C-97/06 Navicon

JUDGMENT OF THE COURT (Fourth Chamber)

18 October 2007

In Case C-97/06, * REFERENCE for a preliminary ruling under Article 234 EC by the Tribunal Superior de Justicia de Madrid (Spain), made by decision of 23 January Court on 20 February 2006, in the proceedings

Navicon SA

v

Administración del Estado,

THE COURT (Fourth Chamber),

composed of K. Lenaerts, President of the Chamber, G. Arestis de Lapuerta, J. Malenovský and T. von Danwitz, Judges,

Advocate General: J. Mazák, Registrar: R. Grass,

* Language of the case: Spanish.

2006, received at the

(Rapporteur), R. Silva after considering the observations submitted on behalf of:

— the Spanish Government, by M. Muñoz Pérez, acting as Agent,

— the Belgian Government, by A. Hubert, acting as Agent,

— the Greek Government, by K. Georgiadis and M. Papida, acting as Agents,

— the Commission of the European Communities, by M. Afonso and L. Escobar Guerrero, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 29 March 2007,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Article 15(5) 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) as amended by Council Directive 92/111/EEC of 14 December 1992 (OJ 1992 L 384, p. 47) ('the Sixth Directive').

2The request has been made in the course of proceedings between Navicon SA ('Navicon'), the appellant in the main proceedings, and the Administración del Estado (Spanish tax authority) concerning the refusal of the latter to exempt Navicon from value added tax ('VAT') in respect of sums paid under a contract for the partial chartering of Navicon's vessels.

Legal context

Community legislation

3Under the title 'Exemption of exports and like transactions and international transport' paragraphs (1), (4), (5) and (13) of Article 15 of the Sixth Directive state:

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

1. the supply of goods dispatched or transported to a destination outside the Community by or on behalf of the vendor;

4. the supply of goods for the fuelling and provisioning of vessels:

(a) used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities;

(b) used for rescue or assistance at sea, or for inshore fishing, with the exception, for the latter, of ships' provisions;

5. the supply, modification, repair, maintenance, chartering and hiring of the sea going vessels referred to in paragraph 4(a) and (b) and the supply, hiring, repair and maintenance of equipment — including fishing equipment — incorporated or used therein.

13. the supply of services, including transport and ancillary transactions, but excluding the supply of services exempted under Article 13, when these are directly connected with the export of goods or import of goods covered by the provisions of Article 7(3) of Article 16(1), Title A.

National legislation

4Article 22.1 of Law 37/1992 on value added tax (Ley 37/1992 del Impuesto sobre el Valor Añadido) of 28 December 1992 (BOE No 312 of 29 December 1992, p. 44247) ('VAT Law'), states as follows:

'Exemptions for transactions equated to exports

The following transactions shall be exempt from the tax under the conditions and in the circumstances to be laid down by regulation:

First: the supply, construction, modification, repair, maintenance, full chartering and hiring of the vessels listed below:

(1) Vessels capable of sailing on the high seas used for international maritime shipping in the exercise of commercial activities of transport of goods or passengers against payment, including tourist services or industrial or fishing activities.

The exemption shall, in no circumstances, apply to vessels intended for sporting or recreational activities, or for general private use.'

The facts of the dispute in the main proceedings and the questions referred for a preliminary ruling

5As is apparent from the decision to refer, Navicon and the Compañía Transatlántica Española SA entered into a partial chartering contract under which the former, in return for payment, provided the latter with part of the space on its vessels to transport containers between several ports on the Iberian peninsula and the Canary Islands, which is an area outside of the scope of Community legislation according to the second subparagraph of Article 3(3) of the Sixth Directive. Navicon did not include VAT on the invoices relating to that contract since it believed that the chartering transaction was exempt

6However, the Spanish tax authorities, holding that the exemption provided for in Article 22.1 of the VAT Law did not apply, in so far as the contract in question related to partial chartering and not full chartering, made adjustments for VAT linked to the sums paid under that chartering contract.

