C-90/02 Bockemühl

JUDGMENT OF THE COURT (Fifth Chamber)

Legal context and the dispute

1 April 2004 *

In Case C-90/02,

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

Finanzamt Gummersbach

and

Gerhard Bockemühl,

on the interpretation of Articles 18(1) and 22(3) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value

* Language of the case: German.

added tax and amending Directive 77/388 with a view to the abolition of fiscal frontiers (OJ 1991 L 376, p. 1) and by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47),

THE COURT (Fifth Chamber),

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

Advocate General: F.G. Jacobs, Registrar: M.-F. Contet, Principal Administrator,

after considering the written observations submitted on behalf of:

— the German Government, by W.-D. Plessing and M. Lumma, acting as Agents,

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

BOCKEMUHI

having regard to the Report for the Hearing,

after hearing the oral observations of the Finanzamt Gummersbach, represented by F. Fürst, acting as Agent, of Mr Bockemühl, represented by J.A. Nohl and C. Hesener, Steuerberater, and of the Commission, represented by K. Gross and A. Böhlke, at the hearing on 11 September 2003,

after hearing the Opinion of the Advocate General at the sitting on 23 October 2003,

gives the following

Judgment

1By order of 22 November 2001, which reached the Court on 15 March 2002, the Bundesfinanzhof referred for a preliminary ruling under Article 234 EC three questions on the interpretation of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388 with a view to the abolition of fiscal frontiers (OJ 1991 L 376, p. 1) and by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax (OJ 1992 L 384, p. 47; 'the Sixth Directive').

2Those questions were raised in a dispute between the Finanzamt Gummersbach ('the Finanzamt') and Mr Bockemühl concerning the Finanzamt's refusal to allow Mr Bockemühl to deduct value added tax ('VAT') on services supplied to him. They concern in essence the conditions for exercising the right to deduct referred to in Article 18(1) of the Sixth Directive, where the taxpayer concerned is himself liable for that tax by reason of the fact that the supplier of the services is established outside the country concerned.

Legal background

Community legislation

3Article 2(1) of the Sixth Directive provides that VAT is to be imposed on the supply of goods or services effected for consideration within the country by a taxable person acting as such.

4In relation to the supply of services, the place of the taxable operation is determined in accordance with Article 9 of that directive, Article 9(1) providing that that place is to 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. By way of exception to that rule, however, Article 9(2) provides:

'(a) the place of the supply of services connected with immovable property, including the services of estate agents and experts, and of services for preparing and coordinating construction works, such as the services of architects and of firms providing on-site supervision, shall be the place where the property is situated;

(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:

— the supply of staff,

5Concerning the right to deduct, Article 17(2) of the Sixth Directive provides:

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

(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person liable for the tax within the territory of the country;

...'

6Article 18 of the Sixth Directive, on the rules governing the exercise of the right to deduct, reads:

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

(a) in respect of deductions under Article 17(2)(a), hold an invoice, drawn up in accordance with Article 22(3);

(b) in respect of deductions under Article 17(2)(b), hold an import document, specifying him as consignee or importer, and stating or permitting calculation of the amount of tax due;

(c) in respect of deductions under Article 17(2)(c), comply with the formalities established by each Member State;

(d) when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formalities laid down by each Member State.

3. Member States shall determine the conditions and procedures whereby a taxable person may be authorised to make a deduction which he has not made in accordance with the provisions of paragraphs 1 and 2.

...'

7Concerning the persons liable to pay VAT, the first paragraph of Article 21 (1)(a) provides that tax is due under the internal system from a taxable person carrying out the taxable supply of goods or of services, other than one of the supplies of services referred to in Article 21(1)(b). However, the second and third paragraphs of Article 21(1)(a) of the Sixth Directive provide:

'Where the taxable supply of goods or of services is effected by a taxable person who is not established within the territory of the country, Member States may adopt arrangements whereby tax is payable by another person. Inter alios a tax representative or the person for whom the taxable supply of goods or of services is carried out may be designated as that other person.

However, the tax is payable by the person to whom the supply of goods is made when the following conditions are met:

— the invoice issued by the taxable person not established within the territory of the country conforms to Article 22(3).

8Under Article 21(l)(b) of the Sixth Directive, VAT is due from persons to whom services covered by Article 9(2)(e) are supplied, when the service is carried out by a taxable person established abroad.

9Article 21 ¹ (c) provides that VAT is due from any person who mentions the value added tax on an invoice or other document serving as an invoice.

10Article 22(3) of the Sixth Directive provides:

'3. (a) Every taxable person shall issue an invoice, or other document serving as invoice, in respect of goods and services which he has supplied or rendered to another taxable person or to a non-taxable legal person ...

(b) The invoice shall state clearly the price exclusive of tax and the relevant tax at each rate as well as any exemptions.

(c) Member States shall lay down the criteria that shall determine whether a document may be considered an invoice.

...'

The national legislation

11In conformity with Article 21(1) of the Sixth Directive, the Federal Republic of Germany has enacted in Paragraph 51 of the Umsatzsteuer-Durchführungsver ordnung 1993 (VAT Implementing Regulation, BGBl. 1993 I, p. 565; 'the UStDV 1993') that:

'(1) The person to whom the service is supplied must withhold the tax on the consideration and pay it to his local tax office in respect of the following taxable transactions:

1. Supply of work and other services by an undertaking established abroad;

(3) An undertaking established abroad is one which does not have its place of residence, head office or centre of management, or any branch establishment within this country or in a customs-free territory. The relevant date is the date on which the consideration is given. If it is doubtful whether the undertaking fulfils those conditions, the person to whom the services are supplied may only omit to deduct and pay over the tax if the undertaking can prove to him, by way of a certificate from the tax office responsible under the German Tax Code for the taxation of its transactions, that it is not an undertaking within the meaning of the first sentence.

(4) The consideration within the meaning of subparagraph (1) means the price including VAT.'

12However, Paragraph 52(2) and (3) of the UStDV introduced exceptions to the obligations under Paragraph 51:

'(2) The person to whom services are supplied shall not be obliged to deduct and pay over the tax on the undertaking's services where:

1. the undertaking has not issued an invoice showing the tax separately, and BOCKEMÜHL

2. the person to whom the services are supplied could claim a full deduction of that input tax if the tax were shown separately.

(3) For the condition in subparagraph (2), point 2 to be fulfilled, it is not necessary that the undertaking supplying the service be authorised to make separate mention of the VAT in an invoice.

...'

The dispute in the main proceedings and the questions referred

13Mr Bockemühl runs a construction company in Germany. During the financial year in question, he had engaged English workers who had been placed at his disposal by a company calling itself 'Jaylink Bau Ltd Building Contractors'. That company had a contact address in the Netherlands.

14The work carried out by those English workers was invoiced to Mr Bockemühl under the name of the company in question, the invoices bearing an English VAT identification number. A first London address was given on the invoices covering the period from 14 December 1994 to 22 March 1995, whereas another London address was indicated on those covering the period from 29 March 1995 to 19 July 1995. Those invoices described the service invoiced as work, whereas in reality it was the supply of staff.

15According to investigations carried out by the Bundesamt für Finanzen (Federal Finance Ministry), there was a company called 'Jaylink Building Contractors Ltd', on the English Register of Companies as at 21 May 1992, whose registered office was at the address mentioned on the first invoices. The company did not appear in local telephone directories.

16The invoices did not show any VAT, but contained the words 'Nullregelung Par.

