Finanzamt Goslar v Brigitte Breitsohl.
Date: 2000-06-08
28 It was in those circumstances that, having doubts as to the interpretation to be given to the provisions of the Sixth Directive applicable to the case before it, the Bundesfinanzhof decided to stay the proceedings and refer the following questions to the Court of Justice for a preliminary ruling:
1. According to the case-law of the Court of Justice of the European Communities (Case C-110/94 INZO v Belgian State [1996] ECR I-857), even the very first investment expenditure incurred for the purposes of a business may be regarded as an economic activity within the meaning of Article 4 of Directive 77/388/EEC. The tax authority has to take account of the business person's declared intention in this regard. The status of taxable person accorded on that basis cannot, in principle, be withdrawn retroactively on account of certain events having or having not occurred (principle of legal certainty). This also applies to the deductions relating to the investment transactions.
According to those principles, is the right to deduct tax (Article 17 of Directive 77/388/EEC) on "setting up" expenditure to be accorded on the basis of the intention to take up economic activity leading to taxable transactions even where the tax authority is already aware, when the first tax assessment is made, that the intended economic activity leading to taxable transactions was not actually taken up?
If the answer to Question 1 is in the affirmative:
2. In the case of a supply of buildings or parts thereof and of the land on which they stand, can the option for taxation be restricted to the buildings and parts thereof?
The first question
34 In that respect, it should be recalled that a person who has the intention, confirmed by objective evidence, to commence independently an economic activity within the meaning of Article 4 of the Sixth Directive and who incurs the first investment expenditure for those purposes must be regarded as a taxable person. Acting in that capacity, he has therefore, in accordance with Article 17 et seq. of the Sixth Directive, the right immediately to deduct the VAT payable or paid on the investment expenditure incurred for the purposes of the transactions which he intends to carry out and which give rise to the right to deduct, without having to wait for the actual exploitation of his business to begin (Case C-37/95 Belgian State v Ghent Coal Terminal [1998] ECR I-1, paragraph 17; Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others v AEAT [2000] ECR I-0000, paragraph 47).
35 It is important to note that it is the acquisition of goods or services by a taxable person acting as such that gives rise to the application of the VAT system and therefore of the deduction mechanism. The use to which the goods or services are put, or intended to be put, determines only the extent of the initial deduction to which the taxable person is entitled under Article 17 of the Sixth Directive and the extent of any adjustments in the course of the following periods, which must be carried out under the conditions laid down in Article 20 of that directive (Case C-97/90 Lennartz v Finanzamt München [1991] ECR I-3795, paragraph 15).
36 That interpretation is confirmed by the wording of Article 17(1) of the Sixth Directive, whereby the right to deduct arises at the time when the deductible tax becomes chargeable. In accordance with Article 10(2) of that directive, that is the case as soon as the goods are delivered to, or the services are performed for, the taxable person entitled to deduct.
37 Moreover, any other interpretation of Article 4 of the Sixth Directive would be contrary to the principle of VAT neutrality, in that it would burden the trader with the cost of VAT in the course of his economic activity without allowing him to deduct it, in accordance with Article 17, and would create an arbitrary distinction between investment expenditure incurred before actual exploitation of a business and expenditure incurred during exploitation (Case 268/83 Rompelman v Minister van Financiën [1985] ECR 655, paragraph 23; INZO, paragraph 16; Gabalfrisa, paragraph 45).
38 The arising of the right to deduct the VAT paid on the first investment expenditure is thus in no way dependent upon formal recognition of the status of taxable person by the tax authority. The only effect of that recognition is that such status, once recognised, cannot, save in situations of fraud or abuse, be withdrawn from the taxpayer with retrospective effect, without infringing the principles of the protection of legitimate expectations and legal certainty.
39 As for the risk of abuse referred to by the German Government, it should be recalled that Article 4 of the Sixth Directive does not preclude the tax authority from requiring objective evidence in support of the declared intention to commence economic activities giving rise to taxable transactions. In that context, it is important to state that a taxable person acquires that status definitively only if he made the declaration of intention to begin the envisaged economic activities in good faith. In cases of fraud or abuse, in which, for example, the person concerned, on the pretext of intending to pursue a particular economic activity, in fact sought to acquire as his private assets goods in respect of which a deduction could be made, the tax authority may claim repayment of the sums retroactively on the ground that those deductions were made on the basis of false declarations (Rompelman, paragraph 24; INZO, paragraphs 23 and 24; Gabalfrisa, paragraph 46).
41 In the absence of fraud or abuse, and subject to adjustments which may be made in accordance with the conditions laid down in Article 20 of the Sixth Directive, the principle of VAT neutrality requires, as indicated in paragraph 36 of this judgment, that the right to deduct, once it has arisen, be retained even where the tax authority is aware, from the time the first tax assessment is made, that the economic activity envisaged, which was to give rise to taxable transactions, will not be taken up.
48 The next point to be made is that, without prejudice to the option which the first sentence of Article 4(3)(a) of the Sixth Directive confers upon Member States to define the words land on which they stand, the concept of supply ... of buildings or parts of buildings and the land on which they stand cannot be defined by reference to the national law applicable in the main proceedings, given the purpose of the Sixth Directive, which is aimed at determining the basis of VAT in a uniform manner according to Community rules. Such a concept, which contributes to determining the persons who may be regarded by Member States as taxable persons by virtue of Article 4(3)(a) of the directive, must therefore be interpreted in a uniform manner in all Member States.
54 Since, moreover, as the order for reference shows and unlike the situation analysed in paragraph 21 of the judgment in Armbrecht, the parts of buildings and the land on which they stood at issue in the main proceedings were intended to be used for business purposes, there is no need, as far as the right of option is concerned, to make an apportionment between that part of the buildings or parts of buildings and the land on which they stood devoted to business activities, and that part reserved for the private use of the taxpayer.