25 March 2010 (*1)
(Failure of a Member State to fulfil its obligations – Value added tax – Directive 2006/112/EC – Articles 13 and 132 – Bodies governed by public law – Capacity of public authorities – Activities – Treatment as non-taxable persons – Exemptions – Health, education and sociocultural sectors – ‘Euroregions’ – Promotion of occupational mobility – Supply of staff – Burden of proof)
In Case C‑79/09,
ACTION for failure to fulfil obligations brought under Article 226 EC on 23 February 2009,
European Commission , represented by D. Triantafyllou and W. Roels, acting as Agents, with an address for service in Luxembourg,
applicant,
v
Kingdom of the Netherlands , represented by C.M. Wissels, D.J.M. de Grave and Y. de Vries, acting as Agents,
defendant,
THE COURT (Second Chamber),
composed of J.N. Cunha Rodrigues, President of the Chamber, A. Rosas, U. Lõhmus, A. Ó Caoimh (Rapporteur) and A. Arabadjiev, Judges,
Advocate General: E. Sharpston,
Registrar: R. Grass,
having regard to the written procedure,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
1By its application, the Commission of the European Communities asks the Court to find that, by granting an exemption from value added tax (‘VAT’) for the supply of staff in the sociocultural, health and education sectors, to ‘Euroregions’ and in connection with the promotion of occupational mobility, the Kingdom of the Netherlands failed to fulfil its obligations under Article 2(1)(c), Article 13, Article 24(1) and Article 132 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax ( OJ 2006 L 347, p. 1 ).
2Directive 2006/112 repealed and replaced the existing Community VAT legislation, in particular Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment ( OJ 1977 L 145, p. 1 ) (‘the Sixth Directive’), from 1 January 2007.
3According to recitals 1 and 3 of Directive 2006/112, it was necessary to recast the structure and wording of the Sixth Directive in order to present all the applicable provisions in a clear and rational manner although without, in principle, making any material changes.
4Article 2(1)(c) of Directive 2006/112 provides as follows:
‘1. The following transactions shall be subject to VAT:
…
5Under Article 9(1) of that directive:
‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’
6Article 13 of that directive provides that:
‘1. States, regional and local government authorities and other bodies governed by public law shall not be regarded as taxable persons in respect of the activities or transactions in which they engage as public authorities, even where they collect dues, fees, contributions or payments in connection with those activities or transactions.
However, when they engage in such activities or transactions, they shall be regarded as taxable persons in respect of those activities or transactions where their treatment as non-taxable persons would lead to significant distortions of competition.
In any event, bodies governed by public law shall be regarded as taxable persons in respect of the activities listed in Annex I, provided that those activities are not carried out on such a small scale as to be negligible.
2Member States may regard activities, exempt under [Article 132], engaged in by bodies governed by public law as activities in which those bodies engage as public authorities.’
7Article 24(1) of Directive 2006/112 reads as follows:
‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’
8Article 132, in Chapter 2, entitled ‘Exemptions for certain activities in the public interest’, of Title IX of that directive, itself entitled ‘Exemptions’, provides that:
‘1. Member States shall exempt the following transactions:
…
…
…
…
…
2For the purposes of point (o) of paragraph 1, Member States may introduce any restrictions necessary, in particular as regards the number of events or the amount of receipts which give entitlement to exemption.’
9Included in the same chapter, Article 134 of Directive 2006/112 provides as follows:
‘The supply of goods or services shall not be granted exemption, as provided for in paragraphs (b), (g), …, (i), … and (n) of Article132(1), in the following cases:
10The Additional Protocol to the European Outline Convention on Transfrontier Co-operation between Territorial Communities or Authorities, concluded on 9 November 1995 under the auspices of the Council of Europe is intended to facilitate and develop such cooperation in transfrontier regions, in particular by means of transfrontier cooperation bodies set up by the territorial communities or authorities and commonly known as ‘Euroregions’.
11Under Article 4(2) of that protocol, those bodies are to perform the responsibilities assigned to them by the territorial communities or authorities in accordance with their purpose and in the manner provided for in the national law by which they are governed.
12Under Article 11 of the Wet op de omzetbelasting (Law on turnover tax) of 28 June 1968 ( Staatsblad 1968, No 329):
‘1. Subject to conditions to be laid down by public administrative regulation the following shall be exempt from tax:
…
…
2the services referred to in Article 2(1)(a) to (e) and (h) of the Besluit zorgaanspraken (Decree on entitlement to care) provided to persons in respect of whom it has been found in a report drawn up under the Algemene Wet Bijzondere Ziektekosten (Law on general insurance for special sickness costs) that they require the care referred to in Article 2(1)(a) to (e) and (h) and household assistance within the meaning of the Wet maatschappelijke ondersteuning (Law on welfare assistance) provided to persons for whom it has been established in accordance with that law that they require that assistance. …;
…
1education, including services and supplies closely related to education, by educational institutions designated by or under the education laws and subject to statutory supervision by the national education department or other supervision by the relevant minister for education;
2education designated by public administrative regulation, including services and supplies closely related to that education, …;
…
2… The exemption does not apply to supplies of closely related goods and services within the meaning of the first part and subparagraphs … (o)(1) and (2) of Article 11(1) … where:
13By decree of 14 March 2007, entitled ‘Value added tax: supply of staff’ (No CPP 2007/347M, Staatscourant 2007, No 57; ‘the 2007 decree’), the State Secretary for Finance established the rules applicable to the supply of staff in a number of specific sectors. That decree reads as follows:
‘1. Introduction
This decree concerns the application of the Law in respect of the supply of staff. In principle, VAT is levied on that service. In certain situations, I have found that it is appropriate not to levy VAT. Those situations are described in this decree. Where VAT is not levied as a result of this decree, no claim can be made to deduct input tax.
