© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
A5. Equal treatment
GENERAL
Meaning of equal treatment
- Similar situations not to be treated differently unless objectively justified
"[46] According to the Court’s settled case-law, that general principle requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified. A difference in treatment is justified if it is based on an objective and reasonable criterion, that is, if the difference relates to a legally permitted aim pursued by the legislation in question, and it is proportionate to the aim pursued by the treatment concerned (judgment of 3 February 2021, Fussl Modestraße Mayr, C‑555/19, EU:C:2021:89, paragraph 95 and the case-law cited)." (VB C-146/21)
"[53] According to settled case-law, the principle of equal treatment, of which the principle of fiscal neutrality is the reflection in matters relating to VAT, requires similar situations not to be treated differently unless differentiation is objectively justified (see, in particular, Case C‑309/06 Marks & Spencer [2008] ECR I‑2283, paragraphs 49 and 51, and Case C‑19/12 Efir [2013] ECR, paragraph 35)." (Jetair NV C-599/12)
"[44] It is also appropriate to point out that the general principle of equal treatment, of which the principle of fiscal neutrality is a particular expression at the level of secondary Community law and in the specific area of taxation, requires similar situations not to be treated differently unless differentiation is objectively justified (Marks & Spencer, paragraph 51 and the case-law cited). It requires, in particular, that different types of economic operators in comparable situations be treated in the same way in order to avoid any distortion of competition within the internal market, in accordance with the provisions of Article 3(1)(g) EC." (NCC Construction Danmark C-174/08)
"[35] The principle of equal treatment is indeed one of the fundamental principles of Community law. That principle requires that similar situations are not to be treated differently unless differentiation is objectively justified (Joined Cases 201/85 and 202/85 Klensch and Others v Secrétaire d'État à l'Agriculture et à la Viticulture [1986] ECR 3477, paragraph 9).
[36] As Idéal Tourisme rightly submits, it also follows from Klensch, paragraph 10, that when Member States transpose directives into their national law they must comply with the principle of equal treatment." (Ideal Tourisme SA C-36/99)
- Different situations not to be treated in the same way unless objectively justified
"[41] It should be recalled at the outset that the Court has consistently held that the principle of equal treatment requires that comparable situations must not be treated differently and different situations must not be treated in the same way unless such treatment is objectively justified (judgments of 12 November 2014, Guardian Industries and Guardian Europe v Commission, C‑580/12 P, EU:C:2014:2363, paragraph 51, and of 4 May 2016, Pillbox 38, C‑477/14, EU:C:2016:324, paragraph 35)." (RPO C-390/15)
Distinction between equal treatment and fiscal neutrality
- Equal treatment has constitutional status, whereas fiscal neutrality requires legislation to be drafted and enacted
"[41] That principle of fiscal neutrality was intended by the Community legislature to reflect, in matters relating to VAT, the general principle of equal treatment (see, to that effect, Case C‑309/06 Marks & Spencer [2008] ECR I‑2283, paragraph 49, and the case-law cited).
[42] However, while that latter principle, like the other general principles of Community law, has constitutional status, the principle of fiscal neutrality requires legislation to be drafted and enacted, which requires a measure of secondary Community law (see, by analogy, with regard to the protection of minority shareholders, Case C‑101/08 Audiolux and Others [2009] ECR I‑0000, paragraph 63).
...
[44] It is also appropriate to point out that the general principle of equal treatment, of which the principle of fiscal neutrality is a particular expression at the level of secondary Community law and in the specific area of taxation,..." (NCC Construction Danmark C-174/08)
Audiolux: rejection of a general principle protecting minority shareholders
"[32] By those questions, which it is appropriate to examine together, the national court asks essentially whether there is a general principle of Community law of equality of shareholders under which minority shareholders are protected by the dominant shareholder’s obligation, when acquiring or exercising control of a company, to offer to buy their shares under the same conditions as those agreed when a shareholding in that company conferring or strengthening the control of the dominant shareholder was acquired.
...
[61] Therefore, the general principle of equality cannot determine the choice between various conceivable means of protection for minority shareholders, such as those recommended by those measures of secondary Community law.
[62] A principle such as that proposed by Audiolux presupposes legislative choices, based on a weighing of the interests at issue and the fixing in advance of precise and detailed rules (see, by analogy, Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraphs 18 to 20; Case 265/78 Ferwerda [1980] ECR 617, paragraph 9; and the order of 5 March 1999 in Case C‑153/98 P Guérin automobiles v Commission [1999] ECR I‑1441, paragraph 14 and 15) and cannot be inferred from the general principle of equal treatment.