7Navicon then challenged that adjustment before the Tribunal Económico-Administrativo Regional de Madrid (Regional Economic Administrative Court, Madrid), which dismissed its application. Following the decision to dismiss the application it appealed to the referring court.

8The Tribunal Superior de Justicia de Madrid (High Court of Justice, Madrid), holding that the resolution of the dispute before it required an interpretation of the Sixth Directive, decided to stay proceedings and to refer to the Court of Justice the following questions for a preliminary ruling:

'(1) Is the term "chartering" in the exemption provided for in Article 15(5) of the Sixth Directive to be interpreted as including only chartering of the entire capacity of the vessel (full chartering) or as including chartering relating to a part or percentage of the vessels capacity (partial chartering)?

(2) Does the Sixth Directive preclude a national law which allows exemption only for full chartering?'

The questions referred for a preliminary ruling

9By its two questions, which it is appropriate to consider together, the referring court asks, in essence, whether Article 15(5) of the Sixth Directive must be interpreted as covering both full chartering and partial chartering of vessels used for navigation on the high seas. In that regard, that court also asks whether that provision precludes a national law, such as that in dispute in the main proceedings, which grants the benefit of the exemption from VAT only in cases of full chartering of such vessels.

Observations submitted to the Court

10The Spanish and Greek Governments consider that the concept of chartering laid down in Article 15(5) of the Sixth Directive covers only chartering of the entire capacity of the vessels and therefore conclude that the VAT Law complies with that provision. They submit that, according to settled case-law of the Court in that regard, the exemptions laid down in the Sixth Directive should be strictly interpreted as they constitute derogations from the general principle that VAT is levied on all services supplied for consideration by a taxable person.

11The Spanish Government adds that the purpose of the exemption provided for by that provision is to facilitate the application of VAT in cases of deliveries outside the Community, which implies the exemption of chartering only in cases of international shipping. According to it, the interpretation which best complies with that objective, and which is as strict as possible, consists of granting such an exemption only in the case where there is full chartering of the vessel, that is, when the recipient of the service being supplied is presumed to be using that service in the context of international shipping.

12The Belgian Government and the Commission of the European Communities contend, by contrast, that the term chartering' used in Article 15(5) of the Sixth Directive covers both full chartering and partial chartering of sea-going vessels.

13According to the Belgian Government, it is abundantly clear from the wording of Article 15(5) of the Sixth Directive that the objective of that provision is to exempt the chartering of vessels intended for international shipping from VAT and not to exempt certain kinds of chartering of vessels. In any case, that government recalls that, when a provision of Community law is open to several interpretations, it is the interpretation which is appropriate to ensure the effectiveness of that provision which should be preferred. In the case in the main proceedings, an interpretation of the concept of chartering limited to full chartering would compromise the effectiveness of Article 15(5), inasmuch as, for the same journey and the same type of cargo, partial chartering would give rise to payment of VAT while, in the case of full chartering, the transaction would be exempt.

14The Commission contends, as a preliminary point, that it is necessary to apply the criterion of strict interpretation to the provisions relating to VAT exemptions, given that the exemptions relating to vessels and aircraft, provided for in Article 15 of the Sixth Directive, constitute a double exception to the general rules set down by that directive, to the extent that they constitute exemptions and represent an exception to the common system of VAT in the single market.

15However, according to the Commission, it is clear from the wording of Article 15(5) of the Sixth Directive that that provision refers to both full and partial chartering of sea-going vessels. That provision makes no distinction between those two types of chartering and therefore it does not seem possible for a Member State to give a scope to the exemption at issue that differs from that which follows clearly from the wording of the Directive (see, to that effect, Case C-382/02 Cimber Air [2004] ECR I-8379). Moreover, the first sentence of Article 15 of the Sixth Directive does not in any way confer on Member States the power to alter the substantive scope of an exemption, such as defined in that directive.

16The Commission also takes the view that goods that are exported to a non-member country must be free from all taxes when they leave the territory of the Community, which requires that taxes are not imposed on the chartering service provided, whether the chartering in question is full or partial chartering. Finally, applying the exemption to full chartering alone would mean that the right to an exemption would depend on the size of the vessel carrying out the chartering service, as the same volume of freight would, or would not, be exempted depending on the capacity of the vessel concerned.

