Opinion of the Advocate General — ECLI:EU:C:2005:557
Date: 2005-09-15
Language of the case: Finnish
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Finland

Summary of the Judgment 1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax (Council Directive 77/388, Arts 20(2) and (5)) 2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax (Council Directive 77/388, Arts 13(C), 17 and 20) 3. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions provided for in the Sixth Directive (Council Directive 77/388, Arts 13(C) and 17(6)) 1. Article 20 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, subject to the provisions of Article 20(5) thereof, it requires Member States to make provision for adjustment of deductions of value added tax on capital goods. (see para. 35, operative part 1) 2. Article 20 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 adjustment provided for therein is also applicable where the capital goods were first used in non-taxable activity that was not eligible for deduction and were then used in activity, subject to value added tax, during the adjustment period. Application of the adjustment mechanism depends on the existence of a right to deduct based on Article 17 of the Sixth Directive. The use to which capital goods are put merely determines the extent of the initial deduction and the extent of any adjustments in the course of the following periods, but does not affect whether a right to deduct arises. It follows that the immediate use of the goods for taxable supplies does not in itself constitute a condition for the application of the system of adjustment of deductions. Furthermore, adjustment of the deduction also applies necessarily where alteration of the right to deduct depends on a deliberate choice on the part of the taxpayer, such as exercise of the option provided for in Article 13(C) of the Sixth Directive. (see paras 37, 39-40, 42, operative part 2) 3. The second subparagraph of Article 13(C) and Article 17(6) 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 a Member State which gives its taxable persons the right to opt for taxation of the letting of a property is not permitted by those provisions to exclude deduction of value added tax on immovable property investments made before that right of option is exercised, where the application to exercise that option has not been made within six months of the property being brought into use. Since under the first subparagraph of Article 13(C) of the Sixth Directive it is possible for taxable persons to opt for taxation of the letting of immovable property, the exercise of that option must lead not only to taxation of the letting but also to deduction of the relevant input taxes on the property concerned. Moreover, restricting deductions in connection with taxable transactions after the right of option has been exercised would affect, not the ‘scope’ of the right of option which Member States may restrict pursuant to the second subparagraph of Article 13(C) of the Sixth Directive, but the consequences of exercising that right. That provision does not therefore permit Member States to restrict the right to deduct provided for in Article 17 of the Sixth Directive or the need to adjust such deductions under Article 20 of that directive. As regards the option given to Member States by the second subparagraph of Article 17(6) of the Sixth Directive, it applies only to maintaining exclusions from deduction with regard to categories of expenditure defined by reference to the nature of the goods or services acquired rather than by reference to the use to which they are put or the way in which they are used. (see paras 44, 46-47, 49, 51, operative part 3-4)