…
2General considerations
For the purposes of this decree, a supply of staff shall be understood to occur where an employer makes a worker available to a different employer to work under the supervision or direction of that different employer. This is referred to, inter alia, as secondment, supply or placement. The fact that workers may have specific technical knowledge, whether or not linked to the occupational responsibilities associated with their occupation, does not mean that such workers cannot work under the supervision or direction of a different employer. …
3Supply of staff in the sociocultural sector
3(1) General considerations
The supply of staff in the sociocultural sector may be exempt from VAT if the following conditions are satisfied:
The conditions set out above under subparagraphs (b) to (g) ensure in essence that, in real terms, the host is in the position of an employer, as epitomised by condition (g) according to which the host is liable for the financial circumstances arising from cessation of the staff loan. It seems in practice that, when that condition is satisfied the other [conditions in subparagraphs (b) to (f)] are generally also satisfied. … Where the host does not bear liability for any consequences that have arisen or might arise from the staff loan coming to an end …, there is a strong chance that there is a distortion of competition in relation to commercial placement agencies. The fact that it does not satisfy condition (g) therefore automatically means that a staff supply transaction is subject to VAT.
…
4Supply of staff in the health sector
4(1) General considerations
The supply of staff in the health sector may be exempt from VAT if certain conditions are satisfied. In general terms, the same conditions apply as in the sociocultural sector. The conditions set out in Paragraph 3(1)(b), (c), (d), (f) and (g) also apply to the supply of staff in the health sector. In addition to those conditions, the following conditions also apply:
We refer to the last unnumbered paragraph of Paragraph 3(1) of this decree for the essential purpose and scope of the foregoing conditions.
…
5Supply of staff in the education sector
The secondment of teaching staff in return for payment is a taxable supply for VAT. However, the right to levy VAT on the supply of staff in the education sector may be waived in certain circumstances. That exemption is possible if a number of conditions are satisfied. …
5(1) Supply of scientific staff
The reciprocal making available of scientific staff by scientific educational establishments may be exempt from VAT if certain conditions are satisfied. In general terms, the same conditions apply as for the VAT exemption for the supply of staff in the sociocultural sector. Accordingly, the conditions set out in Paragraph 3(1)(b), (c), (d), (f) and (g) also apply to the reciprocal supply of scientific staff by scientific educational institutions. In addition to those conditions, the following conditions also apply:
5(2) Activities of teaching staff in relation to trade unions
… Educational institutions that engage staff to replace staff temporarily performing activities in relation to a trade union are eligible for reimbursement of the costs associated with those replacement staff. In such a situation, the educational institution pays no VAT on payments it receives in relation to the (temporary) engagement of replacement staff. That rule does not apply where an institution receives payment independently of the (temporary) replacement of a member of its staff. In that case, the institution concerned must pay VAT on the payment received.
6Supply of staff by bodies governed by public law to Euroregions
In order to foster regional transfrontier cooperation, the [European Union] has established an outline convention under which the Netherlands has concluded cooperation agreements with Belgium and Germany. …
At the present time, there are several structured forms of cooperation. The activities in which those partnerships (“Euroregions”) are active include tourism, leisure, the economy, road traffic, culture and welfare. … The structure and organisation of Euroregions vary. Some Euroregions are informal. Others are governed by private law. The other Euroregions are or intend to become bodies governed by public law.
In common with legal persons governed by public law, transfrontier public entities may engage officials or staff in accordance with private law rules, in which case the principal rule is that the law of the country in which the public entity is established must apply to all staff. For Dutch staff working for a Euroregion whose headquarters are in Belgium or Germany, that circumstance leads to questions concerning their legal situation (whether Social Security follows Belgian law or German law and the interruption of the accrual of pension rights, for example). Those issues can also be resolved by the placement of staff.
In the situations described above, I favour an exemption from VAT for the supply of staff. That exemption can be used provided the placement is structural and the Euroregion concerned is in real terms involved as the employer. Those conditions are satisfied where:
…
8Promotion of occupational mobility
8(1) Promotion of the occupational mobility of the staff of bodies governed by public law
Bodies governed by public law increasingly encourage the mobility of their staff by making certain of their workers available, in return for payment, to a different organisation where those workers can acquire new knowledge and develop their experience.
The placement of staff is of a special kind where it takes place in connection with the promotion of occupational mobility by bodies governed by public law for whom promoting occupational mobility is an integral part of their human resources policy. That is why I approve the exemption of that practice from VAT subject to certain conditions:
The VAT exemption shall apply only to the first 12-month period of the supply. If on expiry of that period the same parties conclude a new contract under which the staff member concerned is again made available on the same terms for a maximum period of one year, VAT must be invoiced. Approval of the exemption shall not apply if it subsequently transpires that a supply has lasted longer than the agreed maximum period of 12 months. Where that occurs, the body governed by public law must pay VAT for the whole of the period of the supply (that is to say, also for the first 12 months).
8(2) Promotion of mobility for teaching staff
Any placement:
shall be exempt from VAT if the conditions set out in Paragraph 8(1)(a) to (g) are satisfied.
…’
14On 23 October 2007, the Commission sent the Kingdom of the Netherlands a letter of formal notice under Article 226 EC, in which it stated that the provisions of the 2007 decree appeared to be incompatible with Article 2(1)(c) and Articles 13, 24 and 132 of Directive 2006/112, in so far as they grant exemption from VAT for the supply of staff in the sociocultural, health and educational sectors, to Euroregions and in the context of promoting occupational mobility.
15The Kingdom of the Netherlands responded to that formal notice by letter of 18 February 2008. In its reply, the Kingdom of the Netherlands stated that Article 132 of Directive 2006/112 and the objective it pursues leave sufficient leeway for it to exempt the reciprocal supply of staff in the sociocultural, health and educational sectors from VAT in the situations described by the 2007 decree. According to that party, any other interpretation would bring about an increase in costs likely to restrict the affordability of healthcare and education. In relation to the supply of staff to Euroregions, it stated that relationships governed by public law are integrated to such an extent that in that field the municipalities and provinces concerned can reasonably be considered to act as public authorities.
16As it was not satisfied with that response, on 27 June 2008 the Commission sent the Kingdom of the Netherlands a reasoned opinion.
17By letter of 28 August 2008, the Kingdom of the Netherlands responded to that opinion, maintaining its arguments and inviting the Commission to change its assessment.
18As it was not satisfied with the response from that Member State, the Commission brought this action.