17However, the Commission also considers the possible justifications for the VAT Law. In that regard, it looks at the possibility of reserving to chartering contracts the same tax system as that which applies to contracts for the carriage of goods, laid down in Article 15(13) of the Sixth Directive. The essential objective and the purpose of the contract would, in each case, be the transfer of goods from one place to another. It considers, however, that that assimilation would go against the content and the objective of the Sixth Directive, which conferred a different legal scheme on chartering to that conferred on the carriage of goods.

18Finally, the Commission submits that it is for the national court to decide, taking account of the terms of the contract between the parties and the specific nature and content of the service provided, whether the contract at issue in the main proceedings has the characteristics of a chartering contract within the meaning of Article 15(5) of the Sixth Directive.

Reply of the Court

19It is clear from the decision making the reference that Article 22.1 of the VAT Law exempts from tax the full chartering of vessels used for international maritime shipping, and used for commercial activities of carriage of goods against payment. Further, it is common ground, that according to the second subparagraph of Article 3(3) of the Sixth Directive, the Canary Islands are an extra-Community territory and that, under that provision, read together with Article 15(1) thereof, the carriage of goods to those islands is considered as an export for VAT purposes.

20As regards the exemptions provided for by the Sixth Directive, it should be recalled that these constitute independent concepts of Community law which must be placed in the general context of the common system of VAT introduced by the Sixth Directive (see, inter alia, Case 235/85 Commission v Netherlands [1987] ECR 1471, paragraph 18; Case C-2/95 SDC [1997] ECR I-3017, paragraph 21, and Cimber Air, paragraph 23).

21That system is based in particular on two principles. First, each supply of goods and services effected for consideration by a taxable person is subject to VAT. Second, in accordance with the principle of fiscal neutrality, economic operators carrying out the same transactions may not be treated differently in relation to the levying of VAT (Cimber Air, paragraph 24).

22In light of those principles, such exemptions must be interpreted strictly since they constitute exceptions to the general principle that VAT is to be levied on all services supplied for consideration by a taxable person (see, to that effect, SDC, paragraph 20, Cimber Air, paragraph 25, and Case C-445/05 Haderer [2007] ECR I-4841, paragraph 18). That requirement of strict interpretation does not, however, mean that the terms used to specify the exemptions should be construed in such a way as to deprive those exemptions of their intended effect (Case C-284/03 Temco Europe [2004] ECR I-11237, paragraph 17, and Haderer, paragraph 18).

23It is in light of those criteria of interpretation derived from the case-law mentioned at paragraphs 20 to 22 of the present judgment that the concept of chartering in Article 15(5) of the Sixth Directive should be interpreted.

24In that regard, it should be stated that Article 15 contains no definition of the concept of chartering'. According to settled case-law, in interpreting a provision of Community law it is necessary to consider not only its wording, but also the context in which it occurs and the objective pursued by the rules of which it is part (see, inter alia, Case C-301/98 KVS International [2000] ECR I-3583, paragraph 21, and Case C-53/05 Commission v Portugal [2006] ECR I-6215, paragraph 20).

25It is clear, in the first place, from the wording of Article 15(5) of the Sixth Directive that Member States are to exempt the supply, modification, repair, maintenance, chartering and hiring of the sea-going vessels referred to in paragraph 4(a) and (b) of that article, particularly those used for navigation on the high seas and for the purposes of commercial activities, as well as the supply, hiring, repair and maintenance of equipment — including fishing equipment — incorporated or used therein.

26Thus, it must be stated that Article 15(5) makes no distinction between full chartering and partial chartering. That provision merely includes the chartering of vessels used for navigation on the high seas within those cases exempt from VAT laid down in Article 15, without specifying whether such chartering must be full or partial

27Moreover, to the extent that Article 22.1 of the VAT Law is based on a specific interpretation of the concept of chartering', it should be borne in mind that, according to settle case-law, although the introductory sentence of Article 15 of the Sixth Directive states that Member States are to lay down the conditions for exemptions in order to ensure the correct and straightforward application of the exemptions and to prevent any possible evasion, avoidance or abuse, those conditions cannot affect the definition of the subject-matter of the exemptions envisaged (see, by analogy, Case C-76/99 Commission v France [2001] ECR I-249, paragraph 26, and Case C-498/03 Kingscrest Associates and Montecello [2005] ECR I-4427, paragraph 24).

