CELEX: 62009CJ0277
Language: en
Date: 2010-12-22
Title: Judgment of the Court (Third Chamber) of 22 December 2010.#The Commissioners for Her Majesty’s Revenue & Customs v RBS Deutschland Holdings GmbH.#Reference for a preliminary ruling: Court of Session (Scotland) (First Division, Inner House) - United Kingdom.#Sixth VAT Directive - Right to deduction - Purchase of vehicles and use for leasing transactions - Differences between the tax regimes of two Member States - Prohibition of abusive practices.#Case C-277/09.

Case C-277/09
      The Commissioners for Her Majesty’s Revenue and Customs
      v
      RBS Deutschland Holdings GmbH
      (Reference for a preliminary ruling from the Court of Session (Scotland) (First Division, Inner House))
      (Sixth VAT Directive – Right to deduction – Purchase of vehicles and use for leasing transactions – Differences between the tax regimes of two Member States – Prohibition of abusive practices)
      Summary of the Judgment
      1.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax
      (Council Directive 77/388, Art. 17(3)(a))
      2.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Exclusions
            from the right of deduction
      (Council Directive 77/388, Art. 17(3)(a))
      1.        Article 17(3)(a) of Sixth Directive 77/388, on the harmonisation of the laws of the Member States relating to turnover taxes,
         must be interpreted as meaning that a Member State may not refuse to allow a taxable person to deduct input value added tax
         paid on the acquisition of goods in that Member State, when those goods have been used for the purposes of leasing transactions
         carried out in another Member State, solely on the ground that the output transactions have not given rise to the payment
         of value added tax in the second Member State.
      
      Under Article 17(3)(a), the right to deduct input value added tax for certain transactions in respect of other output transactions
         carried out in another Member State depends on whether that right to deduct exists when all those transactions are carried
         out within the territory of the same Member State. Consequently, the fact that a Member State has not collected output value
         added tax because of the manner in which it has categorised a commercial transaction cannot deny a taxable person the right
         to deduct input value added tax paid in another Member State. 
      
      (see paras 32, 42, 46, operative part 1)
      2.        The principle of prohibiting abusive practices does not preclude the right to deduct value added tax – recognised in Article
         17(3)(a) of Sixth Directive 77/388, on the harmonisation of the laws of the Member States relating to turnover taxes – in
         circumstances in which a company established in one Member State elects to have its subsidiary, established in another Member
         State, carry out transactions for the leasing of goods to a third company established in the first Member State, in order
         to avoid a situation in which value added tax is payable on the sums paid as consideration for those transactions, the transactions
         having been categorised in the first Member State as supplies of rental services carried out in the second Member State, and
         in that second Member State as supplies of goods carried out in the first Member State.
      
      Taxable persons are generally free to choose the organisational structures and the form of transactions they consider to be
         most appropriate for their economic activities and for the purposes of limiting their tax burdens. A trader’s choice between
         exempt transactions and taxable transactions may be based on a range of factors, including tax considerations relating to
         the neutral system of value added tax. Where it is possible for the taxable person to choose from among a number of transactions,
         he may choose to structure his business in such a way as to limit his tax liability.
      
      (see paras 53-55, operative part 2)
JUDGMENT OF THE COURT (Third Chamber)
      22 December 2010 (*)
      
      (Sixth VAT Directive – Right to deduction – Purchase of vehicles and use for leasing transactions – Differences between the tax regimes of two Member States – Prohibition of abusive practices)
      In Case C‑277/09,
      REFERENCE for a preliminary ruling under Article 234 EC from the Court of Session (Scotland) (First Division, Inner House)
         (United Kingdom), made by decision of 10 July 2009, received at the Court on 21 July 2009, in the proceedings
      
      The Commissioners for Her Majesty’s Revenue and Customs
      v
      RBS Deutschland Holdings GmbH,
      THE COURT (Third Chamber),
      composed of K. Lenaerts, President of the Chamber, D. Švabý, R. Silva de Lapuerta (Rapporteur), E. Juhász and J. Malenovský,
         Judges,
      
