Case C-350/10
Nordea Pankki Suomi Oyj
(Reference for a preliminary ruling from the Korkein hallinto-oikeus)
(Reference for a preliminary ruling – Sixth VAT Directive – Article 13B(d)(3) and (5) – Exemptions – Transfers and payments – Transactions in securities – Electronic messaging services for financial institutions)
Summary of the Judgment
Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for in the Sixth Directive – Banking transactions covered by Article 13B(d)(3) and (5)
(Council Directive 77/388, Article 13B(d)(3) and (5))
Article 13B(d)(3) and (5) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that the exemption from value added tax under that provision does not cover electronic messaging services for financial institutions, such as swift services.
If swift services are electronic messaging services which are simply intended to transmit information, they do not by themselves perform any of the functions of one of the financial transactions referred to in Article 13B(d)(3) and (5) of the Sixth Directive, that is to say, those that have the effect of transferring funds or securities, and do not therefore possess the character of such transactions.
(see paras 34, 40, operative part)
JUDGMENT OF THE COURT (Fourth Chamber)
28 July 2011 (*)
(Reference for a preliminary ruling – Sixth VAT Directive – Article 13B(d)(3) and (5) – Exemptions – Transfers and payments – Transactions in securities – Electronic messaging services for financial institutions)
In Case C‑350/10,
REFERENCE for a preliminary ruling under Article 267 TFEU, from the Korkein hallinto-oikeus (Finland), made by decision of 8 July 2010, received at the Court on 12 July 2010, in the proceedings brought by
Nordea Pankki Suomi Oyj,
THE COURT (Fourth Chamber),
composed of J.‑C. Bonichot, President of the Chamber, K. Schiemann, L. Bay Larsen, C. Toader (Rapporteur) and E. Jarašiūnas, Judges,
Advocate General: P. Cruz Villalón,
Registrar: C. Strömholm, Administrator,
having regard to the written procedure and further to the hearing on 10 May 2011,
after considering the observations submitted on behalf of:
– Nordea Pankki Suomi Oyj, by L. Äärilä, oikeustieteen kandidaatti,
– the Finnish Government, by H. Leppo, acting as Agent,
– the Belgian Government, by J.‑C. Halleux and by M. Jacobs and C. Pochet, acting as Agents,
– the German Government, by T. Henze, acting as Agent,
– the Greek Government, by F. Dedousi, M. Germani and M. Tassopoulou, acting as Agents,
– the United Kingdom Government, by H. Walker, acting as Agent,
– the European Commission, by I. Koskinen and L. Lozano Palacios, acting as Agents,
having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,
gives the following
Judgment
1 The reference for a preliminary ruling concerns the interpretation of Article 13B(d)(3) and (5) of 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’).
2 The reference has been made in proceedings between Nordea Pankki Oyj (‘Nordea’), and the Finnish tax authority concerning the rejection of a claim for reimbursement of value added tax (‘VAT’).
Legal context
European Union law
3 Article 2 of the Sixth Directive provides:
‘The following shall be subject to [VAT]:
1. the supply of goods or services effected for consideration within the territory of the country by a taxable person acting as such;
…’.
4 Article 13B of the Sixth Directive provides:
‘Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:
…
(d) the following transactions:
…
3. transactions, including negotiation, concerning deposit and current accounts, payments, transfers, debts, cheques and other negotiable instruments, but excluding debt collection and factoring;
…
5. transactions, including negotiation, excluding management and safekeeping, in shares, interests in companies or associations, debentures and other securities, excluding:
– documents establishing title to goods,
– the rights or securities referred to in Article 5(3);
…’.
National law
5 Under point 1 of Paragraph 1(1) of the Law on value added tax (Arvonlisäverolaki 1501/1993) of 30 December 1993, as amended by the Law of 29 December 1994 (1486/1994) (‘the AVL’), VAT is paid to the State on each sale of goods and services made in Finland in the course of business.
6 Under the first subparagraph of Paragraph 9 of the AVL, it is the purchaser who is liable to tax on goods and services sold in Finland by a foreigner who does not have a fixed establishment there and who has not applied for registration there as a person liable to tax under the second subparagraph of Paragraph 12 of the AVL.
7 Under Paragraph 41 of the AVL, the sale of financial services is not subject to VAT. Under Paragraph 42(1)(4) and (6) thereof, financial services include payment transactions and dealing in securities.
8 The third subparagraph of Paragraph 42 of the AVL provides that dealing in securities includes the sale and brokerage of shares and comparable interests, and claims and derivative agreements, even when they are not made out in documentary form.
The dispute in the main proceedings and the question referred for a preliminary ruling
9 Nordea is the Finnish subsidiary of Nordea Bank AB, whose registered office is in Sweden. It is a merchant bank which handles both retail and corporate banking. Its banking activities include purchase and brokerage of securities and currency and it also offers investment and fiduciary services. Nordea is the representative of a VAT group formed by the Nordea group.
10 Nordea purchased services from Society for Worldwide Interbank Financial Telecommunication – SWIFT SC (‘SWIFT’), a cooperative society owned jointly by more than 2 000 financial institutions in more than 200 countries.
11 SWIFT manages a worldwide electronic messaging service for financial institutions (‘swift services’) which enables more than 9 000 banks and financial and securities management institutions and other corporate clients to exchange between themselves standardised financial messages with the help of software developed by the undertaking itself and its international secure data exchange network. By way of that data exchange network which it set up and maintains, SWIFT processes in particular messages concerning interbank payments and transactions in securities. The financial institutions affiliated to SWIFT are connected to the network by their own computer systems through a special gateway. In order to access its services SWIFT requires its clients to use computer hardware it has approved in advance.
12 Interbank payments may be divided into domestic and international payments. Swift services are used mostly for international payments, but the proportion of domestic payments is increasing.
13 According to the referring court, the procedure for the transmission of messages concerning interbank payments provides that when a message is sent via the SWIFT network the issuing bank receives a first acknowledgement that the message was received for processing by SWIFT. That formality marks the start of SWIFT’s financial responsibility for the transmission of the message concerned and for the performance of the transaction in accordance with that message. After the arrival of the first acknowledgement, the transaction described in the relevant message becomes binding. From the moment the receiving bank informs the system that it has received the message, SWIFT’s responsibility for the performance of the transaction ends. At the same time, SWIFT sends the bank which gave the order an acknowledgement that the message has been received.
14 In addition to those payment transactions sw
