C-8/03 BBL

C-8/03 JUDGMENT OF THE COURT (First Chamber)

21 October 2004

In Case C-8/03,

REFERENCE for a preliminary ruling under Article

from the Tribunal de première instance de Bruxelles *

234 EC

(Belgium), made by decision of 24 December 2002, received at the Court on 10 January 2003, in the proceedings:

Banque Bruxelles Lambert SA (BBL)

v

État belge,

* Language of the case: French.

THE COURT (First Chamber),

composed of: P. Jann, President of the Chamber, A. Rosas, R. Silva de Lapuerta, K. Lenaerts and S. von Bahr (Rapporteur), Judges,

Advocate General: M. Poiares Maduro, Registrar: M.-F. Contet, Principal Administrator,

having regard to the written procedure and further to the hearing on 11 March 2004,

after considering the observations submitted on behalf of:

— Banque Bruxelles Lambert SA (BBL), by B. de Duve, S. Houx and F. Herbert, avocats,

— the Kingdom of Belgium, by E. Dominkovitis, acting as Agent, and by G. Vander sanden and E. De Plaen, avocats,

— the Hellenic Republic, by D. Kalogiros and S. Spyropoulos, acting as Agents, and by M. Tassopoulou,

— the Commission of the European Communities, by E. Traversa and C. Giolito, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 18 May 2004, gives the following

Judgment

Legal context and the dispute

1The reference for a preliminary ruling relates to the interpretation of Articles 4, 9(2)(e) and 13B(d)(6) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) ('the Sixth Directive').

2That reference was made in proceedings between Banque Bruxelles Lambert SA (BBL) ('BBL') and the Belgian State relating to the determination, for the purposes of liability to value added tax ('VAT'), of the place where services were supplied by BBL to open-ended investment companies {sociétés d'investissement à capital variable) ('SICAVs') in Luxembourg.

Legal framework

Community legislation

3Under Article 2(1) of the Sixth Directive, 'the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such' is subject to VAT.

4According to Article 4(1) and (2) of that directive:

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

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

5Article 9(1) and the third and fifth indents of Article 9(2) (e) ofthat directive provide:

'1. The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

2. However:

(e) the place where the following services are supplied when performed for customers established outside the Community or for taxable persons established in the Community but not in the same country as the supplier, shall be the place where the customer has established his business or has a fixed establishment to which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides:

— services of consultants, engineers, consultancy bureaux, lawyers, accountants and other similar services, as well as data processing and the supplying of information,

— banking, financial and insurance transactions including reinsurance, with the exception of the hire of safes'.

b Article 13B(d)(5) and (6) of the Sixth Directive provides, for its part, that Member States are to exempt:

'5. transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities ...;

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

7Article 1(2) of Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) (OJ 1985 L 375, p. 3) defines undertakings for collective investment in transferable securities ('UCITS') as undertakings:

'— the sole object of which is the collective investment in transferable securities of capital raised from the public and which operate on the principle of risk-spreading,

and

— the units of which are, at the request of holders, re-purchased or redeemed, directly or indirectly, out of those undertakings' assets. ..."

8Under Article 1(3) of that directive, such undertakings may be constituted 'either under the law of contract (as common funds managed by management companies) or trust law (as unit trusts) or under statute (as investment companies)'.

National legislation

9Article 4(1) of the Belgian VAT Code, in the version applying to the facts in the main proceedings, provides:

"Taxable person" shall mean any person who, habitually and independently, in the course of carrying out an economic activity, whether it be on a primary or ancillary basis, and whether or not it be with a view to profit, supplies goods or services covered by this Code, irrespective of the place where that economic activity is carried on.'

10Under Article 21(2) of the Code:

'The place where a service is supplied shall be deemed to be the place where the supplier has established his business or has a fixed establishment from which services are supplied or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.'

11Article 21(3)(7)(d) and (e) of the Belgian VAT Code states that, by way of exception to Article 21(2), the place where a service is supplied shall be deemed to be:

7. the place where the recipient of the service has established his business or a fixed establishment at which the service is supplied or, in the absence of such a place, the place where he has his permanent address or usually resides, where the service is performed for a customer established outside the Community or, for the purposes of his economic activity, to a taxable person established in the Community but not in the same country as the supplier, to the extent that the subject of the service is:

(d) work of an intellectual nature supplied in the ordinary course of business by legal and other consultants, accountants, engineers, consultancy bureaux and other suppliers carrying on similar activities as well as data processing and the supplying of information, ...;

(e) banking, financial and insurance transactions, including reinsurance, with the exception of the hire of safes'.

The main proceedings and the questions referred

12The order for reference states that, during the period relevant to the main proceedings, BBL provided services to Luxembourg SICAVs [BBL Renta Fund, BBL Renta Cash, BBL Patrimonial, International Aviation Fund, BBL Capital Cash, BBL Portfolio and BBL (L) Invest]. Under the consultancy agreement entered into with each of its SICAVs, BBL undertook to:

— assist the SICAV in the management of its assets, by ensuring that any advice given by it was strictly in accordance with the general management guidelines and investment policy adopted by the SICAV;

— provide to those responsible for the day-to-day management of the SICAV all documentation, information and oral or written advice they might deem necessary in order to carry out their duties;

— assist the SICAV in the acquisition, subscription, transfer and disposal of shares, bonds and all other negotiable securities and in relation to currency or treasury operations.

13In February 1998, BBL was the subject of an inspection carried out by the Liège special tax inspection department for the period from 1 May 1993 to 31 December 1997. As a result of that inspection, a report was drawn up on 28 May 1998, stating that BBL had not invoiced VAT in relation to fees invoiced to the Luxembourg SICAVs for advice given, as it considered that those services had been supplied in the Grand Duchy of Luxembourg by virtue of Article 21(3)(7)(d) or (e) of the Belgian VAT Code.

