of itself exclude independent operators from carrying on business in the market in which the group is operating. The exemption may be granted on a merely temporary basis.

— The fact that the largest insurance companies carry out transactions using their own employees which other smaller undertakings carry out through groups which they have established for that purpose, and are, unlike the latter undertakings, thus exempt from value added tax on these transactions, does not have any bearing on the answers to Questions 1 and 2.

Notes

(1) Original language: French.

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

(3) Case C-349/96 [1999] ECR I-973.

(4) Case C-76/99 [2001] ECR I-249, paragraph 27.

(5) Case C-2/95 SDC [1997] ECR I-3017.

(6) Case C-240/99 Skandia [2001] ECR I-1951.

(7) Case C-384/98 D. v W. [2000] ECR I-6795.

(8) OJ 1989 L 226, p. 21.

(9) OJ 1977 L 26, p. 14.

(10) OJ 1992 L 19, p. 32.

(11) OJ 2001 C29 E, p. 245.

(12) Case 107/84 [1985] ECR 2655.

(13) Case C-219/95 P [1997] ECR I-4411.

(14) Author's emphasis.

(15) Commission's wording.

(16) It is not, therefore, a mere exemption. Properly speaking, there is a tax exemption only when there is an event previously chargeable, that is, subject to tax. The concept of exemption presupposes an initial obligation to pay tax for which the legislature grants, for various reasons, a dispensation from paying. It depends therefore on there being an express reference in the law to an exemption from the duty to pay the tax. Before examining whether a given transaction meets the requirements for benefiting from exemption, it is necessary to ascertain that it falls within the field of application of the tax.