52 UStDV vereinbart' (zero rate Para. 52 UStDV as agreed). However, after an audit, the Finanzamt took the view that the services invoiced had not been carried out by the company whose name appeared on the invoices but by another, unknown, undertaking. Accordingly, by a tax assessment notice of 23 August 1996, it held that, as the recipient of the services, Mr Bockemühl was liable to pay VAT of DEM 17 219.17 on the taxable transactions in question.

17Following an action brought by Mr Bockemühl, the Finanzgericht Köln (Germany) annulled that assessment and the subsequent decision on Mr Bockemühl's administrative complaint, dated 27 March 1997, holding that there was 'no reasonable doubt that the person issuing the invoice and the undertaking supplying the service were one and the same person'.

18It is against that judgment that the Finanzamt appealed on a point of law to the Bundesfinanzhof, arguing that the conditions for applying the 'zero rule' in Article 52(2), point 2, of the UStDV 1993 were not fulfilled inasmuch as the identity of the person supplying the services was, in its submission, doubtful. Mr Bockemühl was therefore liable for the tax.

19According to the order for reference, the procedure for deduction at source laid down by Paragraph 51 et seq. of the UStDV 1993 was replaced, from 1 January BOCKEMÜHL

2002, by a procedure implying that the recipient of the services is liable to tax on the ground that that procedure for deduction at source was not in accordance with Community rules. However, the referring court considers that those paragraphs of the UStDV 1993 remain applicable for the financial year in question in so far as they can be interpreted in accordance with the rules of Community law.

20In that context, and with a view to seeing the relevant national provisions applied in a manner consistent with the Sixth Directive, the national court considers that the services in question were supplied by a taxable person established abroad, and that the place where the services were supplied was Germany, either by virtue of Article 9(2)(a) of the Sixth Directive concerning supplies of services relating to immovable property or by virtue of Article 9(2)(e) of that directive concerning the supply of staff. For the purposes of that latter provision, the referring court is of the view that the Federal Republic of Germany is required, in accordance with Article 21(1)(b) of the Sixth Directive, to regard Mr Bockemuhl, as the person to whom the services were supplied, as liable for VAT.

21Concerning the right to deduct, as laid down in Paragraph 52(2), point 2, of the UStDV 1993, the referring court considers that, having used the services in question for his taxable transactions, Mr Bockemuhl should be entitled to deduct input VAT in accordance with Article 17(2)(a) of the Sixth Directive. Having doubts, however, as to the conditions giving rise to the right to deduct, it decided to stay the proceedings and refer three questions to the Court for a preliminary ruling:

'(1) Is it necessary under Article 18(1)(a) of Directive 77/388/EEC for a person to whom services are supplied, who is liable to pay tax under Article 21(1) of Directive 77/388 and who has been charged to tax as such, to be in possession of an invoice issued in accordance with Article 22(3) of Directive 77/388 in order to exercise his right to deduct input tax?

(2) If the first question is answered in the affirmative, what details must the invoice contain? Is it detrimental if, instead of the supply of staff, the work carried out using that staff is given as the service supplied?

(3) What would be the consequences in law of inextinguishable doubts that the person issuing the invoice supplied the service invoiced?'

The first and second questions

22In its first and second questions, which fall to be considered together, the referring court asks, first, whether, in a situation where the reverse charge procedure applies, the right to deduct of a taxable person, liable as the recipient of services for the VAT relating thereto, can be exercised only if that taxable person holds an invoice drawn up in accordance with Article 22(3) of the Sixth Directive. In the event of an affirmative answer to that question, it asks, secondly, what information must be given on that invoice and, in particular, whether the amount of the VAT and the name and address of the supplier of the services must be specified and whether an incorrect specification of the services has legal implications for the right to deduct.

Observations submitted to the Court

23According to the German Government and the Commission, which arc the only parties to have submitted written observations, Article 18(1)(a) of the Sixth Directive undeniably applies to this case. They underline the express nature of the obligation laid down by that provision, namely to hold an invoice drawn up in accordance with Article 22(3) of the Sixth Directive, an obligation which, they submit, admits of no exceptions.

24According to the German Government, even if the recipient of the supply is himself liable for VAT, that transfer of the debt to the recipient of the supply is nothing more than another way of levying VAT and can have no effect on the conditions for access to the right to deduct.

25The Commission further argues that that solution accords with the general system of Article 21(1) of the Sixth Directive. That provision stipulates that, in relation to supplies of goods by a taxable person not established within the country, VAT is payable by the recipient only if the invoice complies with Article 22(3) of the Sixth Directive.

26The Commission further refers to the amendments since made by Council Directive 2001/115/EC of 20 December 2001 amending Directive 77/388 with a view to simplifying, modernising and harmonising the conditions laid down for invoicing in respect of value added tax (OJ 2001 L 15, p. 24). It stresses that the new wording of Article 22(3) of the Sixth Directive specifies that where an exemption is involved or where the customer is liable to pay VAT, the invoice must refer to the appropriate provision of the Sixth Directive, to the corresponding national provision, or to any indication that the supply is exempt or subject to the reverse charge procedure.

27The German Government argues that, from the point of view of the fiscal administration, the invoice has an important documentary function in that it contains verifiable information allowing the amount of deductible input VAT to be established, in cases where the Member State has enacted exceptions to the right to deduct in respect of certain supplies.

28In reply to a written question from the Court, the Finanzamt, the German Government and the Commission have replied that Article 18(1)(a) and Article 18 (1)(d) of the Sixth Directive apply cumulatively so that, where the reverse charge procedure applies, the taxable person must fulfil the additional formalities prescribed by the Member States in the context of the exercise of the option which is open to them pursuant to Article 18(1)(d) of the Sixth Directive. That latter provision does not, therefore, in their submission, allow Member States to adopt exceptions which alleviate the conditions laid down by Article 18(1)(a) of the Sixth Directive.

29In any event, the Commission notes that Article 18(1)(d) of the Sixth Directive expressly refers to the application of Article 21(1) of that directive, according to which the transfer of the tax debt is subject to the condition that 'the invoice issued by the taxable person not established within the territory of the country conform to Article 22(3)'. Therefore, it maintains, Article 18(1)(d) leaves the requirement as to the holding of an invoice unchanged.

30As to whether the invoice must mention the amount of VAT in question, both the German Government and the Commission consider that both the sense and the purpose of Article 22(3)(b) of the Sixth Directive militate in favour of a solution whereby, in cases where the recipient of the supply is also the person owing the tax debt, the provision should be interpreted restrictively with no requirement for a separate reference to VAT.

31The German Government puts forward a number of arguments in support of that argument. First, the recipient of the supply, as the person owing the tax debt, should himself calculate the amount of VAT which he is required to pay, without being obliged to rely on the corresponding references appearing in the invoice drawn up by the undertaking which made the supply. Secondly, in the event of a separate reference to VAT, the supplier would, in accordance with Article 21(1 )(c) of the Sixth Directive, be liable for VAT alongside the recipient of the supply, which would be contrary to the spirit of the Sixth Directive. Thirdly, referring to the wording of Article 22(3)(b) of the Sixth Directive, as since amended by Directive 2001/115, the German Government observes that the system thus established comprises rules which make any separate reference to the amount of the VAT superfluous.

32According to the Commission, Article 22(3)(b) of the Sixth Directive should be regarded as treating such transfer of the tax debt as a case of exemption. Otherwise, the issuer of the invoice would become liable for VAT merely by referring to it in his invoice, in accordance with Article 21(1)(c) of the Sixth Directive, without the recipient of the supply being able to use his right to deduct in relation to that tax. The Commission concludes that, if the recipient of the supply is liable for VAT, it is sufficient to mention that fact on the invoice or to enter a reference on the invoice to the provision pursuant to which that is so.