19It can be seen from the Commission’s application that the Commission relies on two complaints against the Kingdom of the Netherlands. The first complaint alleges, in essence, that the Member State infringed Article 132 of Directive 2006/112 by exempting the supply of staff in the sociocultural, health and educational sectors from VAT. The second complaint alleges, in essence, that the Member State concerned infringed Article 13 of that directive, by providing that the supply of staff by bodies governed by public law to Euroregions and in connection with the promotion of occupational mobility is not subject to VAT.
20As a preliminary remark, it should be noted that the Kingdom of the Netherlands finds it regrettable that the Commission’s request merely reproduces the terms of the reasoned opinion and does not take into account the arguments put forward in response to it. By doing so, it claims, the Commission has failed to do justice to one of the fundamental objectives of the pre-litigation procedure, that of defining the subject matter of the dispute with a view to bringing an action before the Court.
21It should be noted that the purpose of the pre-litigation procedure is to afford the Member State an opportunity to comply with its obligations under EU law or to avail itself of its right to defend itself against the complaints made by the Commission. The proper conduct of the pre-litigation procedure constitutes an essential guarantee not only in order to protect the rights of the Member State concerned, but also so as to ensure that the contentious procedure will have as its subject matter a clearly defined dispute (see, to that effect, inter alia, judgment of 13 December 2001, Commission v France, C‑1/00 , EU:C:2001:687 , paragraph 53 ).
22Accordingly, the pre-litigation procedure pursues the following three objectives: to allow the Member State to put an end to any infringement, to enable it to exercise its rights of defence and to define the subject matter of the dispute with a view to bringing an action before the Court (judgment of 10 December 2002, Commission v Ireland, C‑362/01 , EU:C:2002:739 , paragraph 18 ).
23However, it is common ground in the present case that the Commission has not prevented the Kingdom of the Netherlands from putting an end to the alleged infringement and has not impaired its rights of defence.
24As regards the claim that in its application the Commission failed to take into account the observations of the Kingdom of the Netherlands in response to the reasoned opinion, even were it established, that circumstance had no effect on the definition of the subject matter of the dispute since, as can be seen from paragraph 17 of this judgment, in its response to the reasoned opinion the Kingdom of the Netherlands, in essence, maintained the arguments it advanced in its response to the letter of formal notice (see, by analogy, judgment of 10 December 2002, Commission v Ireland, C‑362/01 , EU:C:2002:739 , paragraph 20 ).
25It is therefore appropriate to examine the merits of the Commission’s allegation that the Kingdom of the Netherlands failed to fulfil its obligations.
26It should be recalled that, according to established case-law, in proceedings for failure to fulfil obligations under Article 226 EC, it is for the Commission to prove that failure. It is the Commission’s responsibility to place before the Court the information needed to enable the Court to establish that the obligation has not been fulfilled and in so doing the Commission may not rely on any presumptions (see, inter alia, judgments of 12 September 2000, Commission v Netherlands, C‑408/97 , EU:C:2000:427 , paragraph 15 , and of 29 October 2009, Commission v Finland, C‑246/08 , EU:C:2009:671 , paragraph 52 ).
The first complaint, alleging infringement of Article 132 of Directive 2006/112 in relation to the VAT exemption for the supply of staff in the sociocultural, health and educational sectors
27The Commission submits that the making available of staff in the sociocultural, health and education sectors, including, in the education sector, in the context of occupational mobility, must be subject to tax in accordance with Articles 2, 9 and 24 of Directive 2006/112 and that the exemptions under Article 132(1)(b), (c), (g), (i) and (n) do not apply to that supply of services.
28The Commission argues that the supply of staff in the education sector cannot be considered to be a service ‘closely related’ to education and, therefore, under Article 132(1)(i) of Directive 2006/112, subject to the same tax provisions as the principal service. According to the Commission, it emerges from the Court’s case-law, in particular the judgment of 22 October 1998, Madgett and Baldwin ( C‑308/96 and C‑94/97 , EU:C:1998:496 , paragraph 24 ), that a service may be considered to be ancillary to a principal service if it does not constitute an end in itself, but a means of better enjoying the principal service. However, that seems not to be the case in the Netherlands legislation. In reality, the Commission claims, the supply of staff is the principal service and the teaching services are ancillary. Moreover, the title of the 2007 decree, which includes the expression ‘supply of staff’, reveals its purpose.
29The Commission observes that, in contrast to the situation in the case which gave rise to the judgment of 14 June 2007, Horizon College ( C‑434/05 , EU:C:2007:343 ; ‘the judgment in Horizon College ’), in which the Court held that making staff available in the education sector may be considered to be closely related to education, the supply described in the Netherlands legislation is not a temporary supply but rather, by virtue of the conditions laid down by the 2007 decree, must be structural. Although the question that arose in that case was confined to teaching duties performed temporarily, the Court’s reasoning went further. According to the Commission, it emerges from the grounds of that judgment that the supply of staff on a structural basis does not fall within the exemptions under Article 132 of Directive 2006/112, because both the fact that it is structural and its duration alter the nature of that service. Since a non-structural service of limited duration can be considered to be an ancillary service, a structural service of long duration should be regarded as the principal service.
30The Commission also notes that the Netherlands legislation does not contain the second condition defined by the Court in the judgment in Horizon College , according to which the supply should be of a nature and quality such that, without recourse to such a service, there could be no assurance that the education provided by the host establishments would have an equivalent value.
31According to the Commission, that analysis applies mutatis mutandis to the supply of staff in the sociocultural and health sectors. It also asserts that it is clear from the 2007 decree that the supply of teaching staff in the context of promoting occupational mobility, specifically, is primarily a personnel management tool rather than a means of providing the best possible education. The promotion of occupational mobility is therefore the primary objective.
32The Kingdom of the Netherlands explains that in the sociocultural sector, which covers solely ‘welfare and social security work’ within the meaning of Article 132(1)(g) of Directive 2006/112, and does not cover cultural services or the health and education sectors, institutions often help each other, including in order to meet personnel requirements. That mutual assistance may be temporary, as in the judgment in Horizon College , or more structural, which occurs primarily when two institutions recruit jointly. The advantage of a structural relationship of that kind is that, formally, the worker has only one employer, which saves the worker from the complications that would arise from having more than one employment relationship concurrently.
