Opinion of the Advocate General — ECLI:EU:C:2001:300
Date: 2001-05-31
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Value added tax
Procedure: Action for failure to fulfil obligations - successful
Origin: Netherlands

Summary of the Judgment 
Tax provisions — Harmonisation of laws — Turnover taxes — Common system of 
value added tax — Deduction of input tax — National legislation allowing an employer 
to deduct, as input tax, a certain percentage of an allowance paid to an employee for 
business use of a private vehicle — Not permissible 
(Council Directive 77/388, Arts 17(2)(a) and 18(1)(a)) 
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SUMMARY — CASE C-338/98 
A Member State fails to fulfil its obligations 
under Articles 17(2)(a) and 18(1)(a) of the 
Sixth Directive (77/388) on the harmonisa­
tion of the laws of the Member States 
relating to turnover taxes if it provides that 
an employer who is a taxable person for the 
purposes of value added tax may deduct 
part of an allowance paid to an employee 
for business use of a private car. 
It follows from the wording of Arti­
cle 17(2)(a) of the Sixth Directive that the 
right to deduct which that provision con­
fers on a taxable person concerns value 
added tax paid in respect of goods and 
services supplied to that taxable person by 
another taxable person. The fact that an 
employee uses his own vehicle in connec­
tion with his employer's business cannot 
have the effect of transforming the 
employee into a 'taxable person' within 
the meaning of the Sixth Directive or, 
therefore, Article 17(2)(a) thereof, even if 
the costs linked to such use give rise to 
reimbursement by the employer. Also, use 
by an employee of his own vehicle in 
connection with his employer's business 
cannot constitute a supply of goods, within 
the meaning of the Sixth Directive, to his 
employer. Accordingly, neither the vehicle 
belonging to the employee nor the fuel 
consumed by that vehicle can be regarded 
as 'supplied' to the taxable employer, 
within the meaning of Article 17(2)(a), 
simply because depreciation of the vehicle 
and fuel costs linked to such use give rise to 
partial reimbursement by the employer. 
In the absence of any supply of goods or 
services between two taxable persons and, 
therefore, of any possibility of an invoice or 
a document considered to be an invoice 
being delivered by one such taxable person 
to another, the deduction of value added 
tax authorised under the national legisla­
tion in question can, by definition, only 
occur in breach of the requirements laid 
down for exercise of a right to deduct by 
Article 18(1)(a) of the Sixth Directive. 
(see paras 44, 46-48, 75-77 
and operative part) 
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