FACTS OF THE CASE IN BRIEF
The administrator of the estate Mr. Adelino Gonçalves Mesquita concluded a contract with a company engaged in viticulture Sociedade Agrícola e Comercial dos Vinhos Vale da Corça, by which he transferred, in return for amounts paid by way of an advance, the use of rural properties — of which he was the owner — for agricultural purposes comprising vineyards, for a period of one year, automatically renewable for a period of the same length, until such time as it was terminated by one or other of the parties.
According to the report on a tax inspection for the year 2002, that transfer was subject to VAT including the tax assessments and compensatory interest. Mr. Gonçalves Mesquita brought an action against those tax assessments before the Tribunal Administrativo e Fiscal de Mirandela (Administrative and Tax Court, Mirandela, Portugal) invoking the VAT exemption provided for in Article 9(30) of the CIVA. Since that action was dismissed, Mr. Gonçalves Mesquita brought an appeal before the Tribunal Central Administrativo Norte (Northern Central Administrative Court, Portugal), which made an order declaring that it lacked jurisdiction and forwarded the case-file to the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal).
The court referred to the case-law of the Court of Justice, in particular, the judgment of 4 October 2001, ‘Goed Wonen’ (C 326/99, EU:C:2001:506), stating that first, the exemption from VAT on leasing or letting of immovable property provided for in Article 13B(b) of the Sixth Directive, which corresponds to Article 135(1)(l) of Directive 2006/112, covers transactions by which the owner of immovable property gives the tenant, for an agreed period and for consideration, the right to occupy that property as if he were the owner thereof and to exclude any other person from enjoyment of such a right. Secondly, since the letting of immovable property is generally a relatively passive activity, transactions involving a more active use of that property are excluded from the scope of the exemption.
QUESTIONS REFERRED TO THE ECJ
Must Article 135(1)(l) of Directive 2006/112 of 28 November 2006 relating to the exemption from VAT of transactions involving the leasing of immovable property be interpreted as meaning that such an exemption is applicable to a contract for the transfer of the use of land comprising vineyards for agricultural purposes to a company whose corporate purpose is an agricultural activity, entered into for a period of one year, automatically renewable for further periods of the same length and under which rent is paid at the end of each year?
CONCLUSIONS OF THE ECJ
The Court upheld that the Article 13B(b) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as meaning that the exemption from value added tax on the leasing or letting of immovable property provided for in that provision is applicable to a contract for transfer of the use of land comprising vineyards for agricultural purposes to a company engaged in viticulture, entered into for a period of one year, automatically renewable and under which rent is paid at the end of each year.
For more information on this case, please contact:
Franco Falzon C.P.A.. LL.M
(Managing Partner)
E: franco@ffinternational.com.mt
Olga Ivanova LL.M
(Legal Associate)
E: olga@ffinternational.com.mt
T: +356 2010 7771
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