      Advocate General: J. Mazák,
      Registrar: N. Nanchev, Administrator,
      having regard to the written procedure and further to the hearing on 17 June 2010, 
      after considering the observations submitted on behalf of:
      –        RBS Deutschland Holdings GmbH, by C. Tyre, QC, and J.-F. Ng, Barrister, 
      –        the United Kingdom Government, by L. Seeboruth, acting as Agent, and R. Hill, Barrister,
      –        the Federal Republic of Germany, by B. Klein, acting as Agent,
      –        the Danish Government, by V. Pasternak Jørgensen and R. Holdgaard, acting as Agents,
      –        Ireland, by D. O’Hagan and B. Doherty, acting as Agents,
      –        the Italian Government, by G. Palmieri, acting as Agent, and S. Fiorentino, avvocato dello Stato,
      –        the European Commission, by M. Afonso and R. Lyal, acting as Agents,
      after hearing the Opinion of the Advocate General at the sitting on 30 September 2010,
      gives the following
      Judgment
      1        This reference for a preliminary ruling concerns the interpretation of Article 17(3)(a) 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 (OJ 1977 L 145, p. 1; ‘the directive’).
      
      2        The reference has been made in proceedings between the Commissioners for Her Majesty’s Revenue and Customs (‘the Commissioners’)
         and RBS Deutschland Holdings GmbH (‘RBSD’) concerning the Commissioners’ refusal to allow deduction of value added tax (‘VAT’)
         on the purchase of motor vehicles used for leasing transactions.
      
       European Union law 
      3        Article 2 of the directive provides that the following are to be subject to VAT: 
      
      ‘1.      the supply of goods or services effected for consideration within the territory of the country by a taxable person acting
         as such;
      
      2.      the importation of goods.’
      4        Article 4(1) and (2) of the directive provides:
      
      ‘1.      “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph
         2, whatever the purpose or results of that activity.
      
      2.      The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying
         services including mining and agricultural activities and activities of the professions. The exploitation of tangible or intangible
         property for the purpose of obtaining income therefrom on a continuing basis shall also be considered an economic activity.’
      
      5        Article 5(1) and (4)(b) of the directive provides as follows:
      
      ‘1.      “Supply of goods” shall mean the transfer of the right to dispose of tangible property as owner.
      …
      4.      The following shall also be considered supplies within the meaning of paragraph 1:
      …
      (b)      the actual handing over of goods, pursuant to a contract for the hire of goods for a certain period or for the sale of goods
         on deferred terms, which provides that in the normal course of events ownership shall pass at the latest upon payment of the
         final instalment’.
      
      6        The first subparagraph of Article 6(1) of the directive provides:
      
      ‘“Supply of services” shall mean any transaction which does not constitute a supply of goods within the meaning of Article
         5.’
      
      7        Article 8(1)(a) and (b) of the directive states:
      
      ‘The place of supply of goods shall be deemed to be:
      (a)      in the case of goods dispatched or transported either by the supplier or by the person to whom they are supplied or by a third
         person: the place where the goods are at the time when dispatch or transport to the person to whom they are supplied begins
         …
      
      (b)      in the case of goods not dispatched or transported: the place where the goods are when the supply takes place.’
      8        Article 9(1) of the directive provides:
      
      ‘The place where a service is supplied shall be deemed to be the place where the supplier has established his business or
         has a fixed establishment from which the service is supplied or, in the absence of such a place of business or fixed establishment,
         the place where he has his permanent address or usually resides.’
      
