62013CO0500
ORDER OF THE COURT (Ninth Chamber)
5 June 2014 (
*1
)
‛Reference for a preliminary ruling — VAT — Directive 2006/112/EC — Deduction of input tax — Capital goods — Immovable property — Adjustment of deductions — National legislation providing for an adjustment period of 10 years’
In Case C‑500/13,
REQUEST for a preliminary ruling under Article 267 TFEU from the Naczelny Sąd Administracyjny (Poland), made by decision of 25 June 2013, received at the Court on 16 September 2013, in the proceedings
Gmina Międzyzdroje
v
Minister Finansów,
THE COURT (Ninth Chamber),
composed of M. Safjan, President of the Chamber, A. Prechal (Rapporteur) and K. Jürimäe, Judges,
Advocate General: P. Cruz Villalón,
Registrar: A. Calot Escobar,
after considering the observations submitted on behalf of:
—
Gmina Międzyzdroje, by K. Wojtowicz, M. Konieczny and M. Janicki, tax advisers,
—
the Minister Finansów, by T. Tratkiewicz and J. Kaute, acting as Agents,
—
the Polish Government, by B. Majczyna, acting as Agent,
—
the Austrian Government, by C. Pesendorfer, acting as Agent,
—
the United Kingdom Government, by V. Kaye, acting as Agent, assisted by R. Hill, Barrister,
—
the European Commission, by J. Hottiaux and L. Lozano Palacios, acting as Agents,
having decided, after hearing the Advocate General, to give a decision by reasoned order, pursuant to Article 99 of the Rules of Procedure of the Court of Justice,
makes the following
Order
1
This request for a preliminary ruling concerns the interpretation of Articles 167, 187 and 189 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1) and also of the principle of neutrality of value added tax (‘VAT’).
2
The request has been made in proceedings between Gmina Międzyzdroje (the Municipality of Międzyzdroje) and the Minister Finansów (Minister for Finance) concerning a decision taken by the Minister Finansów following a request for an interpretation in relation to adjustments to the deduction of input VAT for immovable property acquired as capital goods that are first used in a non-taxable activity but subsequently used in an activity subject to tax.
Legal context
EU law
3
Article 167 of Directive 2006/112 reads as follows:
‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’
4
Article 168 of that directive provides:
‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a)
the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
…’
5
Article 184 of that directive provides:
‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’
6
Under Article 185(1) of the directive:
‘Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.’
7
Article 187 of Directive 2006/112 provides:
‘1.   In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.
Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used.
In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.
2.   The annual adjustment shall be made only in respect of one fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof.
The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.’
8
Article 189 of that directive states:
‘For the purposes of applying Articles 187 and 188, Member States may take the following measures:
(a)
define the concept of capital goods;
(b)
specify the amount of the VAT which is to be taken into consideration for adjustment;
(c)
adopt any measures to ensure that adjustment does not give rise to any unjustified advantage;
(d)
permit administrative simplifications.’
Polish law
9
Articles 91(1) to (3), (7) and (7a) of the version of the Law of 11 March 2004 on the tax on goods and services (ustawa o podatku od towarów i usług, Dz. U. No 54, position 535) that is relevant to the main proceedings, states as follows:
‘1.   Following completion of the year in which the taxable person had the right to deduct the input tax referred to in Article 86(1), he shall be required, in respect of the completed tax year, to adjust the amount of tax deducted pursuant to Article 90(2) to (9), having regard to the proportion calculated in the manner laid down in Article 90(2) to (6) or provisions adopted pursuant to Article 90(11). Such adjustment shall not be effected if the difference between the proportion of deduction specified in Article 90(4) and the proportion specified in the previous sentence does not exceed two percentage points.
2.   In the case of goods and services which are treated by the taxable person as forming part of his depreciable fixed assets, intangible assets and legal assets under the provisions applying to income tax, and also land and rights of perpetual usufruct over land, where they have been added to the fixed assets or intangible assets or legal assets of the acquirer, with the exception of those the book value of which does not exceed 15000 [Polish zlotys (PLN)], the taxable person shall effect the adjustment referred to in paragraph 1 over the five subsequent years, and, in the case of immovable property and rights of perpetual use over land, over ten years, following the year in which they were surrendered for use. In the case referred to in the first sentence, the deduction shall be adjusted annually by one fifth and, in the case of immovable property and perpetual use over land, by one tenth of the amount of tax on their acquisition or establishment. In the case of fixed assets, intangible assets and legal assets the book value of which does not exceed PLN 15000, paragraph 1 shall apply mutatis mutandis, with the adjustment being effected following completion of the year in which they were handed over for usufruct.
…
3.   The adjustments referred to in paragraphs 1 and 2 are to be effected in the tax return filed for the first accounting period of the year following the tax year in respect of which the adjustment is effected, and, where economic activity is ceased, in the tax return for the final accounting period.