33The Kingdom of the Netherlands believes that the services consisting of making staff available in that way are closely related to the corresponding principal services. In the judgment in Horizon College , the Court held that the temporary supply of staff by one educational institution to another is not an end in itself, but a means of ensuring the better provision of the principal service, that is to say, the provision of teaching by the host establishment.
34According to the Kingdom of the Netherlands, while the Commission clearly believes that this reasoning does not apply where staff are made available not temporarily but on a structural basis, it nevertheless carefully refrains from specifying in what respect the fact that it is structural alters the service so much that it is no longer an ancillary service but an independent principal service. It falls to the Commission to provide the Court with the information needed to determine whether the Kingdom of the Netherlands has effectively failed to fulfil its obligations. However, according to the Kingdom of the Netherlands, the Commission has not provided any point of law or fact capable of justifying the assertion that supplying staff on a structural basis is not a means of ensuring better provision of the principal service. The action should therefore be dismissed on the grounds that the Commission has failed in its obligation to state reasons or, at the very least, this part of the action should be dismissed.
35The Kingdom of the Netherlands takes the view that the Court’s reasoning in the judgment in Horizon College is not confined to the temporary supply of staff but also applies where staff are made available on a structural basis. In that judgment, the Court did not in fact lay down any requirement relating to the period for which staff were made available. Although the Court referred to the temporary supply of teaching, that is purely because the actual facts at issue in that case concerned a temporary supply of staff. All that emerges from that judgment is that, in order to constitute an ancillary service, the supply under the 2007 decree must be a means of ensuring the better provision of the principal service.
36The Kingdom of the Netherlands believes that a structural supply in the sociocultural, education and health sectors does satisfy that condition. For example, in the education sector, making staff available on a structural basis is a suitable means of attracting and retaining good teachers. In order to ensure continuity and, accordingly, the quality of the education, it is therefore important that students can continue to enjoy the services of the same teacher for a certain length of time. Indeed, it is obvious that a supply for a longer period contributes more to the better provision of the principal service than a supply for a short period. According to the Kingdom of the Netherlands, the title of the 2007 decree is irrelevant in that respect since it merely refers to the activity for which it is setting out the VAT application rules.
37The Kingdom of the Netherlands also states that the Commission has not claimed that the exemptions examined under this complaint are capable of distorting competition, either in these proceedings or in the pre-litigation phase. Nor at any time during these proceedings have the Netherlands authorities received a complaint or any other signal referring to any such distortion of competition.
38Last, the Kingdom of the Netherlands observes that the structural placements at issue are also essential to the exempted principal services. Those forms of supply are in fact of a nature and quality such that, without recourse to such a service, there could be no assurance that the principal service provided by the establishment concerned would have an equivalent value. According to the Kingdom of the Netherlands, the exemptions under the 2007 decree therefore satisfy the condition laid down in Article 134 of Directive 2006/112 according to which the services must be essential to the activities exempted. The Commission has not claimed, and much less demonstrated, that they do not.
39By this complaint, the Commission argues, according to its application, that the supply of staff referred to in the 2007 decree in the sociocultural, health and education sectors including, in the education sector, in the context of promoting occupational mobility, is not covered by the VAT exemptions under Article 132(1)(b), (c), (g), (i) and (n) of Directive 2006/112 and that, accordingly, that supply must be subject to VAT under Article 2(1)(c), Article 9 and Article 24(1) of that directive.
40In order to substantiate that complaint and, thereby, establish the alleged failure by the Kingdom of the Netherlands to fulfil its obligations in that respect, the Commission relies solely on the argument that the supplies of staff at issue cannot be considered to be ‘closely related’ or ‘closely linked’ activities within the meaning of Article 132(1) of Directive 2006/112.
41This complaint of the Commission therefore concerns exclusively whether the supplies of staff referred to in the 2007 decree, in the sociocultural, health and education sectors, including, in the education sector, in the context of promoting occupational mobility, constitute ‘closely related’ or ‘closely linked’ activities within the meaning of the relevant provisions of Article 132(1).
42It should be noted first of all that Article 132(1)(c) of Directive 2006/112, on which the Commission relies in support of that complaint and which concerns ‘the provision of medical care’, does not refer to the concept of a ‘closely related’ activity on which the Commission bases this complaint, and that the Commission has not proffered any other specific argument or information to demonstrate that this article is relevant to establish the alleged failure to fulfil obligations in relation to that complaint.
43It is clear from Article 38(1)(c) of the Rules of Procedure of the Court of Justice and from the case-law relating to that provision that an application must state the subject matter of the proceedings and a summary of the pleas in law on which the application is based, and that that statement must be sufficiently clear and precise to enable the defendant to prepare his or her defence and the Court to rule on the application. It is therefore necessary for the essential points of law and of fact on which a case is based to be indicated coherently and intelligibly in the application itself and for the heads of claim to be set out unambiguously so that the Court does not rule ultra petita or indeed fail to rule on an objection (see judgments of 26 April 2007, Commission v Finland, C‑195/04 , EU:C:2007:248 , paragraph 22 and the case-law cited, and of 21 February 2008, Commission v Italy, C‑412/04 , EU:C:2008:102 , paragraph 103 ).
44It should also be noted in relation to Article 132(1)(n) of Directive 2006/112, which the Commission likewise invokes in support of the first complaint, that in its defence the Kingdom of the Netherlands stated that the sociocultural sector to which the 2007 decree refers must be understood as referring only to ‘welfare and social security work’ within the meaning of Article 132(1)(g) of that directive, rather than to ‘the supply of certain cultural services’ within the meaning of Article 132(1)(n), and that the Commission has not contradicted it on that point.
45Under those circumstances, in order to assess the merits of the first complaint, it is appropriate only to examine whether, in its action, the Commission has established that the supply of staff envisaged by the 2007 decree in the sociocultural, health and education sectors does not fall within the definition of a ‘closely related’ or ‘closely linked’ activity within the meaning of Article 132(1)(b), (g) and (i) of Directive 2006/112.