[63] The general principles of Community law have constitutional status while the principle proposed by Audiolux is characterised by a degree of detail requiring legislation to be drafted and enacted at Community level by a measure of secondary Community law. Therefore, the principle proposed by Audiolux cannot be regarded as an independent general principle of Community law." (Audiolux C-101/08)
- Equal treatment is broader: applies between traders not in competition with each other
"[24] In the second place, regarding the principle of equal treatment, the Court has held that, although infringement of the principle of fiscal neutrality — which is the reflection, in matters relating to VAT, of the principle of equal treatment — may be envisaged only as between competing traders, infringement of the general principle of equal treatment may be established, in matters relating to tax, by other kinds of discrimination which affect traders who are not necessarily in competition with each other but who are nevertheless in a similar situation in other respects (see, to that effect, judgment of 10 April 2008, Marks & Spencer, C‑309/06, EU:C:2008:211, paragraph 49)." (Compass Contract Services C-38/16)
"[17] Furthermore, it is settled case-law that the principle of fiscal neutrality was intended to reflect, in matters relating to VAT, the general principle of equal treatment, which requires that comparable situations must not be treated differently unless such treatment is objectively justified. However, although infringement of the principle of fiscal neutrality may be envisaged only as between competing traders, infringement of the general principle of equal treatment may be established, in matters relating to tax, by other kinds of discrimination which affect traders who are not necessarily in competition with each other but who are nevertheless in a similar situation in other respects (see, to that effect, Case C‑309/06 Marks & Spencer [2008] ECR I‑2283, paragraphs 49 and 51).
[18] It follows that the principle of equal treatment, in matters relating to tax, does not coincide with the principle of fiscal neutrality..." (Commission v. Sweden C-480/10)
- Fiscal neutrality not relevant where supplies not being treated differently
Fiscal neutrality not relevant to differing time limits for recovering overpaid output v. underclaimed input
"[21] In the first place, it should be recalled that, according to settled case-law, the principle of fiscal neutrality precludes in particular treating similar goods or supplies of services, which are thus in competition with each other, differently for VAT purposes (judgments of 3 May 2001, Commission v France, C‑481/98, EU:C:2001:237, paragraph 22, and of 10 November 2011, The Rank Group, C‑259/10 and C‑260/10, EU:C:2011:719, paragraph 32).
[22] Nothing in the file submitted to the Court by the referring court permits the inference that for VAT purposes the services supplied by Compass were treated differently to similar supplies by a competing trader." (Compass Contract Services C-38/16 - equal treatment was then considered, but not breached)
- Equal treatment permits distinctions based on the situations of the suppliers (not just the perspective of the typical consumer)
"[55] In the main proceedings, it is therefore for the national court to determine, having regard to all those matters, whether the recognition of Kingscrest as a charitable organisation for the purposes of the exemptions provided for in Article 13A(1)(g) and (h) of the Sixth Directive entails infringement of the principle of equal treatment in relation to other operators making the same supplies in comparable situations." (Kingcrest Associates Ltd C-498/03)
Statutory examples
- Deemed supply of withdrawal of business assets to achieve equal treatment with ordinary consumer
"[42] In this regard, it should be noted that the purpose of Article 5(6) of the Sixth Directive is, in particular, to ensure equal treatment as between a taxable person who withdraws goods from his business and an ordinary consumer who buys goods of the same type. In pursuit of that objective, Article 5(6) prevents a taxable person who has been able to deduct VAT on the purchase of goods used for his business from escaping payment of VAT when he transfers those goods from his business for private purposes and from thereby enjoying advantages to which he is not entitled by comparison with an ordinary consumer who buys goods and pays VAT on them (see Case C-20/91 De Jong [1992] ECR I-2847, paragraph 15, and Case C-48/97 Kuwait Petroleum [1999] ECR I-2323, paragraph 21, as well as, with regard to heading (a) of the first subparagraph of Article 6(2) of the Sixth Directive, which is based on the same principle, Case C-230/94 Enkler [1996] ECR I-4517, paragraph 33).
...
[44]It follows that, since the taxable person has not been authorised to deduct the residual VAT on capital goods purchased second-hand from a non-taxable person, the VAT on such goods must be considered not to be deductible for the purposes of Article 5(6) of the Sixth Directive and no tax may therefore be levied on that withdrawal under that provision (see, with regard to heading (a) of the first subparagraph of Article 6(2), Case 50/88 Kühne [1989] ECR 1925, paragraph 9). If the taxable person subsequently sells the goods, he will be carrying out that transaction in a private capacity, and not as a taxable person. That transaction will therefore be excluded from the system of VAT.
