Finanzamt Offenbach am Main-Land v Faxworld Vorgründungsgesellschaft Peter Hünninghausen und Wolfgang Klein GbR.
Date: 2004-04-29
24. As regards the right to deduct, Article 17(2) of the Sixth Directive provides that the taxable person is entitled to deduct from the tax which he is liable to pay the VAT due or paid in respect of goods or services supplied or to be supplied to him by another taxable person ‘insofar as the goods and services are used for the purposes of his taxable transactions’. Thus, it is clear from the wording of that provision that, in order for a person to be entitled to deduct, he must be a ‘taxable person’ within the meaning of the Sixth Directive and the goods and services in question must have been used for the purposes of his taxable transactions.
The classification of Faxworld GbR as a taxable person
27. Those arguments cannot be upheld. First, Article 4 of the Sixth Directive gives VAT a very wide scope, comprising all stages of production, distribution and the provision of services (see Case 235/85 Commission  v Netherlands  [1987] ECR 1471, paragraph 7; Case 348/87 Stichting Uitvoering Financiële Acties  [1989] ECR 1737, paragraph 10; and Case C‑186/89 van Tiem  [1990] ECR I‑4363, paragraph 17).
28. According to settled case-law, a person who acquires goods for the purposes of an economic activity within the meaning of Article 4 does so as a taxable person (Case C‑97/90 Lennartz  [1991] ECR I‑3795, paragraph 14; Joined Cases C‑110/98 to C‑147/98 Gabalfrisa and Others  [2000] ECR I‑1577, paragraph 47; and Case C‑400/98 Breitsohl  [2000] ECR I‑4321, paragraph 34), even if the goods are not used immediately for such economic activities (see, to that effect, Case 268/83 Rompelman  [1985] ECR 655, paragraph 22). Contrary to what the German Government argues, the validity of those findings is in no way limited by the identity of the person whose economic activity is in question.
29. Second, the German Government’s argument based on the exercise by the Federal Republic of Germany of the option provided for in Article 5(8) of the Sixth Directive, by which it intends to show that Faxworld GbR’s only output transaction does not fall within the scope of Article 4 of that directive, is erroneous. In accordance with the purpose of the Sixth Directive, which is, inter alia, to found a common system of VAT upon a uniform definition of ‘taxable persons’, the status of taxable person must be assessed solely on the basis of the criteria set out in Article 4 of the Sixth Directive (see van Tiem , cited above, paragraph 25). Accordingly, the scope of Article 4 of the Sixth Directive cannot be altered by the fact that a Member State has or has not exercised the option provided for in Article 5(8) of that directive, which enables it to deem that no supply of goods takes place where the totality of assets or a part thereof is transferred (see, with respect to the exercise by a Member State of the option provided for in Article 5(3) of the Sixth Directive, van Tiem , paragraph 26).
36. Although it does not dispute that Faxworld GbR is to be treated as a taxable person, the Commission shares the view taken by the German Government as regards that partnership’s right to deduct. Relying on the judgment in Abbey National , paragraph 28, which states that the right to deduct presupposes that the expenditure incurred in acquiring the output services was part of the cost components of the taxable transactions, the Commission argues that the deduction of input tax requires that taxable transactions be effected; Faxworld GbR, however, never intended to effect such transactions.
37. It should be noted, first of all, that the deduction scheme is meant 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, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see Rompelman , paragraph 19; Case C‑37/95 Ghent Coal Terminal  [1998] ECR I-1, paragraph 15; Gabalfrisa , cited above, paragraph 44; Case C‑98/98 Midland Bank  [2000] ECR I‑4177, paragraph 19; and Abbey National , paragraph 24). Given the general nature of that right, derogations are permitted only in the cases expressly provided for in the Directive (see, to that effect, Ghent Coal Terminal , cited above, paragraph 16).
39. Recognising that the taxable person was, in principle, entitled to deduct the VAT, the Court found that the costs of the services in question formed part of the taxable person’s overheads and that, even in the case of a transfer of a totality of assets, where the taxable person no longer effects transactions after using those services, their costs must be regarded as part of the economic activity of the business as a whole before the transfer. Otherwise, an arbitrary distinction would be drawn between, on the one hand, expenditure incurred for the purposes of a business before it is actually operated and that incurred during its operation and, on the other hand, the expenditure incurred in order to terminate its operation (see Abbey National , paragraph 35).
40. That interpretation made it possible to relieve the taxable person in question of the burden of the VAT paid in the course of its economic activity. Accordingly, the taxable person’s additional argument that it had to be able to rely on the recipient’s taxable operations in order to be entitled to deduct all the VAT incurred on those services was rejected ( Abbey National , paragraphs 31 and 32).
41. However, in contrast to the facts of the case giving rise to the judgment in Abbey National , the taxable person in the case before the national court, namely Faxworld GbR, as a Vorgründungsgesellschaft, did not even intend to effect itself taxable operations, its sole object being to prepare the activities of the Aktiengesellschaft (limited company). None the less, the VAT which Faxworld GbR wishes to deduct relates to supplies acquired for the purpose of effecting taxable transactions, even though those transactions were only the planned transactions of Faxworld AG.
42. In those precise circumstances, and in order to ensure the neutrality of taxation, it must be held that, where the Member State has exercised the options provided for in Articles 5(8) and 6(5) of the Sixth Directive, as a result of the fact that, according to those provisions, ‘the recipient shall be treated as the successor to the transferor’, a Vorgründungsgesellschaft, as the transferor, must be entitled to take account of the taxable transactions of the recipient, namely the Aktiengesellschaft, so as to be entitled to deduct the VAT paid on input services which have been procured for the purposes of the recipient’s taxable operations.