Report for the Hearing delivered in Case 173/88

I — Facts and written procedure

1. Article 2 of the Sixth Council Directive (77/388) of 17 May 1977, on the harmonization of the laws of the Member States relating to turnover taxes — Common system of value-added tax: uniform basis of assessment (Official Journal L 145, p. 1), provides as follows:

2. Article 13B(b) was implemented in Denmark by Law No 204 of 10 May 1978 amending the Law on value-added tax. Article 2(3) of that law, as amended, provides as follows:

3. The main proceedings, between the Danish Ministry of Fiscal Affairs and Monen Henriksen, concern essentially the question whether the letting of garages situated in blocks of garages belonging to Mr Henriksen is exempt from value-added tax. The blocks of garages, consisting of two buildings each containing 12 garages, are situated on property acquired by the defendant in the main proceedings in June 1984. The blocks were erected in conjunction with a building development consisting of 37 linked one-family houses. Some of the garages were let to residents of that complex and some to other people resident in the neighbourhood. The garages are all closed and separated from each other by a wall, and each has a door.

4. The order for reference was received at the Court Registry on 27 June 1988.

II — Written observations

1. First question

The Danish Government considers that the reply to the first question should be in the affirmative. On the other hand, the Commission proposes that the Court's reply should be less categoric.

However, Article 13B(b) is formulated differently to Article 13A and B in general inasmuch as it begins by providing that the leasing or letting of immovable property is, with certain exceptions therein set out, exempt from value-added tax. It then adds that the Member States may apply further exclusions to the scope of the exemption, that is to say, they may levy value-added tax in cases other than those expressly set out.

It must be concluded that to a certain extent, the directive leaves the Member States free to determine in their national legislation whether or not the leasing or letting of immovable property is to be liable to value-added tax if the Member State can show that that is necessary to ensure the correct and straightforward application of the exemptions and to prevent any possible evasion, avoidance or abuse. Thus, Article 13B(b) does not give the Member States an unlimited power to levy value-added tax on the leasing or letting of immovable property.

A comparative analysis of the tax legislation of several Member States (Belgium, the Federal Republic of Germany, Ireland, Italy, the Netherlands, the United Kingdom and Spain) shows that the expression sites for parking vehicles constitutes, in certain Member States, the basis on which value-added tax is levied on the letting not only of parking spaces in a car park but also of garages or spaces in a garage when such letting is genuinely commercial in nature. On the other hand, none of those Member States levies value-added tax on the letting of parking places or garages when that letting is part of a contract for the letting of a dwelling, regardless of whether the dwelling is a house or a flat.

Since the expression site for parking vehicles has not been clearly defined in the directive, it must be interpreted in accordance with its ordinary meaning, bearing in mind that the purpose of the directive is to determine the basis for the levying of value-added tax in a way which should preferably be uniform. In this case, it is reasonable to interpret Article 13B(b) in such a way as to conclude that the separate taxation of income from garages or parking places made available to the tenants of immovable property is incompatible with the exemption from value-added tax of the leasing of immovable property when the place in the garage is merely accessory to the purpose of the lease properly so-called. Thus, value-added tax should be levied in respect of parking spaces or garages only when a separate price is specified for the letting thereof. On the other hand, when the letting of a garage is an integral part of a letting of immovable property exempt from value-added tax, without a separate price being fixed for it in the lease, it comes within the scope of the exemption provided for in respect of the letting of immovable property.

In conclusion, the Commission proposes that the Court should reply to the first question as follows:

2. Second question

The Danish Government proposes that the reply to the second question should be in the affirmative. The Commission, for its pan, considers that that question is without purpose, having regard to the reply to the first question.

The Danish Government points out that the directive has been conceived in such a way that the Member States are required by Article 2 to tax the letting of garages of the kind at issue in this case unless such letting has been expressly exempted in the directive or the directive expressly permits the Member States to exempt such lettings.

According to the clear terms of Article 13B(b), the services listed under points 1 to 4 of that provision are not exempt and are, therefore, liable to value-added tax in accordance with the general principle laid down in Article 2. Article 13B(b) provides no legal basis for permitting the Member States to restrict the exceptions set out in points 1 to 4. On the contrary, the second subparagraph of paragraph (b) permits the Member States to apply further exclusions to the scope of the exemption. The terms employed show that the said subparagraph does not permit the Member States to restrict the exceptions set out.

Such a power to limit the exceptions set out in the directive would also be contrary to the purpose thereof because it would permit the Member States to restrict at their discretion the basis on which value-added tax is to be levied.

1 Language of the case: Danish.