      9        Article 17(2) and (3) of the directive provides:
      
      ‘2.      In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled
         to deduct from the tax which he is liable to pay:
      
      (a)      value added tax due or paid in respect of goods or services supplied or to be supplied to him by another taxable person; 
      …
      3.      Member States shall also grant to every taxable person the right to a deduction or refund of the value added tax referred
         to in paragraph 2 in so far as the goods and services are used for the purposes of:
      
      (a)      transactions relating to the economic activities as referred to in Article 4(2) carried out in another country, which would
         be eligible for deduction of tax if they had occurred in the territory of the country;
      
      …’
       National legislation
      10      Schedule 4, paragraph 1(2) of the Value Added Tax Act 1994 (‘the VAT Act’), which contains a definition of the term ‘supply
         of goods’, provides:
      
      ‘If the possession of goods is transferred –
      (a)      under an agreement for the sale of the goods,
      or
      (b)      under agreements which expressly contemplate that the property also will pass at some time in the future (determined by, or
         ascertainable from, the agreements but in any case not later than when the goods are fully paid for), 
      
      it is then in either case a supply of the goods.’
      11      Pursuant to that rule, the national law deems leasing to be a supply of goods only if it is provided for under conditions
         where, on expiry of the contract, title to the goods leased passes to the user or to third parties. In other cases, leasing
         is deemed to be a supply of services under section 5(2)(b) of the VAT Act, which provides that anything which is not a supply
         of goods but is done ‘for a consideration’ is a supply of services.
      
       The dispute in the main proceedings and the questions referred for a preliminary ruling
      12      RBSD is a company established in Germany carrying on business providing banking and leasing services. Since 31 March 2000,
         RBSD has been a member of the Royal Bank of Scotland Group. It does not have any place of establishment in the United Kingdom,
         but it is registered there for VAT purposes as a non-established taxable person.
      
      13      In January 2000, Vinci plc (‘Vinci’), a company incorporated in the United Kingdom, was introduced to RBSD with a view to
         RBSD supplying lease finance to Vinci. To that end, a number of agreements were entered into on 28 March 2001.
      
      14      First, RBSD purchased motor cars in the United Kingdom from Vinci Fleet Services (‘VFS’), a subsidiary of Vinci. VFS, which
         is also incorporated in the United Kingdom, had acquired those motor cars from car dealerships established in the United Kingdom.
      
      15      Second, RBSD and VFS entered into a Put Option Agreement in respect of those cars. Under the terms of that agreement, VFS
         granted RBSD the right to require VFS to buy back those cars from RBSD on a given due date.
      
      16      Third, RBSD also concluded a leasing agreement with Vinci for a term of two years, which could be extended, called the ‘Master
         Lease Agreement’, under which RBSD was to act as lessor and Vinci as lessee in respect of the equipment identified in the
         schedules to that agreement, that is to say, motor cars. On the expiry of the lease, Vinci was liable to pay to RBSD the full
         residual value of the cars. However, if, as was expected by the parties, RBSD sold the cars to a third person, Vinci would
         be entitled to or liable for the difference between the sale prices of the cars and their residual value, depending on the
         circumstances.
      
      17      Between 28 March 2001 and 29 August 2002, RBSD charged rentals of GBP 335 977.49 to Vinci and charged no VAT on those transactions.
      
      18      On 29 August 2002, RBSD assigned the agreements in question to a German subsidiary of the Royal Bank of Scotland Group, Lombard
         Leasing GmbH (‘LL’). LL then charged rentals of GBP 1 682 876.04 to Vinci during the period from 29 August 2002 to 27 June
         2004, charging no VAT on those rentals.
      
      19      Subsequently, and until 15 December 2004, LL exercised the put option with VFS in relation to the cars covered by the leasing
         agreements. VFS bought back those cars for GBP 663 158.20, and output tax totalling GBP 116 052.75 was charged to it by LL,
         which amount was then paid to the Commissioners.
      
      20      The rental payments, received first by RBSD and then by LL, were not subject to VAT in the United Kingdom since, under United
         Kingdom law, the transactions carried out under those leasing agreements were treated as supplies of services and consequently
         the United Kingdom tax authorities regarded them as having been made in Germany, that is to say, where the supplier had its
         place of business. Nor were those payments subject to VAT in Germany since, under German law, the transactions in question
         were treated as supplies of goods and were therefore regarded as having been made in the United Kingdom, that is to say, the
         place of supply.
      