14In that regard, the national court states that the report suggests that Article 21(3)(7) of the Belgian VAT Code does not apply, because Luxembourg SICAVs are not considered under Luxembourg legislation to be taxable persons.

15Furthermore, according to the report, BBL acted with the intention of avoiding VAT or permitting VAT to be avoided, as it could not have been unaware that VAT arising on the cost of the services supplied to the Luxembourg SICAVs was not paid either to the Belgian State or to the Luxembourg State.

16On 8 June 1998, a final demand was issued to BBL for, inter alia, EUR 45 491 373.03 by way of VAT due for the period from 1 May 1993 to 31 December 1997, for EUR 90 982 746.07 by way of a fine at the rate of 200% and for EUR 1819 654.49 in respect of interest on late payment from 1 January to 20 June 1998.

17BBL brought proceedings to contest that final demand before the Tribunal de première instance de Bruxelles (Brussels Court of First Instance).

18The national court observes that to take the view that each Member State is free to treat, or not to treat, persons established in its territory or carrying on business there as being subject to VAT is to misconstrue the Community provisions relating to VAT, the purpose of which is precisely to harmonise the concept of a taxable person and to allocate among the Member States the power to tax transactions by providing a uniform definition of the place where goods and services are supplied.

19In accordance with the duty to interpret national provisions in conformity with Community law, Article 21(3) of the Belgian VAT Code, which transposed Article 9(2)(e) of the Sixth Directive into Belgian law, must be interpreted in the light of the wording of that directive and the purpose which it is intended to achieve, and there is no need to refer to Luxembourg law.

20However, the national court observes that the question whether SICAVs carry out an economic activity within the meaning of Article 4 of the Sixth Directive and accordingly whether they are subject to VAT has not yet been decided by the Court.

21If the Luxembourg SICAVs were not to be treated as subject to VAT, with the result that the services supplied by BBL would be deemed to be supplied in Belgium, the national court observes that the question arises whether those services could benefit from the exemption provided for under Article 13B(d)(6) of the Sixth Directive.

22In the light of those considerations, the Tribunal de première instance de Bruxelles decided to stay the proceedings and to refer the two questions set out below to the Court for a preliminary ruling:

'— Are sociétés d'investissement à capital variable (open-ended investment companies) (SICAVs) established in a Member State which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Council Directive 85/611 of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) taxable persons for value-added-tax purposes within the meaning of Article 4 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, so that, where services referred to in Article 9(2) (e) ofthat directive are supplied to those SICAVs, the place where those services are deemed to be supplied is the place where the SICAVs have established their seat?

— If the answer to that question is in the negative, the resolution of the case entails determining what types of services provided to SICAVs may benefit from the exemption under Article 13B(d)(6) of the Sixth Directive: is it necessary in that context to distinguish between services which comprise the giving of assistance and management advice, on the one hand, and management services in the strict sense, on the other, the latter being said to differ from the former in that they imply a power on the manager's part to take decisions relating to the administration and disposal of the assets under management?'

The first question

23By its first question, the national court is essentially asking whether SICAVs which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Directive 85/611 are taxable persons within the meaning of Article 4 of the Sixth Directive, so that, where services referred to in Article 9(2)(e) of that directive are supplied to such SICAVs which are established in a Member State other than that of the supplier of the services, the place where those services are supplied is the place where the SICAVs have established their business.

Observations submitted to the Court

24All parties which have submitted observations are of the opinion that SICAVs established in accordance with Directive 85/611 carry out economic activities which make them taxable persons for the purposes of Article 4 of the Sixth Directive.

25In that regard, BBL notes the Court's case-law relating to financial instruments which establishes a distinction between transactions which constitute economic activities for the purposes of the Sixth Directive and those which do not, in particular Case C-60/90 Polysar Investments Netherlands [1991] ECR I-3111; Case C-333/91 Sofitam [1993] ECR I-3513 and Case C-155/94 Wellcome Trust [1996] ECR I-3013.

26The activities of UCITS in that regard must be analysed on two levels: first, the relationship between the UCITS and its participants and, secondly, that between the UCITS and the market.

27As regards the relationship between the UCITS and its participants, BBL argues that UCITS can be distinguished from the other economic operators in the financial markets, inasmuch as they actively promote the marketing of their own units. When the units are marketed, the UCITS charge a fee, known, as appropriate, as entry commission or exit commission. That commission is the counterpart of a right of access or withdrawal on the part of the subscriber to the UCITS and the provision of the services connected with that access or withdrawal.

28As regards the relationship between the UCITS and the market, BBL submits that UCITS aim to offer the general public a service which is comparable to the services offered by private banks to their favoured customers in the field of asset management.

29As it considers that those SICAVs which carry on activities regulated by Directive 85/611 are taxable persons by virtue of Article 4 of the Sixth Directive, BBL claims that Article 9(2) (e) of that directive is applicable.

30The Belgian Government submits that, according to the Court's case-law, the mere acquisition and holding of shares in a company is not to be regarded as an economic activity, within the meaning of the Sixth Directive, conferring on the holder the status of a taxable person (see, inter alia, Polysar Investments Netherlands, paragraph 13, and Case C-80/95 Hamas & Helm [1997] ECR I-745, paragraph 15).

31However, the activities carried out by SICAVs are referred to in Article 13B(d)(4) and (5) of the Sixth Directive, and transactions referred to in those provisions will fall within the scope of VAT, in particular where they are effected as part of a commercial share-dealing activity (see Polysar Investments Netherlands, paragraph 14, and Harnas & Helm, paragraph 16).

32The Greek Government argues that the transactions carried out by SICAVs are not those of a mere investor who has acquired shares in order to retain them for purposes of profit, as was the position in Polysar Investments Netherlands, but the organised exploitation of capital to buy and sell transferable securities. That Government also states that the fact that, according to Article 13B(d)(6) of the Sixth Directive, the management of special investment funds is exempt from VAT means that those involved in that management are, in principle, subject to the tax.