[45] Such an interpretation is compatible with the objective of equal treatment pursued by Article 5(6) of the Sixth Directive, since the taxable person does not enjoy any advantage to which he is not entitled in comparison with an ordinary consumer." (Bakcsi C-415/98)
- Only one correct method of apportioning price between elements/supplies
"[31] Counsel for the taxpayer was concerned to emphasise that deciding how to apportion a unitary price charged by a supplier into two elements for the purpose of calculating VAT can involve an exercise of evaluative judgment, as to which differences of view can exist within a spectrum of what is reasonable. This is undoubtedly true. But it does not follow that there must be more than one method of apportionment which the supplier may lawfully use. Although that is a possible conclusion for a court or tribunal to reach, in most cases where such a question is raised the court or tribunal can be expected to exercise its own judgment as to which method should be used. There is good reason for this. In matters of taxation consistency of approach is of critical importance. If the same exercise of apportionment may lawfully be carried out in more than one way, the result is likely to be that different taxpayers whose situations are identical will lawfully pay different amounts of tax. That offends the principle of equal treatment. It is also capable of distorting competition between businesses." (K E Entertainments v. HMRC [2020] UKSC 28)
EFFECT
- Equal treatment can be invoked to challenge secondary EU law
"[38] First, although the national court refers in the wording of its question to the principle of fiscal neutrality, it is apparent from the order for reference that it raises in essence the question of the validity of Article 98(2) of Directive 2006/112 as amended, read in conjunction with point 6 of Annex III thereto, in the light of the principle of equal treatment as set out in Article 20 of the Charter of Fundamental Rights of the European Union (‘the Charter’)." (RPO C-390/15)
"[62] In the light of the foregoing, the answer to the first question is that Article 17(2)(a) and Article 6(2)(a) of the Sixth Directive do not infringe the general principle of equal treatment under Community law by conferring on taxable persons, by means of a full and immediate right to deduct input VAT on the construction of a mixed-use building and the subsequent staggered imposition of that tax on the private use of the building, a financial advantage compared with non-taxable persons and with taxable persons who use their building only as a private residence." (Puffer C-460/07)
"[30] Second, the principle of fiscal neutrality is sometimes understood as reflecting, in VAT matters, the principle of equal treatment. When it is used in that sense, such a principle can, of course, be invoked to challenge the validity of a provision of the VAT Directive.
[31] Third, the Court sometimes uses that expression to indicate that VAT should be neutral from a competitive point of view. In essence, the idea is that similar goods or services which are in competition with each other should be treated in the same way. That principle is, however, somewhat different from the principle of equal treatment since it does not constitute some kind of overarching rule of primary law that can determine the validity of a stated exemption. Used in this (third) sense, the idea of fiscal neutrality is rather an interpretative principle which comes into play when other methods of interpretation do not lead to a conclusive result." (I GmbH C-228/20, AGO)
- Binds member states when implementing the Directive
"[45] In implementing the provisions of the Sixth Directive, the Member States were obliged to take into account the principle of equal treatment, like the other general principles of Community law, which, having constitutional status, bind those Member States when they take action in the field of Community law (see, to that effect, Case C‑107/97 Rombi and Arkopharma [2000] ECR I‑3367, paragraph 65, and Case C‑396/98 Schloßstrasse [2000] ECR I‑4279, paragraph 44)." (NCC Construction Danmark C-174/08)
- Does not apply in a situation where Directive authorises the retention of existing distinctions
"[38] As the Belgian State stated at the hearing, the harmonisation envisaged has not yet been achieved, in so far as the Sixth Directive, by virtue of Article 28(3)(b), unreservedly authorises the Member States to retain certain provisions of their national legislation predating the Sixth Directive which would, without that authorisation, be incompatible with that directive. Consequently, in so far as a Member State retains such provisions, it does not transpose the Sixth Directive and thus does not infringe either that directive or the general Community principles which Member States must, according to Klensch, comply with when implementing Community legislation." (Ideal Tourisme SA C-36/99)
- No right to be treated in the same way as taxpayers who wrongly received beneficial treatment
"[90] Secondly, I accept the submission of the Respondents, summarised in paragraph 46 of their skeleton argument, that there is no EU law right in a taxpayer, at least none that I observe in the case law, to be treated in the same way as other taxpayers who have secured an historic windfall due a misapplication of the law. As the CJEU put it in paragraphs 62 - 64 of the Rank judgment,
"…the fact remains that the principle of equal treatment must be reconciled with the principle of legality, according to which a person may not rely, in support of his claim, on an unlawful act in favour of a third party…
63. It follows that a taxable person cannot demand that a certain supply be given the same tax treatment as another supply, where such treatment does not comply with the relevant national legislation.
64. …the principle of fiscal neutrality must be interpreted as meaning that a taxable person cannot claim reimbursement of the VAT paid on certain supplies of services in reliance on a breach of that principle, where the tax authorities of the member state concerned have, in practice, treated similar services as exempt supplies, although they were not exempt from VAT under the relevant national legislation."