      21      Accordingly, no VAT was collected on the rental payments at issue in the main proceedings in either the United Kingdom or
         Germany. However, VAT was levied in the United Kingdom on the proceeds of the sale of the cars following exercise of the put
         option by LL.
      
      22      Before the United Kingdom tax authorities, RBSD sought deduction in full of the input VAT of GBP 314 056.24 charged to it
         by VFS when it purchased the cars from that company. RBSD maintained, inter alia, that Article 17(3)(a) of the directive entitled
         it to deduct the input tax paid for the acquisition of those goods. Furthermore, RBSD maintained that the conditions governing
         application of the doctrine of abuse of rights were not met in this case, since these were leasing transactions conducted
         between three independent traders operating at arm’s length. 
      
      23      The Commissioners refused to allow RBSD the VAT deduction claimed and demanded repayment of the input tax which had been credited
         to RBSD. The Commissioners contended that Article 17(3)(a) of the directive did not permit deduction of input VAT paid in
         respect of the acquisition of goods subsequently used for transactions which were not chargeable to VAT. The Commissioners
         pointed out, inter alia, that input tax could not be deducted or refunded if no output tax had been charged. Furthermore,
         it was argued, RBSD had engaged in an abusive practice because the legal arrangement which it had put in place had the essential
         aim of obtaining a fiscal advantage contrary to the purpose of the directive. The leasing terms were drawn up in order to
         enable it to exploit the differences in the ways in which the directive had been transposed in the United Kingdom and in Germany.
      
      24      RBSD appealed to the VAT and Duties Tribunal, Edinburgh, against the Commissioners’ decision. In its decision of 24 July 2007,
         the Tribunal held that the principle of fiscal neutrality did not require that a VAT deduction should be refused merely because
         there was no corresponding liability to output VAT. The VAT and Duties Tribunal, Edinburgh, also took the view that the arrangements
         at issue in the main proceedings did not amount to an abusive practice.
      
      25      The Commissioners lodged an appeal against that decision before the Court of Session (Scotland).
      
      26      That court finds that Article 5(4)(b) of the directive has been implemented in different ways in the United Kingdom and Germany.
         The Court of Session (Scotland) states that, in accordance with the relevant United Kingdom law, the transactions carried
         out under the leasing agreements at issue in the main proceedings were treated as supplies of services. Consequently, those
         transactions were regarded as having been made where the supplier had established its business, that is to say, in Germany.
         Under German law, those agreements were treated as supplies of goods, with the result that the Member State in which the VAT
         must be paid corresponds to the place of supply of the goods, which is to say, in the main proceedings, the United Kingdom.
         Accordingly, the leases were not charged to VAT in Germany. Thus, no output tax was charged on the rental costs in either
         of the Member States concerned. 
      
      27      In those circumstances, the Court of Session (Scotland), after finding that the case which has been brought before it is characterised
         by the following facts:
      
      –        a German subsidiary of a United Kingdom bank purchased cars in the United Kingdom with a view to leasing them, with a put
         option, to an unconnected company in the United Kingdom and paid VAT on those purchases;
      
      –        under the relevant United Kingdom legislation, the supplies consisting of the rental of cars were treated as supplies of services
         made in Germany and accordingly not subject to VAT in the United Kingdom. Under German law, these supplies were treated as
         supplies of goods in the United Kingdom and accordingly not subject to VAT in Germany. The consequence was that no output
         tax was charged on those supplies in either Member State;
      
      –        the United Kingdom bank selected its German subsidiary as lessor and determined the duration of the leasing arrangements with
         a view to obtaining the tax advantage of no VAT being chargeable on the rental payments,
      
      decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:
      ‘(1)      Is Article 17(3)(a) of the [directive] … to be interpreted as entitling the United Kingdom tax authorities to refuse to allow
         the German subsidiary to deduct VAT which it paid in the United Kingdom in respect of the purchase of the cars?
      
      (2)      In determining the answer to the first question, is it necessary for the national court to extend its analysis to consider
         the possible application of the principle of prohibiting abusive practices?
      
