WRITTEN QUESTION P-0162/00

by Françoise Grossetête (PPE-DE) to the Commission

(26 January 2000)

Subject: Common VAT system Deductions

Articles 17-19 of Directive 77/388/EEC(1) constitute a major source of controversy and interpretational problems for businessmen.

Does the Commission agree with the interpretations put forward in respect of the following issues:

- Article 17 of Directive 77/388/EEC would never authorise the deduction of VAT charged on expenditure incurred with a view to the acquisition of shares in another company;

- when a taxable person's business activities involve simultaneously activities which are exempt from taxation and activities which are subject to taxation, the structure of Directive 77/388/EEC is such that, as regards the calculation of the proportion which is VAT deductible, the criterion of actual assignment must be applied rather than a general proportion for deduction calculated;

- while, pursuant to Article 17(6) of Directive 77/388/EEC, deduction of VAT on the purchase of cars is restricted, even where such vehicles are used exclusively for a business activity subject to taxation, delivery or subsequent hire to which VAT is applied by the taxable person must take account of the VAT not deducted at the previous stage;

- Directive 77/388/EEC provides for a common system for deliveries of goods or provision of services for the taxable person's own use, but the Member States may derogate from that common system in application of Article 17(6) of the Directive;

- the deduction of VAT provided for in Article 17 of Directive 77/388/EEC may be subject to an act of the tax authorities subsequent to the time when the right of deduct arose, determining the amount of the VAT due and authorising reimbursement of the tax paid;

- where a retailer decides to embellish the pavement area outside his shop by installing a bench and plant containers with a view to attracting customers, the VAT payable on the cost of such embellishment of the pavement area is deductible, even though the work involved does not exclusively benefit his customers;

- a Member State may not extend the period for monitoring the correct collection of the tax to 8 years from the date on which VAT became chargeable while simultaneously restricting the right to VAT deduction claimed by the tax authorities following such monitoring to no more than 5 or 3 years from the date on which VAT became chargeable.

(1) OJ L 145, 13.6.1977, p. 1.

Answer given by Mr Bolkestein on behalf of the Commission

(17 February 2000)

As the Commission informed the Honourable Member in its answer to Written Questions P-2500/99 and P-2751/99(1), the issue it raises concerns a number of very specific and complex cases of interpretation of Community VAT legislation. A detailed analysis of Articles 17 to 19 of the Sixth VAT Directive(2) is therefore required to decide what tax treatment to apply.

A detailed case-by-case examination will have to be made given the size and specific nature of the request which covers a vast list of transactions and practical cases.

The Commission would point out to the Honourable Member's that such a detailed reply will require lengthy and painstaking research that it is unable to undertake at present and which goes far beyond the scope of an answer to a written question.

(1) OJ C 225 E, 8.8.2000, p. 152.

(2) OJ L 145, 13.6.1977.