28From that point of view, whether a specific transaction is subject to or exempt from VAT cannot depend on its classification in national law (see, inter alia, Kingscrest Associates and Montecello, paragraph 25, and Haderer, paragraph 25).

29Secondly, as regards the objective pursued by Article 15 of the Sixth Directive, it should be stated that this deals with the exemption from VAT of transactions for export outside of the Community, equivalent transactions and international carriage. In the context of international business, such an exemption seeks to respect the principle that the relevant goods or services should be taxed at their place of destination. Every export and equivalent transaction should thus be exempt from VAT in order to ensure that the relevant transaction is taxed only in the place where the relevant products are consumed.

30In the case in the main proceedings, it follows from Article 22.1 of the VAT Law that only the full chartering of vessels used for navigation on the high seas and for international shipping is exempt from VAT. Therefore, notwithstanding that they may be transactions equivalent to export, that Law does not allow the VAT exemption to apply to partial chartering of those vessels. It follows that levying tax on that type of chartering at the time of such transactions infringes the principle that the relevant goods and services should be taxed at their place of destination and goes against the objective of the exemption scheme set out in Article 15 of the Sixth Directive.

31It should also be added that, as the referring court states, the VAT law, by limiting VAT exemption to full chartering alone, makes the benefit of that exemption subject to the size of the vessel used for the chartering, as the same volume of freight may be subject to VAT or exempt depending on whether the volume of freight fills all or only part of the vessels capacity. It must be stated that such a condition deprives the exemption of chartering set out in Article 15(5) of the Sixth Directive of its effectiveness.

32In those circumstances, while it is the case that the words used to describe the exemption set out in Article 15(5) of the Sixth Directive must be strictly interpreted, to maintain a particularly strict interpretation of the concept of chartering would lead to misconstruing both the wording and the objective of that provision.

33Therefore, the reply to the questions referred must be that Article 15(5) of the Sixth Directive must be interpreted as covering both full chartering and partial chartering of vessels used for navigation on the high seas. Consequently, that provision precludes national legislation, such as that at issue in the main proceedings, which grants the benefit of the VAT exemption only in the case of full chartering of such vessels.

34The Commission, however, in its observations submitted to the Court examines the possibility of treating the partial chartering of a vessel as a contract for the carriage of goods, which would allow such chartering to benefit from the exemption reserved for the provision of transport services connected with the export of goods, provided for in Article 15(13) of the Sixth Directive, as long as the goods fulfil the conditions set out in that provision. In that context, and by way of such equivalence, the exemption could be granted to partial chartering of a vessel within the framework of a transaction which is treated as being an export transaction.

35It must be stated in that regard, concerning exemptions relating to exports, that the Sixth Directive has reserved different legal schemes for those two types of contract, namely chartering contracts and those relating to the provision of transport services. The exemption for chartering vessels used for navigation on the high seas was laid down in Article 15(5) of the Sixth Directive, while the exemption for services relating to the carriage of goods is governed by Article 15(13). It thus follows from the wording of that article that treating those contracts as equivalent, in order to bring them within the same VAT scheme, has no basis in the system of exemptions established by the Sixth Directive.

36As the Advocate General stated at point 27 of his Opinion, it may be assumed that, if the Community legislature had intended to restrict the concept of chartering vessels used for navigation on the high seas to full chartering alone and to treat partial chartering as a supply of services relating to the carriage of goods, it would have made that clear in Article 15 of the Sixth Directive.