      (3)      If the answer to Question 2 is yes, would the deduction of input tax on the purchase of the cars be contrary to the purpose
         of the relevant provisions of the [directive] and thus satisfy the first requirement for an abusive practice as described
         in paragraph 74 of the decision of the Court in [Case C‑255/02 Halifax and Others [2006] ECR I‑1609] having regard among other principles to the principle of the neutrality of taxation?
      
      (4)      Again if the answer to Question 2 is yes, should the court consider that the essential aim of the transactions is to obtain
         a tax advantage, so that the second requirement for an abusive practice as described in paragraph 75 of the said decision
         of the Court [in Halifax and Others] is satisfied, in circumstances where, in a commercial transaction between parties operating at arm’s length, the choice
         of a German subsidiary to lease the cars to a United Kingdom customer, and of the terms of the leases, are made with a view
         to obtaining the tax advantage of no output tax being charged on the rental payments?’
      
       Consideration of the questions referred 
       First question
      28      By its first question the national court wishes to know, in essence, whether Article 17(3)(a) of the directive must be interpreted
         as meaning that a Member State may refuse to allow a taxable person to deduct input VAT paid on the acquisition of goods in
         that Member State, where those goods have been used for the purposes of leasing transactions carried out in another Member
         State and those output transactions have not been subject to VAT in the second Member State.
      
      29      As the national court set out in its order, the question posed can be explained by the fact that, in the main proceedings,
         the United Kingdom tax authorities categorised the leasing transactions carried out subsequent to the purchase of the cars
         as supplies of services, with the result that those transactions were treated as having been carried out where the supplier
         had established its business, that is to say, in Germany. However, the German tax authorities did not proceed with recovery
         of the related VAT as they took the view that the transactions in question ought to be regarded as a supply of goods.
      
      30      It is common ground that, had the leasing transactions at issue in the main proceedings been carried out by a company having
         its place of business in the United Kingdom or by a company established in that Member State, they would have conferred entitlement
         to deduction of VAT, pursuant to Article 17(2)(a) of the directive, as regards the input tax paid on the purchase of the vehicles
         which were the subject-matter of the leasing.
      
      31      In accordance with Article 17(3)(a) of the directive, the Member States are required to grant a taxable person the right to
         a deduction of VAT in so far as the input goods are used for the purposes of subsequent transactions carried out in another
         country, which would be eligible for deduction of tax if they had occurred in the territory of the Member State concerned.
      
      32      The right to deduct input VAT for certain transactions in respect of other output transactions carried out in another Member
         State therefore depends, under that provision, on whether that right to deduct exists where all of those transactions are
         carried out within the territory of the same Member State.
      
      33      As is apparent from paragraphs 29 and 30 above, it must be observed that this is indeed the case in regard to the circumstances
         of the main proceedings. RBSD may consequently, pursuant to Article 17(3)(a) of the directive, claim a deduction of the VAT
         paid on the purchase of the goods subsequently used for leasing purposes.
      
      34      However, the Governments which submitted observations to the Court contended, in essence, that the right to deduct input VAT
         is conditional upon output VAT having been collected. In the main proceedings, since the German tax authorities did not collect
         VAT when the leasing transactions were carried out, RBSD cannot purport to be entitled, in the United Kingdom, to deduct the
         input VAT on the purchase of the vehicles.
      
      35      The Court has indeed held that the deduction of input VAT is linked to the collection of output VAT (see Case C-184/04 Uudenkaupungin kaupunki [2006] ECR I-3039, paragraph 24, and Case C-72/05 Wollny [2006] ECR I-8297, paragraph 20).
      
      36      However, in the paragraphs of Uudenkaupungin kaupunki and Wollny, the Court stated that 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 VAT can be collected or input VAT deducted.
      
      37      In the case in the main proceedings, however, the output leasing transactions carried out by RBSD were not exempt from VAT
         and came within its scope. They are therefore capable of giving rise to a right to deduct.
      