[91] This seems to me to be the reverse of the situation that arose in M&S 2 where the taxpayer had been wrongly taxed under domestic law whereas others had not." (Sub One Limited v. HMRC [2014] EWCA Civ 773, McCombe, Rimer, Briggs LJJ)
SIMILARITY
Identifying whether situations are similar or not
- Factors to be identified in light of the subject-matter and aim of provisions
"[25] The comparability of different situations must be assessed with regard to all the elements which characterise them. These elements must, in particular, be determined and assessed in the light of the subject matter and purpose of the EU act which makes the distinction in question. The principles and objectives of the field to which the act relates must also be taken into account (judgment of 10 February 2022, OE(Habitual residence of a spouse – Nationality criterion), C‑522/20, EU:C:2022:87, paragraph 20 and the case-law cited)." (Belgian Association of Tax Lawyers C-623/22)
"[25] According to settled case-law, a breach of the principle of equal treatment as a result of different treatment presupposes that the situations concerned are comparable, having regard to all the elements which characterise them (judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 25). The elements which characterise various situations, and hence their comparability, must in particular be determined and assessed in the light of the subject matter of the provisions in question and of the aim they pursue, whilst account must be taken for that purpose of the principles and objectives of the field to which the measure at issue relates (see, to that effect, judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 26, and the judgment of 7 March 2017, RPO, C‑390/15, EU:C:2017:174, paragraph 42)." (Compass Contract Services C-38/16)
- Quality of supply from point of review of recipient relevant
"[40] In order to determine whether medical care is similar, it is appropriate to take into account, concerning the exemption laid down in Article 13A(1)(c) of the Sixth Directive and having regard to the objective pursued by that provision, the professional qualifications of the care providers. In fact, where it is not identical, medical care can be regarded as similar only to the extent that it is of equivalent quality from the point of view of recipients." (Solleveld C-443/04)
- Intending traders and current traders treated the same re input deduction
"[43] Any other interpretation of the VAT Directive would be contrary to the principle that VAT should be neutral as regards the tax burden on a business. It would be liable to create, as regards the tax treatment of the same investment activities, unjustified differences between businesses already carrying out taxable transactions and other businesses seeking by investment to commence activities which will in future be a source of taxable transactions. Likewise, arbitrary differences would be established between the latter businesses, in that final acceptance of the deductions would depend on whether or not the investment resulted in taxed transactions (judgment of 29 February 1996, INZO, C‑110/94, EU:C:1996:67, paragraph 22).
[44] Therefore, the principle of fiscal neutrality precludes national legislation which, by making the final acceptance of the VAT deductions dependent on the results of the taxable person’s economic activity, creates, as regards the tax treatment of identical investment activities, unjustified differences between undertakings with the same profile and carrying on the same activity." (Imofloresmira C-672/16)
- T who has overpaid output tax not in a comparable situation to T who underclaims input tax
"[37] It follows from the foregoing that, whilst the right to repayment of overpaid VAT is intended to remedy a situation which stems from an infringement of EU law by permitting the beneficiary of that right to neutralise an economic burden which is wrongly imposed, the right to deduct input VAT stems from the actual application of the common system of VAT, so that the VAT payable or paid is not borne by the taxable person in his economic activities that are subject to VAT, thus ensuring neutrality of taxation of those activities.
[38] As the Advocate General observed in point 60 of his Opinion, such a difference in the nature of the rights at issue and the objectives pursued justifies the existence of legal rules specific to each of those two rights, inter alia, as regards their content and the conditions for their exercise, such as the limitation period for actions to enforce those rights and, specifically, the date from which such a period applies." (Compass Contract Services C-38/16)
- T in repayment position and T in payment position comparable for purposes of reclaiming overpaid VAT
"[40] Furthermore, concerning the judgment of 10 April 2008, Marks & Spencer (C‑309/06, EU:C:2008:211), cited by Compass in its written observations, as referred to in paragraph 27 above, it is indeed true that the Court stated, in paragraph 50 of that judgment, that the general principle of equal treatment applies in a situation where traders are all holders of VAT credits, seek to obtain repayment from the tax authorities and find that their claims for a refund are treated differently. However, the Court’s interpretation of EU law in that judgment concerned a situation in which the traders all sought to obtain repayment of VAT which they had overpaid to the tax authorities and saw their claims for repayment treated differently. Thus, having regard to the differences between the facts at issue in that judgment and those at issue in the main proceedings, the Court’s interpretation in that judgment cannot call into question the interpretation that the right to repayment of overpaid VAT and the right to deduction of input VAT are different in nature." (Compass Contract Services C-38/16)
Suppliers acting under different legal regimes
- Suppliers subject to different legal regimes (e.g. obligation to provide universal postal service) are not in same position
"[37] Such an interpretation is not contrary to the principle of fiscal neutrality, which precludes economic operators carrying out the same transactions from being treated differently in relation to the levying of VAT (see Case C‑363/05 JP Morgan Fleming Claverhouse Investment Trust and The Association of Investment Trust Companies [2007] ECR I‑5517, paragraph 46 and the case-law cited).
