The Advocate General of the European Court of Justice (ECJ) issued an opinion on 29 September 2016 in the British Film Institute case. This case concerns the VAT exemption for cultural services. The Court of Appeal (England and Wales) (Civil Division) requested a preliminary ruling in this case from the ECJ on 13 November 2015.

The British Film Institute (BFI) is a non-profit organization in the UK that promotes cinema. The organization applied the standard rate of VAT on the right of admission to films at the UK’s National Film Theatre. Later the BFI sent in a claim for the repayment of the output VAT as the supplies were exempt cultural services within the meaning of Article 13A (1)(n) of the Sixth VAT Directive (77/388). The UK Revenue appealed against the decision.

Questions for preliminary ruling

The main questions for preliminary ruling therefore concerned the interpretation of Article 13A(1)(n) and its application in the EU Member State. Article 13A(1)(n) of the Sixth VAT Directive is part of the list of exemptions within the territory of a country and refers to “certain cultural services and goods closely linked thereto supplied by bodies governed by public law or by other cultural bodies recognized by the Member State concerned”.

The ECJ was also asked if application of the VAT exemption to the services supplied by the BFI could be contrary to the EU principle of elimination of distortion in competition.

Advocate General’s Reasoning

The Advocate General noted that not all supplies of cultural services are exempt within the meaning of the relevant article of the Sixth VAT Directive. The EU Member States are therefore left to decide which supplies of cultural services may be exempt from VAT. The Advocate General also noted that to apply the exemption the nature of the body providing the services must be taken into account but also the supply itself must be eligible for the VAT exemption under the law of the relevant Member State. If there is no domestic legislation listing exempt supplies the Advocate General opined that Article 13A(1)(n) has no direct effect.

The Advocate General considered that it should be left to the referring court to determine if application of the exemption to the services supplied by the BFI is contrary to the EU principle of elimination of distortion in competition. This would be the case if the law results in different treatment of bodies supplying similar services.

Advocate General’s Opinion

The AG therefore concluded that Article 13A(1)(n) of the Sixth VAT Directive must be interpreted to mean that the provision leaves the decision to the EU Member State as to which particular services may be exempt from VAT. The national Court must therefore decide if excluding the respondent from entitlement to the VAT exemption complies with the principle of fiscal neutrality. This depends on whether the treatment of this taxable person infringes the principle of equal treatment in relation to other operators supplying the same services in comparable situations and being allowed the exemption.

The Advocate General also opined that Article 13A (1)(n) of the Sixth VAT Directive may not be directly relied on by a taxable person where the Member State has not transposed the provision into national law by the end of the relevant period.

The ECJ may take into account the Advocate General’s opinion when delivering a preliminary ruling but is not obliged to follow it.