46Under Directive 2006/112, the scope of application of VAT is very broad, encompassing all the economic activities of producers, traders and persons supplying services. Nevertheless, Article 132 of that directive exempts certain activities from VAT (see, to that effect, judgments of 16 October 2008, Canterbury Hockey Club and Canterbury Ladies Hockey Club, C‑253/07 , EU:C:2008:571 , paragraph 15 , and of 28 January 2010, Eulitz, C‑473/08 , EU:C:2010:47 , paragraph 24 ).
47It should be recalled that according to the case-law on Article 13A(1) of the Sixth Directive, whose provisions correspond to those of Article 132(1) of Directive 2006/112, the purpose of Article 13A is to exempt certain activities in the public interest from VAT. However, that exemption does not cover every activity performed in the public interest, but only those which are listed in that provision and described in great detail (see the judgment in Horizon College , paragraph 14 and the case-law cited, and judgment of 28 January 2010, Eulitz, C‑473/08 , EU:C:2010:47 , paragraph 26 ).
48It can be seen from the same case-law that the exemptions under Article 132 of Directive 2006/112 constitute independent concepts of EU law whose purpose is to avoid divergences in the application of the VAT system from one Member State to another (see, to that effect, the judgment in Horizon College , paragraph 15 and the case-law cited, and judgment of 28 January 2010, Eulitz, C‑473/08 , EU:C:2010:47 , paragraph 25 ).
49The terms used to specify those 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. Nevertheless, the interpretation of those terms must be consistent with the objectives pursued by those exemptions and comply with the requirements of the principle of fiscal neutrality inherent in the common system of VAT. Thus, the requirement of strict interpretation does not mean that the terms used to specify the exemptions referred to in Article 132 of Directive 2006/112 should be construed in such a way as to deprive the exemptions of their intended effect (see, to that effect, the judgment in Horizon College , paragraph 16 and the case-law cited; and judgments of 19 November 2009, Don Bosco Onroerend Goed, C‑461/08 , EU:C:2009:722 , paragraph 25 ; and of 28 January 2010, Eulitz, C‑473/08 , EU:C:2010:47 , paragraph 27 ).
50Article 132(1)(b), (g) and (i) of Directive 2006/112 contains no definition of the ‘closely related’ and ‘closely linked’ activities and services to which it refers. However, it is evident from the wording itself of the relevant provisions of Article 132 that they do not cover supplies of services with no link to ‘hospital and medical care’, ‘welfare and social security work’ or ‘the provision of children’s or young people’s education, school or university education, vocational training or retraining’ respectively. Accordingly, supplies of services can be considered to be ‘closely related’ to the latter services only where they are actually supplied as services ancillary to those services, which constitute the principal services (see, to that effect, the judgment in Horizon College , paragraphs 27 and 28 and the case-law cited).
51It follows from the case-law that a service may be regarded as ancillary to a principal service if it does not constitute an end in itself, but a means of better enjoying the principal service (see, to that effect, judgments of 22 October 1998, Madgett and Baldwin, C‑308/96 and C‑94/97 , EU:C:1998:496 , paragraph 24 ; of 25 February 1999, CPP, C‑349/96 , EU:C:1999:93 , paragraph 30 ; and of 6 November 2003, Dornier, C‑45/01 , EU:C:2003:595 , paragraph 34 ; and also the judgment in Horizon College , paragraph 29).
52In relation to the supply of staff in the education sector, the Court accordingly held, in paragraph 30 of the judgment in Horizon College , that, as the Commission had argued in that case, the supply of a teacher by one educational establishment to another in order for the teacher temporarily to carry out teaching duties under the responsibility of the latter establishment is an activity which can, in principle, be described as a ‘supply of services closely related to education’ within the meaning of Article 13A(1)(i) of the Sixth Directive because, where there is a temporary shortage of teachers in some educational establishments, making qualified teachers attached to other establishments available to those experiencing the shortage will enable students better to enjoy the education provided by the host establishments.
53In the present action, the Commission is arguing nevertheless that the supply of staff referred to in the 2007 decree in the education sector cannot be regarded as a service ‘closely related’ to the education provided by the host bodies since, in contrast to the situation in the judgment in Horizon College , that supply is required to be structural rather than temporary, according to the conditions laid down in Paragraph 3(1)(b) of that decree. In such a situation, according to the Commission, the supply of staff cannot be found to be an ‘ancillary service’ within the meaning of the relevant provisions of Article 132(1) of Directive 2006/112, but is, on the contrary, an end in itself and, therefore, is in itself the principal service. Furthermore, in the Commission’s view, since Paragraphs 4(1) and 5(1) of the 2007 decree contain the same requirement, that the supply must be structural, in relation to the supply of staff in the sociocultural and health sectors, the same analysis applies mutatis mutandis where staff are made available in those sectors.
54It should be noted in that respect that, although the judgment in Horizon College did indeed concern a temporary supply of staff, the fact that a supply of staff is temporary or structural cannot of itself determine whether the supply can be found to be a ‘closely related’ or ‘closely linked’ activity or service within the meaning of Article 132(1)(b), (g) and (i) of Directive 2006/112. According to the case-law summarised in paragraph 51 of this judgment, and as the Court held explicitly in paragraphs 29 and 30 of the judgment in Horizon College , all that is relevant for that purpose is in fact to ascertain whether the supply does not constitute an end in itself, but a means of better enjoying the principal service.
55In support of its line of argument that the making available of staff envisaged by the 2007 decree in the sociocultural, health and education sectors is not a ‘closely related’ or ‘closely linked’ activity or service, the Commission merely emphasises that the supply is required to be structural, which, in its view, necessarily means that such a supply cannot under any circumstances be regarded as a service ancillary to a principal service.
56However, the Commission has not provided any specific information to show in what respect the structural supply of staff as governed by the 2007 decree in the sectors at issue constitutes an end in itself instead of a means of better enjoying the principal service. In its application, the Commission confined itself to stating that it ‘appears’ that the supply of staff in the education sector constitutes an end in itself. According to the case-law summarised in paragraph 26 of this judgment, it is for the Commission to prove the alleged failure to fulfil obligations and in so doing may not rely on any presumptions.