…
7.   The provisions of paragraphs 1 to 6 shall apply mutatis mutandis where the taxable person had the right to reduce the amounts of tax due by the whole amount of the input tax on goods or services which the taxable person used himself and he made that reduction or he did not have that right and the right to reduce the amount of tax due by the amount of the input tax on those goods or services was subsequently amended.
7a.   In the case of goods and services which are treated by the taxable person as forming part of his depreciable fixed assets, intangible assets and legal assets under the provisions applying to income tax, as well as land and rights of perpetual use over land, where these have been added to the fixed assets or intangible assets or legal assets of the acquirer, with the exception of those the book value of which does not exceed PLN 15000, the adjustment referred to in paragraph 7 is to be effected according to the rules laid down in the first and second sentences of paragraph 2 and in paragraph 3. That adjustment is to be effected in the case of every subsequent amendment of the right to deductions if the amendment occurs during the adjustment period.’
The dispute in the main proceedings and the question referred for a preliminary ruling
10
The decision to refer the case shows that, during the period between 2007 and 2010, Gmina Międzyzdroje invested in extending a sports hall in its ownership, by adding to the sports hall an ancillary building located near a primary school also within its ownership. Within the context of those extension works, goods were delivered and services provided to the municipality, on which the municipality paid VAT.
11
During the course of the works, Gmina Międzyzdroje began to consider changing the entire system for managing municipal properties connected with physical education and sport, including the sports hall in question. That change involved, in particular, leasing the sports hall to a commercial company which would be responsible for its management together with that of all the sports facilities owned by the municipality. The intention was for the company to charge rent to Gmina Międzyzdroje and, in return, to be entitled to use the sports hall and derive income from it in the way of payments from individuals and entities wishing to use the sport facilities.
12
In response to a request by Gmina Międzyzdroje for an interpretation of the Law on the tax on goods and services, in the version applicable to the proposal to lease the sports hall at issue in the main proceedings, the Minister Finansów stated in a decision of 21 September 2011 that, under Articles 91(2), (3) and (7a) of that law, the adjustment to the right to deduct the VAT paid by the municipality in the context of the works to extend the sports hall had to be made over a period of ten years and to relate to one tenth every year of the total input tax, except that no one-tenth adjustment could be made in respect of use of the hall in 2010 for activities not conferring entitlement to deduction.
13
On 12 April 2012, an application brought by Gmina Międzyzdroje for that decision to be reviewed was dismissed by the Wojewódzki Sąd Administracyjny we Szczecinie (Regional Administrative Court, Szczecin). The court held, in particular, that the municipality was not entitled to make a one-off adjustment covering the whole amount of the deductions in one single tax year, since the national legislature had established rules for adjustment to take place over a period of ten years, in compliance with Article 187 of Directive 2006/112.
14
An appeal was brought by Gmina Międzyzdroje before the Naczelny Sąd Administracyjny (Supreme Administrative Court). That court questioned the interpretation to be given to Articles 187 and 189 of Directive 2006/112. In particular, the court is uncertain whether the national legislation at issue in the main proceedings, which provides for a system of adjustment over a 10-year period, is compatible with the principle of the neutrality of VAT enshrined in that directive, since, according to the Court’s case-law, that principle requires a taxable person to be able to obtain a refund of any excess VAT within a reasonable time.
15
According to the referring court, the question also arises of whether, in a situation such as that at issue in the main proceedings, where there is a change in the purpose of capital goods from an initial use in activities not conferring entitlement to deduct tax to a subsequent use in activities which do confer such entitlement, Article 189 of Directive 2006/12 precludes national measures which provides for an extension of the adjustment period up to 10 years. The referring court adds that the answer to this question may well be negative, since the purpose of such measures appears to be to ensure that the adjustments do not give rise to any unjustified advantage. On the other hand, the referring court considers it necessary to examine whether the right to effect a one-off adjustment, such as that invoked by Gmina Międzyzdroje, may be considered to constitute an unjustified advantage.
16
In those circumstances, the Naczelny Sąd Administracyjny decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling:
‘Must Articles 167, 187 and 189 of [Directive 2006/112] and the principle of tax neutrality be interpreted as permitting provisions of national law such as [those at issue in the main proceedings], which provide that, in the event of a change in the purpose of capital goods from use in activities not conferring entitlement to deduct input [VAT] to use in activities which do confer such entitlement, the adjustment of deductions may not be effected on a one-off basis but must be spread over the subsequent five years, and, in the case of immovable property, over ten years, following the year in which the capital goods were surrendered for use?’
Consideration of the question referred
17
Pursuant to Article 99 of the Rules of Procedure of the Court of Justice, where the answer to a question referred to the Court for a preliminary ruling may be clearly deduced from existing case-law or admits of no reasonable doubt, the Court may at any time, on a proposal from the Judge-Rapporteur and after hearing the Advocate General, give its decision by reasoned order.