33Concerning the name and address of the person making the supply, the German Government refers first to the judgments in Joined Cases 123/87 and 330/87 Jeunehomme and EGI [1988] ECR 4517, paragraph 17, and Case 0141/96 Langhorst [1997] ECR I-5073, paragraph 17. It considers that, even if Article 22 (3)(c) of the Sixth Directive and the case-law of the Court of Justice do not require Member States to demand such references, the latter nevertheless have the power to demand additional references.

34The Commission considers that it follows from the judgment in Case C-342/87 GeniusHolding [1989] ECR 4227, which in its view recognises the power to verify the genuineness of the taxable transaction, that the invoice must permit identification of the taxable person, with his name and address, and also of the transaction in question.

35Concerning reference to the nature of the supply, the German Government considers that Member States must be able to require that this be precisely indicated on the invoice, so as to ensure accurate collection of VAT and to prevent evasion.

36According to the Commission, since the invoice represents the essential means of verifying the proper application of VAT, the description of the transaction invoiced must be sufficiently precise to reveal the type of transaction in question, whether that transaction is taxable, the place where it was carried out and, in appropriate cases, the identity of the taxable person.

Reply of the Court

37As the Advocate General has observed in point 37 of his Opinion, a taxable person liable for VAT as the recipient of goods or services is able to rely on the right to deduct contained in Article 17(2)(a) of the Sixth Directive. That position is confirmed by the amendments subsequently made to that provision by Council Directive 95/7/EC of 10 April 1995 amending Directive 77/388 and introducing new simplification measures with regard to value added tax — scope of certain exemptions and practical arrangements for implementing them (OJ 1995 L 102, p. 18), which eliminated divergences in that respect between various language versions.

38According to consistent case-law, the right to deduct laid down in Article 17 or the Sixth Directive forms an integral part of the VAT mechanism and in principle cannot be limited. It may be exercised immediately in respect of all taxes affecting earlier transactions in the chain (see, in particular, the judgments in Case C-62/93 BP Soupergaz [1995] ECR I-1883, paragraph 18, and Joined Cases C>110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I-1577, paragraph 43).

39The system of deductions is intended entirely to relieve an undertaking of the burden of VAT due or paid in the context of all its economic activities. The common system of VAT therefore guarantees neutrality in relation to the tax burden of all economic activities whatever their aim or result, provided those activities are themselves subject to VAT (see, in particular, Case 268/83 Rompelman [1985] ECR 655, paragraph 19; Case C-37/95 Ghent Coal Terminal [1998] ECR I-1, paragraph 15; and Gabalfrisa, cited above, paragraph 44).

40Concerning the conditions for exercising the right to deduct, Article 18(1 )(a) of the Sixth Directive provides as a general rule that, for the deduction referred to in Article 17(2)(a), the taxable person must hold an invoice drawn up in accordance with Article 22(3) of that directive.

41Where, however, in accordance with Article 21(1) of the Sixth Directive, it is the recipient of the services who is liable for VAT, Article 18(1)(d) of that directive states that he is required to fulfil the formalities laid down by each Member State.

42In that regard, the order for reference shows that, in this case, Mr Bockemühl is in principle entitled to exercise the right to deduct in his capacity as a person liable for VAT. However, he is not in possession of an invoice drawn up in accordance with Article 22(3) of the Sixth Directive.

43In those circumstances, the question arises whether, in a case such as the present where the reverse charge procedure applies, it is only the provisions of Article 18 (1)(d) of the Sixth Directive which apply, or whether, as the German Government, the Finanzamt and the Commission maintain, Article 18(1)(a) also applies.

44In that regard, it should be noted first that Article 22(3) of the Sixth Directive, in the version which applied at the time of the facts, did not expressly refer to the reverse charge procedure. As the German Government and the Commission have demonstrated in their observations, application of that provision in the context of that procedure would raise difficulties of interpretation concerning, in particular, the provision requiring indication of the amount of VAT as a precondition for exercising the right to deduct (see paragraphs 30 to 32 of this judgment). In addition, even though the amendments made to Article 22(3)(b) of the Sixth Directive by Directive 2001/115 mention the reverse charge procedure, as indicated in paragraph 26 of this judgment, the fact remains that Article 22 of the Sixth Directive, concerning the invoicing obligation, makes no reference to the conditions as such which open up the right to deduct.

45Secondly, concerning the Commission's argument based on the general scheme of the third paragraph of Article 21(1)(a) of the Sixth Directive in so far as that provision stipulates, in respect of supplies of goods carried out by a taxable person not established inside the country, that VAT is payable by the recipient only if the invoice complies with Article 22(3) of the Sixth Directive, it should be noted that the third paragraph of Article 21(l)(a) of the Sixth Directive merely sets out the conditions under which the recipient of a supply of goods may be designated as liable for VAT.

46It is for a similar reason that, thirdly, the Court cannot accept the Commission's argument that Article 18(1)(d) of the Sixth Directive appears to leave the requirement for the holding of an invoice unchanged, inasmuch as that article expressly refers to the application of Article 21(1) of that directive and the third paragraph of Article 21(1)(a) requires as a condition for the transfer of the tax debt that 'the invoice issued by the taxable person not established within the territory of the country conform to Article 22(3)'. As stated in the previous paragraph of this judgment, the third paragraph of Article 21(l)(a) of the Sixth Directive merely sets out the conditions under which the recipient of a supply of goods may be designated as liable for VAT.

17 The Court therefore finds that, on a proper interpretation of Article 18(1)(a) and (d) of the Sixth Directive, only Article 18(1)(d) applies to the reverse charge procedure such as that in this case. Therefore, a taxable person who is liable as the recipient of services for the VAT relating thereto is not obliged to hold an invoice drawn up in accordance with Article 22(3) of the Sixth Directive in order to be able to exercise his right to deduct, and only has to fulfil the formalities laid down by the Member State concerned in the exercise of the option conferred by Article 18(1)(d) of the Sixth Directive.

48That interpretation is, moreover, supported by the wording of Article 18(1)(c) of the Sixth Directive, which, in terms identical to those of Article 18(1)(d), imposes the condition that the taxable person must fulfil the formalities that are established by each Member State. The former provision applies to situations relating to self-supply, in which it is logical that the right to deduct should not be subject to the obligation to hold an invoice drawn up in accordance with Article 22(3) of the Sixth Directive.

49Concerning the exercise of the option given by Article 18(1)(d) of the Sixth Directive, whilst that provision allows Member States to establish formalities concerning the exercise of the right to deduct in cases where the reverse charge procedure applies, the fact remains that that power must be exercised in conformity with one of the aims pursued by the Sixth Directive, which is to ensure the collection of VAT and its verification by the tax administration (see, as regards Article 22(3)(c) of the Sixth Directive, the judgment in Langhorst, cited above, paragraph 17). Moreover, that power may be exercised only in so far as, by the number or the technical nature of such formalities, their imposition does not make it practically impossible or excessively difficult to exercise the right to deduct (see, in relation to Article 22(3)(b) of the Sixth Directive, in conjunction with Article 18 (1)(a) thereof, the judgment in Jeunehomme, cited above, paragraph 17).

50Therefore, as regards Article 18(1)(d) of the Sixth Directive, the imposition and extent of formalities to be complied with in order to be able to exercise the right to deduct should not exceed what is strictly necessary for the purposes of verifying the correct application of the reverse charge procedure concerned.

