Commissioners for Her Majesty's Revenue and Customs v Volkswagen Financial Services (UK) Ltd.
Date: 2018-10-18
29


According to the Court’s case-law, where a transaction comprises a bundle of elements and acts, regard must be had to all the circumstances in which the transaction in question takes place in order to determine whether that operation gives rise, for the purposes of VAT, to two or more distinct supplies or to one single supply (judgment of 18 January 2018, Stadion Amsterdam, C‑463/16, EU:C:2018:22, paragraph 21 and the case-law cited).
30


The Court has also held, first, that it follows from the second subparagraph of Article 1(2) of the VAT Directive that every transaction must normally be regarded as distinct and independent and, secondly, that a transaction which comprises a single supply from an economic point of view should not be artificially split, so as not to distort the functioning of the VAT system. There is a single supply where two or more elements or acts supplied by the taxable person to the customer are so closely linked that they form, objectively, a single, indivisible economic supply, which it would be artificial to split (see, to that effect, order of 14 April 2016, Gabarel, C‑555/15, not published, EU:C:2016:272, paragraph 44, and judgment of 4 October 2017, Federal Express Europe, C‑273/16, EU:C:2017:733, paragraphs 37 and 38 and the case-law cited).
31


There is also a single supply where one or more elements are to be regarded as constituting the principal supply, while other elements are to be regarded, by contrast, as one or more ancillary supplies which share the tax treatment of the principal supply. In particular, a supply must be regarded as ancillary to a principal supply if it does not constitute for customers an end in itself but a means of better enjoying the principal service supplied (judgment of 18 January 2018, Stadion Amsterdam, C‑463/16, EU:C:2018:22, paragraph 23 and the case-law cited).
32


In the context of the cooperation established by Article 267 TFEU, it is for the national courts to determine whether that is the situation in a particular case and to make all definitive findings of fact in that regard (judgment of 10 March 2011, Bog and Others, C‑497/09, C‑499/09, C‑501/09 and C‑502/09, EU:C:2011:135, paragraph 55 and the case-law cited).
33


Thus, in order to determine whether a commercial transaction constitutes independent services or a single service for the purposes of VAT, it is for the national court to examine the characteristic elements of the transaction concerned, taking into account the economic objective of that transaction and the interests of the recipients thereof (see, to that effect, judgment of 8 December 2016, Stock ‘94, C‑208/15, EU:C:2016:936, paragraphs 28 and 29 and the case-law cited).
35


In particular, as the United Kingdom Government contended, that breakdown of the hire purchase transaction appears to be compatible with the Court’s case-law, according to which although the exemptions laid down in Article 135 of the VAT Directive must be interpreted strictly, the fact remains that, in the absence of any precision as to the identity of the lender or the borrower, the expression ‘the granting and the negotiation of credit, within the meaning of paragraph 1(b) of that article, cannot refer solely to loans and credit granted by banking and financial institutions.
36


Accordingly, deferred payment of the purchase price of goods, in return for payment of interest, may be regarded as a grant of credit, which constitutes an exempt transaction under that provision, provided that the payment of interest does not constitute part of the consideration obtained for the supply of goods or services, but consideration for the grant of that credit (see, to that effect, judgment of 27 October 1993, Muys’ en De Winter’s Bouw- en Aannemingsbedrijf, C‑281/91, EU:C:1993:855, paragraphs 12, 13 and 19).
38


The Court has already held that it is apparent from Article 168 of the VAT Directive that a taxable person is, in principle, entitled to deduct input tax where it is established that the goods and services relied on to give entitlement to that right are used by that taxable person for the purposes of his own taxed transactions, and that, as inputs, those goods or services are supplied by another taxable person (see, to that effect, judgment of 22 June 2016, Gemeente Woerden, C‑267/15, EU:C:2016:466, paragraphs 34 and 35).
39


According to settled case-law of the Court, that right of taxable persons is a fundamental principle of the common system of VAT established by EU law, so that that right is an integral part of the VAT scheme and in principle may not be limited (see, to that effect, judgment of 22 June 2016, Gemeente Woerden, C‑267/15, EU:C:2016:466, paragraphs 30 and 31 and the case-law cited).
40


The deduction system is intended 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 the purpose or results of those activities, provided that they are themselves subject to VAT (judgment of 22 June 2016, Gemeente Woerden, C‑267/15, EU:C:2016:466, paragraph 32).
41


In accordance also with the Court’s settled case-law, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct is necessary, in principle, before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement. 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 (judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments, C‑132/16, EU:C:2017:683, paragraph 28 and the case-law cited).
42


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 (judgment of 14 September 2017, Iberdrola Inmobiliaria Real Estate Investments, C‑132/16, EU:C:2017:683, paragraph 29 and the case-law cited).
45


So far as concerns the fact that the general costs at issue in the main proceedings are not clearly reflected in the price of the taxed transactions of supplies of vehicles, it should be recalled that the result of those economic transactions is irrelevant for the right to deduct provided that the activity itself is subject to VAT (judgment of 22 June 2016, Gemeente Woerden, C‑267/15, EU:C:2016:466, paragraph 40 and the case-law cited).
46


As the Court has already held, the right to deduct VAT must be guaranteed, without it being subjected to a criterion relating, inter alia, to the result of the economic activity of the taxable person, in accordance with Article 9(1) of the VAT Directive under which a taxable person ‘shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity’ (judgment of 5 July 2018, Marle Participations, C‑320/17, EU:C:2018:537, paragraph 44).
47


Nevertheless, the extent of the right to deduct varies according to the intended use of the goods and services at issue. Whilst, for goods and services intended to be used exclusively for the carrying out of taxable transactions, taxable persons are entitled to deduct all the tax that has been charged on their acquisition or supply, for goods and services intended for a mixed use, it is apparent from Article 173(1) of the VAT Directive that the right to deduct is limited to such proportion of the VAT as is attributable to the transactions in respect of which VAT is deductible that are carried out by means of those goods or services (see, to that effect, judgment of 9 June 2016, Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft, C‑332/14, EU:C:2016:417, paragraph 25).
51


According to the Court’s case-law, Member States may, as a result of that provision, apply, for a given transaction, a method or allocation key other than the turnover-based method, on condition that the method used guarantees a more precise determination of the deductible proportion of the input VAT than that arising from the application of the turnover-based method (judgment of 8 November 2012, BLC Baumarkt, C‑511/10, EU:C:2012:689, paragraph 24).
52


Thus, any Member State which decides to authorise or compel the taxable person to make the deduction on the basis of the use made of all or part of the goods and services must ensure that the method for calculating the right to deduct makes it possible to ascertain with the greatest possible precision the portion of VAT relating to transactions in respect of which VAT is deductible. The principle of neutrality, which forms an integral part of the common system of VAT, requires that the method by which the deduction is calculated objectively reflects the actual share of the expenditure resulting from the acquisition of mixed use goods and services that may be attributed to transactions in respect of which VAT is deductible (see, to that effect, judgment of 10 July 2014, Banco Mais, C‑183/13, EU:C:2014:2056, paragraphs 30 and 31).
53


In that regard, the Court has nevertheless specified that the method chosen must not necessarily be the most precise possible, but that, as is apparent from paragraph 51 of this judgment, it must be able to guarantee a more precise result than the result which would arise from the application of the turnover-based allocation key (see, to that effect, judgment of 9 June 2016, Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft, C‑332/14, EU:C:2016:417, paragraph 33).