33The Commission states as a preliminary point that, leaving Belgium and Luxembourg aside, the question whether SICAVs are subject to VAT has not been completely resolved in the Member States. In the Netherlands, by reference to the Polysar Investments Netherlands case-law, SICAVs are, as in Luxembourg, treated as non-taxable persons. In Belgium, Germany, Denmark, Spain, France, Ireland, Italy, Portugal and the United Kingdom, SICAVs are treated as taxable persons, but are exempt.

34Next, the Commission observes that management companies, within the meaning of Directive 85/611, are generally undertakings which supply services in consideration for which they charge management fees. The fact that Article 13B(d)(6) of the Sixth Directive expressly provides for the management of special investment funds to be exempt shows that the transactions concerned fall within the scope of VAT.

35The management company or the SICAV which manages funds undeniably carries on an activity which amounts to the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis for the purposes of Article 4(2) of the Sixth Directive, and thus falls to be distinguished from holding companies which do no more than hold shares. To treat managers of funds differently, depending on whether that activity is carried out by a management company outside the fund or by the SICAV itself, would contravene the principle that VAT should be neutral.

Grounds

Findings of the Court

36It must be noted that under Article 4(1) of the Sixth'Directive a taxable person is any person who independently carries out any economic activity specified in paragraph 2 of that article. 'Economic activities' are defined in Article 4(2) as comprising all activities of producers, traders and persons supplying services, and in particular the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis. 'Exploitation' within the meaning of Article 4(2) refers, in accordance with the requirements of the principle that the common system of VAT should be neutral, to all those transactions, whatever may be their legal form (see Case C-186/89 Van Tiem [1990] ECR I-4363, paragraph 18; Case C-306/94 Régie dauphinoise [1996] ECR I-3695, paragraph 15, and Case C-77/01 EDM [2004] ECR I-4295, paragraph 48).

37The purpose of the Sixth Directive, which seeks in particular to found a common system of VAT upon a uniform definition of 'taxable persons', requires that status to be assessed solely on the basis of the criteria set forth in Article 4 of that Directive (see Van Tiem, paragraph 25).

38It must also be pointed out that it is settled case-law that the mere acquisition and holding of shares in a company is not to be regarded as an economic activity within the meaning of the Sixth Directive, conferring on the holder the status of a taxable person. The mere acquisition of financial holdings in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property and is not the product of any economic activity within the meaning of that directive (see Harnas & Helm, paragraph 15, and Case C-442/01 KapHag [2003] ECR I-6851, paragraph 38). IIIf, therefore, such activities do not in themselves constitute an economic activity within the meaning of that directive, the same must be true of activities consisting in the sale of such holdings (see Wellcome Trust, paragraph 33, and KapHag, paragraph 40).

39Likewise, the simple acquisition and the mere sale of other negotiable securities cannot amount to exploitation of an asset for the purpose of obtaining income on a continuing basis, the only consideration for those transactions consisting of a possible profit on the sale of those securities (see EDM, paragraph 58).

40As a rule, such transactions cannot, by themselves, constitute economic activities within the meaning of the Sixth Directive.

41However, it follows from Article 13B(d)(5) of the Sixth Directive that transactions affecting securities may come within the scope of VAT. The Court has already held that the transactions covered by that provision are those which consist in drawing revenue on a continuing basis from activities which go beyond the compass of the simple acquisition and sale of securities, such as transactions carried out in the course of a business trading in securities (see EDM, paragraph 59).

42It follows from Article 1(2) of Directive 85/611 that the transactions carried out by SICAVs consist in the collective investment in transferable securities of capital raised from the public. With the capital provided by subscribers when they purchase shares, SICAVs assemble and manage, on behalf of the subscribers and for a fee, portfolios consisting of transferable securities.

43Such an activity, which goes beyond the compass of the simple acquisition and the mere sale of securities and which aims to produce income on a continuing basis, constitutes an economic activity within the meaning of Article 4(2) of the Sixth Directive.

44It follows that SICAVs are taxable persons within the meaning of Article 4 of the Sixth Directive.

45Accordingly, where services referred to in Article 9(2) (e) of the Sixth Directive are supplied to SICAVs established in a Member State other than that of the supplier of the services, the place where those services are provided is the place where the SICAVs have established their business.

46Against that background, the Belgian Government, which accepts that consultancy services, data processing services and information provision services provided to the SICAVs come within the scope of the third indent of Article 9(2) (e) of the Sixth Directive, none the less argues that the management services provided to them, which can be characterised by the fact that they comprise, de jure or de facto, the power to take decisions, are, by contrast, not covered by that provision.

47In that regard, it is sufficient to hold, as the Advocate General noted at point 20 of his Opinion, that the third and fifth indents of Article 9(2)(e) of the Sixth Directive cover both consultancy services and banking and financial transactions.

48The answer to the first question must therefore be that SICAVs which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Directive 85/611 are taxable persons within the meaning of Article 4 of the Sixth Directive, so that, where services referred to in Article 9(2)(e) of that directive are supplied to such SICAVs established in a Member State other than that of the supplier of the services, the place where those services are provided is the place where the SICAVs have established their business.

The second question

49Since the second question was posed only in the event of a negative answer to the first question, it does not require an answer.

Costs

so 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. The costs incurred in submitting observations to the Court, other than by those parties, are not recoverable.

Operative part

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

Open-ended investment companies (SICAVs) which have as their sole object the collective investment in transferable securities of capital raised from the public in accordance with Council Directive 85/611/EEC of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UCITS) are taxable persons within the meaning of Article 4 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, so that, where services referred to in Article 9(2)(e) of that directive are supplied to such SICAVs which are established in a Member State other than that of the supplier of the services, the place where those services are provided is the place where the SICAVs have established their business.