51In that context, it is true that an invoice has an important documentary function because it may contain verifiable data. In a reverse charge situation, however, it is precisely on the strength of such verifiable information that the recipient of goods or services will have been held liable for the VAT, and in what amount. Where the tax administration has the information necessary to establish that the taxable person is, as the recipient of the supply in question, liable to VAT, it cannot, in relation to the right of that taxable person to deduct that VAT, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes.

52Therefore, where a taxable person, as the recipient of services, is designated as liable for the VAT relating thereto, the tax administration cannot require as an additional condition for the right to deduct that that person be in possession of an invoice drawn up in conformity with Article 22(3) of the Sixth Directive. Such a requirement would result in a taxable person being, on the one hand, liable as the recipient of services for the VAT in question, but, on the other hand, risking not being able to deduct that tax.

53In the light of the above, the answer to the first question must be that, where the reverse charge procedure applies, a taxable person who is liable, as the recipient of services, for the VAT relating thereto in accordance with Article 21 ¹ of the Sixth Directive is not obliged to be in possession of an invoice drawn up in accordance with Article 22(3) of the Sixth Directive in order to be able to exercise his right to deduct.

54Concerning the second question, there is no need to reply to.

The third question

55Given the answer to the first question, there is no need to reply to the third question.

Costs

Costs

56The costs incurred by the German Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court. On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Bundesfinanzhof by order of 22 November 2001, hereby rules:

A taxable person who is liable, as the recipient of services, for the value added tax relating thereto, in accordance with Article 21(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment, as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388 with a view to the abolition of fiscal frontiers and by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplification measures with regard to value added tax, is not obliged to be in possession of an invoice drawn up in accordance with Article 22 (3) of that directive in order to be able to exercise his right to deduct.

Jann Rosas von Bahr

Delivered in open court in Luxembourg on 1 April 2004.

R. Grass V. Skouris

Registrar President

BOCKEMÜHL

OPINION OF ADVOCATE GENERAL JACOBS delivered on 23 October 2003 1

1In this case the German Bundesfinanzhof (Federal Finance Court), seeks guidance on the interpretation of the Sixth VAT Directive ('the Directive' or 'the Sixth Direc 2 tive'). First, it asks whether the recipient of a service who is also liable to pay the relevant VAT may deduct that tax only if he is in possession of an invoice issued in accordance with the Directive. If so, it further wishes to know what details the invoice must contain, in particular whether the amount of tax and the name and address of the supplier must be specified, and whether an incorrect definition of the taxable service constitutes a defect. Finally, it enquires, what legal consequences ensue if it is impossible to establish that the person who issued the invoice was the person who supplied the service?

1 — Original language: English.

2 — 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.

Background and legislation

The Community VAT system

2The essence of the VAT system is set out 3 in Article 2 of the First VAT Directive:

'The principle of the common system of value added tax involves the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, whatever the number of transactions which take place in the production and distribution process before the stage at which tax is charged.

3 — First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes, OJ, English Special Edition 1967, p. 14. On each transaction, value added tax, calculated on the price of the goods or services at the rate applicable to such goods and services, shall be chargeable after deduction of the amount of value added tax borne directly by the various cost components.'

3That system thus envisages a chain of transactions in which the net amount payable in respect of each link is a specified proportion of the value added at that stage. When the chain comes to an end at the final stage of private consumption, the total amount levied will have been the relevant proportion of the final price.

4The Sixth Directive regulates the system in greater detail, although some matters are left to the Member States. Under Article 2, a 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, although certain transactions, not in issue here, are exempted under other provisions. A taxable person is defined in Article 4(1) as one who carries out an economic activity, whatever its purpose or result. Under Articles 5 to 7, taxable transactions are supplies of goods, supplies of services or imports.

5The essentials of the right to deduct are set out in Article 17 of the Sixth Directive. A taxable person may deduct from the VAT which he is liable to pay any input tax on supplies made to him by another taxable person, in so far as those supplies are used for the purposes of his own taxable transactions. That entitlement arises whenever the deductible tax becomes chargeable. In accordance with Article 21, the person liable to pay the tax on a transaction is in general the supplier, although it may in some circumstances — including those in issue in the present case — be the recipient of the supply. 4

6Clearly in such a system there is a need for documentary evidence of liability for, payment of and entitlement to deduct tax. Such matters are dealt with in particular in Articles 18 and 22.

7A further important consideration is the fact that VAT, although to a large extent harmonised by Community rules and an important element in the Community's own resources, remains from a national point of view a national tax and is subject to varying rates in different Member States. Where cross-border transactions within the Community are concerned, there must therefore

4 — This latter situation is sometimes known as 'reverse charge' or 'tax shift'.

BOCKEMUI II be rules to determine the place where the supply occurs. As regards most services, in particular those of the kind in issue in the present case, those rules appear in Article 9 of the Directive although, as will be seen, their relevance here is confined essentially to the fact that they may indirectly determine who is liable to pay the tax.

The relevant Community provisions in detail

8The main provisions of Community law at issue are Articles 9, 17, 18, 21 and 22 of the Sixth Directive. The version applicable to the facts in the main proceedings is that in force in 1995. It is therefore necessary to consider the text as amended by, in particular, Council Directive 91/680/EEC and Council Directive 92/111/EEC. 6 In the case of Articles 17(2), 18(1), 21(1) and 22 (3), the relevant text in fact appears — confusingly enough — in Articles 28f, 28g

5 — Council Directive of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/188/KKC with a view to the abolition ot fiscal frontiers, OJ 1991 1. 376, p. 1.

6 — Council Directive of 14 December 1992 amending Directive 77/188/EEC and introducing simplification measures with regard to value added tax, OJ 1992 1. 384, p. 47.

and 28h, which form part of Title XVIa concerning the Transitional arrangements for the taxation of trade between Member States'.

Place where a service is supplied

9In Title VI of the Directive relating to the place of taxable transactions. Article 9 concerns the supply of services. Under Article 9(1) a service is normally deemed to be supplied at the place of the supplier's business, establishment, address or residence, as the case may be. Under Article 9 (2), however:

'(a) the place of the supply of services connected with immovable property ... shall be the place where the property is situated;

(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:

— the supply of staff,

…'

Persons liable to pay tax to the authorities

10According to Article 21:

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

1. under the internal system:

(a) the taxable person carrying out the taxable supply of goods or of services, other than one of the supplies of services referred to in (b).

Where the taxable supply of goods or of services is effected by a taxable person established abroad, Member States may adopt arrangements whereby tax is payable by another person. Inter alios a tax representative or the person for whom the taxable supply of goods or of services is carried out may be designated as that other person.

(b) persons to whom services covered by Article 9(2)(e) are supplied ...; however, Member States may require that the supplier of the service shall be held jointly and severally liable for payment of the tax;

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

…'

Invoices

11Dealing with the obligations of persons liable for payment of the tax, Article 22(3) provides, inter alia:

'(a) Every taxable person shall issue an invoice, or other document serving as BOCKEMÜHL invoice, in respect of goods and services which he has supplied or rendered to another taxable person or to a non-taxable legal person. ... A taxable person shall keep a copy of every document issued.

(b) The invoice shall state clearly the price exclusive of tax and the relevant tax at each rate as well as any exemptions.

... [

7]

(c) Member States shall lay down the criteria that shall determine whether a document may be considered an invoice.'

7 — For certain types of supply not in issue in the present case, Article 22(3)(b) also requires further details, including in particular the national VAT registration numbers of the two parties to the transaction.

