Brussels, 27/04/2009 (Agence Europe) - The universal postal service carried out by the British Royal Mail is exempt from VAT insofar as this operator provides postal services in response to the essential needs of the British population. This is the thrust of the decision made on Thursday 23 April by the European Court of Justice in a case (C-357/07) where TNT Post UK Ltd questioned the legality of the Royal Mail's tax exemption. The ECJ notes, however, that the Royal Mail is subject to VAT when it provides individually negotiated provisions of service.
In 2001, Royal Mail was designated the only universal postal service provider in the United Kingdom. Under that licence, Royal Mail is obliged to provide a universal postal service including at least one delivery to every address and one collection from every access point every working day at affordable and uniform prices. From 2006, the postal market in the United Kingdom was fully liberalised, without affecting the status and obligations of Royal Mail. The conveyance by Royal Mail of postal packets and letters is not subject to VAT. TNT Post offers “upstream services” for business mail. It collects, sorts and delivers the mail to one of Royal Mail's regional depots. Royal Mail then provides “downstream services” by distributing that mail, since TNT Post does not have a distribution service. VAT is charged on TNT's services.
The Court first notes that the expression “public postal services” refers to the operators which supply the services and not the services themselves, regardless of the status of the provider of those services. Furthermore, the liberalisation of the market does not exclude the application of the exemption.
In its decision, the Court points out that the exemption encourages the public interest objective of offering postal services which meet the essential needs of the population at a reduced cost. That objective matches the definition of the universal postal service found in the postal directive and that concept thus constitutes a useful point of reference for the purpose of interpreting the term “public postal services”. Consequently, the Court declares that “public postal services” must be regarded as operators, whether public or private, who undertake to supply postal services which meet the essential needs of the population and therefore, in practice, to provide all or part of the universal postal service in a member state. In addition, the Court considers that such an interpretation is not contrary to the principle of fiscal neutrality since, on account of the obligations imposed under its licence, Royal Mail supplies postal services under a legal regime which is substantially different from that of an operator such as TNT Post. The supplies of services by those two companies are therefore not comparable.
Nevertheless, the Court states that not all the supplies of services by the public postal services are exempt, regardless of their intrinsic nature. Only the supply by the public postal services acting as such, in their capacity as the provider of the universal postal service, are exempt. Supplies of services for which the terms have been individually negotiated are excluded from the exemption. (O.L./transl.rh)