57Conversely, in its submissions the Kingdom of the Netherlands has set out in detail why, in its view, the structural supply to which the 2007 decree relates in the sociocultural, health and education sectors ensures the better provision of the principal service. Specifically, as can be seen from paragraphs 32 and 36 of this judgment, the Kingdom of the Netherlands has emphasised that the supply in question enables establishments active in those sectors to help each other in relation to staffing requirements and is a satisfactory means of attracting and retaining high-quality staff, thereby ensuring continuity and, accordingly, the quality of welfare and social security, health and educational services as the case may be. The Commission neither denied nor attempted to deny those assertions in its reply.
58Admittedly, the Commission stated in its application that the supply of teaching staff in the context of the promotion of occupational mobility, which is covered by specific rules in the 2007 decree, is in essence a personnel management tool rather than a means of ensuring the best possible education, and that the supply must therefore be considered to be the main objective.
59It should be noted however that, in support of that statement, the Commission merely asserts that this objective ‘is apparent’ from that decree but does not in any way substantiate the statement, and in particular does not explain in what respect such a supply, between educational establishments, cannot enable the better provision of teaching, even though the Kingdom of the Netherlands emphasises that the making available of staff in the education sector contributes to ensuring the quality of education, and even though Article 132(1)(i) of Directive 2006/112 explicitly refers to services closely related to ‘vocational training’ and ‘retraining’.
60It follows that the Commission has not proved that the making available of staff envisaged by the 2007 decree in the sectors at issue constitutes an end in itself instead of a means of better enjoying the principal service.
61Admittedly, in paragraphs 34 to 43 and 46 of the judgment in Horizon College , the Court specified that the exemption for the supply of staff as an activity ‘closely related’, in that case, to education, is, in any event, subject to three conditions, reflected in part in Articles 132 and 134 of Directive 2006/112, that is to say, in essence, first, that both that principal activity and the supply closely related to it are performed by organisations referred to in Article 132(1)(i) of that directive; second, that the supply in question is of a nature and quality such that, without recourse to such a service, there could be no assurance that the education provided by the host establishment and, consequently, the education from which its students benefit, would have an equivalent value; and, third, that the basic purpose of such a placement is not to obtain additional income by carrying out a transaction which is in direct competition with commercial enterprises liable for VAT.
62Nevertheless, here too the Commission has not sought to demonstrate that those three conditions are not satisfied in respect of the supply of staff envisaged by the 2007 decree in the education sector. Furthermore, even though the Commission takes the view that those conditions apply mutatis mutandis to the supply of staff in the sociocultural and health sectors, it has likewise not sought to demonstrate that they are similarly not satisfied in those situations.
63It is true that the second condition that the Court set out in the judgment in Horizon College does not feature explicitly in the text of the 2007 decree. Nevertheless, in the light of the explanations provided by the Kingdom of the Netherlands referred to in paragraph 57 of this judgment, that fact, alone, is not sufficient to demonstrate that the supply of staff envisaged by that legislation in the sectors at issue is not of a nature and quality such that, without recourse to such a service, there could be no assurance that the services provided by the host establishment would have an equivalent value.
64It follows from the foregoing that the first complaint must be rejected as unfounded.
The second complaint, alleging infringement of Article 13 of Directive 2006/112, in relation to the fact that the supply of staff by bodies governed by public law to Euroregions and in connection with the promotion of occupational mobility is treated as not subject to VAT
65The Commission submits that bodies governed by public law that supply staff in the context of promoting occupational mobility and to Euroregions should be regarded as taxable persons and therefore are not covered by Article 13 of Directive 2006/112.
66Relying on the judgment of 12 September 2000, Commission v France ( C‑276/97 , EU:C:2000:424 , paragraph 40 ), among others, the Commission notes that according to the Court’s case-law the treatment of bodies governed by public law as non-taxable persons depends primarily on how their activities are pursued, and that activities in which they engage as public authorities are those engaged in by those bodies under the special legal regime applicable to them and do not include activities pursued by them under the same legal conditions as those that apply to private traders and that, according to the judgment of 14 December 2000, Fazenda Pública ( C‑446/98 , EU:C:2000:691 , paragraph 21 ), it is necessary in that regard to analyse the conditions laid down by national law for the pursuit of the activity at issue.
67According to the Commission, it concluded as a result of such an analysis of the Netherlands legislation that the treatment of public bodies as non-taxable persons in the situations where staff are made available at issue here is not consistent with Article 13 of Directive 2006/112. Since the treatment as non-taxable persons depends on how the activities are pursued, the fact that the relationship between the official made available and the municipalities concerned is governed by the rules of public law does not in its view automatically mean that the official was made available by those municipalities in their capacity as public authorities. The large number of placement agencies in Europe clearly shows that the supply of staff is also subject to the rules of private law.
68The Commission also states that it is not ‘totally convinced’ that the conditions that a supply of staff to a Euroregion must satisfy in order not to be subject to tax according to the 2007 decree prevent any distortion of competition. In its view, the fact that VAT does not apply to one segment of the staff supply market is likely to distort competition since the rest of the market cannot enjoy that treatment. Furthermore, according to the judgment of 16 September 2008, Isle of Wight Council and Others ( C‑288/07 , EU:C:2008:505 , paragraphs 63 and 64 ), a potential effect on competition is also relevant.
69The Kingdom of the Netherlands submits, in respect, first, of the supply of staff in the context of promoting occupational mobility, that the Commission has not clarified why that supply is not covered by Article 13 of Directive 2006/112. The conditions that must be satisfied for that supply not to be subject to tax are different from those applicable to the Euroregions. The action should therefore be dismissed on the grounds that the Commission has failed in its obligation to state reasons or, at the very least, this part of the action should be dismissed.
70In any event, the Kingdom of the Netherlands asserts that the supply of staff at issue is carried out by a body acting as a public authority because in the context of that supply the official made available engages in acts of a public authority and because under the 2007 decree those supplies are subject to specific conditions that do not apply to individuals and whose objective is to ensure that only supplies whose actual purpose is to enable an official to acquire knowledge and experience at a different public body can enjoy that treatment.