37It nevertheless falls to the referring court to take into account the relevant circumstances in which the chartering transaction at issue in the main proceedings took place, to seek its characteristic elements in order to be able to decide if that transaction should be considered as chartering or as a provision of services for the carriage of goods. In particular, that court must take account of the terms of the contract concluded between the parties and the specific nature and content of the service provided in order to determine whether that contract satisfies the conditions of a chartering contract within the meaning of Article 15(5) of the Sixth Directive.

38In that regard, as the Commission pointed out, a chartering contract differs from a contract for the carriage of goods in that it requires one party, the ship-owner, to make available to the other party, the charterer, all or part of the vessel, whereas, in the case of a contract for the carriage of goods, the undertaking which the carrier assumes towards the customer relates only to the transport of those goods.

39Such an assessment of the legal nature of the contract at issue in the main proceedings proves necessary, moreover, in order to ensure the correct and straightforward application of the exemptions provided for by the Sixth Directive and to prevent any possible evasion, avoidance or abuse in the implementation of that directive.

40It follows that it is for the referring court to determine whether the contract in issue in the main proceedings satisfies the conditions of a chartering contract within the meaning of Article 15(5) of the Sixth Directive.

Costs

41Since 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. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

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

1. Article 15(5) 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, as amended by Council Directive 92/111/EEC of 14 December 1992, must be interpreted as covering both full chartering and partial chartering of vessels used for navigation on the high seas. Consequently, that provision precludes national legislation, such as that at issue in the main proceedings, which grants the benefit of the exemption from value added tax only in the case of full chartering of such vessels,

2, It is for the referring court to determine whether the contract in issue in the main proceedings satisfies the conditions of a chartering contract within the meaning of Article 15(5) of Sixth Directive 77/388, as amended by Directive 92/111,

[Signatures]

OPINION OF ADVOCATE GENERAL

MAZÁK delivered on 29 March 2007 1

Introduction

1The two questions referred for a preliminary ruling concern the interpretation of Article 15(5) 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, 2 as amended by Council Directive 92/111/EEC of 14 December 1992 ('the Sixth Directive').

2The questions arose in the course of proceedings between the company Navicon ('Navicon') and the competent Spanish tax authority concerning the refusal of the latter to exempt from value added tax ('VAT') operations consisting of the partial chartering of a vessel in order to transport containers. In this connection, it should be noted that the Spanish legislation implementing the Sixth Directive provides only for full chartering to be exempted.

3The Court is therefore asked to construe the concept of chartering used in Article 15(5) of the Sixth Directive, and in particular to determine whether the concept applies only to the chartering of the whole vessel ('full' chartering) or also to the chartering of a part of it (partial' chartering).

I — The relevant legislation

A — Community legislation

4Article 15 of the Sixth Directive states:

'Exemption of exports outside the Community, for like transactions and international transport:

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

(4) the supply of goods for the fuelling and provisioning of vessels:

(a) used for navigation on the high seas and carrying passengers for reward or used for the purpose of commercial, industrial or fishing activities;

(b) used for rescue or assistance at sea, or for inshore fishing, with the exception, for the latter, of ships' provisions; ...

(5) the supply, modification, repair, maintenance, chartering and hiring of the sea-going vessels referred to in paragraph 4(a) and (b) and the supply, hiring, repair and maintenance of equipment — including fishing equipment — incorporated or used therein. ...'

B — National legislation

5Article 22.1 of Law 37 of 28 December 1992 on Value Added Tax provides:

'Exemptions on transactions equated to exports

The following transactions shall be exempt from the tax under the conditions and in the circumstances to be laid down by regulation:

One. The supply, construction, modification, repair, maintenance, full chartering and hiring of the vessels listed below:

(1) Vessels capable of sailing on the high seas used for international maritime shipping in the exercise of commercial activities of transport of goods or passengers against payment, including tourist services or industrial or fishing activities. ...'

II — Factual background, procedure and the questions referred

6Navicon and the company Compañía Transatlántica Española SA entered into a partial chartering agreement in which the former provided the latter, against payment of a sum, with part of the space on its vessels to transport containers between various ports on the Iberian peninsula and a territory outside the scope of application of value added tax (the Canary Islands).

