Court of Justice of the European Communities (including Court of First Instance Decisions)

Provisional text

JUDGMENT OF THE COURT (Ninth Chamber)

9 March 2023 (*)

(Reference for a preliminary ruling – Common system of value added tax (VAT) – Directive 2006/112/EC – Exemption from VAT – Article 135(1)(a) – Exemption of insurance and reinsurance transactions – Article 136(a) – Exemption of supplies of goods used solely for an exempt activity – Concept of ‘insurance transactions’ – Resale of parts from written-off motor vehicles purchased from insured persons – Principle of fiscal neutrality)

In Case C‑42/22,

REQUEST for a preliminary ruling under Article 267 TFEU from the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal), made by decision of 16 December 2021, received at the Court on 19 January 2022, in the proceedings

Generali Seguros SA, formerly Global – Companhia de Seguros, SA

v

Autoridade Tributária e Aduaneira,

THE COURT (Ninth Chamber),

composed of L.S. Rossi, President of the Chamber, J.-C. Bonichot and O. Spineanu-Matei (Rapporteur), Judges,

Advocate General: G. Pitruzzella,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

–        Generali Seguros SA, by P. Braz, advogado,

–        the Portuguese Government, by P. Barros da Costa, C. Bento, R. Campos Laires and A. Rodrigues, acting as Agents,

–        the European Commission, by P. Caro de Sousa and J. Jokubauskaitė, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1        This request for a preliminary ruling concerns the interpretation of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).

2        The reference has been made in proceedings between Generali Seguros SA, formerly Global – Companhia de Seguros SA, an insurance undertaking, and the Autoridade Tributária e Aduaneira (Tax and Customs Authority, Portugal) concerning the taxable or exempt nature, for the purposes of value added tax (VAT), of transactions carried out by that undertaking for the resale of parts of written-off vehicles.

 Legal context

 European Union law

3        Recital 66 of the VAT Directive states:

‘The obligation to transpose this Directive into national law should be confined to those provisions which represent a substantive change as compared with the earlier Directives. The obligation to transpose into national law the provisions which are unchanged arises under the earlier Directives.’

4        Article 1(2) of that directive provides:

‘The principle of the common system of VAT entails the application to goods and services of a general tax on consumption exactly proportional to the price of the goods and services, however many transactions take place in the production and distribution process before the stage at which the tax is charged.

On each transaction, VAT, calculated on the price of the goods or services at the rate applicable to such goods or services, shall be chargeable after deduction of the amount of VAT borne directly by the various cost components.

…’

5        Article 2(1)(a) of that directive provides:

‘The following transactions shall be subject to VAT:

(a)      the supply of goods for consideration within the territory of a Member State by a taxable person acting as such’.

6        Under Article 14(1) of that directive:

‘“Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.’

7        Article 24(1) of the VAT Directive reads as follows:

‘“Supply of services” shall mean any transaction which does not constitute a supply of goods.’

8        Article 135(1)(a) of that directive provides:

‘Member States shall exempt the following transactions:

(a)      insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents’.

9        Under Article 136(a) of that directive:

‘Member States shall exempt the following transactions:

(a)      the supply of goods used solely for an activity exempted under Articles 132, 135, 371, 375, 376 and 377, Article 378(2), Article 379(2) and Articles 380 to 390, if those goods have not given rise to deductibility’.

10      The provisions set out in paragraphs 8 and 9 of this judgment correspond to Article 13(B)(a) and Article 13(B)(c), respectively, of the 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’).

 Portuguese law

11      Article 9(29) and (33) of the Código do Imposto sobre o Valor Acrescentado (Value Added Tax Code), approved by Decreto-lei No. 394-B/84 (Decree-Law No 394-B/84) of 26 December 1984 (Diário da República I, Series I-A, No 297, of 26 December 1984), in the version applicable to the facts in the main proceedings (‘the VAT Code’), provides:

‘The following shall be tax-exempt:

…

(29)      Insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents;

…

(33)      Transfers of goods which were used solely for an exempt activity, where those goods have not given rise to the right to deduction, or of goods on the acquisition or production of which, by virtue of Article 21(1), value added tax did not become deductible’.

