Danfoss A/S and AstraZeneca A/S v Skatteministeriet.
Date: 2008-12-11
25. From the outset, it must be recalled that the Sixth Directive entered into force in Denmark on 1 January 1979 (see, to that effect, Joined Cases C‑177/99 and C‑181/99 Ampafrance and Sanofi  [2000] ECR I‑7013, paragraphs 5 and 9, and Case C-40/00 Commission  v France  [2001] ECR I-4539, paragraphs 5 and 9; see also Article 1 of Directive 78/583 and, finally, the second paragraph of Article 176 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1)).
26. It must also be borne in mind that, according to the fundamental principle which underlies the VAT system and which follows in particular from Article 2 of the Sixth Directive, VAT applies to each transaction by way of production or distribution after deduction has been made of the VAT which has been levied directly on transactions relating to inputs. It is settled case-law that the right of deduction 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. That right must be exercised immediately in respect of all the taxes charged on input transactions. Any limitation on 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 (see, to that effect, Case C‑409/99 Metropol and Stadler  [2002] ECR I‑81, paragraph 42 and the case-law cited). Furthermore, provisions laying down derogations from the principle of the right to deduct VAT, which ensures the neutrality of that tax, must be interpreted strictly ( Metropol and Stadler , paragraph 59).
27. Article 17(2) of the Sixth Directive sets out in express and specific terms the principle of the taxable person’s right to deduct the amounts invoiced as VAT for goods supplied or services rendered to him, in so far as such goods or services are used for the purposes of his taxable transactions ( Metropol and Stadler , paragraph 43).
28. That principle is none the less subject to the derogation in Article 17(6) of the Sixth Directive, and in particular the second subparagraph thereof. The Member States are thereby authorised 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 until such time as the Council has adopted the provisions envisaged by that article (see Case C-345/99 Commission  v France  [2001] ECR I-4493, paragraph 19, and Metropol and Stadler , paragraph 44).
29. Since, however, as has been indicated in paragraph 5 of this judgment, none of the proposals put to the Council by the Commission under the first subparagraph of Article 17(6) of the Sixth Directive has been adopted by the Council, the Member States may retain their existing legislation in regard to exclusion from the right to deduct VAT until such time as the Community legislature has established a Community system of exclusions and thus brought about the progressive harmonisation of national VAT legislation. Community law therefore does not yet contain any provision listing the expenditure excluded from the right to deduct VAT (Case C-280/04 Jyske Finans  [2005] ECR I‑10683, paragraph 23 and the case-law cited).
30. As the Court stated in paragraph 48 of Metropol and Stadler , the second subparagraph of Article 17(6) of the Sixth Directive contains a standstill clause which provides for the retention of national exclusions from the right to deduct VAT which were applicable before the Sixth Directive entered into force.
31. The Court has explained in this respect that the objective of that provision is to allow the Member States, pending the establishment by the Council of the Community system of exclusions from the right to deduct VAT, to maintain any rules of national law excluding the right to deduct which were actually applied by their public authorities at the date of entry into force of the Sixth Directive ( Metropol and Stadler , paragraph 48).
32. In this context, where, after the entry into force of the Sixth Directive, the legislation of a Member State is amended in such a way as to reduce the scope of existing exclusions and thereby brings itself into line with the objective of the Sixth Directive, that legislation must be considered to be covered by the derogation provided for by the second subparagraph of Article 17(6) of the Sixth Directive and is not in breach of Article 17(2) thereof (Case C-345/99 Commission  v France , paragraph 22, and Metropol and Stadler , paragraph 45).
33. By contrast, 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) thereof, 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 , paragraph 17, and Metropol and Stadler , paragraph 46).
34. The same is true of any amendment subsequent to the entry into force of the Sixth Directive which increases the extent of exclusions applicable immediately before that amendment (Case C-40/00 Commission  v France , paragraph 18).
42. In the present case, it must be held that, by introducing, through an administrative practice that remained in force from November 1978 until 1999, a right to deduct in full input VAT relating to the provision of food and beverages by company canteens, the Danish administration precluded itself from subsequently limiting the right to deduct that tax. In this respect, it must be stressed that, in the context of the second subparagraph of Article 17(6) of the Sixth Directive, it is not only legislative acts in the strict sense that must be taken into account, but also administrative measures and practices of the public authorities of the Member State concerned ( Metropol and Stadler , paragraph 49).
46. First of all, it must be recalled that Article 6(2) of the Sixth Directive treats certain transactions for which no consideration is actually received by the taxable person as supplies of goods and provisions of services effected for consideration. The purpose of that provision is to ensure equal treatment as between a taxable person who applies goods or services for his own private use or for that of his staff and a final consumer who acquires goods or services of the same type (see, to that effect, Case C-230/94 Enkler  [1996] ECR I-4517, paragraph 35; Case C‑258/95 Fillibeck [1997] ECR I‑5577, paragraph 25; Joined Cases C‑322/99 and C‑323/99 Fischer and Brandenstein  [2001] ECR I‑4049, paragraph 56; and Case C‑412/03 Hotel Scandic Gåsabäck [2005] ECR I‑743, paragraph 23).
47. As the Danish Government argued in the written observations which it submitted to the Court, in a situation where a taxable person which has been able to deduct VAT on the purchase of goods used for its business applies those goods from its business for its own private use or that of its staff, that person becomes a final consumer of those goods and must be treated accordingly. From that point of view, Article 6(2)(a) of the Sixth Directive prevents the taxable person from escaping payment of VAT when it applies those goods for its own private use and from thus enjoying advantages to which it is not entitled by comparison with an ordinary consumer who buys the goods and pays VAT on them (see, to that effect, Case C-20/91 de Jong  [1992] ECR I-2847, paragraph 15; Enkler , paragraph 33; Case C‑415/98 Bakcsi  [2001] ECR I‑1831, paragraph 42; Fischer and Brandenstein , paragraph 56; and Hotel Scandic Gåsabäck , paragraph 23).
48. Similarly, Article 6(2)(b) of the Sixth Directive prevents a taxable person or members of its staff from obtaining, free of tax, services provided by the taxable person for which a private individual would have had to pay VAT ( Hotel Scandic Gåsabäck , paragraph 23).
49. It is apparent from the order for reference that, pursuant to the administrative practice in force from November 1978 until 1999, the provision, free of charge, of canteen meals to business contacts and staff in connection with work meetings was regarded as having taken place for consideration corresponding to the cost price of the provision of the services offered. Therefore, those services could not be considered to be ‘applied for private use’, since application for private use occurs only where no consideration is paid for the goods or the provision of services (see Hotel Scandic Gåsabäck , paragraphs 22 to 24).
58. In certain circumstances, however, the requirements of the business may make it necessary for the employer itself to provide meals (see, by analogy to transport provided by the employer to bring employees to their place of work, Fillibeck , paragraphs 29 and 30).