[38] As the Advocate General observes in point 63 of her Opinion, the assessment of the comparability of the services supplied hinges not only on the comparison of individual services, but on the context in which those services are supplied.
[39] As the facts in the main proceedings demonstrate, on account of the obligations described in paragraph 12 of this judgment, which are required under its licence and connected with its status as the universal service provider, an operator such as Royal Mail supplies postal services under a legal regime which is substantially different to that under which an operator such as TNT Post provides such services." (TNT Post UK Ltd C-357/07)
"[63] TNT is not obliged to offer comparable services. The principle of fiscal neutrality therefore categorically does not require that TNT’s and Royal Mail’s transactions be treated equally for tax purposes. It may indeed be the case that TNT provides some services which are identical to those of Royal Mail, such as, for example, the collection and sorting of postal items. However, the tax‑privileged universal service consists precisely in providing a public postal network as a system of infrastructure facilities and services of specified quality at a particular price. Consequently, the assessment of the comparability of the transactions hinges not only on the comparison of individual services, but on the fact that they are part of a comprehensive range of provision offered by the public postal network." (TNT Post UK Ltd C-357/07, AGO Kokott)
- But only to the extent that the different legal regime applies to particular supplies
"[44] It follows from the requirements referred to in paragraph 31 of this judgment that the exemption provided for in Article 13A(1)(a) must be both strictly interpreted and interpreted consistently with the objectives of that provision, that the supplies of services and of goods incidental thereto must be interpreted as being those that the public postal services carry out as such, that is, by virtue of their status as public postal services.
[45] Such an interpretation is dictated, in particular, by the need to observe the principle of fiscal neutrality. The obligations on an operator such as Royal Mail, which – as is apparent from paragraph 39 of this judgment – distinguish the situation in which that operator supplies postal services from that in which an operator such as TNT provides such services, concern only the postal services supplied in its capacity as the universal service provider." (TNT Post UK Ltd C-357/07)
- Unlawful and lawful transactions comparable
"[28] As pointed out in paragraph 21 of this judgment, it is clear from the judgment in Lange that the principle of fiscal neutrality precludes a generalised distinction from being drawn in the levying of VAT between unlawful and lawful transactions. It follows that Member States cannot reserve the exemption solely to lawful games of chance." (Fischer C-283/95)
- Difference in incidence of domestic taxation does not make situations different
"[28] It cannot be contended, as the German Government has done, that the conditions in which lawful games take place are not comparable to those pertaining in the case of unlawful games on the ground that licensed casinos are subject to a levy calculated on the basis of their profits.
[29] First, the common system of VAT would be distorted if Member States could adjust its application on the basis that there are other, unharmonised, taxes. Secondly, as the German Government itself acknowledged at the hearing, there is nothing to prevent levies of the same kind as those payable by licensed casinos from also being imposed on organisers of unlawful games of chance." (Fischer C-283/95)
Suppliers under different VAT regimes
- Trader who fails to opt for small trader exemption is in the same position as other traders subject to VAT, cannot retrospectively opt into exemption
"[47] In that regard, it must be found that to allow taxable persons to opt for an exemption scheme after the time limit set would confer on them an undue competitive advantage, to the detriment of operators who duly complied with the procedural obligations laid down in the national legislation at issue in the main proceedings. Those taxable persons would be in a position to choose after the event and, consequently, on the basis of the actual results of their activity, the tax arrangements which seem most advantageous to them.
[48] However, the principle of fiscal neutrality precludes, in particular, taxable persons who are in comparable situations and thus in competition with each other from being treated differently for VAT purposes.
[49] It follows that the principle of fiscal neutrality and, more generally, the principle of the equal treatment of taxable persons do not preclude national legislation which does not grant the VAT exemption to taxable persons who have failed to opt for one of the exemption schemes at the same time as they declare the commencement of their economic activity, even if the proceeds from their activity do not exceed the maximum threshold granting entitlement to the small enterprise exemption." (Vamos C-566/16)
Examples re similarity
- Taxable and non-taxable persons are not in the same situation re input recovery on mixed use goods
"[56] Thus, the possible difference of treatment of taxable and non-taxable persons results from the application of the principle of fiscal neutrality, the primary purpose of which is to ensure the equal treatment of taxable persons. That potential difference results, also, from the pursuit by those persons of their economic activities as defined in Article 4(2) of the Sixth Directive. Finally, it is linked to the specific status of taxable persons provided for in the Sixth Directive, which results inter alia in the fact that, in accordance with Article 21 of that directive, they are liable to VAT and must collect it.
