© 2025 by Michael Firth KC, Gray's Inn Tax Chambers
Contact: michael.firth@taxbar.com
E1. Taxable person
MEANING OF TAXABLE PERSON
- Any person with intention of independently starting economic activity
"According to the case-law of the Court, that concept should be given a broad interpretation. Any person with the intention, as confirmed by objective elements, of independently starting an economic activity, and who incurs the initial investment expenditure for those purposes must be regarded as a taxable person (see, to that effect, Case C-400/98 Breitsohl [2000] ECR I-4321, paragraph 34, and Case C-280/10 Polski Trawertyn [2012] ECR, paragraph 30)." (Ablessio C-527/11)
- Need not be in a position to prove they have the resources to carry out such the intended activity
It follows from this case-law and from the wording of Article 213(1) of Directive 2006/112 that, not only persons who already carry out an economic activity are considered to be taxable persons eligible to apply for a VAT identification number, but also those who plan to start such an activity and who incur the initial investment expenditure for that purpose. These persons may therefore not be in a position to prove, at this early stage of their economic activity, that they already have the material, technical and financial resources to carry out such an activity." (Ablessio C-527/11)
- Not dependent on satisfying a threshold amount of activity
"[23] It follows that the status of taxable person is not subject to the satisfaction of the requirement related to a person carrying out transactions that are subject to VAT and the economic value of which exceeds an income threshold set in advance, which corresponds to the return that can reasonably be expected from the assets held by that person. The only relevant question in that regard is whether that person actually carries out an economic activity and, as stated in paragraph 21 of the present judgment, that that person exploits tangible or intangible property for the purposes of obtaining income on a continuing basis." (Feudi C-341/22)
INDEPENDENTLY
Function of the independence requirement
- Allocation of the transaction to a particular person and entitlement to input recovery
"[29] In order to determine who, in circumstances such as those at issue in the main proceedings, must be regarded as a ‘taxable person’ for the purposes of VAT, it must be established who has independently carried out the economic activity referred to. The criterion of independence concerns allocation of the transaction concerned to a particular person or entity, whilst also guaranteeing that that person or entity can exercise any right of deduction with legal certainty. To that end, and as has already been recalled in paragraph 23 of the present judgment, it is necessary to examine whether the person or entity concerned performs an economic activity in his, her or its own name, on his, her or its own behalf and under his, her or its own responsibility, and whether he, she or it bears the economic risk associated with the carrying-out of those activities (judgment of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement), C‑312/19, EU:C:2020:711, paragraphs 40 and 41 and the case-law cited)." (ET C-213/24)
Meaning of independently
- National law may be relevant
"[29] Admittedly, it is settled case-law that, in view of the purpose of the VAT Directive, which is intended to determine the basis of assessment for VAT in a uniform manner and in accordance with EU rules, the status of taxable person must be interpreted in a uniform manner in all the Member States and assessed exclusively on the basis of the criteria set out in Article 9(1) of the VAT Directive (judgment of 17 September 2014, Skandia America (USA), filial Sverige, C‑7/13, EU:C:2014:2225, paragraph 23; see, by analogy, judgment of 8 June 2000, Breitsohl, C‑400/98, EU:C:2000:304, paragraph 48).
