Sandra Puffer v Unabhängiger Finanzsenat, Außenstelle Linz.
Date: 2009-04-23
39. First, it must be pointed out that it is settled case-law that, where capital goods are used both for business and for private purposes the taxpayer has the choice, for the purposes of VAT, of (i) allocating those goods wholly to the assets of his business, (ii) retaining them wholly within his private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into his business only to the extent to which they are actually used for business purposes (Case C-434/03 Charles and Charles-Tijmens  [2005] ECR I‑7037, paragraph 23 and case-law cited, and Case C-72/05 Wollny  [2006] ECR I‑8297, paragraph 21).
40. Should the taxable person choose to treat capital goods used for both business and private purposes as business goods, the input VAT due on the acquisition of those goods is, in principle, immediately deductible in full ( Charles and Charles-Tijmens , paragraph 24, and Wollny , paragraph  22).
41. However, it follows from Article 6(2)(a) of the Sixth Directive that when the input VAT paid on goods forming part of the assets of a business is wholly or partly deductible, their use for the private purposes of the taxable person or of his staff or for purposes other than those of his business is treated as a supply of services for consideration. That use, which is therefore a ‘taxable transaction’ within the meaning of Article 17(2) of that directive is, under Article 11A(1)(c) thereof, taxed on the basis of the cost of providing the services ( Charles and Charles-Tijmens , paragraph 25, and Wollny , paragraph 23).
42. Consequently, where a taxable person chooses to treat an entire building as forming part of the assets of his business and uses part of that building for private purposes he is both entitled to deduct the input VAT paid on all construction costs relating to that building and subject to the corresponding obligation to pay VAT on the amount of expenditure incurred to effect such use ( Wollny , paragraph 24).
43. By contrast, if the taxable person chooses, when acquiring capital goods, to allocate those goods entirely to his private assets or to allocate only part of them to his business activities, no right to deduct can arise in relation to the part allocated to his private assets (see, to that effect, Case C-97/90 Lennartz  [1991] ECR I-3795, paragraphs 8 and 9, and Case C-25/03 HE  [2005] ECR I-3123, paragraph 43).
45. In the case of capital goods the mixed use of which varies over time, the interpretation of Article 17(1) and (2) of the Sixth Directive supported by the Unabhängiger Finanzsenat and the Austrian Government could lead to the taxable person being denied deduction of VAT input tax payable for subsequent taxable business uses, despite the taxable person’s initial wish to treat the goods in question, in their entirety, as forming part of the assets of the business, with future transactions in mind.
46. In such a situation, the taxable person is not relieved entirely of the burden of the tax relating to the item which he uses for the purposes of his economic activity and the taxation of his business activities would lead to double taxation contrary to the principle of fiscal neutrality inherent in the common system of VAT, of which the Sixth Directive forms part (see, to that effect, Case C-415/98 Bakcsi  [2001] ECR I‑1831, paragraph 46, and HE , paragraph 71).
47. In addition, even supposing that, after actual use for business purposes of the part of the building initially used for private purposes, a refund of the input tax due on the building costs was provided for, a financial charge would encumber the property during the period, which may sometimes be considerable, between the initial investment expenditure and the commencement of actual business use. The principle of the neutrality of VAT with regard to the taxation of the business requires that the investment expenditure incurred for the needs and objectives of a business be regarded as economic activities giving rise to an immediate deduction of input VAT due. The deduction system is meant to relieve the taxable person entirely of the burden of the VAT payable or paid in the course of all his taxable economic activities (see, to that effect, Case 268/83 Rompelman  [1985] ECR 655, paragraphs 19 and 23).
52. Second, it should be borne in mind that, according to settled case-law, infringement of the general principle of equal treatment under Community law can arise through the application of different rules to comparable situations or the application of the same rule to different situations (see Case C-390/96 Lease Plan  [1998] ECR I‑2553, paragraph 34, and Case C-156/98 Germany  v Commission  [2000] ECR I‑6857, paragraph 84).
53. It should also be borne in mind that the principle of fiscal neutrality is the reflection, in matters relating to VAT, of the principle of equal treatment (Case C-106/05 L.u.P . [2006] ECR I‑5123, paragraph 48 and case-law cited, and Case C-309/06 Marks & Spencer  [2008] ECR I‑0000, paragraph 49).