Signatures.

OPINION OF ADVOCATE GENERAL POIARES MADURO delivered on 18 May 2004 1

Introduction

1The Court of Justice is for the first time requested to give a preliminary ruling concerning the application of the common system of value added tax to undertakings for collective investment in transferable securities. Those undertakings have recently been the subject of Community legislation. Two directives, 2001/107/EC and 2001/108/ EC of the European Parliament and of the Council of 21 January 2002, 2 amending Council Directive 85/611/EEC of 20 December 1985, 3 lay down conditions for the operation and management of such undertakings. However, the Court is requested to give a preliminary ruling primarily in the light of the Sixth Council Directive 77/388/ EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment ('Sixth Directive'). 4

1 — Original language: Portuguese.

2 — Directive 2001/107/EC of the European Parliament and of the Council of 21 January 2002 amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (LOTS) with a view to regulating management companies and simplified prospectuses (O) 2002 L 41, p. 20); Directive 2001/108/EC of the European Parliament and of the Council of 21 January 2002 amending Council Directive 85/611/EEC on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UC1TS), with regard to investments of UC1TS (O) 2002 L 41. p. 35). The time-limit for transposition of the directives was 13 February 2004.

3 — Council Directive of 20 December 1985 on the coordination of laws, regulations and administrative provisions relating to undertakings for collective investment in transferable securities (UC1TS) (OJ 1985 L 375, p. 3).

4 — Sixth Council Directive of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common svstem of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1).

I — The main proceedings and questions submitted for a preliminary ruling

2The facts of the case are as follows. Banque Bruxelles Lambert SA ('BBL') provided services comprising the giving of assistance and advice and supply of information to open-ended investment companies (sociétés d'investissement à capital variable) ('SICAVs') established in Luxembourg. BBL did not pay value added tax ('VAT') on these services because Luxembourg exempts SICAVs from the application of VAT. Following an inspection in 1998, the Belgian tax authority issued an enforcement notice to BBL in order to recover the VAT due in respect of the services supplied to SICAVs from 1993 to 1997.

3The tax authority relied, for that purpose, on the Belgian VAT Code. According to Article 21(2) of the Code, 'the place where a service is supplied shall be deemed to be the place where the supplier's economic activity is centred or where he has a fixed establishment from which services are supplied or, in the absence of such a place or fixed establishment, the place where he has his permanent address or usually resides'. This rule nevertheless contains a derogation, in Article 21(3) of the same Code, according to which the place where a service is supplied shall be deemed to be the place where the recipient of the service has established the centre of his economic activity or where he has a fixed establishment where the following two conditions are satisfied: the recipient of the service is a taxable person established in the Community but not in the same country as the supplier and the service involves work of an intellectual nature supplied by legal advisers or banking, financial and insurance transactions. In accordance with Article 9 of the Sixth Directive, pursuant to Belgian law, it is necessary to verify whether the recipient of a service is a taxable person before the place where the services in question are supplied is determined.

4It is apparent from the order for reference that the Belgian authority interpreted those provisions as follows. As, in the present case, the SICAVs, recipients of the services, were not liable to pay VAT under Luxembourg law, the derogating rule laid down under Article 21(3) as to the place where services are supplied did not apply. The services provided to the SICAVs consequently were to be treated as supplied in Belgium, the place where the provider of the services was established. The Belgian law applicable at the time of the facts ruled out the possibility of such services qualifying for exemption from VAT. According to the Belgian authority, it follows that BBL must pay the VAT relating to the services provided to the Luxembourg SICAVs.

5BBL disputes this interpretation as contrary to the Sixth Directive. Consequently, BBL has made an application before the Tribunal de première instance de Bruxelles (Court of First Instance, Brussels) for a declaration that the enforcement notice issued against it is null and void. BBL contends, first, that SICAVs are taxable persons for the purpose of VAT in accordance with Article 4 of the Sixth Directive, irrespective of their classification under national law, and, second, that the services provided in this case are covered by Article 13 of the same Directive which exempts them from VAT.

6The two questions referred to the Court by the Tribunal de première instance stem from these claims. By the first question, the national court asks whether SICAVs are taxable persons for value added tax purposes within the meaning of Article 4 of the Sixth Directive so that the services referred to in Article 9(2)(e) of that directive supplied to them are deemed to be provided at the place where such SICAVs have established their business. The second question is submitted in the alternative. If the answer to the first question is in the negative, the referring court asks whether, for the purposes of applying Article 13 of the Sixth Directive, which provides an exemption from VAT for the management of special investment funds, it is necessary to distinguish between services which comprise the giving of assistance and management advice, on the one hand, and management services in the strict sense, on the other, in so far as the latter differ from the former in that they imply a power on the managers part to take decisions relating to the administration and disposal of the assets under management.

II — The status of SICAVs as taxable persons

7Although, before the national court, the parties to the main proceedings disagreed as to whether SICAVs are liable to pay VAT, all the parties which have submitted observations to the Court appear to agree that the answer to the first question is in the positive. BBL, the Commission, the Belgian Government and the Greek Government consider that SICAVs are taxable persons under Community law. The parties differ only as to the manner in which they arrive at this conclusion and as to its consequences.

A — The classification of SICAVs under Community VAT rules

8It will be recalled that Article 4 of the Sixth Directive provides that only economic activities fall within the scope of the common system of value added tax. Under that provision 'taxable person' is defined as any person who 'independently carries out in any place any economic activity specified in paragraph 2, whatever the purpose or results of that activity'. Article 4(2) specifies that the said economic activities shall comprise all activities of producers, traders and persons supplying services and notably the exploitation of tangible or intangible property for the purpose of obtaining income therefrom on a continuing basis.