[32] However, taking provisions of national law into account may be useful in determining whether, in circumstances such as those in the main proceedings, the criteria for considering that an economic activity has been carried out independently, recalled in paragraphs 23 and 29 of the present judgment, are satisfied (see, to that effect, judgment of 21 December 2023, Administration de l’enregistrement, des domaines et de la TVA (VAT – Member of a board of directors), C‑288/22, EU:C:2023:1024, paragraph 55)." (ET C-213/24)
- Activity performed in own name, bearing the associated economic risk
"[30] In order to establish that an economic activity is being carried out in an independent manner, it is necessary to examine whether the persons concerned perform their activities in their own name, on their own behalf and under their own responsibility, and whether they bear the economic risk associated with carrying out those activities (judgment of 12 October 2016, Nigl and Others, C‑340/15, EU:C:2016:764, paragraph 28 and the case-law cited)." (WEG C-449/19)
- Convergent interests of entity and owners do not mean entity not a taxable person
"[32] In that regard, first, as the Advocate General stated in paragraph 49 of his opinion, it is apparent from the order for reference that, under German law, an association of residential property owners such as the WEG Tevesstraße is a legal person distinct from the property owners which make up that entity. Further, convergent economic interests between the association of residential property owners and the property owners concerned are not sufficient to support a finding that that association does not exercise the activity at issue ‘independently’, for the purposes of Article 9(1) of the VAT Directive." (WEG C-449/19)
- Co-operation does not call into question independence
"[31] In that context, the fact that some degree of cooperation occurs between such civil-law partnerships and a limited company, particularly in relation to the marketing of their products under a common trade mark, cannot suffice to call into question the independence of those civil-law partnerships vis-à-vis that company." (Nigl C-340/15)
- Sub-contracting does not call into question independence
"[32] The fact that such civil-law partnerships share a portion of their activities by entrusting that portion to a third company is the result of a choice made in the organisation of those activities and cannot warrant the conclusion that those civil-law partnerships do not carry out their activities independently or that they would not bear the economic risk associated with their economic activity." (Nigl C-340/15)
- Joint owners not appearing to act independently to each other probably both carrying on economic activity
"[34] It should be borne in mind, first of all, that the mere fact that the property at issue is part of the statutory joint ownership and is owned jointly by the spouses does not prevent those spouses from being separately subject to tax where the economic activity concerned is carried out separately by one of them (see, to that effect, judgment of 21 April 2005, HE, C‑25/03, EU:C:2005:241, paragraph 74) or where each of them carries out an economic activity independently (see, to that effect, judgment of 24 March 2022, Dyrektor Izby Skarbowej w L. (Loss of flat-rate farmer status), C‑697/20, EU:C:2022:210, paragraphs 24 and 25).
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[37] Furthermore, given that, according to the provisions of Polish law set out by the referring court and by E. T., the sale of joint property requires the consent of each of the spouses and there is no authorisation for either of them to act in the name of the joint ownership, both spouses appear to have acted jointly during the sales at issue and thus, subject to the referring court’s determination, did not appear to third parties (purchasers and public authorities) and to the outside world as each acting independently, which constitutes a relevant factor for identifying the taxable person (see, to that effect, judgments of 12 October 2016, Nigl and Others, C‑340/15, EU:C:2016:764, paragraphs 30 and 34, and of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement), C‑312/19, EU:C:2020:711, paragraphs 43 to 46).
[38] Moreover, even if this is not decisive in the case of acts incidental to the economic activity giving rise to the liability to tax (see, to that effect, judgments of 12 October 2016, Nigl and Others, C‑340/15, EU:C:2016:764, paragraphs 31 and 32, and of 16 September 2020, Valstybinė mokesčių inspekcija (Joint activity agreement), C‑312/19, EU:C:2020:711, paragraph 46), it may be noted that, as is apparent from the request for a preliminary ruling, both spouses also jointly concluded the contract of mandate with the contractor and jointly applied to the local authorities to establish a right of way to access the plots at issue.
[39] Lastly, it is for the referring court to ascertain whether, taking into account the rules governing the liability of spouses in the context of their activities, it was the statutory joint ownership, and not each spouse individually, which bore the economic risk linked to the sales of land at issue." (ET C-213/24)
Employees not independent
- Employee or bound by equivalent legal ties
"‘The condition in Article 9(1) that the economic activity be conducted “independently” shall exclude employed and other persons from VAT in so far as they are bound to an employer by a contract of employment or by any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer’s liability." (Article 10)
- Board member with supervisory function not employee or similar
"[35] As regards, in the third place, the examination of any other legal ties creating the relationship of employer and employee as regards working conditions, remuneration and the employer’s liability, it must be concluded that there is no relationship of employer and employee as regards working conditions, since the members of a Supervisory Board of that kind are not bound by instructions from the governing body of the foundation concerned, in particular where they stipulate how they should perform their role. Thus, the members of that Supervisory Board are expected to monitor independently the governing body’s strategy and the general course of business of that foundation, since that supervisory function is incompatible with an employer-employee relationship.
