Opinion of the Advocate General — ECLI:EU:C:2021:417
Date: 2021-05-20
Language of the case: German
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Germany

Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
29 January 2020 
Referring court: 
Bundesfinanzhof (Germany) 
Date of the decision to refer: 
18 September 2019 
Applicant and appellant in the appeal on a point of law: 
E 
Defendant and respondent in the appeal on a point of law: 
Finanzamt N 
  
Subject matter of the main proceedings 
Common system of value added tax — Directive 2006/112/EC — Deduction of 
VAT — Right of taxable person to allocate a mixed-use item to private assets or 
to the assets of the business — Admissibility of a limitation period for allocation 
to the assets of the business — Admissibility of a presumption of allocation to 
private assets in the absence of sufficient evidence to the contrary 
Subject matter and legal basis of the reference 
Interpretation of EU law, Article 267 TFEU 
Questions referred 
1. Does Article 168(a), read in conjunction with Article 167 of Council 
Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax conflict with national case-law precluding the right to 
deduct VAT in cases in which the trader is entitled to choose the allocation 
EN 
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of a supply at the time of purchase if the tax authorities have not adopted a 
decision on its allocation on expiry of the statutory deadline for submission 
of the annual VAT return? 
2. Does Article 168(a) of Council Directive 2006/112/EC of 28 November 
2006 on the common system of value added tax conflict with national case-
law whereby allocation to private assets is assumed or presumed in the 
absence of (sufficient) evidence for allocation to the assets of the business? 
Provisions of EU law cited 
Council Directive 2006/112/EC of 28 November 2006 on the common system of 
value added tax, as amended by Council Directive 2009/162/EC of 22 December 
2009, specifically Articles 167, 168, 168a, 179, 250, 252 and 273 
Provisions of national law cited 
Umsatzsteuergesetz (Law on value added tax, ‘the UStG’), specifically 
Paragraphs 15 and 16 
Brief summary of the facts and procedure 
1 The action concerns the deduction as input tax of VAT incurred in 2015 in setting 
up an office in an otherwise privately used single-family dwelling. The defendant 
rejected the deduction of VAT, which the applicant, who operates a scaffolding 
business, claimed for the first time in his annual VAT return for 2015, submitted 
late, because the office was not allocated to the assets of the business in time. The 
objection and the action both failed. Now the matter has been brought before the 
Bundesfinanzhof (Federal Finance Court, ‘the BFH’) in an appeal on a point of 
law. 
Brief summary of the basis for the reference 
Preliminary remarks 
2 According to Paragraph 15(1), No 1, first sentence, of the UStG, traders can 
deduct the VAT due by law on supplies for their business carried out by another 
trader. The VAT deductible in accordance with Paragraph 15 of the UStG must be 
deducted in the tax period in which it is incurred (Paragraph 16(2), first sentence, 
of the UStG). 
3 Article 168(a) of Directive 2006/112/EC likewise stipulates that, in so far as the 
goods and services are used for the purposes of his taxed transactions, the taxable 
person is entitled to deduct the VAT due or paid in respect of supplies carried out 
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by another taxable person. Under Article 167 of Directive 2006/112, the right to 
deduct VAT arises at the time when the deductible tax becomes chargeable. 
4 According to the case-law of the BFH and the Court (see, for example, judgments 
of 11 July 1991, Lennartz, C-97/90, EU:C:1991:315; of 16 February 2012, Eon 
Aset Menidjmunt, C-118/11, EU:C:2012:97, paragraph 53 et seq.; and of 9 July 
2015, Trgovina Prizma, C-331/14, EU:C:2015:456, paragraph 20), a trader is 
entitled to choose the allocation of integral goods for mixed use, that is for both 
private and business purposes, at the time of their purchase. The goods may be 
retained wholly within his private assets, allocated wholly to the business or 
integrated into the business only to the extent to which they are used for business 
purposes. 
Assessment of the case on the basis of national law 
5 According to national case-law, the allocation of goods in full or in part to the 
business requires an allocation decision by the taxable person which is 
documented externally and adopted in time. As the criteria established by the BFH 
(in particular allocation clearly recognisable by the tax authorities by expiry of the 
deadline for submission of the annual VAT return) are not fulfilled in this case, 
the VAT cannot be deducted. 
The reference to the Court 
6 In light of the judgment of 25 July 2018, Gmina Ryjewo (C-140/17, 
EU:C:2018:595), doubt has arisen as to whether the criteria developed and applied 
to date by the BFH on the exercise of the allocation choice are compatible with 
EU law. 
Question 1 
7 The first question seeks clarification as to whether a Member State may provide 
for a limitation period for allocation to the assets of the business. In so far as the 
principles formulated in the judgment in Gmina Ryjewo (EU:C:2018:595) can be 
applied to this case, the 2015 annual VAT return or any entries in building plans 
or an implied intention expressed at a later date by the taxable person might be 
regarded as sufficient evidence for allocation to the assets of the business. 
