Waterschap Zeeuws Vlaanderen v Staatssecretaris van Financiën.
Date: 2005-06-02
31. Under Article 17(1), the right to deduct arises at the time when the deductible tax becomes chargeable. Article 10(2) of the Sixth Directive provides that that time is when the goods are delivered or the services are performed. Accordingly, where goods are purchased, the right to deduct arises when those goods are delivered. Under Article 17(2) of that directive the taxable person is entitled to deduct the VAT paid in respect of goods supplied to him by another taxable person, in so far as those goods are used for the purposes of his taxable transactions.
32. It follows from the provisions of Articles 2 and 17 that only a person who is a taxable person and who is acting as such at the time of the purchase of goods, has a right to deduct in respect of those goods and may deduct the VAT due or paid in respect of those goods if he uses them for the purposes of his taxable transactions (see, as regards Article 17 of the Sixth Directive, Case C-97/90 Lennartz  [1991] ECR I-3795, paragraph 8).
38. The Court noted that Article 17 of the Sixth Directive specifies the time when the right to deduct arises and makes it clear that only the capacity in which the individual is acting at the time of purchase of the goods can determine the existence of a right to deduct. It then pointed out that Article 20 of that directive, entitled ‘Adjustments of deductions’, contains no provision concerning the conferral of entitlement to deduct. It held that Article 20 does no more than establish the procedure for calculating the adjustments to the initial deduction and cannot therefore give rise to any right to deduct or convert the tax paid by a taxable person in respect of his non-taxable transactions into a tax that is deductible within the meaning of Article 17 (see Lennartz , cited above, paragraphs 11 and 12).
39. That argument must be applied to a body governed by public law which acts as a public authority at the time when it purchases capital goods. Since that body did not at that time act as a taxable person it does not have, in the same way as an individual acting in furtherance of his own needs, any right to deduct the VAT paid by it in respect of those goods.
43. That argument must also be rejected. Any distortion of competition in circumstances such as those in the case in the main proceedings stem more from the exercise by the body governed by public law of the right to opt for taxation in respect of the sale and letting of the immovable property concerned than from application of the rule that bodies governed by public law are not regarded as taxable persons in respect of the transactions in which they engage as public authorities. As the Advocate General pointed out at point 38 of his Opinion, it is inherent in the existence of exceptions to the VAT system that they will interfere to some extent with the application of the principles of neutrality and of equality of treatment.
44. The answer to the first question must therefore be that a body governed by public law which purchases capital goods as a public authority within the meaning of the first subparagraph of Article 4(5) of the Sixth Directive, that is to say as a non-taxable person, and subsequently sells those goods as a taxable person, is not entitled, in respect of that sale, to a right of adjustment based on Article 20 of that directive in order to deduct the VAT paid on the purchase of those goods.
The second question