Court of Justice 26 June 2003, C-442/01 (KapHag Renditefonds 35 Spreecenter Berlin-Hellersdorf 3. Tranche GbR v Finanzamt Charlottenburg.)

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In Case C-442/01, the Court of Justice (Sixth Chamber) held that a partnership admitting a new partner in consideration of a cash contribution does not effect a supply of services for consideration within the meaning of Article 2(1) of Sixth Council Directive 77/388/EEC. The decisive legal issue was whether such admission constitutes an economic activity subject to VAT, which the Court resolved by applying its established case-law that the mere acquisition and holding of financial holdings does not constitute an economic activity, and that the same principle applies to the transfer or issuance of such holdings. Consequently, the partnership could not be regarded as a taxable person in respect of that transaction, rendering the second question on incidental transactions under Article 19(2) unnecessary to answer.AI