7Navicon did not apply the amount of value added tax to the respective invoices, as it believed that the transaction was exempt from the payment of VAT. The competent Spanish tax authority made an adjustment to the amounts paid under the chartering agreement for the amount of VAT, as it took the view that the exemption did not apply when there was partial chartering and not full chartering.

8Navicon challenged this adjustment before the Tribunal Económico Administrativo (Regional and Administrative Court) of Madrid, but was not successful. It appealed against this decision before the Tribunal Superior de Justicia de Madrid (High Court of Justice, Madrid), which decided to stay the proceedings and make a reference to the Court of Justice of the European Communities for a preliminary ruling on the following questions:

'(1) Is the term "chartering" in the exemption provided for in Article 15(5) of the Sixth Directive to be interpreted as including only chartering of the entire capacity of the vessel (full chartering) or as including chartering relating to a part or percentage of the vessels capacity (partial chartering)?

(2) Does the Sixth Directive preclude a national law which allows exemption only for full chartering?'

III — Main submissions to the Court

9The Greek and Spanish Governments take the view that the concept of chartering' used in Article 15(5) of the Sixth Directive refers only to the chartering of the full space of the vessel and accordingly draw the conclusion that the national legislation complies with the Directive. The exemptions laid down under the Sixth Directive are to be strictly interpreted, because they constitute an exception to the general principle according to which VAT is to be levied on any service supplied against payment by a taxable person.

10The Belgian Government and the Commission contend that the concept of chartering refers both to partial and full chartering.

11According to the Belgian Government, the purpose of the wording of Article 15(5) of the Sixth Directive is to exempt the chartering of certain vessels, in particular seagoing vessels referred to in paragraph 4(a) and (b), and not to exempt particular types of chartering. In any event, according to the case-law of the Court, when a provision of Community law can be construed in different ways, the interpretation which ensures that the provisions retain their effectiveness must be favoured. In the present case, however, an interpretation of the concept of chartering which is limited to full chartering puts the effectiveness of Article 15(5) of the Sixth Directive at risk, because, for the same route and the same type of vessel, a partial chartering would lead to the payment of VAT whereas a full chartering would be exempted.

12The Commission submits in the first place that the Court has consistently held that the first sentence of Article 15 of the Sixth Directive does not give Member States the ability to influence the material scope of the Sixth Directive, as defined by that Directive. Furthermore, goods exported to third countries must be free of any taxes when they leave the territory of the Community, which requires that chartering services should not be taxed, whether they are partial or full. Lastly, if the concept of chartering were to be limited to full chartering only, this would mean that the right to an exemption would depend on the size of the vessel, because a similar volume of freight would, or would not, be exempted, depending on the size of the vessel concerned.

13However, the Commission also raises an argument which could support the view that the Spanish legislation is compatible with Community law. It could be said, by analogy, that partial chartering should be regarded as the carriage of goods, and thus as falling under Article 15(13) of the Sixth Directive, which lays down inter alia an exemption for transport services relating to exported goods. However, the Commission takes the view that this argument should not be upheld. First, the wording of the Sixth Directive makes the chartering and carriage of goods subject to different legal regimes and, secondly, the two kinds of contract are very different.

14The Commission submits that it is for to the national court to determine, on the basis of the wording of the agreement between the parties as well as on the basis of the nature and the content of the service provided, whether the contract in question fulfils the conditions required for a chartering agreement for the purposes of Article 15(5) of the Sixth Directive.

IV — Legal assessment

15According to Article 15(5) of the Sixth Directive, the chartering of sea-going vessels is exempt from VAT. The provision does not define the concept of chartering more precisely.

16In practice, chartering can relate to an entire vessel, in which case the operation is called 'full' chartering, or it can relate to a part only of the vessel, when it is referred to as 'partial' chartering.

17It appears from the submissions of the Member States which have intervened in the present proceedings that the concept of chartering has not been interpreted in a uniform way throughout the Community, as is evidenced by the implementing legislation of some Member States, including Spain, from where the present reference for a preliminary ruling originates, which restrict the concept of chartering to 'full' chartering, whereas other national legislation, such as the Belgian legislation, appear to adopt a broader interpretation, according to which any kind of chartering, whether 'full' or partial', is exempted. Thus, the question arises of the scope to be given to the concept of chartering in the context of the VAT exemption under Article 15(5) of the Sixth Directive.