[57] Since those characteristics distinguish the position of taxable persons from that of non-taxable persons who do not exercise such economic activities, a possible difference in treatment results from the application of different rules to different situations, thus not giving rise to any infringement of the right to equal treatment." (Puffer C-460/07)
Even if the taxable person only makes exempt supplies
"[59] Nor can a different view be reached as regards a taxable person who carries out only exempt operations, since such a taxable person is subject to the same VAT burden as a non-taxable person and his status thus largely similar to the latter." (Puffer C-460/07)
- But it is permissible to exclude taxable persons only making exempt suplies from full initial recovery on mixed use goods
"[71] In those circumstances, and without it being necessary to examine the other three conditions, the answer to the second question is that Article 87(1) EC must be interpreted as not precluding a national measure transposing Article 17(2)(a) of the Sixth Directive and which provides that the right to deduct input VAT payable is confined to taxable persons carrying out taxable transactions, to the exclusion of those carrying out only exempt transactions, in so far as that national measure may confer a financial advantage only on taxable persons carrying out taxable transactions." (Puffer C-460/07)
- Supply of digital books on physical medium and electronically are comparable
"[48] That said, in order that such an objective may be achieved, what matters is that citizens of the Union can have access to the content of books effectively, and the manner in which the books are supplied does not play a decisive role in that regard.
[49] Consequently, it must be found that, in the light of the objective pursued by Article 98(2) of Directive 2006/112 as amended, read in conjunction with point 6 of Annex III thereto, the supply of digital books on all physical means of support and the supply of digital books electronically amount to comparable situations." (RPO C-390/15)
- Suppliers acting in own name in different situation to intermediaries
"[55] It is apparent from those provisions that the European Union legislature considered that those two categories of travel agents were not in a comparable situation. The Court has previously pointed out that what characterises the activity of travel agents covered by the Sixth Directive is that they are economic operators who organise travel or tour packages in their own name and entrust other taxable persons with the supply of the services generally associated with that kind of activity (see Case C‑94/97 Madgett and Baldwin [1998] ECR I‑6229, paragraph 23).
[56] It follows that the national legislature does not infringe European Union law and, in particular, does not contravene the principle of equal treatment or the principle of neutrality by treating those two categories of operators differently." (Jetair NV C-599/12)
- Transactions for no consideration not comparable to low consideration transactions
"[30] However, in so far as transactions, such as those in the main proceedings, in which a price patently lower than the open market price has been agreed are none the less transactions for consideration in which an actual consideration able to serve as the taxable amount has been received, the principle of equal treatment is not, in itself, such as to necessitate applying to them the rules for determining the taxable amount which were laid down for transactions effected free of charge for the estimation, in the absence of any actual consideration, of such a taxable amount according to objective criteria, as those two types of transaction are not comparable." (Campsa Estaciones de Servicio C-285/10)
- Import and intra-community acquisition not comparable
"[56] As Teleos and Others and the Commission correctly maintain and as the Advocate General observed in points 78 to 82 of her Opinion, the application of customs duties to imports from outside the European Union and the imposition of VAT on intra-Community acquisitions are not comparable transactions.
[57] The regime applying to intra-Community trade lays down the division of powers in tax matters in the internal market and permits the tax authorities to resort to both the supplier and the purchaser to obtain payment of the VAT, whereas, under the common customs regime, duties are recoverable only from the importer. It follows that the case-law cited in paragraph 54 of the present judgment is not applicable to the case which is before the national court." (Teleos C-409/04)
- Internal and intra-community supplies are comparable
"[59] As regards, thirdly, the principle of fiscal neutrality, it must be recalled that that principle precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see Case C‑240/05 Eurodental [2006] ECR I-11479, paragraph 46).
[60] If the suppliers involved in the main proceedings were themselves required to account for the VAT after the event, that principle would be infringed, since suppliers who effect transactions within a country are never liable to pay output tax, given that it is an indirect tax on consumption. Therefore, taxable persons effecting an intra-Community transaction, in circumstances such as those of the main proceedings, would be in a less advantageous position than that of taxable persons effecting an internal transaction (see, to that effect, as regards the right to deduct, Eurodental , paragraph 47)." (Teleos C-409/04)
- Breach of fiscal neutrality to give right to deduct for intra-community supply but not internal supply
"[46] Thirdly and lastly, as regards the principle of fiscal neutrality, it must be recalled that that principle precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, to that effect, Case C-498/03 Kingscrest Associates and Montecello [2005] ECR I-4427, paragraph 54).