9In this respect, in the Polysar case, the Court distinguished between the mere holding of property or shares in a company, entailing enjoyment of the yield resulting from ownership of the investment, and the concept of economic activity within the meaning of the Sixth Directive. 5 The Court then stated that concerning financial investments, the mere exercise of the right of ownership by the holder cannot, in itself, be regarded as constituting an economic activ 6 ity. It follows that investment activity comparable to that of a private investor who manages his own assets, is not, as a matter of principle, classified as an economic activity. In the present case, it is also important to note that the employment of a consultancy undertaking cannot constitute a valid criterion for distinguishing between the activities of a private investor, which fall outside the scope of the Directive, and those

5 - Case C-60/90 Polysar [1991] ECR I-3111. paragraph 13 and Case C-333/91 Sofitam [1993] ECR I-3513, paragraph 12. 6 - Case C-155/94 Wellcome Trust [1996] ECR I-3013, paragraph 32.

of an investor liable to pay tax. 7 Indeed an activity may be considered an economic activity only where it is carried out with a business or commercial purpose characterised by, in particular, a concern to maximise returns on capital investment. 8

10According to that judgment, 'economic activity' must therefore be construed as meaning an activity likely to be carried out by a private undertaking on a market, organised within a professional framework and generally performed in the interest of generating profit. It is to be noted that this interpretation is quite different compared with the interpretation of 'economic activity' in other sectors such as competition law, where it also has the purpose of determining the scope of application of Community law. 9 In the tax field, the concept of economic activity is based on a double criterion, not only a functional criterion relating to activity but also and above all a structural criterion relating to organisation. Such a definition is in accordance with the objective of the common system of VAT, which is to treat, for the purposes of the tax, all active persons established on Community territory 10 equally.

7 — Ibid., paragraph 37.

11In the light of those criteria, there can be no doubt that the transactions carried out by SICAVs must be considered economic activities within the meaning of the Sixth Directive. A SICAV is a statutory collective investment undertaking. Unlike special investment funds, a SICAV has a legal personality distinct from that of its investors. It is so named as its capital may vary on a continuing basis, according to subscriptions and the buying-back of shares, and valuation of its assets. 11

12Article 1 of Directive 85/611/EEC defines the object of these undertakings as the collective investment in transferable securities of capital raised from the public and which operate on the principle of risk-spreading. The business of these undertakings therefore consists of repeated acts of purchase and sale, performed on a professional basis, with a view to meeting the demands of third parties (the participating 12 investors). Such activity clearly constitutes a regulated and commercial 'exploitation' of 1 capital on the securities market. 3 Taken as a whole, these criteria confer on SICAVs the status of taxable persons within the meaning of the Sixth Directive.

11 — Cf. Kremer G & Lebbe I., Les organismes de placement collectif en droit luxembourgeois, Larcier, Brussels, 2001. 8 — Case C-142/99 Floridienne and Berginvest [2000) ECR I-9567, paragraph 28.

9 — See, in particular, Case C-41/90 Höfner [1991] ECR I-1979. 10 — For a detailed account of the specific objectives of Community tax law, which do not entirely match those of competition law, see Berlin D., Droit fiscal communautaire, P.U.F., Paris, 1988, p. 229 et seq.

12 — By way of comparison, Advocate General van Gerven refers to features of an economic activity within the meaning of Article 4 of the Sixth Directive in the Polysar case, cited in footnote 5.

13 — On the concept of exploitation within the meaning of Article 4(2) of the Sixth Directive, see Case C-80/95 Harnas & Helm [1997] ECR I-745.

13This approach cannot be disputed by comparing the activity of a SICAV with that of holding companies, which have been held by the Court generally not to have the status 1 of a taxable person. 4A s a general rule, a holding company merely manages financial holdings in other companies, without seeking to make profit other than that resulting from an ordinary management of its investments. On the other hand, the main function of a SICAV is to make investments for commercial purposes, with a view to generating profit. It matters little that the holding in the capital of a single issuing body is restricted by legislation, with a view 15 to spreading risk prudently. It need only be observed, in this respect, that SICAVs are motivated by the objective of maximising returns on capital investment; accordingly 16 the risk is always taken into account. Nor is it more useful to distinguish between the active and passive management of financial 17 instruments. It is common ground that the ordinary management of assets may require much work on the part of the holder. What distinguishes a SICAV from a holding company is rather the intention which motivates them and their conduct which is peculiar to them: whereas a holding company, in general, conducts itself like an

14 — See Case C-16/00 Cibo Participations [2001] ECR I-6663, paragraph 19. Admittedly, in certain circumstances, a holding company may provide ad hoc services to its subsidiaries in return for payment, such as the supply of administrative, financial, accounting and information technology services. However, specifically, in these exceptional cases, the Court has held that the involvement of the holding company in the management of its subsidiaries, in so far as it entails carrying out transactions which are subject to VAT by virtue of Article 2 of the Sixth Directive, must be regarded as an economic activity (Case C-142/99 Floridienne and Berginvest, cited in footnote 8, paragraph 19).

15 — The Commission points out that under Article 25 of Directive 85/611/EEC, a SICAV may acquire no more than 10% of the non-voting shares of any single issuing body. 16 — Case C-142/99 Floridienne and Berginvest, cited in footnote 8, paragraph 28.

17 — The Kingdom of Belgium put this criterion for distinction forward with a view to establishing that SICAVs, unlike holding companies, are taxable persons. It is noted, in this respect, that the observations of the Belgian State before the Court differ from the position it took before the national court.

owner, interested only in obtaining the yield 18 from its property, a SICAV conducts itself like a businessman by seeking to obtain the highest yield possible, having regard to the investment policy adopted, from its investments on the financial markets.

14Must a distinction none the less be made according to whether or not the SICAV is self-managed? In the first case, management of the SICAV is an incorporated function whereas in the second, the SICAV relies on an authorised external company to manage it. The Commission, guided by the way in which the Court has dealt with holding companies in this field, submits in its written observations that only self-managed SICAVs are liable to pay VAT. The Commission contends that, like a holding company, a SICAV which is not self-managed only holds securities and does not carry out taxable transactions.