8 (a) Although EU law expressly assumes that goods are ‘allocated’ (see 
Article 168a(1) of Directive 2006/112/EC), it does not regulate how or when the 
‘allocation decision’ within the meaning of the case-law of the BFH or the 
synonymous concept of ‘acting as a taxable person’ used by the Court must be 
documented (see, for example, judgments in Lennartz, EU:C:1991:315, 
paragraphs 14 and 19, and in Gmina Ryjewo, EU:C:2018:595, paragraph 34). 
9 (b) The fundamental principle of the neutrality of VAT requires deduction of input 
VAT to be allowed if the substantive requirements are satisfied, even if the 
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taxable persons have failed to comply with some formal conditions. Consequently, 
where the tax authorities have the information necessary to establish that the 
substantive requirements have been satisfied, they cannot, in relation to the right 
of the taxable person to deduct that tax, impose additional conditions which may 
have the effect of rendering that right ineffective for practical purposes 
(judgments of 15 September 2016, Barlis 06 — Investimentos Imobiliários e 
Turísticos, C-516/14, EU:C:2016:690, paragraphs 37 and 42, and of 21 November 
2018, Vadan, C-664/16, EU:C:2018:933, paragraph 41). 
10 (c) However, Article 167 and Article 179(1) of Directive 2006/112/EC permit 
Member States to require taxable persons to exercise their right to deduct VAT 
during the period in which that right has arisen (judgment of 12 July 2012, EMS-
Bulgaria Transport, C-284/11, EU:C:2012:458, paragraph 53). Furthermore, it 
follows from Article 250(1) of Directive 2006/112/EC that the tax return 
submitted must set out all the information needed to calculate the deductions 
made. That includes documentation of the allocation decision adopted when the 
goods were acquired or manufactured, as that is a requirement for deduction of the 
VAT. 
11 Aside from the fact that Article 252 of Directive 2006/112/EC permits the 
Member States to set deadlines for the submission of tax returns, Article 273 of 
Directive 2006/112/EC permits the Member States to impose measures in general 
to ensure the correct collection of tax and to prevent evasion. In particular, in the 
absence of provisions of EU law on that matter, the Member States have the 
power to choose the sanctions which seem to them to be appropriate in the event 
that conditions laid down by EU legislation for the exercise of the right to deduct 
VAT are not observed (see judgments of 26 April 2017, Farkas, C-564/15, 
EU:C:2017:302, paragraph 59, and of 8 May 2019, EN.SA., C-712/17, 
EU:C:2019:374, paragraph 38 and the case-law cited). They must, however, 
exercise that power in compliance with EU law and its principles, inter alia the 
principles of proportionality and of VAT neutrality (see judgments of 28 July 
2016, Astone, C-332/15, EU:C:2016:614, paragraph 49, and in EN.SA., 
EU:C:2019:374, paragraph 39). 
12 (d) The fact that exercise of the allocation choice is a substantive requirement at 
the time of purchase of the supply suggests that a prompt allocation decision is 
compatible with EU law. That is because a supply is only purchased for the 
business or the trader is only acting as a taxable person at the time of purchase of 
a supply if, at the time of purchase, the supply is (intended) to be used for an 
activity exercised on a continuing basis in return for remuneration (judgment in 
Lennartz, EU:C:1991:315, paragraph 15; in Eon Aset Menidjmunt, EU:C:2012:97, 
paragraph 57; and of 22 March 2012, Klub, C-153/11, EU:C:2012:163, 
paragraph 39). 
13 The fact that the allocation decision must be documented externally is justified by 
its characteristic as an internal fact and it therefore does not make the allocation 
decision a formal condition for VAT deduction. The Court has also emphasised 
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that the intention to carry on an economic activity must be confirmed by objective 
evidence (judgment in Gmina Ryjewo, EU:C:2018:595 39). 
14 (e) The documentation deadline established in BFH case-law may be based under 
EU law on the powers of regulation of the formal requirements for the deduction 
of VAT in Title XI of Directive 2006/112/EC (see judgment in Astone, 
EU:C:2016:614, paragraph 47 et seq.). This is suggested by the regulatory gap in 
Article 168(a), read in conjunction with Article 167 of Directive 2006/112/EC in 
relation to the exercise of the allocation choice. 
15 (aa) Thus, the Court has already ruled that, since Directive 2006/112/EC is silent 
on this point, the determination of the methods and criteria for apportioning input 
VAT between economic and non-economic activities falls within the discretion of 
the Member States (judgment of 8 May 2019, Zwiazek Gmin Zaglebia 
Miedziowego, C-566/17, EU:C:2019:390, paragraph 29). Likewise, the Member 
States have a margin of discretion with regard to the means of achieving the 
objectives laid down in Article 273 of Directive 2006/112/EC (judgment of 
21 November 2018, Fontana, C-648/16, EU:C:2018:932, paragraph 35 and the 
case-law cited). 
