Opinion of the Advocate General — ECLI:EU:C:2013:120
Date: 2013-02-28
Language of the case: French
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: France

Summary — Judgment of the Court (First Chamber), 12 September 2013 1. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Proportional deduction — Taxpayer with a fixed establishment in another Member State — Determination of the deductible proportion taking into account the turnover of that fixed establishment — Not permissible (Council Directive 77/388, Arts 5(7)(a), 6(3), 17(5), third para. and 19(1)) 2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Proportional deduction — Taxpayer with a fixed establishment in a third State — Determination of the deductible proportion taking into account the turnover of that fixed establishment — Not permissible (Council Directive 77/388, Arts 17(3)(a) and (c), and 19(1)) 3. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — National legislation providing that for the purposes of the calculation of the deductible proportion per sector of business of a company subject to tax it may take into account the turnover of a fixed establishment in another Member State or in a third State — Not permissible (Council Directive 77/388, Art. 17(5), third para.) 1. Article 17(2) and (5) and Article 19(1) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in other Member States. The right for a taxable person to calculate the deductible proportion applicable to its principal establishment in a certain Member State by taking into account the turnover of its fixed establishments in the other Member States cannot guarantee, in all cases, better observance of the principle of neutrality of VAT than a system which provides that a taxable person must, in every Member State in which he can be regarded as having a fixed establishment within the meaning of the Sixth Directive, determine a separate deductible amount. Next, such a method of determining the deductible proportion applicable to a taxable person’s principal establishment would serve to increase, in relation to all the acquisitions which that taxable person carried out in the Member State in which its principal establishment is situated, the proportion of VAT which that principal establishment may deduct, even though some of those acquisitions have no connection with the activities of the fixed establishments outside that State. Thus, the amount of the applicable deductible proportion would be distorted. For that reason, such a method of establishing the deductible proportion is liable to impair the effectiveness of Articles 5(7)(a) and 6(3) of the Sixth Directive which grant Member States certain discretion while mitigating the effects of their choices in relation to taxation policy. (see paras 37-40, operative part 1) 2. Article 17(3)(a) and (c) and Article 19(1) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as meaning that, in determining the deductible proportion of VAT applicable to it, a company, the principal establishment of which is situated in a Member State, may not take into account the turnover of its branches established in third States. The deduction system is based on the principle of territoriality of the applicable national provisions and, where a taxable person has a fixed establishment in a State other than that in which it has set up its principal establishment, the economic activities which it carries out in that State are regarded, for the purposes of application of the provisions of the Sixth Directive, as being exercised from that fixed establishment. No support can be drawn from either the preamble to the Sixth Directive or its substantive provisions for a finding that the fact that a taxable person has a fixed establishment outside the EU can affect the deduction system to which that taxable person is subject in the Member State in which its principal establishment is situated. (see paras 42, 43, 49, operative part 2) 3. The third subparagraph of Article 17(5) of the Sixth Directive Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as not permitting a Member State to adopt a rule for the calculation of the deductible proportion per sector of business of a company subject to tax which authorises that company to take into account the turnover of a branch established in another Member State or in a third State. The reference in the third subparagraph of Article 17(5) of the Sixth Directive to ‘sectors of business’ cannot be interpreted as referring to geographic areas. As is apparent from Article 4(1) and (2) of the Sixth Directive, the term ‘activities’ refers, in the context of the Sixth Directive, to different forms of economic activities such as the activities of producers, traders and persons supplying services. (see paras 53, 54, 56, operative part 3)