 The dispute in the main proceedings and the questions referred for a preliminary ruling

12      Generali Seguros is an insurance undertaking which, in the course of its business, purchases vehicle parts from written-off motor vehicles damaged in accidents involving the persons whom it insures and subsequently sells them to third parties, without accounting for VAT on those sales.

13      Following an inspection relating to the 2007 financial year, the Tax and Customs Authority took the view that the sales of parts from written-off motor vehicles by Generali Seguros, as transfers of tangible property for consideration, were subject to the payment of VAT under the VAT Code and that they were not eligible for any exemption provided for by that code. Consequently, it assessed the VAT on those sales in the amount of EUR 17 213.70, plus compensatory interest.

14      Generali Seguros paid that sum, but disputed its liability in an action brought before the Tribunal Tributário de Lisboa (Finance Court, Lisbon, Portugal).

15      Before that court, Generali Seguros argued that the sale of parts from written-off vehicles should be regarded, in the circumstances at issue in the main proceedings, as a transaction exempt from VAT. It relied, first, on Article 9(29) of the VAT Code, which exempts ‘insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents’, and, second, on Article 9(33) of that code, which exempts ‘transfers of goods which were used solely for an exempt activity, where those goods have not given rise to the right to deduction’.

16      By judgment of 30 December 2017, that court dismissed Generali Seguros’ action.

17      That company brought an appeal against that judgment before the referring court, the Supremo Tribunal Administrativo (Supreme Administrative Court, Portugal).

18      Before that court, Generali Seguros submits that transactions for the resale of parts from written-off motor vehicles by an undertaking whose principal activity is insurance are connected with that activity and are inseparable from the normal activity of negotiating and paying compensation in the event of an accident, with the result that they fall within the scope of the purpose of that undertaking.

19      The referring court points out that the question whether such a transaction is exempt from VAT under Article 9(29) or (33) of the VAT Code, provisions which are intended to transpose Article 13(B)(a) and Article 13(B)(c) respectively of the Sixth Directive into Portuguese law, is the subject of considerable disagreement in academic legal writing and case-law in Portugal. It therefore considers that it is required to make a request for a preliminary ruling to the Court of Justice in order to verify the classification of that transaction in the light of the relevant provisions of that directive and of the VAT Directive.

20      In those circumstances, the Supremo Tribunal Administrativo (Supreme Administrative Court) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘(1)      Must Article 13(B)(a) of the [Sixth Directive], and, therefore, … Article 135(1)(a) of the VAT Directive, be interpreted as meaning that the concept of “insurance and reinsurance transactions” includes, for the purposes of exemption from VAT, related or supplementary activities such as the purchase and sale of parts from written-off [motor] vehicles?

(2)      Must Article 13(B)(c) of the [Sixth Directive], and, therefore, … Article 136(a) of the VAT Directive, be interpreted as meaning that parts from written-off [motor] vehicles are regarded as being purchased and sold solely for an exempt [activity], where those goods have not given rise to the right to deduction of VAT?

(3)      Is it contrary to the principle of VAT neutrality for the sale of parts from written-off [motor] vehicles by insurance companies not to be exempt from VAT where there was no right to deduction of VAT?’

 Consideration of the questions referred

21      By its questions, the referring court asks about the treatment, in the light of the common system of VAT, of transactions consisting of the resale by an insurance undertaking to third parties of parts from written-off motor vehicles, involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures.

22      As a preliminary point, as regards the EU law applicable ratione temporis in the dispute in the main proceedings, it should be noted that it follows from Article 413 of the VAT Directive that that directive entered into force on 1 January 2007. Recital 66 of that directive states that the obligation to transpose it into national law should be confined to those provisions which represent a substantive change as compared with the earlier directives and that the obligation to transpose into national law the provisions which are unchanged arises under the earlier directives.