15The Commission did not set out this distinction at the hearing, but merely contrasted the situation of special investment funds, which are not legal persons, with that of SICAVs, which are legal persons. In any event, the distinction apparent from its written observations does not seem to me

18 — To distinguish the activity of a holding company, the Court thus noted that 'the activity of a bondholder may be defined as a form of investment which does not extend further than straightforward asset management' (Case C-80/95 Harnas & Helm [1997] ECR I-745, paragraph 181.

to be relevant. The main criterion for determining the circumstances in which a SICAV must be considered liable to pay VAT is the nature of its activities and not its legal 19 form. Of course, alternatively, these activities must take place within a legal structure which is likely to be subject to taxation. This is indeed the case for the activities at issue: all SICAVs are legal persons, whatever their 20 internal organisation. They own a portfolio of transferable securities which an external management company will possibly have the task of managing. SICAVs may therefore be considered as taxable persons for the purpose of applying the Sixth Directive, irrespective of the legal form which they choose for the management of their activities.

16This approach seems to me to meet the requirement of simplicity and structure of the tax system. It is also in accordance with one of the objectives of the Sixth Directive,

19 — In another context, the Court stated that 'the principle of fiscal neutrality precludes, inter alia, economic operators carrying on the same activities from being treated differently as far as the levying of VAT is concerned. It follows that that principle would be frustrated if the possibility of relying on the benefit of the exemption provided for activities carried on by the establishments or organisations referred to in Article 13A(1)(b) and (g) was dependent on the legal form in which the taxable person carried on his activity' (Case C-216/97 Gregg [1999] ECR I-4947, paragraph 20). The legal form of the body in question is consequently also irrelevant in cases where it is necessary to determine whether or not that body is a taxable person.

20 — This is the main criterion which distinguishes SICAVs from special investment funds. Special investment funds are contract-based but are not legal persons. As they are not legal entities, they may be considered as 'transparent' for tax purposes. Therefore, one cannot do otherwise but tax the management company which manages the collective portfolios. However, this approach is, in a sense, dictated both by default and out of necessity.

which is to lay down common rules with a view to approximating the conditions of competition between comparable economic actors. Moreover, the relations existing between a SICAV and its management company are not in any way comparable to those which may develop between a holding company and the companies in which it has acquired shareholdings. Indeed, the management company acts upon delegation from the SICAV. The SICAV remains responsible for the investment activities. However, the decisive criterion for the issue of tax liability is whether the body in question is the actual medium through which the economic activities are performed, and not how the body in question organises the management of those activities.

17The answer to the first part of the first question referred for a preliminary ruling should therefore be that Article 4 of the Sixth Council Directive 77/388/EEC of 17 May 1977 must be interpreted as meaning that SICAVs established in accordance with Directive 85/611/EEC are taxable persons for the purposes of value added tax. It remains to determine the consequences of this answer as regards determination of the place where services are supplied to SICAVs.

B — The place where services are supplied to SICAVs

18Article 9 of the Sixth Directive lays down the principle that the place of supply of services is the place where the supplier is established. This principle is however subject to exceptions, one of which provides, at Article 9(2)(e), that the place of supply of consultancy services and banking and financial transactions performed for taxable persons established in the Community but not in the same country as the supplier is the place where the customer has established his business.

19As it has been established that SICAVs are taxable persons, Article 9(2)(e) would indeed seem to apply to the services which are provided to them. None the less, the Kingdom of Belgium disagrees with that conclusion. It considers, in its written observations, that a distinction should be made: only consultancy services, data processing services and the supplying of information to SICAVs fall within the scope of the provision; management services provided to SICAVs are not covered by Article 9(2)(e), where those services involve a power to take decisions.

20As a basis for this distinction, the Kingdom of Belgium relies on case-law of the Court regarding the conditions of eligibility for an exemption from VAT under 21 Article 13(A) of the Sixth Directive. However, this case-law is not relevant at this stage of the analysis, where it is a question simply of determining the place where

21 — Case C-267/00 Zoological Society [2002] ECR I-3353.

services are supplied. It is sufficient to note that Article 9(2)(e), third and fifth indents, covers both consultancy services and banking and financial transactions.

21It is clear from the foregoing that Article 9(2)(e) of the Sixth Directive also applies to management services, where they fall within the framework of financial operations. Provided that these services were supplied to taxable persons established in the Community but not in the same country as the supplier, they must be deemed to be supplied at the place where the recipient of the services has established his business.

III — The scope of the exemption from

VAT under Article 13(B)(d), point 6 of the Sixth Directive

22Although, according to the national court, an affirmative answer to the first question renders the second irrelevant to resolving the main proceedings, I consider that it is useful to analyse it.

23Under the scheme set up by the Sixth Directive, Article 13(B)(d), point 6, provides that the Member States shall exempt 'management of special investment funds as defined by Member States'. In that regard, the disputes relate to both the general interpretation of this provision and the specific meaning of the concept of management.

A — Rules of interpretation

24The parties which have submitted observations are in agreement as to the general rule, established by settled case-law, according to which the exemptions under Article 13 of the Sixth Directive must be narrowly construed inasmuch as they provide an exception to the principle that VAT is due each time a service is provided for con 22 sideration by a taxable person.

25It may also be useful to recall, in the light of the considerations in the order for reference, that, like the concept of taxable person, the exemptions constitute independent concepts of Community law which must be placed in the general context of the common system of VAT introduced by 2 the Directive. 3T he fact that Article 13(B) (d), point 6, refers to the laws of the Member States does not mean that it is for the different national legislatures to determine

22 — See, lastly, Case C-45/01 Dormer [2003] ECR I-1294, paragraph 42.

