| REVENUE — Value added tax — Rate of tax — Reduced rate applied to auctioneers’ commission on sale of temporarily imported works of art — Whether contrary to EC law — Sixth VAT Council Directive 77/388/EEC (as amended)
Commission of the European Communities v United Kingdom (Case C-305/03)
ECJ: President of Chamber Rosas, Judges Puissochet, von Bahr, Lõhmus and Ó Caoimh: 9 February 2006
By applying a reduced rate of VAT to the commission received by auctioneers on sales by auction of works of art, antiques and collectors’ items imported under the arrangements for temporary importation, the United Kingdom had failed to fulfil its obligations under arts 2(1), 5(4)(c), 12(3) and 16(1) of Directive 77/388 as amended by Council Directive 1999/49/EC (“the Sixth Directive”).
The Third Chamber of the Court of Justice of the European Communities so declared on an application by the Commission of the European Communities.
Art 12(3)(a) of the Sixth Directive provides for the levying of VAT at the standard rate, but subpara (c) provides that member states may apply a reduced rate to imports of works of art. The Commission’s complaint was that in the United Kingdom an auction was treated as a single event, so that the reduced rate was applied not only to the importation of works of art, imported with a view to auction under the temporary importation procedure referred to in art 16(1), but also to the auctioneer’s profit margin in the event of a successful sale. In the Commission’s view, there was an importation followed by a supply within the country, and both were separately taxable.
THE COURT, concurring with the position adopted by the Commission, said that it was necessary to draw a distinction between the part of the auction price corresponding to the auctioneer’s commission and the part corresponding to the customs value of the imported goods. As to importation, which was subject to VAT under art 2(2) of the Sixth Directive, arts 12(3)(c) and 11B(6) did provide for a reduced rate of tax to apply to the customs value of the imported goods. However, the auctioneer’s commission concerned a transaction within the territory of the country which was taxable by virtue of art 2(1) of the Directive, being, by virtue of art 5(4)(C), a supply of goods made by the auctioneer when he transferred the goods pursuant to a contract concluded between himself and the seller or purchaser, under which commission was payable. Art 26a(C) of the Directive, which made special VAT arrangements for sales by public auction, identified the auctioneer’s commission as the taxable amount, on which VAT was leviable at the standard rate laid down in art 12(3)(a).
On those among other grounds the court made the declaration sought by the Commission.
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