12It may be mentioned that, since the material time in the present case, Directive 2001/115/EC 8 has amended Article 22(3) (b) to include an extended and exhaustive list of particulars to be included in an invoice, and has deleted Article 22(3)(c). The new provision spells out that:

'without prejudice to the specific arrangements laid down by this Directive, only the following details are required for VAT purposes on invoices issued under the first, second and third subparagraphs of point (a)'.

13Among the various particulars the list includes:

— 'the VAT identification number ... under which the taxable person supplied the goods or services',

8 — Council Directive of 20 December 2001 amending Directive 77/388/EEC with a view to simplifying, modernising and harmonising the conditions laid down for invoicing in respect of value added tax, OJ 2002 L 15, p. 24. Member States are to adopt measures to implement Directive 2001/115 with effect from 1 January 2004.

— 'the full name and address of the taxable person and of his customer',

— 'the extent and nature of the services rendered',

— 'the VAT amount payable, except where a specific arrangement is applied for which this Directive excludes such a detail' and

— 'where an exemption is involved or where the customer is liable to pay the tax, reference to appropriate provision of this directive, to the corresponding national provision, or to any indication that the supply is exempt or subject to the reverse-charge procedure'.

14Article 22(8) of the Sixth Directive provides:

'Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion, subject to the requirement of equal treatment for domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.'

15Since the material time, Directive 2001/115 has added a second subparagraph to Article 22(8): 'The option provided for in the first subparagraph cannot be used to impose additional obligations over and above those laid down in paragraph 3'.

Right to deduct

16Article 17, on the 'origin and scope of the right to deduct', provides:

'1. The right to deduct shall arise at the time when the deductible tax becomes chargeable.

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

(a) value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person liable for the tax within the territory of the country; 9

...'

17Article 18(1) of the Directive, setting out the rules governing the exercise of the right to deduct, provides:

9 — In the version applicable at the material time, the words 'within the territory of the country' or their equivalent, which had been introduced by Directive 91/680, appeared to refer to the liability of the supplier in many language versions, including the English, French, Italian and Spanish. In the German version, however, they referred to the place where the tax was due or paid, and in the Dutch to the place where the supply was made. Directive 95/7/EC of 10 April 1995 amending Directive 77/388/EEC and introducing new simplification measures with regard to value added tax — scope of certain exemptions and practical arrangements for implementing them, OJ 1995 L 102, p. 18, which entered into force on 1 January 1996, has since unified all language versions in line with the German. Thus the English version of Article 17(2)(a) now reads: 'value added tax due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by another taxable person' (emphasis added).

'To exercise his right of deduction, a taxable person must:

(a) in respect of deductions pursuant to Article 17(2)(a), hold an invoice drawn up in accordance with Article 22(3);

(d) when he is required to pay the tax as a customer or purchaser where Article 21(1) applies, comply with the formalities laid down by each Member State;

...'

Relevant national legislation

18Germany has exercised the option open to it under the second subparagraph of Article 21(1)(a) of the Sixth Directive. Under Paragraph 18 of the Umsatzsteuergesetz (VAT Law) 1993, as it applied in 1995, the federal finance minister could decide, in order to ensure the collection of the tax, that the person to whom goods or services were supplied by a person established abroad was liable to pay the value added tax on that transaction. The implementing decision could lay down certain other conditions, relating in particular to the method of calculation and payment of the tax.

19A withholding system was thus provided for in Paragraph 51 et seq. of the Umsatzsteuer-Durchführungsverordnung (VAT implementing regulation, 'the UStDV') 1993.

20Under Paragraph 51 of the UStDV, the recipient of work and other services supplied by an undertaking established abroad was to withhold the relevant VAT and pay it to the competent tax office, even in the event of unresolved doubt as to whether the supplier was indeed established abroad.

21Paragraph 52 provided for certain exceptions to those obligations. Paragraph 52(2) embodied the so-called 'Nullrege lung', a system under which the recipient was not obliged to withhold and pay the tax when the supplier established abroad had not issued an invoice showing the tax separately and when the recipient could have claimed a full deduction of the VAT if it had been shown separately. In such cases, it would appear, the recipient was merely to pay full output tax instead of advancing the input tax on those supplies and subsequently deducting it.

22However, following objections from the Commission that it was not fully in accordance with Community law, that withholding system was abolished with effect from 1 January 2002.

The main proceedings and the questions referred

23Mr Gerhard Bockemuhl runs a construction firm in Germany operating in particular in the superstructure, bridge building and tunnelling sectors. In 1995, some work was done for the firm by workers from Jaylink Bau Ltd Building BOCKKMUHL Contractors. That company had a contact address in the Netherlands. The referring court notes that an Offshore' company with the name of Jaylink Building Contractors is registered in England with its registered office at an accountants' firm in Mayfair, London.

24The services supplied were invoiced by Jaylink Bau Ltd Building Contractors. The invoices showed an English VAT registration number and the references of a German bank account. No VAT amount was, however, indicated. The invoices merely stated: 'Nullregelung, Paragraph 52 UStDV, as agreed'. Initially, the Mayfair address mentioned above was given, while later invoices indicated a different address in London.

25Following an audit, the Finanzamt (Tax Office) Gummersbach issued Mr Bockemühl with a tax assessment notice for the VAT on the services supplied to him. The tax office observed that the invoices did not show the tax amount. Nor was the name and address of the undertaking issuing the invoice correct, so that it was impossible to determine that the undertaking issuing the invoice was the same as had supplied the services. In the tax office's view, those services had been supplied by a third, unknown undertaking, established outside Germany. Moreover, the services supplied were not defined correctly (referring not to the supply of staff but to the work done). Consequently it concluded that, as recipient of the services, Mr Bockemühl was liable to pay VAT of DEM 17 219.17 on those taxable transactions.

26Following an unsuccessful objection, Mr Bockemühl brought an action before the competent Finanzgericht (Finance Court), which found in his favour. That court had no 'reasonable doubt that the person issuing the invoice and the undertaking supplying the service were one and the same person'. The tax office seeks a review of that decision before the Bundesfinanzhof, the referring court.

27The tax office submits that, in case of doubt, Mr Bockemühl should have withheld the tax on the services supplied to him. Moreover, even if the invoice had shown the tax separately, he would not have been entitled to deduct it because the person who invoiced — or indeed who supplied — those services was not clearly identifiable. Consequently, Paragraph 52(2) of the UStDV was not applicable. The applicant was thus liable to the tax as recipient of the services.

28The Bundesfinanzhof observes that, according to its case-law, even under the Paragraph 52(2) procedure there must be an invoice. Further that invoice must be issued by the person supplying the service and the service should be so defined that the taxable transaction can be accurately determined and easily verified.

29The Bundesfinanzhof has however doubts about the interpretation of the requirements of the Directive with respect to invoicing in a case such as the one at issue. It has therefore stayed the proceedings and referred the following questions to the Court for a preliminary ruling:

'1. Is it necessary under Article 18(1)(a) of Directive 77/388/EEC for a person to whom services are supplied, who is the person liable to pay the tax under Article 21(1) of Directive 77/388/EEC and to whom the tax has been charged

I - 3 3 14 in that capacity, to be in possession of an invoice issued in accordance with Article 22(3) of Directive 77/388/EEC in order to exercise his right to deduct input tax?

2. If so, what details must the invoice contain? Is it detrimental if, instead of the supply of staff, the work carried out using that staff is given as the service supplied?

3. What are the consequences in law of unresolvable doubts that the person issuing the invoice supplied the service invoiced?'