54. Moreover, the Court has already held that, by treating the private use of goods treated by the taxable person as forming part of the assets of his business as a supply of services for consideration, Article 6(2)(a) of the Sixth Directive aims, first, to ensure equal treatment as between a taxable person, who was able to deduct the VAT on the acquisition or construction of those goods, and a final consumer, by preventing the former from enjoying an advantage to which he is not entitled by comparison with the latter who buys the goods and pays VAT on them, and, second, to ensure fiscal neutrality by ensuring a correspondence between deduction of input VAT and charging of output VAT (see, to that effect, Wollny , paragraphs 30 to 33).
55. However, with regard to the private use of mixed-use capital goods, it is possible, as the national court has pointed out, that that provision does not ensure, on its own, the same treatment of taxable persons and non-taxable persons or of other taxable persons who acquire goods of the same kind on a private basis and are, as a result of that fact, bound to pay immediately and in full the VAT imposed. It cannot be ruled out that the objective stated in paragraph 47 of this judgment of relieving the taxable person entirely, by the mechanism laid down in  Article 17(1) and (2) and Article 6(2)(a) of the Sixth Directive, of the burden of VAT payable or paid in the course of all their economic activities, including any financial charge encumbering the property during the period between the initial investment expenditure and the commencement of actual business use, can give rise to a financial advantage with regard to the private use of those goods by those taxable persons (see, by analogy,  Wollny , paragraph 38).
68. According to settled case-law, classification as ‘State aid’ for the purposes of Article 87(1) of the Treaty requires that all the conditions set out in that provision are fulfilled. Thus, first there must be intervention by the State or through State resources; second, the intervention must be liable to affect trade between the Member States; third, it must confer an advantage on the recipient; and fourth, it must distort or threaten to distort competition (Joined Cases C-341/06 P and C‑342/06 P Chronopost and La Poste  v Ufex and Others  [2008] ECR I‑0000, paragraphs 121 and 122, and case-law cited).
83. The principle of the right to deduct VAT is none the less subject to the derogation set out in Article 17(6) of the Sixth Directive, and in particular the second subparagraph. In that regard, since none of the proposals made by the Commission to the Council under the first paragraph of Article 17(6) have been adopted by the latter, it remains open to the Member States to retain their existing legislation as at the date of entry into force of the Sixth Directive in regard to exclusion from the right of deduction (Case C-345/99 Commission  v France  [2002] ECR I-4493, paragraph 19, and Case C-409/99 Metropol and Stadler  [2002] ECR I-81, paragraph 44).
84. While it is, in principle, for the national court to determine the content of the legislation which existed on a date laid down by a Community measure, the Court can provide guidance on interpreting the Community concept which constitutes the basis of a derogation from Community rules for national legislation existing on a particular date (C-157/05 Holböck  [2007] ECR I-4051, paragraph 40).
85. In that context, the Court has held that any national measure adopted after a date thus fixed is not, by that fact alone, automatically excluded from the derogation laid down in the Community measure in question ( Holböck , paragraph 41). Where, after the entry into force of the Sixth Directive, the legislation of a Member State is amended so as to reduce the scope of existing exemptions and thereby brings itself into line with the objective of the Sixth Directive, that legislation must be considered to be covered by the derogation in the second subparagraph of Article 17(6) of the Sixth Directive and is not in breach of Article 17(2) of that directive (see Commission  v France , paragraph 22, and Metropol and Stadler , paragraph 45).
86. On the other hand, national legislation does not constitute a derogation permitted by the second subparagraph of Article 17(6) of the Sixth Directive, and infringes Article 17(2) of the directive, if its effect is to increase, after the entry into force of the Sixth Directive, the extent of existing exclusions, thus diverging from the objective of that directive (Case C-40/00 Commission  v France  [2001] ECR I-4539, paragraph 17, and Metropol and Stadler , paragraph 46).
87. Consequently, it must be held that a provision which is, in substance, identical to the previous legislation, or limited to reducing or eliminating an obstacle to the exercise of Community rights and freedoms in the earlier legislation, will be covered by the derogation provided for in Article 17(6) of the Sixth Directive. By contrast, legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing at the date fixed in the Community measure in question  (see, to that effect, Case C-155/01 Cookies World  [2003] ECR I‑8785, paragraph 63, and, by analogy, Holböck , paragraph 41).