European Union - Meaning of taxable person

Slaby v Minister Finansow; Kuc and another v Dyrektor Izby Skarbowej w Warszawie: Court of Justice of the European Union (Second Chamber) (Judges Cunha Rodrigues (President of the Chamber), Arabadjiev (Rapporteur), Lohmus, O Caoimh and Lindh): 15 September 2011

The Polish referring court made a reference for a preliminary ruling to the Court of Justice of the European Union in two sets of proceedings, between (i) Słaby and the Minister for Finance (Case C-180/10) and (ii) Kuc and Jeziorska-Kuc and the Director of the Fiscal Chamber (Case C-181/10) concerning the issue of whether the disposal of several plots of land designated for development had to be subject to value added tax (VAT).

The questions were whether a natural person who carried out an agricultural activity on land purchased VAT-free that was reclassified, following a change to urban management plans which occurred for reasons beyond his control, as land designated for development had to be regarded as a taxable person for VAT when he began to sell that land.

Moreover, whether, in such circumstances, a ‘flat-rate farmer’, within the meaning of article 295(1)(3) of Council Directive (EC) 2006/112 (on the common system of value added tax) (the VAT directive), had to be regarded as a taxable person who was required to account for VAT under the general rules and whether article 16 of that directive was applicable to him.

The Court ruled: The supply of land designated for development had to be regarded as subject to VAT under the national legislation of a member state if that state had availed itself of the option provided for by article 12(1) of the VAT directive, irrespective of whether the transaction was carried out on a continuing basis or whether the person who effected the supply carried out an activity of a producer, a trader or a person supplying services, to the extent that that transaction did not constitute the mere exercise of the right of ownership by its holder.

A natural person who carried out an agricultural activity on land that was reclassified, following a change to urban management plans which occurred for reasons beyond his control, as land designated for development should not be regarded as a taxable person for VAT for the purposes of articles 9(1) and 12(1) of the VAT directive when he began to sell that land if those sales fell within the scope of the management of the private property of that person.

If, on the other hand, that person took active steps, for the purpose of concluding those sales, to market property by mobilising resources similar to those deployed by a producer, a trader or a person supplying services within the meaning of the second subparagraph of article 9(1) of the VAT directive that person should be regarded as carrying out an ‘economic activity’ within the meaning of that article and should, therefore, be regarded as a taxable person for VAT.

The fact that that person was a ‘flat-rate farmer’ within the meaning of article 295(1)(3) of the VAT directive was irrelevant in that respect (see [49]-[52] of the judgment).