Issues: Whether a private cubicle where one person watches films alone, after starting the projection by inserting a coin and choosing among films, falls within the expression "admissions to cinemas" in Category 7 of Annex H to the Sixth Directive so as to justify application of a reduced VAT rate.

Analysis: The relevant provision in Category 7 of Annex H concerns admissions to listed cultural and entertainment facilities, including cinemas. As an exception to the general rule that the standard VAT rate applies, the reduced-rate provision must be interpreted strictly. The concept of admission to a cinema must therefore be understood according to its ordinary meaning and in its context. The listed events and facilities share the feature that the public pays an admission fee to enjoy the service collectively. A private cubicle used by a single customer to watch films alone does not correspond to that common meaning or to the collective character inherent in the concept of a cinema.

Conclusion: The payment made to watch films alone in private cubicles does not fall within the concept of admissions to a cinema under Category 7 of Annex H to the Sixth Directive, and the reduced VAT rate is not available on that basis.

Issues: (i) Whether the supply of standard software and its subsequent customisation for the purchaser's requirements constituted a single supply for VAT purposes and, if so, whether that supply was a supply of services; (ii) Whether the place of supply of that single service fell under the general rule or the specific rule for certain services in Article 9 of the Sixth Directive.

Issue (i): Whether the supply of standard software and its subsequent customisation for the purchaser's requirements constituted a single supply for VAT purposes and, if so, whether that supply was a supply of services.

Analysis: A transaction must be examined in its economic reality and not artificially split where its elements are so closely linked that they form one indivisible whole. The separate pricing of the basic software and the customisation was not decisive. The core of the transaction was the provision of software made functional for the purchaser's specific needs, and the customisation was not minor or ancillary but of decisive importance in enabling use of the software.

Conclusion: The supply of standard software and its subsequent customisation constituted a single supply for VAT purposes, and that single supply was a supply of services because the customisation predominated.

Issue (ii): Whether the place of supply of that single service fell under the general rule or the specific rule for certain services in Article 9 of the Sixth Directive.

Analysis: The specific rule in Article 9(2) prevails where the service falls within one of its categories. The software customisation service was akin to engineering or similar services and was covered by the provision dealing with services of consultants, engineers and similar activities, including data processing and the supplying of information.

Conclusion: The service fell within Article 9(2)(e), third indent, so the place of supply was governed by that specific rule and not by the general rule in Article 9(1).

Final Conclusion: The reference was answered by holding that the software supply and customisation formed one taxable service and that its place of supply was determined by the specific place-of-supply rule for similar professional services.

Ratio Decidendi: For VAT purposes, closely linked elements of a transaction must be treated as a single supply according to their economic reality, and the predominant element determines whether the composite supply is to be classified as goods or services and which place-of-supply rule applies.

Issues: Whether, under the Sixth Council Directive 77/388/EEC, national rules may treat a supply of goods or services as an application for private use where an actual consideration is paid but the consideration is lower than the cost price of the goods or services.

Analysis: The taxable amount under the directive's general rule is the consideration actually received for a supply, namely the subjective value paid by the purchaser, customer or third party. Articles 5(6) and 6(2)(b) apply only where no consideration is actually received and deem certain free-of-charge uses to be supplies for consideration in order to preserve equal treatment between a taxable person using business assets or services privately and an ordinary consumer. Where the transaction is in fact made for consideration, even if the amount is lower than cost, it remains a transaction effected for consideration and does not fall within those deeming provisions. The cost incurred by the supplier itself cannot be treated as part of the taxable amount, and the risk of avoidance through symbolic pricing is not resolved by extending those provisions beyond their text.

Conclusion: National legislation that treats transactions for which actual consideration is paid as private-use applications, merely because the consideration is below cost, is precluded by the directive.

Ratio Decidendi: Provisions deeming private-use or free-of-charge supplies to be taxable apply only where no actual consideration is received; if an actual consideration exists, the taxable amount is the consideration actually paid, not the supplier's cost.

Issues: Whether the expressions "other duly recognised establishments of a similar nature" and "other organisations recognised as charitable by the Member State concerned" in Article 13A(1)(b) and (g) of the Sixth Directive exclude natural persons running a business from the VAT exemption.

Analysis: The exemption provisions in Article 13 of the Sixth Directive are to be construed strictly, but strict construction does not require reading into the text a limitation to legal persons where the words used are broader. The expressions "establishment" and "organisation" are capable, in their ordinary meaning, of covering one or more natural persons carrying on a business. The absence of any reference to "legal person" supports that reading. The interpretation is also consistent with the principle of fiscal neutrality, which prohibits treating economically equivalent operators differently for VAT purposes solely because they adopt different legal forms.

Conclusion: Natural persons running a business are not excluded from the exemption under Article 13A(1)(b) and (g) of the Sixth Directive.

Final Conclusion: The reference was answered in the affirmative for the taxpayers, and the VAT exemption was held to be capable of applying to business activities carried on by natural persons.

Ratio Decidendi: Terms in VAT exemption provisions referring to an "establishment" or "organisation" are not confined to legal persons where the legislative text does not say so expressly, and the principle of fiscal neutrality forbids denying exemption merely because the business is carried on by natural persons.