[36] Moreover, as noted in the request for a preliminary ruling, although the Supervisory Board establishes its working arrangements in a regulation, that board does not seem to be able to impose on its members rules on how they exercise their mandate individually. According to the request for a preliminary ruling, the members of that Supervisory Board are independent within that board and must act critically in relation to its other members." (IO C-420/18)
- Even if not employee or similar, still test whether independent under general meaning
"[37] In the absence of a relationship of employer and employee as regards working conditions, the members of a Supervisory Board of that kind are not bound by any other legal ties creating the relationship of employer and employee, within the meaning of Article 10 of the VAT Directive. Consequently, secondly, the question whether an activity such as that at issue in the main proceedings must be regarded as being carried out independently must be assessed in the light of Article 9 of that directive." (IO C-420/18)
Examples
- Supervisory board member not employee but not independent
"[60] In the light of the foregoing, the answer to the second question is that the first subparagraph of Article 9(1) of the VAT Directive must be interpreted as meaning that the activity of a member of the board of directors of a public limited company under Luxembourg law is not carried out independently, within the meaning of that provision, where – despite the fact that that member is free to arrange how he or she performs their work, receives the emoluments making up his or her income, acts in his or her own name and is not subject to an employer-employee relationship – he or she does not act on their own behalf or under their own responsibility and does not bear the economic risk linked to their activity." (TP C-288/22)
"[37] In the absence of a relationship of employer and employee as regards working conditions, the members of a Supervisory Board of that kind are not bound by any other legal ties creating the relationship of employer and employee, within the meaning of Article 10 of the VAT Directive. Consequently, secondly, the question whether an activity such as that at issue in the main proceedings must be regarded as being carried out independently must be assessed in the light of Article 9 of that directive." (IO C-420/18)
WITHDRAWAL OF STATUS OF TAXABLE PERSON
- Status based on preparatory acts cannot be withdrawn retroactively in the absence of fraud
" [32] The Court has ruled that, once the tax authorities have accepted, on the basis of information provided by a business, that it should be accorded the status of a taxable person, that status cannot, in principle, subsequently be withdrawn retroactively on account of the fact that certain events have or have not occurred, save in cases of fraud or abuse (judgment of 28 February 2018, Imofloresmira – Investimentos Imobiliários, C‑672/16, EU:C:2018:134, paragraph 36 and the case-law cited)." (ITH Comercial C-734/19)
TAXABLE PERSON "ACTING AS SUCH"
Private capacity
- Taxable person performing a transaction in a private capacity does not act as a taxable person
"[16] It is clear from the wording of Article 2(1) of the Directive that a taxable person must act "as such" for a transaction to be subject to VAT.
[17] A taxable person performing a transaction in a private capacity does not act as a taxable person.
[18] A transaction performed by a taxable person in a private capacity is not, therefore, subject to VAT.
[19] Nor is there any provision in the Directive which precludes a taxable person who wishes to retain part of an item of property amongst his private assets from excluding it from the VAT system." (Armbrecht C-291/92)
- Choice as to whether to integrate part of asset used privately into business
"[20] This interpretation makes it possible for a taxable person to choose whether or not to integrate into his business, for the purposes of applying the Directive, part of an asset which is given over to his private use. That approach concurs with one of the basic principles of the Directive, namely that a taxable person must bear the burden of VAT only when it relates to goods or services which he uses for private consumption and not for his taxable business activities. The availability of that option does not impede the application of another rule stated by the Court in Case C-97/90 Lennartz v Finanzamt Muenchen III [1991] ECR I-3795, to the effect that capital goods used both for business and private purposes may none the less be treated as business goods the VAT on which is in principle wholly deductible.
[21] As the Advocate General pointed out in point 50 of his Opinion, apportionment between the part allocated to the taxable person' s business activities and the part retained for private use must be based on the proportions of private and business use in the year of acquisition and not on a geographical division. The taxable person must, moreover, throughout his period of ownership of the property in question, demonstrate an intention to retain part of it amongst his private assets." (Armbrecht C-291/92)
- Person may retain asset used partly for business purposes wholly within private assets
"[27] When a taxable person thus decides to retain a capital item entirely within his private assets, whether or not he uses it for both business and private purposes, no portion of the input VAT due or paid on the acquisition of the item is therefore deductible.
[28] In that respect, the choice, for a taxable person, between assigning goods to his private assets and assigning them, in whole or in part, to his business assets may be based on a variety of considerations, including the fact that he is not, in any event, authorised to deduct the residual VAT on a business asset purchased second-hand from a non-taxable person.