23      Article 135(1)(a) and Article 136(a) of the VAT Directive correspond, respectively, to Article 13(B)(a) and Article 13(B)(c) of the Sixth Directive, so that the obligation to transpose them stems from the latter directive. Therefore, since the dispute in the main proceedings concerns additional assessments to VAT relating to the year 2007, the VAT Directive is applicable to that dispute (see, by analogy, judgment of 4 October 2017, Federal Express Europe, C‑273/16, EU:C:2017:733, paragraphs 30 and 31).

24      Furthermore, it should also be noted that, although the questions referred concern transactions consisting of the purchase by an insurance undertaking of parts from written-off vehicles belonging to the persons whom it insures and the resale of those parts to third parties, it is apparent from the order for reference that the dispute in the main proceedings concerns the tax treatment of solely such a resale transaction for the purposes of VAT.

25      Consequently, in order to provide the national court with an answer which will be of use to it and enable it to resolve the dispute, it is necessary to reformulate the questions referred as relating solely to the resale by an insurance undertaking to third parties of parts from written-off motor vehicles purchased from the persons whom it insures.

 The first question

26      By its first question, the referring court asks, in essence, whether Article 135(1)(a) of the VAT Directive must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, fall within the scope of that provision and are therefore exempt under that provision.

27      It should be noted, as a preliminary point, that, first, it is apparent from the documents before the Court that, in the context of the Portuguese compulsory motor vehicle civil liability insurance scheme, in the event of an accident in which the vehicle covered is completely written off, the person insured and the insurance undertaking are able to decide on the transfer of ownership of the parts from that written-off vehicle to that undertaking. To that end, the latter is required to communicate to the person insured the value at which it is prepared to purchase those written-off parts, in order to enable him or her to take a decision. If that transfer is carried out, that undertaking then resells those written-off parts to a third party, as has occurred in the situations in the main proceedings. The amount paid by the insurance undertaking to the person insured includes the value of the written-off parts thus determined.

28      Secondly, it should be recalled that the exemptions laid down in Article 135(1) of the VAT Directive constitute independent concepts of EU law whose purpose is to avoid divergences in the application of the VAT system as between one Member State and another (judgment of 25 July 2018, DPAS, C‑5/17, EU:C:2018:592, paragraph 28 and the case-law cited), which must therefore be interpreted uniformly throughout the Member States.

29      Moreover, the terms used to specify the exemptions set out in Article 135 of the VAT Directive are to be interpreted strictly, since they constitute exceptions to the general principle that VAT is to be levied on all goods and 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 define those exemptions should be construed in such a way as to deprive the exemptions of their intended effect (judgment of 17 January 2013, Woningstichting Maasdriel, C‑543/11, EU:C:2013:20, paragraph 25 and the case-law cited).

30      It is in the light of those preliminary considerations that it is necessary to determine whether transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, fall within the scope of Article 135(1)(a) of the VAT Directive.

31      Under that provision, Member States are to exempt ‘insurance and reinsurance transactions, including related services performed by insurance brokers and insurance agents’.

32      The objective of that exemption relates essentially to the difficulty of determining the correct basis of assessment of VAT for insurance premiums relating to the coverage of risk (see, to that effect, judgment of 8 October 2020, United Biscuits (Pensions Trustees) and United Biscuits Pension Investments, C‑235/19, EU:C:2020:801, paragraph 32).

33      As regards, in the first place, the concept of ‘insurance transactions’, within the meaning of Article 135(1)(a) of the VAT Directive, the essentials of such transactions are that the insurer undertakes, in return for prior payment of a premium, to provide the insured, in the event of materialisation of the risk covered, with the service agreed when the contract was concluded (judgments of 25 February 1999, CPP, C‑349/96, EU:C:1999:93, paragraph 17, and of 8 October 2020, United Biscuits (Pensions Trustees) and United Biscuits Pension Investments, C‑235/19, EU:C:2020:801, paragraph 30 and the case-law cited). The essence of those transactions lies in the fact that the insured person is exempted from the risk of bearing financial loss, which is uncertain, but potentially significant, by the premium, payment of which for that person is certain but limited (judgment of 16 July 2015, Mapfre asistencia and Mapfre warranty, C‑584/13, EU:C:2015:488, paragraph 42).