16 (bb) Moreover, the Court has already ruled in respect of the regulation of 
deadlines permitted by Article 252 of Directive 2006/112/EC that legislation 
providing for a limitation period of two years for VAT deduction cannot be 
contested (judgments of 8 May 2008, Ecotrade, C-95/07, C-96/07, 
EU:C:2008:267, paragraph 45 et seq., and in Astone, EU:C:2016:614, 
paragraph 36 et seq.). This must also apply to a documentation deadline for the 
allocation decision. 
17 (cc) The fact that the possibility of exercising the right to deduct without any 
temporal limit would be contrary to the principle of legal certainty also suggests 
that the allocation deadline is compatible with EU law. That is because that 
principle requires the tax position of the taxable person, having regard to his rights 
and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely 
(see judgments in Ecotrade, EU:C:2008:267, paragraph 44; in EMS-Bulgaria 
Transport, EU:C:2012:458, paragraph 48; and in Astone, EU:C:2016:614, 
paragraph 33). 
18 (f) However, in its judgment in Gmina Ryjewo (EU:C:2018:595, paragraph 38 et 
seq.), the Court indicates various ways in which acting as a taxable person 
justifies VAT deduction, even where it is not necessarily brought to the prompt 
attention of the tax authorities. Moreover, it emphasises that the absence of an 
express declaration of allocation does not exclude the subsequent deduction of 
VAT (judgment in Gmina Ryjewo, EU:C:2018:595 47). 
19 (aa) Although the judgment in Gmina Ryjewo (EU:C:2018:595) concerned 
correction to the VAT deducted, rather than the right of VAT deduction, the Court 
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examines the concept of ‘acting as a taxable person’ required in order to deduct 
VAT in paragraph 34 of that judgment. 
20 (bb) The question also arises as to whether the findings made in the judgment in 
Gmina Ryjewo (EU:C:2018:595) also apply to a private trader with an allocation 
choice, whereas no such allocation choice exists in the case of a non-economic 
activity. In any event, that is how the BFH has understood to date the findings in 
paragraph 35 et seq. of the judgment of 12 February 2009, Vereniging Noordelijke 
Landen Tuinbouw Organisatie, C-515/07 (EU:C:2009:88). These differences 
might suggest that the criteria established in the judgment in Gmina Ryjewo 
(EU:C:2018:595) do not apply. 
21 (cc) However, insisting on a prompt allocation decision might infringe the 
principle of neutrality. That is because, if only a negative allocation decision 
excludes the deduction of VAT in the case of a public authority, a private sole 
proprietor cannot be required to make a prompt allocation, at least not in so far as 
there appears to be no reason to treat sole proprietors and public authorities 
differently. 
Question 2 
22 The second question concerns the legal consequences of missing the deadline. 
23 The Court held as follows at paragraph 47 of the judgment in Gmina Ryjewo 
(EU:C:2018:595): ‘However, although a clear and express declaration of the 
intention to use the goods for economic purposes at the time of their acquisition 
may suffice for a finding that the goods were acquired by the taxable person 
acting as such, the absence of such a declaration does not exclude the possibility 
that such an intention may be conveyed implicitly’. The question therefore arises 
as to whether this is compatible with the principle that allocation to the business 
cannot be assumed if there is no sign of any such evidence (apparent to the tax 
authorities). 
24 The Court is of the opinion that the question of whether a person is acting as a 
taxable person should be interpreted broadly, taking account of various factors in 
each individual case (judgment in Gmina Ryjewo, EU:C:2018:595, paragraph 47 
et seq.). In light, in particular, of the Opinion of the Advocate General to which 
the Court referred in that context (paragraph 54), it may be understood as meaning 
that a trader who acquires goods which, by their very nature, can also be used in 
principle for business purposes and have not been allocated solely for private use 
may be presumed to be ‘acting as a taxable person’, especially as deliberately not 
making a decision on the question of allocation should not give rise to any 
disadvantages. 
25 A fundamental presumption that supplies should be allocated to the assets of the 
business might be supported by the purpose of the allocation choice. That is 
because, for reasons of tax neutrality, the allocation choice is intended to prevent 
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any residual VAT encumbrance from the acquisition or manufacture of goods 
initially put to private use, but later put to more extensive business use (judgment 
of 23 April 2009, Puffer, C-460/07, EU:C:2009:254, paragraph 47). 
26 In any event, such a broad interpretation might rule out a fundamental 
presumption that unallocated goods should be allocated to private assets. 
27 On the other hand, the fact that allocation is a choice of and must be exercised by 
the taxable person, by taking some form of action, suggests that allocation to the 
assets of the business cannot be assumed in the absence of evidence.