Portugal Telecom SGPS SA v Fazenda Pública.
Date: 2012-09-06
27. In that connection, the information that must be provided to the Court in an order for reference serves to enable the Court to provide answers which will be of use to the national court. For that purpose, it is necessary that the national court should define the factual and legislative context of the questions which it is asking or, at the very least, explain the factual circumstances on which those questions are based (see, to that effect, Case C-450/09 Schröder  [2011] ECR I-2497, paragraph 18, and Case C-25/11 Varzim Sol  [2012] ECR, paragraph 30).
31. In that connection, it must be recalled, first of all, that it is apparent from settled case-law that a holding company whose sole purpose is to acquire holdings in other undertakings and which does not involve itself directly or indirectly in the management of those undertakings does not have the status of taxable person within the meaning of Article 4 of the Sixth Directive and therefore has no right to deduct tax under Article 17 of the Sixth Directive, without prejudice to its rights as a shareholder (see Case C-60/90 Polysar Investments Netherlands  [1991] ECR I-3111, paragraph 17; Case C-142/99 Floridienne and Berginvest  [2000] ECR I-9567, paragraph 17; and Case C-16/00 Cibo Participations  [2001] ECR I-6663, paragraph 18).
32. The mere acquisition and the mere holding of shares are not to be regarded as economic activities within the meaning of the Sixth Directive, conferring on the holder the status of taxable person. A mere financial holding in other undertakings does not amount to the exploitation of property for the purpose of obtaining income therefrom on a continuing basis because any dividend yielded by that holding is merely the result of ownership of the property (see Case C-333/91 Sofitam  [1993] ECR I-3513, paragraph 12; Case C-80/95 Harnas & Helm  [1997] ECR I-745, paragraph 15; and Cibo Participations , paragraph 19).
33. The position is otherwise where the holding in another company is accompanied by direct or indirect involvement in the management of the company in which the holding has been acquired, without prejudice to the rights held by the holding company as shareholder ( Polysar Investments Netherlands , paragraph 14; Floridienne and Berginvest , paragraph 18; Cibo Participations , paragraph 20; and Case C-29/08 SKF  [2009] ECR I-10413, paragraph 30).
34. The involvement of a holding company in the management of companies in which it has acquired a shareholding constitutes an economic activity within the meaning of Article 4(2) of the Sixth Directive where it entails carrying out transactions which are subject to VAT by virtue of Article 2 of that directive, such as the supply by a holding company to its subsidiaries of administrative, financial, commercial and technical services ( Cibo Participations , paragraph 22).
35. Second, it should also be noted that the right to deduct provided for in Article 17 et seq. of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. The right to deduct is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case C-62/93 BP Soupergaz  [1995] ECR I-1883, paragraph 18; Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others  [2000] ECR I-1577, paragraph 43; Case C-437/06 Securenta  [2008] ECR I-1597, paragraph 24; and Case C-102/08 SALIX Grundstücks-Vermietungsgesellschaft  [2009] ECR I-4629, paragraph 70). Any limitation of the right to deduct VAT affects the level of the tax burden and must be applied in a similar manner in all the Member States. Consequently, derogations are permitted only in the cases expressly provided for in the Sixth Directive (Case C-97/90 Lennartz  [1991] ECR I-3795, paragraph 27, and BP Soupergaz , paragraph 18).
36. For VAT to be deductible, the input transactions must have a direct and immediate link with the output transactions giving rise to a right of deduction. Thus, the right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct (see Cibo Participations , paragraph 31; Case C-465/03 Kretztechnik  [2005] ECR I-4357, paragraph 35; Case C-435/05 Investrand  [2007] ECR I-1315, paragraph 23; Securenta , paragraph 27; and SKF , paragraph 57).
37. However, a taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or transactions giving rise to the right to deduct, where the costs of the services in question are part of his general costs and are, as such, components of the price of the goods or services which he supplies. Such costs do have a direct and immediate link with the taxable person’s economic activity as a whole (see, in particular, Kretztechnik , paragraph 36; Investrand , paragraph 24; and SKF , paragraph 58).
38. As regards the regime applicable to the right to deduct, in order to give rise to the right to deduct under Article 17(2) of the Sixth Directive, the goods or services acquired must have a direct and immediate link with the output transactions in respect of which VAT is deductible. The ultimate aim pursued by the taxable person is irrelevant in this respect (see Case C-98/98 Midland Bank  [2000] ECR I-4177, paragraph 20; Case C-408/98 Abbey National  [2001] ECR I-1361, paragraph 25; and Cibo Participations , paragraph 28).
39. Furthermore, Article 17(5) of the Sixth Directive lays down the rules applicable to the right to deduct VAT where the VAT relates to input transactions used by the taxable person ‘both for transactions covered by paragraphs 2 and 3, in respect of which [VAT] is deductible, and for transactions in respect of which [VAT] is not deductible’, limiting the right of deduction to that proportion of the VAT which is attributable to the former transactions. It follows from that provision that, where a taxable person uses goods and services in order to carry out both transactions in respect of which VAT is deductible and transactions in respect of which it is not, he may deduct only that proportion of the VAT which is attributable to the former ( Cibo Participations , paragraphs 28 and 34).
40. It follows from that case-law, first, that the deduction system provided for in Article 17(5) of the Sixth Directive only covers cases in which the goods and services are used by a taxable person to carry out both economic transactions which give rise to a right to deduct and those which do not, that is to say, goods and services for mixed use and, second, that Member States may use one of the methods of deduction referred to in the third subparagraph of Article 17(5) only for those goods and services.
41. On the other hand, the goods and services which are used by the taxable person solely to carry out economic transactions giving rise to a right to deduct do not fall within the scope of Article 17(5) of the Sixth Directive, but are covered, as regards the deduction system, by Article 17(2) thereof.
42. Finally, the Court has held that the rules in Article 17(5) of the Sixth Directive concern the input tax chargeable on expenses relating exclusively to economic transactions and that the determination of the methods and criteria for apportioning input VAT between economic and non-economic activities within the meaning of the Sixth Directive is in the discretion of the Member States which, when exercising that discretion, must have regard to the aims and broad logic of the 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 ( Securenta , paragraphs 33 and 39).
44. If the position of the tax authorities is indeed as described in the previous paragraph, which is for the referring court to ascertain, it should be observed that the deduction system 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 complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see Midland Bank , paragraph 19; Abbey National , paragraph 24; Cibo Participations , paragraph 27; Kretztechnik , paragraph 34; and Investrand , paragraph 22).
46. When those services are used in order to perform both transactions in respect of which VAT is deductible and transactions in respect of which VAT is not deductible, the deduction is allowed only for the part of the VAT which is proportionate to the amount attributable to the former transactions and Member States are authorised to provide for one of the methods of determining the right to deduction set out in Article 17(5) of the Sixth Directive.
47. Finally, where the services are used both for economic and non-economic activities, Article 17(5) of the Sixth Directive is not applicable and the methods of deduction and apportionment are defined by the Member States, in accordance with the criteria set out in paragraph 42 of this judgment.