34      Moreover, the identity of the person supplied with the service is relevant for the purposes of the definition of insurance transactions, which necessarily imply the existence of a contractual relationship between the provider of the insurance service and the person whose risks are covered by the insurance, that is to say, the insured party (see, by analogy, judgments of 8 March 2001, Skandia, C‑240/99, EU:C:2001:140, paragraph 41, and of 22 October 2009, Swiss Re Germany Holding, C‑242/08, EU:C:2009:647, paragraph 36).

35      It should be noted that transactions for the sale of parts from written-off motor vehicles, such as those at issue in the main proceedings, take place under agreements separate from the insurance contracts covering those vehicles, those agreements being concluded by the insurance undertaking with persons other than the persons insured and not being covered by an insurance relationship.

36      The sale of goods bears no relation to covering a risk and the price corresponds to the value of the goods concerned at the time of that sale. The determination of the basis of assessment for VAT does not involve any difficulty in such a case.

37      The fact that, as was pointed out in paragraph 27 of this judgment, such a transaction relates to parts from a written-off motor vehicle that was involved in an accident covered by the insurance undertaking which is selling it and that the amount of the compensation due to the person insured as a result of that accident includes the purchase price of those written-off parts is irrelevant in that regard. The value of the parts constitutes the residual value, after the accident, of the insured vehicle and is therefore not, by definition, part of the damage suffered by the insured person. Consequently, that price does not form part of the insurance compensation itself, and is paid to the insured person under a contract of sale separate from the insurance agreement and separable from it.

38      Therefore, transactions for the sale of parts from a written-off motor vehicle, such as those transactions at issue in the main proceedings, do not constitute ‘insurance transactions’ within the meaning of Article 135(1)(a) of the VAT Directive.

39      Finally, it must be held that such a sale transaction cannot be regarded as inseparably linked to the insurance contract relating to the vehicle concerned and as therefore having to be subject to the same tax treatment as that contract.

40      Admittedly, it is apparent from the Court’s case-law that, in certain circumstances, several formally distinct services, which could be supplied separately and thus give rise in turn to taxation or exemption, must be considered to be a single transaction when they are not independent. There is a single supply where two or more elements or acts supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split. Such is also the case where one or several services constitute the principal service, and where the other service or services constitute one or several ancillary services which share the tax treatment of the principal service (judgment of 16 April 2015, Wojskowa Agencja Mieszkaniowa w Warszawie, C‑42/14, EU:C:2015:229, paragraph 31 and the case-law cited).

41      However, the Court has also held that, although any insurance transaction has, by nature, a link with the item it covers, such that there is necessarily a connection between that transaction and another transaction concerning the same item, such a connection is not sufficient in itself to determine whether or not there is a single complex transaction for VAT purposes (see, to that effect, judgment of 17 January 2013, BGŻ Leasing, C‑224/11, EU:C:2013:15, paragraph 36).

42      In the present case, as it was noted in paragraph 35 of the present judgment, the sales of the parts from written-off motor vehicles at issue in the main proceedings are the result of agreements which are separate from the insurance contracts covering those vehicles and are concluded by the insurance undertaking with persons other than the insured persons. Moreover, it follows from paragraph 27 of this judgment that the latter, the original owners of those vehicles, are not obliged to transfer those parts to that undertaking, so that the decision of those insured persons is independent of those insurance contracts and taken after those contracts have been concluded, and even after the materialisation of the risk covered.

43      Thus, it cannot be held that the fact that sales such as those at issue in the main proceedings are made by an insurance undertaking and relate to parts from written-off motor vehicles that have been involved in accidents covered by that undertaking means that those sales and the insurance contracts relating to those vehicles are so closely linked that they form objectively, from an economic point of view, a whole which it would be artificial to split.