18The Court of Justice has consistently held that VAT exemptions must be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on each service supplied for consideration by a taxable person. 5 The Court has restated this principle, inter alia when construing the exemptions applicable to sea-going vessels. 6

19However this principle of strict interpretation cannot have the effect of giving Article 15 a meaning different from that which is clear from its wording. 7

20There is nothing in the provision in question or elsewhere in the wording of the Sixth Directive that would warrant a restriction of the term chartering' to 'full' chartering only. It appears that, unlike what is provided in the Sixth Directive with regard to the exemption under Article 15(4) of the directive, 8 Member States may not restrict the exemption laid down under Article 15(5) of the directive until Community fiscal rules specifying the scope of this exemption enter into force. Thus, restricting the meaning of the term chartering' in the context of the exemptions from VAT provided for by the Sixth Directive to 'full chartering' appears to go beyond the margin of discretion that Member States have when transposing that Directive into national law. Indeed, the definition of the scope of application of VAT belongs in principle to the Community legislature and for a restriction of the scope of application of VAT, in particular by means of national implementing legislation, to be compatible with the Sixth Directive, it must be possible to infer it from the wording, the purpose and/or the general scheme of the Sixth Directive.

21In this respect, it must also be questioned whether a restrictive approach, such as that of the Spanish legislature, could be reconciled with the system and the objective of the Sixth Directive. In this respect, it should also be noted that exemptions are independent concepts of Community law which must be placed in the general context of the common system of VAT introduced by the Sixth Directive. 9

22As the Belgian Government and the Commission have submitted, to interpret the word chartering' used in Article 15(5) of the Sixth Directive as referring exclusively to full chartering would lead to serious inconsistencies in the treatment of chartering operations with respect to VAT. Under such an approach, the right to an exemption in respect of a chartering operation would depend on the size of the vessel, because a chartering operation for the transportation of the same volume of freight would be exempted on a small vessel, since it would use the full cargo capacity of the vessel and therefore be regarded as a full chartering, whereas on a larger vessel the same volume of freight would use only part of the full cargo capacity, which would therefore be regarded as partial chartering of the vessel Such inconsistencies would put the effectiveness of Article 15(5) of the Sixth Directive at risk.

23Moreover, if an agreement for the partial' chartering of seagoing vessels were not to be exempted, this would lead to situations where the transportation costs of some exported goods, namely those goods which are exported by means of a partial chartering, would not be exempted. Such an outcome would clearly be contrary to the principle of the country of destination, according to which goods are to be taxed in the country where they will be consumed by the end consumer. It follows in particular from that principle that goods which are intended to be exported outside the Community must be free of any tax, including any tax on their costs in respect of transportation outside the Community, because such costs will be included in the price of the exported goods.

24It may be argued that the exclusion of partial' chartering from the scope of the exemption under Article 15(5) of the Sixth Directive relating to the chartering' of vessels does not necessarily threaten the principle of the country of destination. Indeed, the latter may be safeguarded for goods which are exported by means of a partial' chartering by the application of Article 15(13) of the Sixth Directive, which provides inter alia for the transport of exported goods to be exempted, provided those goods fulfil the conditions set out in that provision. As pointed out by the Commission, it is, however, questionable whether such an application of that article would be consistent with the system and the logic of the Sixth Directive.

25First, it appears that an agreement for charter and an agreement for the transportation of goods are quite different with regard to their object and their legal regime. When a vessel — or part of it, in a case of partial chartering — is subject to an agreement for charter and hire, it is provided for a certain purpose, for example transportation, whereas an agreement for the carriage of goods is a contract by which the carrier undertakes the obligation to deliver goods to a certain destination. Put differently, while contracts for charter or hire concern the means of transportation as such, a contract of carriage concerns the contents which are to be carried by the means of transportation. It follows that while the charterer and the hirer have a right over the use of the vessel which is the subject of the agreement — or part of it, in a case of partial chartering — the owner of the goods being carried on a vessel under an agreement for the carriage of goods has no such right, but can expect only that the goods are delivered to a given destination. These differences appear to support the argument that the relevant regime under the Sixth Directive should be different.

