Luxembourg, 13/04/2007 (Agence Europe) - In his conclusions on case C-97/06, delivered on 29 March, the advocate general says that the Spanish legislation which imposes value added tax to the partial chartering of sea-going vessels is incompatible with Community law. Article 15 of the Council's sixth directive 77/388/EEC exempts the charter of certain categories of ship from VAT, but without making any distinction on the various types of charter. Advocate General M. J.Mazák says that this Article should not be interpreted, as Spanish law No 37 of 28 December 1992 does, in a restrictive way, applying VAT exemption only to full charters, with partial charters not qualifying for exemption, and, therefore, being subject to tax.
Compañía Transatlántica Española E.A. employed Navicon to transport containers between various ports on the Iberian Peninsula and the Canary Islands (which lie outside the scope of the application of VAT). Navicon did not apply the amount of value added tax to the respective invoices, as it believed that the transaction was exempt from VAT by virtue of the Council directive. The competent Spanish tax authority made an adjustment to the amounts paid under the chartering agreement for the amount of VAT, as it took the view that the exemption did not apply when there was partial chartering and not full chartering.
Navicon challenged this adjustment in the Madrid Tribunal Económico Administrativo (Regional and Administrative Court), but was not successful. It appealed against this decision to the Tribunal Superior de Justicia de Madrid (High Court of Justice, Madrid), which decided to stay the proceedings and to ask the European Court of Justice if this different treatment of full and partial charters was in line with European law.
The advocate general found on behalf of Navicon. Among various arguments, he pointed out that the same cargo could be exempt from VAT if it filled a small vessel, but subject to VAT if it was only a partial charter of a larger vessel. Such inconsistencies would put the effectiveness of the directive at risk.
If the Court agrees with these conclusions, as happens in most cases, the Spanish legislation would have to be amended, and perhaps also some provisions in Greek regulations, if one is to judge from the support Greece gave Spain during this procedure. The judgment is expected in the next few weeks. (cd)