CELEX: C2003/171/30
Language: en
Date: 2003-07-19 00:00:00
Title: Case C-244/03: Action brought on 10 June 2003 by the French Republic against the European Parliament and the Council of the European Union

C 171/20               EN                        Official Journal of the European Union                                            19.7.2003
The Commission of the European Communities claims that                   Action brought on 10 June 2003 by the French Republic
the Court should:                                                        against the European Parliament and the Council of the
                                                                                                 European Union
1.    declare that by introducing a special rule limiting the
      deductibility of VAT on the purchase of capital goods on
                                                                                                  (Case C-244/03)
      the ground that they were financed by subsidies, the
      French Republic has failed to fulfil its obligations under
      Community law, and in particular Articles 17 and 19 of                                      (2003/C 171/30)
      the Sixth Council Directive of May 1977, as amended, on
      the harmonisation of the laws of the Member States
      relating to turnover taxes — Common system of value
      added tax: uniform basis of assessment ( 1);
                                                                         An action against the European Parliament and the Council of
                                                                         the European Union was brought before the Court of Justice
2.    order the French Republic to pay the costs.
                                                                         of the European Communities on 10 June 2003 by the French
                                                                         Republic, represented by F. Alabrune, G. de Bergues and
                                                                         Ch. Lemaire, of acting as Agents, with an address for service in
                                                                         Luxembourg.
Pleas in law and main arguments
                                                                         The applicant claims that the Court should:
Articles 17 to 20 of the Sixth Directive establish the scheme
for the right of taxable persons to deduct VAT. Taxable persons
who carry out transactions giving rise to the right to deduct            —     Article 1(2) of Directive 2003/15/EC of the European
and at the same time transactions not giving rise to that right                Parliament and of the Council of 27 February 2003 ( 1) in
                                                                               so far as it introduces a new Article 4a into Council
may deduct from the amount of the tax payable by them on
taxed transactions the amount of the tax which they have paid                  Directive 76/768/EEC ( 2) on the approximation of the
on purchases of goods or supplies of services used, within the                 laws of the Member States relating to cosmetic products;
limit of a proportion calculated according to the procedures
defined in Article 19.                                                   —     order the European Parliament and the Council to pay
                                                                               the costs.
The French legislation provides for a limit on the deduction of
VAT payable on assets financed by subsidies in certain
conditions not provided for in the Sixth Directive. The system           Pleas in law and main arguments
established by the French legislation for mixed taxable persons
precludes entitlement to deduct the VAT paid on the purchase
of capital goods to the extent of the proportion of that
                                                                         Article 4a of Directive 76/768/EEC, introduced by Article 1(2)
purchase financed by a subsidy, if the proportion thus financed
                                                                         of Directive 2003/15/EC, prohibits the marketing of cosmetic
is not reflected in the price of the taxable transactions. This
                                                                         products where the final formulation, or which contain
exclusion, which concerns purchases of goods assigned to
                                                                         ingredients or combinations of ingredients which have been
activities coming within the scope of the directive, takes affect
                                                                         the subject of animal testing and prohibits the performance on
before any application of the proportion of deduction and
                                                                         their territory of animal testing of finished cosmetic products
reduces the amount of VAT to which that proportion is
                                                                         and of ingredients or combinations of ingredients. That
applied, where appropriate, for the purpose of calculating the
                                                                         prohibition is more severe than the prohibition which preceded
deductible VAT. However, derogations from the right to
                                                                         it and is incompatible with the rules of the World Trade
deduct are permitted only in the cases expressly provided for
                                                                         Organisation.
by the Sixth Directive. The French Government cannot rely on
Article 2 of First Council Directive 67/227/EEC of 11 April
1967 on the harmonisation of legislation of Member States
concerning turnover taxes, which provides that VAT is charge-            The French Government is seeking the annulment of
able after deduction of the amount of VAT borne directly by              Article 1(2) of the directive in so far as it infringes the principle
the various costs components, to justify such limitation of the          of legal certainty. The Community legislature has disregarded
right to deduct.                                                         the requirement of legal certainty, since it has failed to define
                                                                         clearly and precisely the scope of Article 4a and has used in
                                                                         several places the imprecise expression ‘in order to meet the
It also appears that the French authorities apply the same               requirements of this Directive’. Article 4a gives rise to sensitive
limitation of deduction to taxable persons who carry out only            questions of interpretation and, consequently, the Member
transactions giving rise to the right to deduct.                         States are likely to transpose the amending directive into their
                                                                         domestic legal systems in divergent ways. Secondly, the
                                                                         requirement of legal certainty is even more important where it
( 1) OJ 1977 L 145, p. 1.
                                                                         is sought to impose obligations on individuals. In the present
                                                                         case, the lack of precision and the unclear nature of Article 4a
                                                                         do not enable undertakings to determine what circumstances
                                                                         and legal relationships fall within the scope of that article.
 ---pagebreak--- 19.7.2003             EN                          Official Journal of the European Union                                         C 171/21
That uncertainty is particularly to the detriment of the                        with the intended aim — the improvement to animal
undertakings concerned since in order to maintain their                         welfare is extremely small. Moreover, the implementation
presence on the international markets and avoid falling behind                  of that article is likely to result in the circulation of
in introducing innovations, an essential element of their                       products presenting significant risks to human health as
competitiveness, European industries should be in a position                    a result of the mismatch between the object of Article 4a
to determine exactly what legal situations fall within the scope                and the envisaged state of scientific knowledge.
of Article 4a of the directive.
In the alternative, the French Government takes the view that
that article should be annulled inasmuch as it infringes the              —     precaution: the Community legislature has allowed
following principles:                                                           human health to be exposed to unacceptable risks.
— freedom to pursue a professional activity: Article 4a
     introduces restrictions to the right to pursue freely a              —     non-discrimination: Article 4a is likely to upset the level
     professional activity despite not being consonant with an                  of equality among undertakings in the cosmetics industry
     objective of general interest pursued by the Community,                    for no objective reason.
     namely the welfare of animals and, in any event, such
     restrictions constitute, in view of their intention, excessive
     and intolerable interference.
— proportionality: the inconvenience caused by the                        (1 ) OJ 2003 L 66, p. 26.
     implementation of Article 4a are excessive by comparison             (2 ) OJ 1976 L 262, p. 169.