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[32] In the light of the foregoing, the Commission's argument that a taxable person demonstrates his decision to assign an item by using it wholly or partly for the purpose of his business activities and is therefore precluded from assigning a mixed-use item wholly to his private assets must be rejected." (Bakcsi C-415/98)
- Choice not affected by recovering input VAT on connected expenses such as repairs
"[33] It is also necessary to reject the argument put forward by the German and Greek Governments to the effect that the taxable person's choice to integrate into his business assets an item of property purchased from a private individual, the acquisition of which does not create a right to deduct VAT, results from the fact that he exercises the right to deduct the VAT levied on the expenses connected to the item, such as repairs. The purpose to which a particular capital item is assigned determines the application of the VAT system to the item itself and not to the goods and services employed for its use and maintenance. The right to deduct the VAT levied on those goods and services is a separate matter coming under the application of Article 17 of the Sixth Directive. That right depends, in particular, on the connection between those goods and services and the taxed transactions of the taxable person. It follows that the tax arrangements applicable to the supply of capital items must be dissociated from those concerning the taxable expenses incurred for their use and maintenance." (Bakcsi C-415/98)
- Use to which a capital item is put only taken into account if input deduction claimed
"[29] It is also necessary to point out that the use, for business or private purposes, to which a taxable person actually puts a capital item need be taken into account for the purpose of determining how that item has been assigned only if the taxable person requests the right to deduct, wholly or in part, the input VAT paid in respect of the acquisition. In such a case, it is necessary to determine whether the goods have been acquired by the taxable person acting, at least in part, as such, that is to say, for the purposes of his economic activities within the meaning of Article 4 of the Sixth Directive. This is a question of fact to be determined in the light of all the circumstances of the case, including the nature of the goods concerned and the period between the acquisition of the goods and their use for the purposes of the taxable person's economic activities (see, to this effect, Lennartz, paragraphs 21 and 35)." (Bakcsi C-415/98)
- Inability to recover input VAT on purchase, of itself, is irrelevant
"[40] In this regard, it is necessary to point out that, when a taxable person has chosen to incorporate, wholly or partly, the capital item into his business assets, the fact that the item was purchased second-hand from a non-taxable person and that the taxable person was therefore not authorised to deduct the residual VAT attaching to that item is irrelevant. It is an item applied for business purposes and its sale constitutes a taxable supply within the meaning of the Sixth Directive." (Bakcsi C-415/98)
- Fact that property was originally acquired for private purposes does not prevent subsequent use as taxable person
"[39] It is, furthermore, necessary to state that the fact that the applicant in the main proceedings acquired the tangible property in issue to meet his own personal needs, as is suggested by the wording of the first question in the reference, does not preclude that property from being subsequently used for the purposes of the exercise of an ‘economic activity’ within the meaning of Article 9(1) of the VAT Directive. The question as to whether an individual, in a given case, has acquired property for the needs of his economic activities or for his own needs arises when that individual requests the right to deduct the input VAT paid in respect of the acquisition of that property (see, by analogy, Case C-415/98 Bakcsi [2001] ECR I-1831, paragraph 29). Such an issue does not, however, arise in the case in the main proceedings." (Rēdlihs C-263/11)
Sale of business assets
- Person who sells business assets is acting as a taxable person
"[36] As has already been stated in paragraph 24 of the present judgment, it is clear from the wording of Article 2(1) of the Sixth Directive that a taxable person must act as such in order for a transaction to be subject to VAT.
[37] A taxable person who sells a business asset is acting in a business capacity and therefore as a taxable person.
[38] Consequently, where a taxable person has chosen to incorporate wholly into his business assets a capital item which he uses for both business and private purposes, the sale of that item is subject in full to VAT, in accordance with Articles 2(1) and 11.A(1)(a) of the Sixth Directive." (Bakcsi C-415/98)
- Person who sells partly business asset is acting as a taxable person to that extent
"[39] Where a taxable person assigns to his business assets only the part of the item used for business purposes, the sale of that part alone is subject to VAT (see, to this effect, Armbrecht, paragraph 24)." (Bakcsi C-415/98)
- Assets previously withdrawn from business no longer business assets
"[43] Once the taxable person has thus withdrawn a capital item from his business and, where appropriate, paid the VAT on that withdrawal, he is free to dispose of that item as he wishes, since Article 5(6) of the Sixth Directive imposes no limit in that regard." (Bakcsi C-415/98)