Judgment — ECLI:EU:C:2016:687
Date: 2016-09-15
Language of the case: German
Court formation: Eighth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary — Judgment of the Court (Eighth Chamber), 15 September 2016 1. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Use of goods and services allocated to the business for the purpose of transactions other than the taxable transactions of the taxable person — Right to deduction — Not included (Council Directive 77/388, Art. 6(2)) 2. Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — National measures derogating therefrom — Decision 2004/817 authorising the exclusion of the right to deduction for expenditure on goods and services allocated to non-business purposes to an extent greater than 90% of total use — Scope — Expenditure on goods and services allocated to non-economic purposes to such an extent — Not included (Council Directive 77/388, Art. 17; Council Decision 2004/817, Art. 1) 1. Article 6(2)(a) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes is not intended to establish a rule that transactions that fall outside the scope of the system of value added tax (VAT) may be considered to be carried out for ‘purposes other than [business purposes]’ within the meaning of that provision. Such an interpretation would have the effect of rendering Article 2(1) of the Sixth Directive meaningless. Those conclusions are supported by the broad logic of the common system of VAT, under which a distinction is made between economic and non-economic activities according to criteria that are different from those distinguishing between business use and use for non-business purposes, in particular for private purposes. Thus, where capital goods are used both for business and for private purposes, the person concerned has the choice, for the purposes of VAT, of (i) allocating those goods wholly to the assets of his business, (ii) retaining them wholly within his private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into his business only to the extent to which they are actually used for business purposes. By contrast, there is no such freedom of choice when considering whether or not goods are used for economic activities. (see paras 31-34) 2. Article 1 of Decision 2004/817 authorising Germany to apply a measure derogating from Article 17 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes — a measure which excludes expenditure on goods and services from the right to deduct VAT when the extent of use of the goods and services in question for the private purposes of a taxable person or of his employees, or, more generally, for non-business purposes, is greater than 90% — must be interpreted as not applying to a situation in which the goods or services that an undertaking acquires are used, to an extent greater than 90%, for non-economic activities, which fall outside the scope of VAT. Where a business uses goods both for economic and non-economic activities, Article 17(2)(a) of the Sixth Directive merely provides a right to deduct input tax. The measures which the Member States are required to adopt in that regard must comply with the principle of fiscal neutrality on which the common system of VAT is based. In accordance with that principle of fiscal neutrality, the deduction system is meant to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. This requirement is not met, however, if the right to deduct is excluded where the extent of use of business goods for economic activities is less than 10%. (see paras 34-36, 40, operative part)