[47] If the transactions at issue in the main proceedings gave rise to the right to deduct tax where they were of an intra-Community nature, that principle would not be observed as the same transactions do not give rise to a deduction where they are carried out within the territory of a Member State. Consequently, taxable persons carrying out intra-Community transactions would be treated more favourably than taxable persons effecting domestic transactions (see, to that effect, Debouche, paragraph 19)." (Eurodental C-240/05)
- Co-owner using part of assets for business in similar situation to owner of just part for input recovery purposes
"[73] Thus, two taxable persons who objectively are in the same situation in that each of them has exclusive use of the same percentage of a building as an office which he has allocated to his business are treated in the same way, since they are entitled to deduct the same amount of input VAT. However, account is taken of the difference inherent in their situation – one having sole ownership of the building whilst the other owns only a share in it – by virtue of the fact that the first person is entitled to deduct 100% of the input VAT as long as he chooses to integrate the mixed-use building in its entirety into his business, whilst the second person can never be relieved of VAT in excess of the amount which he has actually borne, namely the amount relating to his share in the co-ownership (25% in the main proceedings)." (HE C-25/03)
- Foundation that satisfies charitable requirements not to be denied charitable status on the basis of where it is established
"[40] Nevertheless, the fact remains that where a foundation recognised as having charitable status in one Member State also satisfies the requirements imposed for that purpose by the law of another Member State and where its object is to promote the very same interests of the general public, which it is a matter for the national authorities of that other State, including its courts, to determine, the authorities of that Member State cannot deny that foundation the right to equal treatment solely on the ground that it is not established in its territory.
[41] In the dispute in the main proceedings, the national court states that, during the financial year at issue, the foundation pursued charitable objects within the meaning of Paragraphs 51 to 68 of the AO and also satisfied the requirements under the terms of its statutes to enable it to qualify for exemption from corporation tax in accordance with the first sentence of Paragraph 5(1)(9) of the KStG.
[42] Accordingly, in circumstances such as those in the main proceedings, the effect of Paragraph 5(2)(3) of the KStG is to treat foundations in objectively comparable situations differently by reason of their place of residence. It follows that such a fiscal measure cannot, in principle, constitute unequal treatment permitted under Article 73d(1)(a) of the EC Treaty, unless it can be justified by overriding reasons in the general interest (see, to that effect, Verkooijen, paragraph 46, Manninen, paragraph 29, and Case C-265/04 Bouanich [2006] ECR I-923, paragraph 38)." (Centro di Musicologia Walter Stauffer C-386/04)
JUSTIFICATION
- Justified where the difference in treatment relates to a legally permitted objective and is proportionate to the objective
"[80] As regards the principle of equal treatment, to which the referring court has also referred, it should be borne in mind that that principle, which is enshrined in Articles 20 and 21 of the Charter, requires that comparable situations must not be treated differently and that different situations must not be treated in the same way unless such treatment is objectively justified. A difference in treatment is justified if it is based on an objective and reasonable criterion, that is, if the difference relates to a legally permitted aim pursued by the legislation in question, and it is proportionate to the aim pursued by the treatment (judgment of 24 February 2022, Glavna direktsia ‘Pozharna bezopasnost i zashtita na naselenieto’, C‑262/20, EU:C:2022:117, paragraph 58 and the case-law cited)." (PK C-278/24)
"[52] Where a difference in treatment between two comparable situations is found, the principle of equal treatment is not infringed in so far as that difference is duly justified (see, to that effect, judgment of 16 December 2008, Arcelor Atlantique et Lorraine and Others, C‑127/07, EU:C:2008:728, paragraph 46).
[53] That is the case, according to settled case-law of the Court, where the difference in treatment relates to a legally permitted objective pursued by the measure having the effect of giving rise to such a difference and is proportionate to that objective (see, to that effect, judgments of 17 October 2013, Schaible, C‑101/12, EU:C:2013:661, paragraph 77, and of 22 May 2014, Glatzel, C‑356/12, EU:C:2014:350, paragraph 43)." (RPO C-390/15)
- Tax measures involve complex assessment leading to broad discretion challengeable on the basis of manifest error
"[54] In that respect, it is understood that, when the EU legislature adopts a tax measure, it is called upon to make political, economic and social choices, and to rank divergent interests or to undertake complex assessments. Consequently, it should, in that context, be accorded a broad discretion, so that judicial review of compliance with the conditions set out in the previous paragraph of this judgment must be limited to review as to manifest error (see, to that effect, judgments of 10 December 2002, British American Tobacco (Investments) and Imperial Tobacco, C‑491/01, EU:C:2002:741, paragraph 123, and of 17 October 2013, Billerud Karlsborg and Billerud Skärblacka, C‑203/12, EU:C:2013:664, paragraph 35)." (RPO C-390/15)
- Legitimate to treat electronically delivered digital books differently to physically delivered digital books for uniform regime for e-commerce
"[57] As the Council and the Commission explained in reply to a written question asked by the Court and at the hearing, the ruling out, in Article 98(2) of Directive 2006/112 as amended, of the application of a reduced rate of VAT to the supply of digital books electronically must be viewed as forming part of a specific VAT regime for e-commerce. Indeed, it is apparent from their explanations that it was considered necessary to make electronically supplied services subject to clear, simple and uniform rules in order that the VAT rate applicable to those services may be established with certainty and, thus, that the administration of VAT by taxable persons and national tax authorities is facilitated.