71Moreover, the Kingdom of the Netherlands is of the view that the Commission has not claimed, and even less demonstrated, that the fact that the supply at issue is not subject to tax is likely to distort competition. The staff in question are not made available in order to meet a demand for staff that private economic operators, such as placement agencies, might be able to satisfy, because the raison d’être of those supplies is to ensure that the staff of a body governed by public law acquire knowledge and experience at another body which they can then put to use at their own institutions.
72In respect, second, of the supply of staff from bodies governed by public law to Euroregions, the Kingdom of the Netherlands asserts that the Commission has shown neither that the activities at issue are not activities in which those bodies engage as public authorities nor that the treatment of those bodies as non-taxable persons distorts competition. The action should therefore be dismissed on that ground.
73In any event, the Kingdom of the Netherlands contends that the activities consisting of supplying staff to Euroregions are engaged in by bodies acting as public authorities. Indeed, in accordance with the Additional Protocol to the European Outline Convention on Transfrontier Co-operation between Territorial Communities or Authorities, for the purpose of cooperation, national officials are made available by their national public authorities to a transfrontier cooperation body in order to perform the responsibilities of a public authority assigned to that body by the national authorities. The making available of officials in that way is therefore not intended to meet a staffing requirement, but is an important means whereby the relevant territorial communities or authorities can cooperate within Euroregions and contribute to pursuing the public duties entrusted to those Euroregions. Moreover, according to the Kingdom of the Netherlands, the non-taxable supplies are subject to legal conditions that do not apply to private economic operators.
74Furthermore, in respect of the condition that there must be no distortion of competition, the Kingdom of the Netherlands notes that the 2007 decree contains strict conditions to prevent distortion and that the staff supply activities at issue do not compete with those of private operators, such as placement agencies, because they concern the situation where a municipality makes specific staff available to Euroregions in order to participate actively in cooperation within Euroregions. Recruiting new staff via placement agencies is not an option that would meet that need. In respect of the likelihood of potential distortion of competition, according to the Kingdom of the Netherlands, the Commission has not submitted any element of fact or law showing that the exempt activities are carried on, either actually or potentially – in the sense of there being a real possibility – in competition with private economic operators.
75By this complaint, the Commission asserts that the supply of staff by bodies governed by public law to Euroregions and in the context of promoting occupational mobility, as envisaged by the 2007 decree, does not fall within the provisions of Article 13(1) of Directive 2006/112 whereby it is not subject to tax, because that placement activity is not engaged in by bodies governed by public law ‘as public authorities’ within the meaning of the first subparagraph of Article 13(1) and because, in any event, their treatment as non-taxable persons ‘would lead to significant distortions of competition’ within the meaning of the second paragraph of Article 13(1). The bodies subject to public law that make those officials available should therefore be regarded as ‘taxable persons’ within the meaning of Article 9 of that directive and, therefore, those supplies should be subject to VAT under Article 2(1)(c) and Article 24(1) of that directive.
76As a preliminary point, it should be noted that, as can be seen from the scheme and purpose of Directive 2006/112, as well as from the place of Article 13 of that directive in the common system of VAT established by the Sixth Directive, any activity of an economic nature is, in principle, to be taxable. As a general rule and in accordance with Article 2(1) of Directive 2006/112, the supply of services for consideration, including those supplied by bodies governed by public law, is to be subject to VAT. Articles 9 and 13 of Directive 2006/112 thus give a very wide scope to VAT (see, to that effect, judgments of 16 September 2008, Isle of Wight Council and Others, C‑288/07 , EU:C:2008:505 , paragraphs 25 to 28 and 38 , and of 16 July 2009, Commission v Ireland, C‑554/07 , not published, EU:C:2009:464 , paragraph 39 ).
77However, by derogation from that general rule, a number of activities of an economic nature are not subject to VAT. One such derogation is established in the first subparagraph of Article 13(1) of Directive 2006/112, according to which activities engaged in by bodies governed by public law acting as public authorities are not subject to that tax. However, even where those bodies carry out such activities as public authorities, they must be considered taxable persons, in accordance in particular with the second subparagraph of Article 13(1) of Directive 2006/112, where their treatment as non-taxable persons would lead to significant distortions of competition (see, to that effect, judgments of 16 September 2008, Isle of Wight Council and Others, C‑288/07 , EU:C:2008:505 , paragraphs 30 and 31 , and of 4 June 2009, SALIX Grundstücks-Vermietungsgesellschaft, C‑102/08 , EU:C:2009:345 , paragraphs 62 and 63 ).
78In the present case, it is therefore necessary to examine initially whether the Commission has established that the supply of staff envisaged by the 2007 decree to Euroregions and in the context of promoting occupational mobility is not engaged in by ‘bodies governed by public law … as public authorities’ within the meaning of the first subparagraph of Article 13(1) of Directive 2006/112. If it is found that it has not done so it will be necessary to ascertain thereafter whether the Commission has established that the fact that those bodies are treated as non-taxable persons ‘would lead to significant distortions of competition’ within the meaning of the second subparagraph of Article 13(1).
79In relation, first, to the first subparagraph of Article 13(1) of Directive 2006/112, the Court has held on numerous occasions that two conditions must be cumulatively fulfilled in order for that provision to apply: the activities must be carried out by a body governed by public law and they must be carried out by that body acting as a public authority (see, to that effect, judgments of 16 September 2008, Isle of Wight Council and Others, C‑288/07 , EU:C:2008:505 , paragraph 19 and the case-law cited, and of 16 July 2009, Commission v Ireland, C‑554/07 , EU:C:2009:464 , paragraph 41 ).
80It should be noted that, in its action, the Commission has not disputed that the supply of staff envisaged by the 2007 decree to Euroregions and in the context of promoting occupational mobility is engaged in by ‘bodies governed by public law’ within the meaning of the first subparagraph of Article 13(1) of Directive 2006/112.
81In those circumstances, it is necessary to examine whether the Commission has established that those bodies governed by public law do not engage in that supply ‘as public authorities’ within the meaning of the same provision.