44      As regards, in the second place, the concept of ‘services [related to insurance and reinsurance transactions] performed by insurance brokers and insurance agents’ within the meaning of Article 135(1)(a) of the VAT Directive, it should be noted that ‘services’ are defined in Article 24(1) of that directive as any transaction which does not constitute a supply of goods.

45      The sale of parts from a written-off motor vehicle constitutes a ‘supply of goods’ within the meaning of Article 14(1) of that directive, which refers to the transfer of the right to dispose of tangible property as owner. Accordingly, such a sale cannot fall within the concept referred to in the preceding paragraph.

46      In the light of all the foregoing considerations, the answer to the first question is that Article 135(1)(a) of the VAT Directive must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, do not fall within the scope of that provision.

 The second question

47      By its second question, the referring court asks, in essence, whether Article 136(a) of the VAT Directive must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, fall within the scope of that provision and are therefore exempt under that provision.

48      Article 136(a) of the VAT Directive provides for the exemption of supplies of goods used solely for an activity exempted under, inter alia, Article 135 of that directive, if those goods have not given rise to deductibility.

49      In the context of Article 136(a) of the VAT Directive, the term ‘used’ refers to the fact that, in respect of goods, they are intended for a specific use, in the present case to be used for the purposes of an activity consisting of carrying out insurance transactions, as defined in paragraphs 33 and 34 of the present judgment.

50      That is not the case for goods which an insurance undertaking purchases in the event of an accident covered by it and which it does not intend to use in the course of its insurance business, but rather to sell, in an unaltered state and without having been used, to third parties. That fact is indeed sufficient to establish that such goods are not relevant in the context of that insurance activity.

51      Therefore, the answer to the second question is that Article 136(a) of the VAT Directive must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, do not fall within the scope of that provision.

 The third question

52      By its third question, the referring court asks, in essence, whether the principle of fiscal neutrality inherent in the common system of VAT must be interpreted as precluding the refusal to exempt transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, where those purchases did not give rise to deductibility.

53      The principle of fiscal neutrality manifests itself through the deduction system which is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his or her economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT, are taxed in a wholly neutral way (judgment of 13 March 2014, Malburg, C‑204/13, EU:C:2014:147, paragraph 41 and the case-law cited).

54      Although, as is apparent from paragraph 29 of the present judgment, the interpretation of the provisions of the VAT Directive providing for exemptions must comply with the requirements of the principle of fiscal neutrality, that principle cannot extend the scope of an exemption in the absence of clear wording to that effect. That principle is not a rule of primary law which can condition the validity of an exemption, but a principle of interpretation, to be applied concurrently with the principle of strict interpretation of exemptions (judgments of 19 July 2012, Deutsche Bank, C‑44/11, EU:C:2012:484, paragraph 45, and of 8 July 2021, Rádio Popular, C‑695/19. EU:C:2021:549, paragraph 44 and the case-law cited).

55      The exclusion of transactions such as those at issue in the main proceedings from the scope of the exemptions provided for in Article 135(1)(a) and Article 136(a) of the VAT Directive cannot therefore be called into question on the ground that it is contrary to the principle of fiscal neutrality.

56      The answer to the third question is therefore that the principle of fiscal neutrality inherent in the common system of VAT must be interpreted as not precluding the refusal to exempt transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, where those purchases did not give rise to deductibility.

 Costs

57      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. The costs incurred in submitting observations to the Court, other than those of the parties to the main proceedings, are not recoverable.

On those grounds, the Court (Ninth Chamber) hereby rules:

1.      Article 135(1)(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, do not fall within the scope of that provision.

2.      Article 136(a) of Directive 2006/112

must be interpreted as meaning that transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, do not fall within the scope of that provision.

3.      The principle of fiscal neutrality inherent in the common system of value added tax

must be interpreted as not precluding the refusal to exempt transactions consisting of the sale by an insurance undertaking to third parties of parts from written-off motor vehicles that have been involved in accidents covered by that undertaking, which it has purchased from the persons whom it insures, where those purchases did not give rise to deductibility.

[Signatures]

*      Language of the case: Portuguese.

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