18
That provision is applicable in the context of the present reference for a preliminary ruling.
19
First, it should be recalled that, according to the structure of the system introduced by Directive 2006/112, input taxes on goods or services used by a taxable person for his taxable transactions may be deducted. The deduction of input taxes is linked to the collection of output taxes. Where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted. However, where goods or services are used for the purposes of transactions that are taxable as outputs, deduction of the input tax on them is required in order to avoid double taxation (see, to that effect, judgment in Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 24).
20
The period laid down in Article 187 of Directive 2006/112 for adjustment of deductions enables inaccuracies to be avoided in the calculation of deductions and unjustified advantages or disadvantages for a taxable person where, in particular, changes occur in the factors initially taken into consideration in order to determine the amount of deductions after the declaration has been made. The likelihood of such changes is particularly significant in the case of capital goods, which are often used over a number of years, during which the purposes to which they are put may alter (see, to that effect, judgment in Uudenkaupungin kaupunki, EU:C:2006:214, paragraph 25).
21
Article 187(1) of Directive 2006/112 thus provides for an adjustment period of five years, extendable to 20 years in the case of immovable property, with varying deductions staggered over the whole period. That provision also permits Member States to base the adjustment on a total period starting from the time at which the goods are first used.
22
Article 187(2) of the directive provides that, if the adjustment period has been extended beyond five years, adjustment shall only be made for the corresponding fraction of the VAT charged on the capital goods. The same provision also states that the adjustment shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.
23
Article 187 of Directive 2006/112 is applicable in cases of adjustment of deductions, such as the case in the main proceedings, where goods the use of which is not eligible for deduction are then put to a use which is eligible (see, to that effect, judgment in Uudenkaupungin kaupunki, EU:C:2006:214, paragraph 30).
24
The system of adjustment of deductions is an essential element of the system introduced by Directive 2006/112 in that its purpose is to ensure the accuracy of deductions and hence the neutrality of the tax burden. Article 187 of the same directive, concerning capital goods, which are relevant to the case in the main proceedings, is moreover drafted in terms which leave no doubt as to its binding nature (see, to that effect, judgment in Uudenkaupungin kaupunki, EU:C:2006:214, paragraph 26).
25
In this instance, the national legislation applicable to the case in the main proceedings provides for an adjustment period of 10 years in the case of immovable property acquired as capital goods, starting from the time at which the goods are first used. Under that legislation, the annual adjustment that can be made for such goods is one tenth of the amount of tax calculated on their acquisition or manufacture.
26
It should be noted that the rules established by that national legislation clearly constitute an adequate transposition of the provisions of Article 187 of Directive 2006/112, referred to in paragraphs 21 and 22 of this order, and cannot therefore be criticised in relation to those provisions.
27
However, Article 187 is clearly binding in nature, as reiterated in paragraph 24 of this order, and so would preclude a system permitting the adjustment of deductions over a period of less than five years and therefore also preclude a system of one-off adjustment, such as the one invoked by Gmina Międzyzdroje, which would allow for the adjustment to be made during a single tax year.
28
Neither can the national legislation applicable to the case in the main proceedings be criticised in relation to the principle of neutrality, in that it provides for an adjustment period of 10 years in the case of immovable property acquired as capital goods, starting from the time at which the goods are first used.
29
As has been pointed out in paragraphs 20 and 24 of this order, the requirement for an adjustment period of at least five years for capital goods constitutes an essential element of the system of adjustment introduced by Directive 2006/112, in that it enables inaccuracies to be avoided in the calculation of deductions and unjustified advantages or disadvantages for a taxable person and thus seeks to ensure the neutrality of the tax burden.
30
In the light of all the foregoing considerations, the answer to the question referred is that Articles 167, 187 and 189 of Directive 2006/112, together with the principle of neutrality, must be interpreted as not precluding provisions of national law, such as those at issue in the main proceedings, which, in a case where there is a change in the purpose of immovable property acquired as capital goods from an initial use in activities not conferring entitlement to deduct VAT to a subsequent use in activities which do confer such entitlement, provide for an adjustment period of 10 years starting from the time at which the goods are first used and, therefore, do not permit a one-off adjustment during a single tax year.
Costs
31
Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.
On those grounds, the Court (Ninth Chamber) hereby rules:
Articles 167, 187 and 189 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, together with the principle of neutrality of value added tax, must be interpreted as not precluding provisions of national law, such as those at issue in the main proceedings, which, in a case where there is a change in the purpose of immovable property acquired as capital goods from an initial use in activities not conferring entitlement to deduct value added tax to a subsequent use in activities which do confer such entitlement, provide for an adjustment period of 10 years starting from the time at which the goods are first used and, therefore, do not permit a one-off adjustment during a single tax year.
[Signatures]
(
*1
)	Language of the case: Polish.