      38      As regards the right to deduct under Article 17(2) of the directive, relating to the input VAT on the goods and services used
         by the taxable person for the purposes of his taxable output transactions, the Court has emphasised that the deduction mechanism
         is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities.
         The common system of VAT consequently ensures neutrality of taxation of all economic activities, provided that those activities
         are themselves subject in principle to VAT (see Case C-408/98 Abbey National [2001] ECR I-1361, paragraph 24; Case C-435/05 Investrand [2007] ECR I-1315, paragraph 22; and Case C-174/08 NCC Construction Danmark [2009] ECR I-10567, paragraph 27). 
      
      39      In addition, the right to deduct VAT, as an integral part of the VAT scheme, is a fundamental principle underlying the common
         system of VAT and in principle may not be limited (see Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I‑1577, paragraph 43, and Case C‑74/08 PARAT Automotive Cabrio [2009] ECR I‑3459, paragraph 15).
      
      40      If follows that a taxable person may deduct the VAT levied on goods and services acquired for the exercise of his taxable
         activities (see NCC Construction Danmark, paragraph 39).
      
      41      Accordingly, and in view of the facts of the main proceedings, the right to deduct VAT cannot depend on whether the output
         transaction has in fact given rise to the payment of VAT in the Member State concerned.
      
      42      In so far as differences in the laws and regulations of the Member States continue to exist in this area, despite the establishment
         of the common system of VAT by the provisions of the directive, the fact that a Member State has not collected output VAT
         because of the manner in which it has categorised a commercial transaction cannot deny a taxable person the right to deduct
         input VAT paid in another Member State.
      
      43      As regards the judgment in Case C-302/93 Debouche [1996] ECR I‑4495, on which the United Kingdom tax authorities have relied in order to deny the right to deduct, it need
         simply be observed that, at paragraphs 12 to 14 of that judgment, the Court had regard only to the fact that the person concerned
         had been unable to submit a certificate issued by the authorities of the State in which he was established proving that he
         was a taxable person for the purposes of VAT in that State. Such a document could not be issued because the supplies of services
         in question were exempt from VAT. It must therefore be held that the facts of the main proceedings in the present case, in
         the context of which RBSD enjoys the right to deduct under Article 17(3)(a) of the directive, differ from those in Debouche.
      
      44      Although it may seem inconsistent in some respects to hold that a taxable person may deduct input VAT without paying output
         VAT, that cannot, however, furnish grounds for failing to apply the provisions of the directive relating to the right to deduct,
         such as Article 17(3)(a) thereof.
      
      45      In the light of its wording, that provision cannot be interpreted as meaning that the tax authorities of a Member State may
         refuse to allow VAT to be deducted in circumstances such as those of the main proceedings.
      
      46      Consequently, the answer to the first question is that, in circumstances such as those of the main proceedings, Article 17(3)(a)
         of the directive must be interpreted as meaning that a Member State cannot refuse to allow a taxable person to deduct input
         VAT paid on the acquisition of goods in that Member State, where those goods have been used for the purposes of leasing transactions
         carried out in another Member State, solely on the ground that the output transactions have not given rise to the payment
         of VAT in the second Member State.
      
       The remaining questions
      47      By its second, third and fourth questions, which should be examined together, the national court asks whether, in the event
         that Article 17(3)(a) of the directive is interpreted as not entitling the tax authorities of a Member State to refuse to
         allow VAT to be deducted in circumstances such as those of the main proceedings, where a company established in one Member
         State elects to have its subsidiary, established in another Member State, carry out transactions for the leasing of goods
         to a third company established in the first Member State, in order to avoid VAT being payable on the sums paid as consideration
         for those transactions – the transactions having been categorised in the first Member State as supplies of rental services
         carried out in the second Member State, and in that second Member State as supplies of goods carried out in the first Member
         State – the principle of prohibiting abusive practices may influence the interpretation adopted.
      
      48      In order to answer those questions, it must, first of all, be recalled that preventing possible tax evasion, avoidance and
         abuse is an objective which is recognised and encouraged by the directive (see, inter alia, Joined Cases C-487/01 and C-7/02
         Gemeente Leusden and Holin Groep [2004] ECR I-5337, paragraph 76, and Halifax and Others, paragraph 71).
      