[58] Doubt cannot reasonably be cast on the fact that such an objective is legally permitted." (RPO C-390/15)
- Achieving legal certainty and avoiding need for case by case assessment
"[62] By precluding the application of a reduced rate of VAT to electronically supplied services, the EU legislature spares taxable persons and national tax authorities from an obligation to examine, for each type of electronic service that is supplied, whether it falls within one of the categories of services that qualify for such a rate under Annex III to Directive 2006/112 as amended.
[63] Thus, the measure at issue must be regarded as being appropriate for achieving the objective of establishing with certainty the VAT rate applicable to electronically supplied services and thus of facilitating the administration of VAT by taxable persons and national tax authorities." (RPO C-390/15)
- Legitimate for member states to be able to treat the same situation differently whilst VAT not fully harmonised
"[50] As long as the European Union legislature has not established that definitive system and the Member States may retain their existing legislation, it must be accepted that differences may exist between those Member States without those differences being contrary to European Union law." (Jetair NV C-599/12)
- Whether cost of supplies covered by social security does not justify difference in treatment for medical exemption
[71] It should, however, be made clear that the considerations set forth in paragraphs 69 and 70 of the present judgment do not mean that the exemption under Article 13A(1)(b) of the Sixth Directive must be systematically excluded when the services supplied are not reimbursed by the social security authorities. It is rather a factor which must be weighed in the balance, and which could be outweighed, for example, by the necessity to ensure equal treatment. Indeed, it is also apparent from the case-law that, if, for example, a taxable person’s situation is comparable to that of other operators providing the same services in comparable situations, the mere fact that the cost of those services is not fully covered by the social security authorities does not justify a difference in the treatment of providers for VAT purposes (see, to that effect, Dornier, paragraph 75)." (Copygene C-262/08)
- No justification for legislation creating incentive to ensure that tax authority is only creditor
"[90] The judicial creation of such a condition for exemption could encourage members of the board of directors of a company to ensure, where the financial situation of that company deteriorates to such an extent that it risks becoming insolvent, that the company has debts in respect of only one creditor, namely the public exchequer. That could lead to instances of misappropriation, to the detriment of the public exchequer, in so far as a company would fail to retain sufficient funds to discharge its VAT debt, but would use its funds for other purposes. Such a result would clearly run counter to the objective of ensuring the correct collection of VAT.
[91] Therefore, such unequal treatment cannot be justified.
[92] Accordingly, the principle of equal treatment would not be observed if a member or former member of the board of directors of a company having the public exchequer as its sole creditor were to be exempted from his or her joint and several liability for the VAT debt of that company on that ground alone." (PK C-278/24)
- Justified to distinguish between registered and unregistered traders in relation to application of reverse charge
"[48] The aim of that restriction is legal certainty and legal clarity. In circumstances such as those at issue in the main proceedings, the recipient of a supply of goods is liable to pay VAT if the transaction is subject to VAT, which depends, in particular, on the supplier’s turnover, who may benefit from the special exemption scheme provided for by Romanian legislation concerning small businesses. However, that condition is difficult for the recipient of the supply to ascertain. In that regard, it must be pointed out that, in the present case, it is apparent, in particular, from recital 6 of Implementing Decision 2010/583 that the Romanian timber market consists of a large number of small businesses which the Romanian authorities have found difficult to control.
[49] By imposing on taxable persons a condition of registration for VAT purposes, the beneficiary of the taxable transaction has a more accessible criterion for knowing, precisely, the extent of its tax liabilities, since Romanian law excludes from the obligation to register for VAT taxable persons benefiting from the exemption applicable to small businesses and therefore not carrying out transactions in respect of which VAT is deductible.
[50] The difference in treatment therefore appears proportionate to the aim pursued by the national legislation at issue in the main proceedings, in so far as, first, registration for VAT purposes derives from EU law itself, namely Article 214 of the VAT Directive, and, secondly, the right of deduction of the taxable persons concerned is not, in principle, called into question." (VB C-146/21)
- Not required to choose less restrictive measure if it would compromise legitimate objective
"[64] So far as concerns the requirement, associated with the proportionality condition, that the measure chosen must be the least restrictive among the appropriate measures that may be envisaged and that the disadvantages caused must not be disproportionate to the objectives pursued, it should be noted that the EU legislature might possibly have separated the supply of digital books electronically from electronic services as a whole and, accordingly, have permitted the application of a reduced rate of VAT to those books.
[65] However, such a solution would be liable to run counter to the objective pursued by the EU legislature relating to the need to remedy the lack of legal certainty resulting from the constant developments to which all electronic services are subject, for which reason the EU legislature excluded all of those services from the list of transactions qualifying for a reduced rate of VAT under Annex III to Directive 2006/112 as amended." (RPO C-390/15)
Proportionality