30Written observations have been submitted by the German Government and the Commission. The Finanzamt, Mr Bockemühl, the German Government and the Commission have also replied in writing to a question put by the Court on whether Member States are empowered under Articles 18(1)(d) and 22(3)(c) of the Directive to BOCKEMÜHL introduce exceptions to the requirements of Articles 18(1)(a) and 22(3)(b) of the Directive. The Finanzamt, Mr Bockemuhl and the Commission presented oral argument at the hearing.

Assessment

Preliminary observations

31First, Paragraph 51 et seq. of the UStDV appear to have been intended to implement provisions of the Directive.

32The Bundesfinanzhof recognises however that those national provisions were not fully consistent with Community law and that is why they have been repealed. The referring court is none the less of the view that the rule of liability of the service recipient and the 'Nullregelung' system in Paragraph 52(2) of the UStDV are applicable to the facts in the main proceedings to the extent that the person to whom the services are supplied is liable to pay the tax as provided in Article 21 of the Directive, and may take advantage of the right of deduction as provided in the same Directive.

33It must be stressed that the questions in this case concern the interpretation of the Directive, and not whether Paragraph 51 et seq. of the UStDV are compatible with it.

34It is well established however that, in an area governed by a directive, national courts must interpret national law, whether adopted before or after that directive, as far as possible in the light of its wording and purpose in order to achieve the result aimed 10 for by it. It will therefore be for the referring court to determine to what extent the national provisions at issue can be construed consistently with the Directive and hence be applicable in the instant case.

10 — See, among others, Case 106/89 Marleasing [1990] ECR I-4135, paragraph 8 of the judgment; Case C-91/92 Faccini Dori [1994] ECR I-3325, paragraph 26.

35Second, before examining the questions themselves, it is helpful to have in mind a schematic view of the way in which the Directive provisions set out above interact in their application to the circumstances in issue.

36In that context, there seems to be some uncertainty whether the services supplied were construction services or the supply of staff. However, it appears from the order for reference that the uncertainty may be ignored, at least for the purposes of the first and third questions and part of the second question. Thus, if construction services are involved, the place of supply is that of the immovable property concerned under Article 9(2)(a); if the supply of staff, the place of supply is that of the customer's establishment under Article 9(2)(e). The country is Germany in both cases. If Article 9(2)(e) applies, the customer is liable to pay the VAT under Article 21(1)(b); if the supply falls within Article 9(2)(a) it is open to the Member States to make the customer liable under Article 21(1)(a). It may be inferred

I - 3 3 16 from the order for reference that Germany has opted for that solution, so that in either case Mr Bockemuhl is the person liable to pay the tax.

37Mr Bockemuhl also wishes to deduct the tax, and relies on Article 17(2)(a) in that regard. In several language versions of the Directive as it applied at the material time, the right to deduct under Article 17(2)(a) would seem to be confined to cases where the supplier was liable for the tax within the territory of the country in which the 1 deduction was claimed. 1 However, that clearly appears to have been a drafting error, rectified by Directive 95/7 in line with the original German version which referred simply to tax due or paid within the territory of the country. Moreover, even before that correction, the inconsistency between the various languages does not seem to have been considered an obstacle to the exercise of the right of deduction in cases where the supplier was in a different Member State from the customer liable to 12 pay the tax. I thus accept the view —

11 — See note 9.

12 — See, for example, B.G.M Terra and J. Kajus, A Guide to the European VAT Directives, IBFD, Amsterdam, 1993, Vol. 2, Ch. XI.4.

BOCKEMUHL which has not been challenged in the course of the proceedings — that Article 17(2)(a) is the correct basis for deduction in such circumstances.

38In order for the customer to exercise his right of deduction under Article 17(2)(a), Article 18(1)(a) requires him to hold an invoice drawn up in accordance with Article 22(3), that is to say issued by the supplier in compliance with certain specifications. Where the customer himself is liable for the tax pursuant to Article 21 (1), Article 18(1)(d) requires him to comply with the formalities laid down by the Member State in order to exercise the right of deduction.

39In summary, Article 9(2) determines the place of supply (here, Germany) and, on that basis, Article 21(1) determines the person liable to pay the tax (here, the customer). Article 17(2) determines the customer's right to deduct, and Article 18 ¹ lays down rules governing the exercise of that right. Those rules refer to possession of an invoice in accordance with Article 22(3) and, in cases such as the present, to compliance with formalities laid down by Member States.

40Third, it must be remembered that, when a taxable person has paid VAT (input tax) on goods or services acquired for the purposes of taxable supplies to be made by him, the VAT system requires that, in the absence of any express provision to the contrary, he must be able to deduct that amount from any VAT (output tax) for which he must account to the tax authorities in respect of the supplies which he makes, provided that he can establish payment of the input tax and has complied with whatever formalities are legitimately imposed.

First question

41By its first question, the Bundesfinanzhof asks whether a recipient of services who is liable to pay the VAT on those services in accordance with Article 21(1) of the Directive, and has been charged with its payment, may exercise his right of deduction under Article 18(1)(a) only if he is in possession of an invoice issued in accordance with Article 22(3).

42In my view that is indeed so.

43Under Article 17(2)(a) of the Directive, a taxable person is entitled to deduct from the tax that he is liable to pay the VAT paid in respect of supplies made to him by another taxable person, provided that those supplies are used for the purposes of his taxable transactions. Article 18(1)(a) expressly and clearly provides: 'to exercise his right of deduction, a taxable person must ... in respect of deductions pursuant to Article 17(2)(a) ... hold an invoice drawn up in accordance with Article 22(3)'. Such language leaves little room for doubt.

44Indeed, the referring court accepts that the wording is quite clear. It suggests however that, where the person liable to pay the tax is the recipient of the supply, the invoice does not have the same significance as it has when the person liable is the supplier.

45I disagree. Whilst it is important, when interpreting the terms of the Directive, to bear in mind the purpose for which they were enacted and their place in the overall system of VAT, that approach does not in my view lead on the present issue to any different result from that indicated by the plain wording of Article 18(1)(a).

46If VAT is to be deducted, there must be proof that it has been incurred. In the context of the Community VAT system, an invoice is an important — and probably the clearest — means of providing that proof. It is the 'ticket of admission' to the right to 13 deduct. For that reason any taxable person who is entitled to deduct input VAT must be meticulous in obtaining and keeping the necessary documentation, so as to avert the possibility that a claim may be rejected as unsubstantiated. The proper issuing and keeping of invoices is also of crucial importance for the checks carried

13 — As Advocate General Slynn defined it in Joined Cases C-123/87 and C-330/87 Jeunehomme [1988] ECR 4517, at p. 4534.

BOCKFMUHI out by the relevant tax administration to ensure compliance with the relevant VAT rules.

47The fact that, in the case at issue, the person entitled to deduct the input VAT is also the person liable to pay it to the relevant authority does not change that analysis. The same considerations remain valid. Moreover, as the German Government observes, liability to pay VAT and entitlement to deduct input tax are separate issues governed by separate rules. If in certain cases the person liable to pay the tax is the recipient and not the supplier, that does not affect the need to hold an invoice in order to exercise the right to deduction.

48That approach is consistent with other provisions of the Directive. Under Article 21(1)(a), where goods are supplied by a person established in another Member State, the tax is due by the recipient provided that, inter alia, there is an 'invoice issued by the taxable person not established within the territory of the country' that 'conforms to Article 22(3)'. And, according to Article 22(3)(a), an invoice is required also in the case of supply of goods that are exempted under Article 28c(A). In my view, it may safely be considered that the requirement in Article 22(3)(a), whereby 'every taxable person shall issue an invoice, or other document serving as invoice, in respect of goods and services which he has supplied or rendered ...', is of general application.