23 - Case C-2/95 SDC [1997] ECR I-3017, paragraph 21.

the scope of the exemption. First, Member States only have the right to define the status of special investment funds and not determine their situation in the light of the common VAT rules. Second, the definition of special investment funds is now, in part, regulated by Community law, through Directive 85/611/EEC.

26BBL submits that it is necessary to consider, in the analysis, the ratio legis of the provision, that is, the reasons of general policy common to Member States which justify the exemption. It is clear that such reasons existed when Article 13 was drafted. They doubtless reflect, within the framework of Article 13, the overall intention, pointed out by BBL, to promote access by savers to collective investment. However, there is a more practical basis for the exemption, which is to avoid subjecting contract-based funds to a tax burden which self-managed investment undertakings which are legal entities do not have to bear, by reason of the exemption under Article 13(B)(d), point 5. According to this last provision transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding documents establishing title to goods, and the rights or securities referred to in Article 5(3) of the Sixth Directive are exempt from VAT.

27In that regard, the Belgian Government submits that an exemption restricted to contract-based funds, to the exclusion of statutory funds which have opted to delegate the management of their assets, could affect equality of treatment between the various collective investment undertakings. I am inclined to agree with this last argument. It is legitimate to extend the regime provided for special investment funds to SICAVs, where they are in a similar position. However, this provides no ground for inferring, as BBL claims, that all services supplied to such collective investment undertakings should be exempted. In order to determine the scope of this exemption, the meaning of the concept of management, for the purpose of Article 13, should be defined.

28This conclusion is not contradicted by the alleged inequality of treatment between collective investment undertakings which, according to BBL, could lead to the exemption being restricted to certain management services for special investment funds. First, a self-managed SICAV which chooses to use a third party to take charge of services which are not directly linked to management of its activities would in this respect be in the same tax position as a special investment fund. The fact that such a SICAV may cany out these tasks itself without being liable to pay VAT, although special investment funds do not have this choice, is irrelevant. In those circumstances, any difference in treatment between SICAVs and special investment funds is, in fact, only the normal consequence of the application of the common system of VAT, under which only activities performed independently, in the context of a relationship between two autonomous tax 24 able persons, are subject to taxation. Second, if one was to follow BBL's line of argument on this point, it would have to be accepted that many services supplied, concerned broadly with the management of special investment funds, could fall within the scope of the exemption. This manifestly would go beyond the wording of Article 13 (B), which must be interpreted narrowly.

B — The concept of management within the meaning of Article 13(B)(d), point 6 of the Sixth Directive

29The Sixth Directive does not define the concept of management, just as it does not define the object of the transactions covered by Article 13(B)(d). In several cases, the Court has had the opportunity to clarify the meaning of some of these transactions. However, the Court has never ruled on the exemption laid down in Article 13(B)(d), point 6.

30In the absence of a definition, BBL proposes referring to the general meaning given by national civil law doctrine to the concept of management. Although tempting,

24 — Advocate General Ruiz-larabo Colomer followed a similar reasoning in SDC, ated in footnote 22, paragraphs 54 et seq. this suggestion is not acceptable. It is recalled that the case-law of the Court specifically excludes asset management operations from the scope of application of VAT. Therefore, a definition which makes these operations a central feature must be rejected. Such a definition logically cannot determine the scope of a tax exemption which, by definition, implies prior liability to 25 tax.

31The observations submitted to the Court focus on whether management should be construed as involving a power to take decisions. Indeed this is the interpretation of the Commission and of the Greek Government. In their opinion, management in the terms of this provision corresponds solely to financial management in the strict sense, which includes the power to take decisions concerning investment policy. BBL and the Belgian Government disagree with this interpretation. In their view, the concept of management is broad and covers management advice.

32Thus framed, the question does not appear to be correct. In order to clarify the meaning of the concept of management, one must consider both its constituent parts and the purpose of the provision of which it is

25 — See, in support of this, the Opinion of Advocate General Ruiz-Jarabo Colomer in SDC, cited in footnote 22, paragraph 57.

part. That provision requires the exemption to be circumscribed so that it does not affect the principle that VAT should have general application but without rendering the object 2 of the exemption meaningless. 6 On this basis, it is possible to extend the exemption to all transactions directly linked to management of the investment funds. Consequently, the exemption cannot be restricted merely to decision-making. However neither can the exemption be deemed to cover all services provided to collective investment undertakings in the position of special investment funds.

33In my view, the transactions covered by the exemption must be restricted to those which are closely linked to the exploitation of the funds, that is, to determining policies of investment and acquisition and sale of shares. The exempt transactions, if they do not amount to decision-making, must at least be involved directly in the trade in securities. In order to be able to apply the exemption, it must be established that the services in question are in fact an integral part of the transactions expressly exempted by the Sixth Directive. Services that are easily dissociable from fund management in the narrow sense must on the contrary be considered liable to VAT.

34Indeed the Court, following a similar reasoning, regarding the exemptions covered by Article 13(B)(d), points 3 to 5, distin-

26 — Article 4 of the Sixth Directive confers a very wide scope on value added tax, see Case C-186/89 van Tiem [1990] ECR I-4363, paragraph 17.

guished between exempt transactions and straightforward physical, administrative and technical services which are neither specific to nor essential for the exempt transac 27 tions. In my view, the same analysis should apply, mutatis mutandis, to the scope of the exemption in Article 13(B)(d), point 6 of the Sixth Directive.

35It follows from this analysis that, to determine the scope of the exemption in Article 13(B)(d), point 6, it must be considered whether the services in question have an effect directly on the financial position of the fund, so that they have a determining influence on the assessment of financial risks or on the decisions taken as to invest 28 ments.

36In the present case, the information provided by the national court concerning the services supplied to the SICAVs does not enable it to be concluded whether those services are transactions which are indissoci 29 able from management of the SICAVs. It

27 - Case C-2/95 SDC [1997] ECR I-3017 and Case C-235/00 CSC Financial Services [2001] ECR I-10237.