26An assimilation of partial chartering to the carriage of goods is also likely to question the need for the separate exemption of full chartering. If partial chartering resembled carriage of goods to such an extent as to assimilate them in spite of substantial differences in the legal nature of the agreement, it may be doubted whether a separate exemption for chartering should exist at all and whether it should not be assimilated altogether to the carriage of goods. The assimilation of partial chartering to the carriage of goods would therefore be difficult to reconcile with the wording of the Sixth Directive.

27Lastly, since these two types of agreement are plainly quite different in their legal nature, it may reasonably be assumed that the Community legislature would have made it clear in the Sixth Directive if it had intended to restrict the concept of chartering to full chartering alone and to assimilate partial chartering to the carriage of goods.

28It follows from above that there is no compelling reason to assimilate 'partial' chartering to the carriage of goods for the purpose of the application of the exemptions from VAT under the Sixth Directive, rather than to consider it as falling under the exemption for chartering under Article 15(5) of the Sixth Directive. 10

29For all these reasons, the answer to the first question should be that the term chartering' in the exemption provided for in Article 15(5) of the Sixth Directive is to be interpreted as including both chartering of the entire capacity of the vessel (full chartering) and chartering relating to a part or percentage of the vessel's capacity (partial chartering).

30It also follows from the above that the answer to the second question should be that the Sixth Directive precludes a national law which allows exemption only for full chartering.

V — Conclusion

31In the light of the foregoing, I propose that the Court should answer the questions referred as follows:

(1) The term chartering' in the exemption provided for in Article 15(5) 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, as amended by Council Directive 92/111/EEC of 14 December 1992, is to be interpreted as including both chartering of the entire capacity of the vessel (full chartering) and chartering relating to a part or percentage of the vessels capacity (partial chartering).

(2) The Sixth Directive precludes a national law which allows exemption only for full chartering.

Notes

(1) Original language: English.

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

(3) OJ 1992 L 384, p. 47.

(4) Article 15(13) of the Sixth Directive provides: 'The supply of services, including transport and ancillary operations, but excluding the supply of services exempted in accordance with Article 13, where these are directly connected with the export of goods or imports of goods covered by the provisions of Article 7(3) or Article 16(1), Title A.'

(5) See, for example, Case C-382/02 Cimber Air [2004] ECR I-8379, paragraph 25.

(6) See Case C-185/89 Velker International Oil Company [1990] ECR I-2561, paragraph 19, and Joined Cases C-181/04 to C-183/04 Elmeka [2006] ECR I-8167, paragraph 15.

(7) See, to this effect, Cimber Air, cited in footnote 5, paragraph 29.

(8) The second sentence of Article 15(4) provides as follows: 'The Commission shall submit to the Council as soon as possible proposals to establish Community fiscal rules specifying the scope of and practical arrangements for implementing this exemption and the exemptions provided for in (5) to (9). Until these rules come into force, Member States may limit the extent of the exemption provided for in this paragraph.'

(9) See, in particular, Case C-2/95 SDC [1997] ECR I-3017, paragraph 21; Case C-141/00 Kügler [2002] ECR I-6833, paragraph 25; Cimber Air, cited in footnote 5, paragraph 23; and Elmeka, cited in footnote 6, paragraph 20.

(10) This being said, in order to ensure the proper application of the Sixth Directive there is nothing to prevent a national court from modifying the characterisation classification of an agreement for 'partial' chartering if it were to come to the conclusion that the latter was, in a given case and based on the contractual clauses of the agreement at issue, nothing else than a contract for the carriage of goods and therefore wrongly designated as an agreement for 'chartering' in order to fall under the conditions for exemption in respect of chartering operations as set out in Article 15(5) of the Sixth Directive.