Opinion of the Advocate General — ECLI:EU:C:2006:426
Date: 2006-06-22
Language of the case: French
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Luxembourg

summary, an exempt intra-Community transaction does not give rise to the right to deduct input tax if, had it been purely domestic in scope, the transaction would also have been exempt on the basis of its nature. (19) VI – Conclusion 43. In the light of the foregoing considerations, I propose that the Court reply to the questions referred for a preliminary ruling by the Cour d’Appel, Grand Duchy of Luxembourg, by declaring that: The supply of goods and services referred to in Article 13A(1)(e) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment is exempt under that provision, even where it entails intra-Community transactions governed by Article 15(1), (2) and (3) (in the original version and in the one laid down in Directive 91/680/EEC) and Article 28cA(a), but does not thus give rise to the right of deduction laid down in Article 17. 1 – Original language: Spanish. 2 – Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1). 3 – That provision was inserted by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388/EEC with a view to the abolition of fiscal frontiers (OJ 1991 L 376, p. 1). 4 – The supply of services constitutes a residual category comprising any transaction which does not constitute a supply of goods (Article 6 of the Sixth Directive). 5 – BGBl. 1991, p. 351. 6 – In the Opinion in Case C-382/02 Cimber Air [2004] ECR I-8379, I observed that ‘[i]nternational goods traffic is governed by the principle of taxation at the place of destination or final consumption. For that reason, if it is wished to avoid the “exportation” of indirect taxes from the country of origin – which would involve double taxation – a system must be agreed for the exemption of foreign transactions’ (point 17). 7 – That objective is set out in the third, eighth and ninth recitals in the preamble to Directive 91/680. 8 – Mémorial A-No 11 of 19 February 1979, p. 186. 9 – The claim put forward by Eurodental was dismissed because the Luxembourg court held that the necessary supporting documents had not been produced. 10 – For an analysis of the system of deducting VAT, see Alguacil Marí, P. and Orón Moratal, G., ‘La deducción en el IVA español y su adecuación a la Sexta Directiva’, Noticias/C.E.E., numbers 67 and 68, August/September 1990, p. 101. Colmenar Valdés, S., ‘El derecho a la deducción en el IVA’, Revista de Derecho Financiero y Hacienda Pública, number 157, 1982, p. 327, argues that, ‘since the deduction of input tax arising in the previous period is functionally linked to the input tax to be paid in the subsequent period, in cases where no tax liability arises it is clear that nor can input tax from the previous period be deducted, since the rationale for the right of deduction no longer exists.’ 11 – Case C-4/94 [1995] ECR I-983. 12 – In the main proceedings, the dental technician would be authorised to deduct the input tax on the materials used to make the prostheses since they are used for an exempt activity. 13 – In the case before the Court, a professional who supplies goods outside Luxembourg would be entitled to deduct the VAT charged until his participation, a right which is not granted to a professional operating within his own borders. 14 – Terra, B. and Kajus, J., A Guide to the European VAT Directives, Volume 1, Introduction to European VAT and other indirect taxes, 2006, pp. 418 to 422, explain that the neutrality of VAT is a complex notion comprising a legal aspect, aimed at affording non-discriminatory treatment before the law, a financial aspect, aimed at optimising the choice of production means, and a competitive aspect, aimed at avoiding distortions of the market. 15 – In the judgment in Case C-302/93 Debouche [1996] ECR I-4495, in particular paragraph 19, the Court ruled that an economic operator who carries out exempt activities may not rely on his intra-Community position to claim a refund of tax where he would not have been able to rely on that right within the territory of the country. 16 – In a situation like the one in the main proceedings, a patient in Germany would pay an invoice from the dentist which includes: (a) the material used to make the prosthesis in Luxembourg plus the VAT due (residual VAT); (b) the fees of the dental technician; and (c) the fees of the German dentist. Thus, the financial consequences would be greater for the final consumer if there were no provision for the deduction of residual VAT, from which it follows, in the opinion of the German Government, that the solution is to allow such deduction. 17 – In the judgment in Case C-169/00 Commission v Finland [2002] ECR I‑2433, the Court noted in paragraph 32 that the exemptions laid down under Article 28(3) are not part of the common system of VAT. 18 – Only two other Member States – Belgium and Hungary – have chosen the same option. 19 – That was the solution proposed by the Advisory Committee on Value Added Tax, set up under Article 29 of the Sixth Directive, at its 60th meeting which was held on 20 and 21 March 2000 (TAXUD/1876/00 – Rév. 1, Comité de la TVA, Orientations de la 60ème réunion, 20 et 21 mars 2000).