28 — It should be noted that the Court, ruling, in a different context, on the concept of (the right to] 'manage undertakings' under the second paragraph of Article 43 EC, considered that this involved [a national of a Member State] having a holding in a company which gives him 'definite influence over the company's decisions and [which] allows him to determine its activities' (Case C-251/98 Baars [2000] ECR I-2787, paragraph 22).

29 — The services involved providing the SICAVs with information and assistance in managing assets within the framework of the investment policy adopted and material help in the acquisition, subscription and transfer of securities.

will be a matter for the national court to rule on the specific nature of the services provided.

37BBL however adds two textual arguments which, in its opinion, overturn this analysis. The first, put forward at the hearing, makes a connection, within the context of Article 13(B)(d) of the Sixth Directive, between the concept of management at point 5 and the concept of management within the meaning of point 6. Article 13(B)(d), point 5, provides that 'Member States shall exempt transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding documents establishing title to goods, [and] the rights or securities 30 referred to in Article 5(3)'. The exemption in point 6 is apparently directly connected to the exclusion from the exemption provided for in point 5. The concept of management in point 6 should therefore be understood in the broad sense in order to reflect the reservation in point 5. It will be recalled that management within the meaning of point 5, according to the case-law of the Court, covers supply of a straightforward physical, technical or administrative service, which does not alter the legal or financial situa-31 tion.

38This argument assumes that both concepts of management in Article 13(B)(d) are identical. However, their content is not the same. The concept of management chosen

30 — Emphasis added.

31 — Case C-235/00 CSC Financial Services, cited in footnote 27, paragraph 28.

by the legislature, in the context of Article 13 (B)(d), point 5, is a restriction of the original formula, proposed by the Commission, which covered all operations relating to debts, shares, debentures and other secu 32 rities. This concept of management means excluding physical, technical or administrative assistance and executive tasks, not directly linked with trade in securities, from the scope of the exemption. On the other hand, management within the meaning of point 6 of the same Article is a positive concept, which clearly covers the activity of exploiting portfolios of securities allotted to a fund by its subscribers. To that effect, management is one of the two fundamental components of a special investment fund, along with the safekeeping, by the depositary, of the fund assets. This concept of management cannot therefore be construed as covering services supplied to the manager which are not directly related to the exploitation of the fund.

39BBL's second argument is based on the fact that the scope of the activity of companies which manage investment funds has recently been extended, pursuant to Directive 2001/107/EC. This is a decisive 33 factor of BBL's written arguments. Directive 2001/107/EC clarifies and extends the

32 — See the Resolution embodying the opinion of the European Parliament on the Commission's proposal for a Sixth Council Directive 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 1974 C 40, p. 34). [Not available in English.]

33 — In actual fact, BBL also relies on Council Directive 93/22/ EEC of 10 May 1993 on investment services in the securities field (OJ 1993 L 141, p. 27). It is settled, however, that Article 2(2)(h) of the Directive excludes collective investment undertakings and the depositaries and managers of such undertakings from its scope of application.

scope of activities of companies which manage collective investment undertakings, 34 inter alia to giving investment advice. It appears however that this extension does not in any way have the automatic effect of bringing the said activities within the concept of management under Article 13(B)(d), point 6 of the Sixth Directive. First, as the object of both provisions is separate, nothing precludes the concept of management from being treated differently in both cases. Second, it should be recalled that, in Directive 2001/107/EC, the activity of giving investment advice is only intended to be a 'non-core service' as opposed to the principal 35 activity of fund management. Within the context of the common system of VAT it is therefore quite possible to consider such activities as 'ancillary transactions'. According to the case-law of the Court, this classification concerns services which do not constitute the 'direct, permanent and necessary extension' of the taxable activity. 36 Such activities must be considered as separate transactions, producing their own results, and known as such by third parties. On that basis, they cannot be treated as fund management for the purpose of an exemption from VAT.

34 — Article 5 of Directive 85/611/EEC as amended by Directive 2001/107/EC provides that 'The activity of management of unit trusts/common funds and of investment companies includes, for the purpose of this Directive, the functions mentioned in Annex II which are not exhaustive'. Annex II of the Directive includes the functions of investment management, administration, and marketing. Article 5(3) [of Directive 2001/107/EC] provides, by way of derogation from paragraph 2, that Member States may authorise management companies to provide, in addition to the management of unit trusts/common funds and of investment companies, services of management of portfolios of investments on a client-by-client basis and, as non-core services, investment advice and safekeeping and administration services in relation to units of collective investment undertakings.

35 — Article 5(3)(b) of Directive 85/611/EEC as amended by Directive 2001/107/CE.

36 — See, by analogy, Case C-306/94 Régie dauphinoise [1996] ECR I-3695, paragraph 18.

40To conclude this analysis, I consider that directly on the financial position of under Article 13(B)(d), point 6 of the Sixth Council takings for collective investment in transfer Directive 77/388/EEC of 17 May 1977 must able securities in the position of special be interpreted as meaning that the term investment funds, so that they have a 'management' covers not only management determining influence on decisions taken as services involving a power to take decisions to investments.

but also transactions likely to have an effect

IV — Conclusion

41In the light of the foregoing observations, I suggest that the Court respond to the questions referred by the Tribunal de première instance, Brussels, as follows:

(1) Article 4 of the Sixth Council Directive 77/388/EEC of 17 May 1977 must be interpreted as meaning that SICAVs established in accordance with Council Directive 85/611/EEC of 20 December 1985 are taxable persons for value added tax purposes, so that the services referred to in Article 9(2)(e) of the Sixth Council Directive 77/388/EEC of 17 May 1977 supplied to them are deemed to be provided at the place where the said SICAVs have established their business.

(2) Having regard to the response to the first question, it is unnecessary to reply to the second question.