49I therefore conclude that a recipient of services who is also the person liable to pay the VAT on those services may exercise his right of deduction under Article 18(1)(a) of the Sixth Directive only if he is in possession of an invoice issued in accordance with Article 22(3).

Second question

50By its second question, the Bundesfinanzhof asks what contents the invoice should have. In its reasoning, it specifies that it is particularly interested in the question whether the invoice should state (i) the amount of the tax and (ii) the name and address of the supplier. Furthermore, it wishes to know (iii) whether the taxable transaction must be accurately described, specifically whether a reference to work done by staff supplied, rather than the supply of the staff itself (when that is what was actually provided) affects the validity of the invoice for VAT purposes.

51It may be useful to consider the tax amount and the two other aspects separately, since the former is specifically mentioned in Article 22(3)(b), whereas the latter are not.

Tax amount

52Under Article 22(3)(b) of the Sixth Directive the invoice must clearly state 'the price exclusive of tax and the relevant tax at each rate as well as any exemptions'.

53The Bundesfinanzhof none the less doubts whether such an express statement is necessary in circumstances such as the present, where the customer rather than the supplier is liable directly to the tax authorities. The Commission and the German Government, in a similar vein, submit that Article 22(3)(b) should be interpreted in such cases to the effect that it is sufficient if the invoice expressly mentions that the recipient of the service is liable to pay the tax, or refers to the provision which establishes that liability. The Commission in that context suggests that a reverse-charge transaction should be treated, for the purposes of Article 22(3)(b), as if it were an exemption.

54I agree, at least in so far as the result is concerned.

55Where a taxable supply is made by a taxable person in one Member State to a taxable person in another Member State, and it is the latter who is liable to pay the VAT on the transaction, it is clear that a statement on the invoice of the price exclusive of tax is essential in order to ensure the proper operation of the VAT system. In the version of the Directive applicable at the material time, the invoice 15 had to be issued by the supplier.

14 — See note 4.

15 — In the version amended by Directive 2001/115 (cited above in note 8), Article 22(3)(a) no longer requires the supplier to issue the invoice but to 'ensure that an invoice is issued, either by himself or his customer or, in his name and on his behalf, by a third party'.

BOCKEMÜHL

56To require the same supplier to indicate also the amount of tax due, however, poses at least two problems.

57First, it would in principle render the supplier liable to pay the tax in accordance with Article 21(1)(c) — a result which could either lead to tax being levied twice or simply negate the whole reverse-charge mechanism. It is certain that no such result was intended by Article 21(1)(c), which is essentially a guard against fraud or loss of 1 revenue, 6 but the provision is clear and unmitigated by any exception.

58Second, on a more practical level, it would mean that the supplier must be fully conversant with the differing rules governing VAT rates in each Member State in which he provides services. The task is by no means impossible, but it would be infinitely better carried out by the customer

16 — See Case 342/87 Genius Holding [1989] ECR 4227; Case C-454/98 Schmeink & Cofreth [2000] ECR I-6973; and, in particular, Case C-427/98 Commission v Germany [2002] ECR I-8315, at paragraph 41 of the judgment.

who is liable to pay the tax in his own country; apart from any other consideration, the risk of error requiring cumbersome rectification is greatly reduced.

59The evident incoherence and impracti-cality of this aspect of the legislation may well be due to the fact that, to a large extent, it was not drafted with reverse-charge cross-border transactions in mind. Prior to 1993, the VAT system operated, essentially, independently within each Member State, cross-border supplies of goods being in principle exempted (with deduction of input tax) in the Member State of origin and taxed on importation into the Member State of destination. While the essentials of all the provisions concerning services with which we are concerned in the present case were already in place in the 1977 version of the Directive, Article 22 in particular seems to have been designed to deal with domestic rather than cross-border situations. It is headed Obligations under the internal system', in contrast to 'Obligations in respect of imports' in Article 23. Prior to 1993, however, imports were 'into the territory of the country', whereas they 1 are now 'into the Community'. 7 The

17 — See the definition of 'importation' in Article 7 of the Directive, in the various applicable versions.

reference to Article 22(3) in Article 18(1)(a) would seem to have been originally conceived in that light. Such considerations plead in favour of a liberal interpretation.

60It is in any event obvious — and it was accepted by all at the hearing — that the various applicable provisions of the Directive simply cannot all be applied literally to circumstances such as those of the present case without some absurdity in the result — for example, as I have just pointed out, that tax is levied twice or that the reverse-charge mechanism is set at nought. One or other provision must be interpreted more liber ally, and the Court must determine which provision that must be, and what interpretation is to be given to it.

61With regard to Article 22(3)(b), one point is clear: 'as well as' cannot bear a literal interpretation where a single supply is invoiced. A supply is either taxed or exempt, it cannot be both. If a supply consists of various elements, some of which are taxed (perhaps at differing rates) and some exempt, they must be itemised separately but each item can fall only within a single category. Many invoices however are for single supplies. In their case, and in the case of each item on a complex invoice, it is impossible to state an amount of tax 'as well as' an exemption. Article 22(3)(b) must therefore be interpreted — in any event — as meaning 'the price exclusive of tax, together with the relevant tax at each rate or, as the case may be, any exemptions'.

62The Commission favours such an interpretation and, in the present circumstances, goes one step further by suggesting that a reverse charge should be assimilated to an exemption for that purpose. That suggestion, it has made clear, is based significantly on the wording of Article 22 18 (3)(b) as applicable from 1 January 2004.

63Whilst it seems clear that the new version is considerably more than a clarification of the old, I do not find the suggestion unreasonable even on the present wording. From the supplier's point of

18 — See paragraph 13 above.

BOCKEMÜHL view, a reverse-charge transaction is very similar, in terms of liability to tax and entitlement to deduct, to an export transaction exempted under Article 15 of the Sixth Directive, with deduction or refund of input tax pursuant to Article 17(3)(b) — and from the customer's point of view it is comparable to an importation taxable under Article 2(2) with deduction under Article 17(2)(b). I thus favour an interpretation of Article 22(3)(b) to the effect that, for each item invoiced, the supplier must state the price exclusive of tax and, as the case may be, either the amount of tax to be charged or the exemption or reverse-charge mechanism applicable.

64It is true that a not dissimilar result might be achieved by a liberal interpretation of Article 18(1) of the Directive, reading Article 18(1)(d) (applicable when the customer is liable to pay the tax under Article 21(1)) as an exception rather than a complement to the general rule in Article 18 (1)(a), which requires possession of an invoice in accordance with Article 22(3)(b) whenever the right to deduct is based on Article 17(2)(a). In that case it would be for each Member State to lay down the formalities to be complied with, and a statement of the amount of tax need not be one of them.

65I do not however favour such an interpretation. VAT is an area in which a degree of Community harmonisation is necessary. Whilst many matters of detail are indeed left to the Member States, it would not seem logical to have a Community rule for deduction of tax due or paid 19 'within the territory of the country' and national rules for what are essentially cross-border transactions. And to take reverse-charge transactions entirely out of the scope of Article 18(1)(a) would even appear to remove the Community rule that an invoice must be held. As the Commission put it at the hearing with regard to Article 22(3)(c), Article 18(1)(d) is concerned more with 'how' than with 'whether' details are to be established.

19 — And, pursuant to Articles 17(2)(b) and 18(1)(b), in relation to imports.

