Article 17(5) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7, must be interpreted as meaning that, where a building is used in order to carry out certain output transactions in respect of which value added tax (VAT) is deductible and others in respect of which it is not, the Member States are not required to prescribe that the input goods and services used for the construction, acquisition, use, conservation or maintenance of that building must, in a first stage, be assigned to those various transactions when such assignation is difficult to carry out, in order that, in a second stage, only the deduction entitlement due in respect of those of the goods and services which are used both for certain transactions in respect of which value added tax is deductible and for others in respect of which it is not is determined by applying a turnover-based allocation key or, provided that this method guarantees a more precise determination of the deductible proportion, on the basis of floor area.

It is true that, in the light of the difference in the extent of the right to deduct according to the intended use of the goods and services on which VAT has been charged, the Member States are, in principle, required to lay down that taxable persons, in order to determine the amount that they are entitled to deduct, must, in a first stage, assign the input goods and services to the various output transactions which have been carried out and for the performance of which they were intended and, in a second stage, apply, in respect of those goods or services, the deduction arrangement corresponding to their assignation; the arrangement laid down in Article 17(5) of the Sixth Directive should be applied so far as concerns goods and services which do not relate to a single type of transaction.

However, national legislation may, first of all, authorise taxable persons not to assign those goods and services, irrespective of the use to which they will be put, where they relate to the acquisition or construction of a mixed-use building and their assignation is, in practice, difficult to carry out.

Next, when the Member States make use of certain of the options provided for in the third subparagraph of Article 17(5) of the Sixth Directive, they may apply a calculation method different from the one consisting in applying a turnover-based allocation key, subject to the condition, in particular, that the method used guarantees a more precise determination of the deductible proportion of the input VAT than that arising from application of the first method. That condition does not, however, mean that the method chosen must necessarily be the most precise possible. It is required merely that the method chosen must guarantee a more precise result than the result which would arise from application of the turnover-based allocation key.

Finally, where a Member State chooses to have recourse to a deduction method different from that provided for by the Sixth Directive, that does not call into question the power available to it to provide that taxable persons are not required to link each of the goods or services used for the acquisition or construction of a mixed-use building to a particular output transaction, since the requirement of precision relates to the method of calculating the deductible proportion of the amount of VAT and not to assignation of the goods and services used.

(see paras 26, 28, 32, 33, 35, 36, operative part 1)