82According to the case-law on the first subparagraph of Article 4(5) of the Sixth Directive, whose content correspond to that of the first subparagraph of Article 13(1) of Directive 2006/112, those provisions envisage the situation in which bodies governed by public law engage, as entities subject to public law, under the special regime applicable to them, in activities or transactions which may also be engaged in, in competition with them, by private individuals under a regime governed by private law or on the basis of administrative concessions. On the other hand, when those bodies governed by public law act under the same legal conditions as those that apply to private traders, they cannot be regarded as engaging in those activities or transactions ‘as public authorities’ (see, inter alia, judgments of 17 October 1989, Comune di Carpaneto Piacentino and Others, 231/87 and 129/88 , EU:C:1989:381 , paragraph 16 , and of 8 June 2006, Feuerbestattungsverein Halle, C‑430/04 , EU:C:2006:374 , paragraph 24 ).
83It should be noted that, in support of its line of argument on that point, in its action the Commission merely summarises the foregoing case-law of the Court but does not in any way apply it to the Netherlands legislation at issue, by establishing or even seeking to establish that the bodies governed by public law that make staff available to Euroregions or in the context of promoting occupational mobility under the 2007 decree act under the same legal conditions as a private trader within the meaning of the Court’s case-law (see, by analogy, judgment of 12 September 2000, Commission v Netherlands, C‑408/97 , EU:C:2000:427 , paragraph 37 ).
84The fact, briefly alluded to by the Commission, that there are a large number of private operators in Europe, such as placement agencies, which supply staff under private law rules, is irrelevant in that respect. Indeed, that fact does not in the slightest demonstrate that the supply of staff to Euroregions or in the context of promoting occupational mobility referred to by the 2007 decree is engaged in by the bodies governed by public law at issue under the same legal conditions as those that apply to private traders rather than under the special legal regime applicable to them, and at the very most confirms that the activities engaged in by those bodies ‘as public authorities’ may be engaged in in competition with private individuals operating under a regime governed by private law.
85It should be noted, moreover, that, as can be seen from paragraphs 70 and 73 of this judgment, in its written submissions the Kingdom of the Netherlands has given a detailed and reasoned explanation of how the supply of staff to Euroregions and in the context of promoting occupational mobility is engaged in by the bodies governed by public law at issue in their capacity as public authorities.
86In particular, that Member State emphasised that under the 2007 decree, as its wording shows, those supplies of staff are subject to specific conditions that do not apply to individuals and are intended, as regards the promotion of occupational mobility, to ensure that only supplies whose purpose is to enable an official to acquire knowledge and experience at a different public body can benefit from not being subject to VAT.
87The Kingdom of the Netherlands has also explained that the supply of staff to Euroregions was not intended to meet a staffing requirement, but was purely an important means whereby the participating municipalities and provinces could cooperate within Euroregions and contribute to performing the public duties entrusted to those Euroregions.
88The Commission neither denied nor attempted to deny those explanations which in part are even apparent from the text of the 2007 decree itself.
89It must therefore be found that the Commission has failed to place before the Court the information needed to enable it to establish the alleged failure to fulfil obligations in relation to the condition that the relevant bodies must engage in an activity as ‘public authorities’ within the meaning of the first subparagraph of Article 13(1) of Directive 2006/112.
90In relation, second, to the second subparagraph of Article 13(1) of Directive 2006/112, it should be recalled that, according to that provision, a body governed by public law acting as a public authority must be regarded as a ‘taxable person’ where its treatment as a non-taxable person is likely to lead to significant distortions of competition. What is envisaged here is therefore the situation in which bodies governed by public law engage in activities which may also be engaged in, in competition with them, by private economic operators. The aim is to ensure that those private operators are not placed at a disadvantage because they are taxed while those bodies are not (see, to that effect, judgment of 17 October 1989, Comune di Carpaneto Piacentino and Others, 231/87 and 129/88 , EU:C:1989:381 , paragraph 22 ).
91The Court has stated, inter alia, that the significant distortions of competition, to which the treatment as non-taxable persons of bodies governed by public law acting as public authorities would lead, must be evaluated by reference to the activity in question, as such, without such evaluation relating to any market in particular, and by reference not only to actual competition, but also to potential competition, provided that the possibility of a private operator entering the relevant market is real and not purely hypothetical (see, to that effect, judgment of 16 September 2008, Isle of Wight Council and Others, C‑288/07 , EU:C:2008:505 , paragraphs 53 and 65 ).
92It should be noted in that respect that, in its action, the Commission confined itself to stating that it is not ‘totally convinced’ that the conditions laid down by the Netherlands legislation for a body to be not subject to VAT prevent any distortion of competition. However, the Commission has not provided any information in support of that statement, in particular to demonstrate that the alleged possibility that competition with the activities engaged in by private operators such as placement agencies would be distorted is real and not purely hypothetical (see, by analogy, judgment of 8 March 2001, Commission v Portugal, C‑276/98 , EU:C:2001:133 , paragraph 28 ).
93Conversely, as can be seen from paragraphs 71 and 74 of this judgment, in its written submissions the Kingdom of the Netherlands has given a detailed and reasoned explanation of how the supply of staff to Euroregions and in the context of promoting occupational mobility, governed by the 2007 decree, cannot be regarded as being pursued in competition with the placement activities engaged in by private operators. Specifically, that Member State asserted that, in essence, given the specific nature of the requirements which the supply in question is to meet, using private agencies to recruit staff is not a viable option. The Commission neither denied nor attempted to deny those explanations.
94It should therefore be found that the Commission has failed to place before the Court the information needed to enable it to establish the alleged failure to fulfil obligations in relation to the condition that there must be a ‘significant distortion of competition’ within the meaning of the second subparagraph of Article 13(1) of Directive 2006/112.
95Accordingly, the second complaint must be rejected as unfounded.
96In the light of the foregoing, the action should be dismissed in its entirety.
97Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party’s pleadings. As the Kingdom of the Netherlands has applied for an order for costs against the Commission and the latter has been unsuccessful, the Commission must be ordered to bear the costs.
On those grounds, the Court (Second Chamber) hereby:
[Signatures]
(*1) Language of the case: Dutch.
Text from our archive (Publications Office of the EU, Cellar). Commission Decision 2011/833/EU — free reuse incl. commercial; attribution to EUR-Lex / Court of Justice of the European Union required; EUR-Lex is not the authentic record of the Court.