Związek Gmin Zagłębia Miedziowego w Polkowicach v Szef Krajowej Administracji Skarbowej.
Date: 2019-05-08
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The structure of the system established by the VAT Directive is based on neutrality. Only the input tax charged in respect of goods or services used by a taxable person for his taxed transactions may be deducted. In other words, the deduction of input taxes is linked to the collection of output taxes. Where goods or services acquired by a taxable person are used for the purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected and no input tax deducted. However, where goods or services are used for the purposes of taxed output transactions, deduction of the input tax charged in respect of those goods or services is required in order to avoid double taxation (see, to that effect, judgment of 16 June 2016, Mateusiak, C‑229/15, EU:C:2016:454, paragraph 24 and the case-law cited).
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Thus, the question of whether there is a right to deduct presupposes, first, that a taxable person acting as such acquires goods or services and uses them for the purposes of his economic activity (see, inter alia, judgment of 16 February 2012, Eon Aset Menidjmunt, C‑118/11, EU:C:2012:97, paragraph 69). Second, for VAT to be deductible, the input transactions must, as a general rule, have a direct and immediate link with the output transactions giving rise to a right of deduction. Ultimately, the right to deduct VAT charged in respect of the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the taxed output transactions (see, to that effect, judgments of 13 March 2008, Securenta, C‑437/06, EU:C:2008:166, paragraph 27; of 6 September 2012, Portugal Telecom, C‑496/11, EU:C:2012:557, paragraph 36; and of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt, C‑108/14 and C‑109/14, EU:C:2015:496, paragraphs 23 and 24).
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In the second place, where a taxable person uses goods and services to carry out both economic transactions in respect of which VAT is deductible and economic transactions in respect of which it is not (that is, exempt transactions), Articles 173 to 175 of the VAT Directive lay down rules for determining the share of deductible VAT, which must be proportional to the amount attributable to the taxable person’s taxed economic transactions. In that regard, the Court has stated that those rules concern the input VAT chargeable on expenditure relating exclusively to economic transactions, distinguishing between economic activities which are taxed and give rise to a right of deduction and those which are exempt and do not give rise to such a right (see, to that effect, judgments of 13 March 2008, Securenta, C‑437/06, EU:C:2008:166, paragraph 33; of 6 September 2012, Portugal Telecom, C‑496/11, EU:C:2012:557, paragraph 42; and of 16 July 2015, Larentia + Minerva and Marenave Schiffahrt, C‑108/14 and C‑109/14, EU:C:2015:496, paragraph 27). However, so as not to compromise the objective of neutrality guaranteed by the common system of VAT, transactions falling outside the scope of the VAT Directive must be excluded from the calculation of the deductible proportion referred to in those provisions (see, to that effect, judgments of 14 November 2000, Floridienne and Berginvest, C‑142/99, EU:C:2000:623, paragraph 32; of 27 September 2001, Cibo Participations, C‑16/00, EU:C:2001:495, paragraph 44; and of 29 April 2004, EDM, C‑77/01, EU:C:2004:243, paragraph 54).
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In the third place, it should be borne in mind that the Court has already held that, since the VAT Directive is silent on this point, the determination of the methods and criteria for apportioning input VAT between economic and non-economic activities falls within the discretion of the Member States. When exercising that discretion, Member States must have regard to the aims and broad logic of the VAT Directive and, on that basis, provide for a method of calculation which objectively reflects the part of the input expenditure actually to be attributed, respectively, to those two types of activity (see, inter alia, judgment of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 58 and the case-law cited).
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Indeed, as the Advocate General observed in point 57 of her Opinion, to permit a taxable person, such as the Association of Municipalities, carrying out both economic and non-economic activities, to deduct the input VAT paid in respect of mixed expenditure in full would give it an advantage contrary to the principle of fiscal neutrality, which, in the Court’s view, was intended by the EU legislature to reflect, in matters relating to VAT, the general principle of equal treatment (see, to that effect, judgment of 29 October 2009, NCC Construction Danmark, C‑174/08, EU:C:2009:669, paragraph 41 and the case-law cited).
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As regards, more specifically, the right of deduction, this is an essential element of the obligation to pay VAT. The scope of that right is clearly delineated in Article 168 of the VAT Directive. As the Court has pointed out, that provision specifies the conditions giving rise to the right of deduction and the scope of that right and does not leave the Member States any discretion as to its implementation (see, to that effect, judgment of 10 March 2005, Commission v United Kingdom, C‑33/03, EU:C:2005:144, paragraph 16 and the case-law cited).
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In that regard, it should be borne in mind, first, that the national courts are bound to interpret, where possible, national law in a manner consistent with EU law, and that such an interpretation can, in principle, be relied on against a taxable person by the competent national tax authority (see, to that effect, judgments of 26 September 1996, Arcaro, C‑168/95, EU:C:1996:363, paragraphs 41 and 42; of 5 July 2007, Kofoed, C‑321/05, EU:C:2007:408, paragraph 45; and of 15 September 2011, Franz Mücksch, C‑53/10, EU:C:2011:585, paragraph 34).
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Second, although the obligation to interpret national law in a manner consistent with EU law cannot serve as the basis for an interpretation of national law contra legem (see, inter alia, judgment of 15 April 2008, Impact, C‑268/06, EU:C:2008:223, paragraph 100 and the case-law cited), national courts must alter their established case-law, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive (judgments of 19 April 2016, DI, C‑441/14, EU:C:2016:278, paragraph 33; of 17 April 2018, Egenberger, C‑414/16, EU:C:2018:257, paragraph 72; and of 11 September 2018, IR, C‑68/17, EU:C:2018:696, paragraph 64).