66I therefore take the view that, in the version applicable at the material time, Article 22(3)(b) requires the supplier to state, for each item invoiced, the price exclusive of tax and, as the case may be, either the amount of tax to be charged or the exemption or reverse-charge mechanism applicable, and that, if either of those statements is omitted, the invoice may be refused as justification of the customer's right to deduct.

Supplier's name and address — identification of the taxable transaction

67The applicable version of Article 22(3) (b) does not however expressly require any further details except, in special circumstances which do not include those in the present case, the supplier's and customer's VAT registration number and certain particulars relating to new means of transport.

68The list of details required is not however exhaustive. Member States may require further statements on the invoice. According to Article 22(8), 'Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion', provided that there is no discrimination between domestic transactions and intra-Community transactions, and that there are no formalities connected with the crossing of frontiers. The explanatory memorandum to the Commission's Proposal for a Sixth 20 Directive states that it was not considered necessary (at that stage) to harmonise the numerous and detailed national provisions concerning the delivery of invoices, and recital 1 in the preamble to Directive 2001/115 recognises that 'the current conditions laid down for invoicing and listed under Article 22(3) ... are relatively few in number, thus leaving it to the Member States to define the most important such conditions'.

69By contrast Directive 2001/115 now fully harmonises the contents of the invoice for VAT purposes, with effect from 1 January 2004. The list of required statements under Article 22(3)(b) has been significantly extended, including inter alia 'the full name and address of the taxable person and of his customer' and 'the extent and nature of the services rendered'.

20 — Bulletin of the European Communities, Supplement 11/73, at p. 21; what is now Article 22 was Article 23 in the original proposal.

BOCKEMUI IL Further, only those details may be required. Member States are thus now precluded from imposing other particulars for VAT 21 purposes.

70Consequently, neither the name and address of the supplier nor the identification of the taxable transaction is among the statements that the invoice must contain according to the version of the Directive applicable at the material time. Member States may however require the inclusion of those and/or other statements. Their discretion in that regard is subject only to certain provisos concerning freedom of trade, but any additional requirements should obviously, in the interests of legal certainty, be duly promulgated before their application to individual cases.

71The significance of particulars such as those under examination, and their contribution to the proper functioning of the VAT system, in particular to ensuring the correct collection of the tax and the prevention of evasion, are self-evident and confirmed — if confirmation were needed — by their inclusion in the list of compul

21 — See also the second subparagraph to Article 22(8) added by Directive 2001/115 (quoted above in paragraph 1 5). sory statements following amendment by Directive 2001/115. 22

72To require the express indication of the name and address of the supplier, and indeed of the customer, even when the invoice already contains his VAT identification number, may prove useful. It provides an additional element of clarity and, should for instance there be a misprint in the VAT number, it can help to resolve any uncertainty as to the identity of the taxable persons.

73Identification of the taxable transaction is clearly of great practical importance for determining what provisions are applicable. It is evident that, when mentioned, the taxable transaction must be defined correctly in accordance with the categories in the Directive, since a different qualification may trigger the application of different provisions of the Directive and possibly different tax rates. Definitions which are not accurate in that regard may préjudice the application of the Directive and distort competition.

22 — Their omission hitherto may have been due simply to the assumption that any commercial invoice must necessarily identify the supplier and the supply in order to be of any practical use in normal trade.

74In the case at issue, the invoice mentioned construction work done whereas the tax authorities consider that it should have mentioned the supply of staff to do that work. If a description of services invoiced is incorrect and thus liable to give rise to an incorrect application of VAT, it seems to me that the invoice may legitimately be regarded as invalid for VAT purposes in accordance with such rules as a Member State has adopted to that effect. It seems however that in Mr Bockemühl's case the tax authorities may have been motivated principally by concerns relating to possible circumvention of national provisions of employment and social security law. Such concerns, whilst clearly very important, are extraneous to the VAT rules and should not in my view be regarded as relevant to the ruling to be given in the present case.

75My view is none the less that the applicable version of the Sixth Directive allows Member States to require suppliers to indicate their name and address and to identify accurately the nature of the supply, on any invoice used for VAT purposes, and thus to refuse the recipient a right to deduct if those particulars are absent or materially incorrect.

23

76In Jeunehomme the Court made it clear that 'as regards the exercise of the right to deduction ... the Sixth Directive does no more than require an invoice containing certain information. Member States may provide for the inclusion of additional information to ensure the correct levying of value added tax and permit supervision by the tax authorities'.

77It did however also warn: 'the requirement on the invoice of particulars other than those set out in Article 22(3)(b) of the Sixth Directive, as a condition for the exercise of the right to deduction, must be limited to what is necessary to ensure the correct levying of value added tax and permit supervision by the tax authorities. Moreover, such particulars must not, by reason of their number or technical nature, render the exercise of the right to deduction practically impossible or excessively difficult'. In my view, there is no such difficulty with fundamental particulars such

23 — Cited in note 13.

24 — Ibid, paragraph 16 of the judgment.

25 — Ibid., paragraph 17 of the judgment.

BOCKEMÜHL as the name and address of the supplier and the (correct) identification of the taxable transaction.

Third question

78The third question concerns the consequences in law of difficulties in establishing that the person who issued the invoice is the same as the supplier of the taxable service; it appears from the order for reference that the national court is concerned in particular with whether the burden of proof falls on the tax authority or the claimant.

79Although the Directive does not deal explicitly with the issue of the proof by the taxable person of his right to deduct, I agree with both Germany and the Commission that the answer can again be found in Article 22(8).

80Pursuant to that provision, Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion. Proper identification of the supplier is indeed a useful element in that context. It follows that, as the Directive stands, Member States may indeed, in cases of doubt or where evasion is suspected, require proof that the person issuing the invoice and the person supplying the service 2 are one and the same. 6 In the absence of Community provisions, the procedural rules governing that proof are also a matter for the Member States.

81However, as the Court held in Jeune-2 homme, 7 the obligations imposed on the taxable person invoking the right to deduction must not be such as to render the exercise of that right in practice impossible or excessively difficult. It seems to me that that must be true irrespective of whether those obligations are of substantive or procedural nature. It is therefore for the national court to apply its own rules of proof in compliance with that requirement.

26 — See also Case C-85/95 Reisdorf [1996] ECR I-6257, paragraph 29 of the judgment. However, it is to be noted that, as from 1 January 2004, it is expressly provided that the service provider and the issuer of the invoice need not be the same person (see note 15 above).

27 — Quoted in paragraph 78 above.

Conclusion

82I accordingly conclude that the questions referred by the Bundesfinanzhof should be answered as follows:

(1) A recipient of services who is also the person liable to pay the VAT on those services and to whom that tax has been charged may exercise his right of deduction under Article 18(1)(a) of the Sixth Council Directive 77/388 only if he is in possession of an invoice issued in accordance with Article 22(3).

(2) In the version of that Directive applicable before 1 January 2004, Article 22(3)(b) requires the supplier to state, for each item on the invoice, the price exclusive of tax and, as the case may be, either the amount of tax to be charged or the exemption or reverse-charge mechanism applicable; if either of those statements is omitted, the invoice may be refused as justification of the customer's right to deduct. Article 22(8) allows Member States to require suppliers to indicate their name and address and to identify accurately the nature of the supply, on any invoice used for VAT purposes, and thus to refuse the recipient a right to deduct if those particulars are absent or materially incorrect.

(3) It is for the Member States to determine the consequences in law of difficulties in establishing that the person who issued the invoice is the same as the supplier of the taxable service, provided that the exercise of the right to deduction is not rendered in practice impossible or excessively difficult.