      49      At paragraphs 74 and 75 of Halifax and Others, the Court held, inter alia, that, in the sphere of VAT, an abusive practice can be found to exist only if, first, the transactions
         concerned, notwithstanding formal application of the conditions laid down by the relevant provisions of the directive and
         the national legislation transposing it, result in the accrual of a tax advantage the grant of which would be contrary to
         the purpose of the relevant provisions of the directive and, second, it is apparent from a number of objective factors that
         the essential aim of the transactions concerned is solely to obtain that tax advantage.
      
      50      As regards the facts at issue in the main proceedings in the present case, it should be noted that the various transactions
         concerned took place between two parties which were legally unconnected. It is also common ground that those transactions
         were not artificial in nature and that they were carried out in the context of normal commercial operations.
      
      51      As the national court has observed, the characteristics of the transactions at issue in the main proceedings and the nature
         of the relations between the companies that carried out those transactions contain nothing to suggest an artificial arrangement
         that does not reflect economic reality and the sole aim of which is to obtain a tax advantage (see, to that effect, Case C-162/07
         Ampliscientifica and Amplifin [2008] ECR I-4019, paragraph 28), since RBSD is a company established in Germany carrying on business providing banking and
         leasing services.
      
      52      In those circumstances, the fact that services were supplied to a company established in one Member State by a company established
         in another Member State, and that the terms of the transactions carried out were chosen on the basis of factors specific to
         the economic operators concerned, cannot be regarded as constituting an abuse of rights. RBSD in fact provided the services
         at issue in the course of a genuine economic activity. 
      
      53      It is important to add that taxable persons are generally free to choose the organisational structures and the form of transactions
         which they consider to be most appropriate for their economic activities and for the purposes of limiting their tax burdens.
         
      
      54      The Court has held that a trader’s choice between exempt transactions and taxable transactions may be based on a range of
         factors, including tax considerations relating to the neutral system of VAT (see Case C‑108/99 Cantor Fitzgerald International [2001] ECR I-7257, paragraph 33). In that connection, the Court has made clear that, where it is possible for the taxable
         person to choose from among a number of transactions, he may choose to structure his business in such a way as to limit his
         tax liability (see Halifax and Others, paragraph 73).
      
      55      Consequently, the answer to the second, third and fourth questions is that the principle of prohibiting abusive practices
         does not preclude the right to deduct VAT, recognised in Article 17(3)(a) of the directive, in circumstances such as those
         of the main proceedings, in which a company established in one Member State elects to have its subsidiary, established in
         another Member State, carry out transactions for the leasing of goods to a third company established in the first Member State,
         in order to avoid a situation in which VAT is payable on the sums paid as consideration for those transactions, the transactions
         having been categorised in the first Member State as supplies of rental services carried out in the second Member State, and
         in that second Member State as supplies of goods carried out in the first Member State.
      
       Costs
      56      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 (Third Chamber) hereby rules:
      1.      In circumstances such as those of the main proceedings, Article 17(3)(a) 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 must be interpreted as meaning that a Member State cannot refuse to allow a taxable person to deduct input
            value added tax paid on the acquisition of goods in that Member State, where those goods have been used for the purposes of
            leasing transactions carried out in another Member State, solely on the ground that the output transactions have not given
            rise to the payment of value added tax in the second Member State.
      2.      The principle of prohibiting abusive practices does not preclude the right to deduct value added tax, recognised in Article
            17(3)(a) of Directive 77/388, in circumstances such as those of the main proceedings, in which a company established in one
            Member State elects to have its subsidiary, established in another Member State, carry out transactions for the leasing of
            goods to a third company established in the first Member State, in order to avoid a situation in which value added tax is
            payable on the sums paid as consideration for those transactions, the transactions having been categorised in the first Member
            State as supplies of rental services carried out in the second Member State, and in that second Member State as supplies of
            goods carried out in the first Member State.
      [Signatures]
      * Language of the case: English.