Keywords

Summary



Keywords

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value-added tax – Deduction of input tax

(Council Directive 77/388, Arts 13A(1)(e), and 17(3)(b))

Summary

A transaction such as the making and repair of dental prostheses which is exempted from value added tax within the territory of a Member State under Article 13A(1)(e) of the Sixth Council Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directives 91/680 and 92/111, does not give rise to the right to deduct input value added tax pursuant to Article 17(3)(b) of that directive, even when it is an intra-Community transaction, and regardless of the system of value added tax applicable in the Member State of destination.

That interpretation, inferred from the wording of the Sixth Directive itself, is borne out by the objective it pursues as well as by its scheme and the principle of fiscal neutrality.

It is apparent, first of all, from the objective of the common system of value added tax and of the transitional arrangements introduced by Directive 91/680 for the taxation of trade between the Member States that a taxable person who benefits from exemption and is consequently not entitled to deduct input tax within the territory of a Member State is not entitled to do so either where the transaction concerned is of an intra-Community nature.

Secondly, the exemptions provided for in Article 13A, as they benefit only certain activities in the public interest which are listed and described in detail in that provision, are of a specific nature, whereas, the exemption for transactions of an intra-Community nature, is of a general nature, as it refers in an unspecified manner to economic transactions between the Member States. In those circumstances, it is consistent with the scheme of the Sixth Directive that the rules applicable to the specific exemptions provided for in Article 13A of that directive are accorded precedence over the rules applicable to the general exemptions provided for by the directive as regards transactions of an intra-Community nature.

Thirdly, the principle of fiscal neutrality precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for value added tax purposes. If the transactions exempted under Article 13A(e) of the Sixth Directive gave rise to the right to deduct tax where they were of an intra-Community nature, that principle would not be observed as the same transactions do not give rise to a deduction where they are carried out within the territory of a Member State.

The fact that the Member State of destination applies the transitional arrangements provided for in Article 28(3)(a) of the Sixth Directive in conjunction with point 2 of Annex E of the directive, arrangements which permit it to continue to tax the transactions in question, is irrelevant. The taxation allowed by that provision is not harmonised taxation that is an integral part of the value added tax regime as arranged by the Sixth Directive for certain activities in the public interest, but taxation authorised only for a transitional period. Those exceptions must be strictly interpreted and their scope cannot therefore be extended to Member States which have complied with the principle enshrined in the Sixth Directive in exempting certain activities in the public interest listed in Article 13 of that directive.

(see paras 38, 41, 43-44, 46-48, 52, 54, 58, operative part)