Opinion of the Advocate General — ECLI:EU:C:2018:305
Date: 2018-05-03
Language of the case: English
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: United Kingdom

Summary — Judgment of the Court (Sixth Chamber), 18 October 2018 1. Harmonisation of fiscal legislation — Common system of value added tax — Supply of goods — Supply of services — Transactions comprising several elements — Leasing transactions — Vehicle hire purchase — Granting of finance and supply of vehicles — Distinct transactions — Granting and negotiation of credit — Concept – Deferred payment of the purchase price in return for payment of interest — Included — Condition (Council Directive 2006/112, Arts 1(2), second para., and 135(1)(b)) 2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Goods and services used both for transactions in respect of which VAT is deductible and for transactions in respect of which it is not deductible –Leasing transactions — Vehicle hire purchase –Components of the price of the transaction— Concept –General costs, relating to both the taxable and exempt parts of the transaction, passed on in the amount due in respect of the exempt part — Included — Proportional deduction — Calculation — Allocation key other than that based on turnover – Calculation method not capable of ensuring a more precise apportionment of costs than that arising from a turnover-based allocation— Not permissible (Council Directive 2006/112, Arts 168 and 173(2)(c)) 1. See the text of the decision. (see paras 29-31, 33, 35, 36) 2. Article 168 and Article 173(2)(c) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, first, even where the general costs relating to supplies of moveable goods by hire purchase, such as the supplies at issue in the main proceedings, are passed on not in the amount due by the customer in respect of the supply of the goods concerned, that is to say the taxable part of the transaction, but in the amount of the interest due in respect of the ‘finance’ part of the transaction, that is to say the exempt part thereof, those general costs must nonetheless be considered, for the purposes of value added tax (VAT), to be a component of the price of that supply and, second, Member States may not apply a method of apportionment which does not take account of the initial value of the goods concerned when they are supplied, since that method is not capable of ensuring a more precise apportionment than that which would arise from the application of the turnover-based allocation key. Thus, any Member State which decides to authorise or compel the taxable person to make the deduction on the basis of the use made of all or part of the goods and services must ensure that the method for calculating the right to deduct makes it possible to ascertain with the greatest possible precision the portion of VAT relating to transactions in respect of which VAT is deductible. The principle of neutrality, which forms an integral part of the common system of VAT, requires that the method by which the deduction is calculated objectively reflects the actual share of the expenditure resulting from the acquisition of mixed use goods and services that may be attributed to transactions in respect of which VAT is deductible (see, to that effect, judgment of 10 July 2014, Banco Mais, C‑183/13, EU:C:2014:2056, paragraphs 30 and 31). In that regard, the Court has nevertheless specified that the method chosen must not necessarily be the most precise possible, but that, as is apparent from paragraph 51 of this judgment, it must be able to guarantee a more precise result than the result which would arise from the application of the turnover-based allocation key (see, to that effect, judgment of 9 June 2016, Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft, C‑332/14, EU:C:2016:417, paragraph 33). In particular, in the light of the fundamental nature of the right to deduct, recalled in paragraph 39 of this judgment, where the method by which the deduction is calculated does not take account of an actual and non-negligible allocation of a share of the general costs to transactions giving rise to a right to deduct, such a method cannot be regarded as objectively reflecting the actual share of the expenditure resulting from the acquisition of mixed use goods and services that may be attributed to those transactions. Consequently, such a method is not capable of ensuring a more precise apportionment than that which would arise from the application of the turnover-based allocation key. (see paras 52, 53, 57, 59, operative part)