Oasis East sp. z o.o. v Minister Finansów.
Date: 2010-09-30
17. Since the wording of the question referred relates to both Article 17(6) of the Sixth Directive and Article 176 of Directive 2006/112, it is necessary to point out, first of all, that those two provisions are essentially identical.
18. In order to answer that question, it is necessary to bear in mind that the right of deduction laid down in Article 17(2) of the Sixth Directive, as an integral part of the VAT scheme, is a fundamental principle underlying the common system of VAT and in principle may not be limited (see Case C‑409/99 Metropol and Stadler  [2002] ECR I‑81, paragraph 42; Case C‑465/03 Kretztechnik  [2005] ECR I‑4357, paragraph 33; and Joined Cases C‑538/08 and C‑33/09 X Holding and Oracle Nederland  [2010] ECR I‑0000, paragraph 37).
19. The principle of the right to deduct VAT is, however, subject to the derogation in Article 17(6) of the Sixth Directive. 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‑371/07 Danfoss and AstraZeneca  [2008] ECR I‑9549, paragraph 28, and X Holding and Oracle Nederland , paragraph 38).
20. Since the Council has not adopted any such provisions, the Member States may retain their existing legislation in regard to exclusion from the right to deduct VAT. European Union law therefore does not yet contain any provision listing the expenditure excluded from the right to deduct (see Case C‑280/04 Jyske Finans  [2005] ECR I‑10683, paragraph 23, and Danfoss and AstraZeneca , paragraph 29).
21. With regard to the scope of the derogation scheme provided for in Article 17(6) of the Sixth Directive, the Court has, however, held that that provision presupposes that the exclusions which Member States may retain were lawful under Second Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes – Structure and procedures for application of the common system of value added tax (OJ, English Special Edition 1967, p. 16) (‘the Second Directive’), which predated the Sixth Directive (see Case C‑305/97 Royscot and Others  [1999] ECR I‑6671, paragraph 21, and X Holding and Oracle Nederland , paragraph 40).
23. Consequently, the power granted to the Member States in Article 17(6) of the Sixth Directive does not constitute an unfettered discretion to exclude all, or virtually all, goods and services from the right to deduct VAT, and thus to render meaningless the system established in Article 11(1) of the Second Directive. That power does not therefore apply to general exclusions and does not release Member States from the obligation sufficiently to define the goods and services in relation to which the right to deduct is excluded (see, to that effect, Royscot and Others , paragraphs 22 and 24, and Case C‑434/03 Charles and Charles-Tijmens  [2005] ECR I‑7037, paragraphs 33 and 35).
24. Furthermore, as the scheme here involves a derogation from the principle of the right to deduct VAT, it must be interpreted strictly (see Metropol and Stadler , paragraph 59, and Case C‑414/07 Magoora  [2008] ECR I‑10921, paragraph 28).
25. So far as concerns the main proceedings and the possible applicability of the derogation provided for in Article 17(6) of the Sixth Directive, it must be noted that that directive entered into force in Poland on the date of the accession of that Member State to the European Union, namely 1 May 2004. Therefore, that is the material date for the purposes of the application of the abovementioned provision in respect of that Member State ( Magoora , paragraph 27).
27. Consequently, Article 176 of Directive 2006/112 cannot give rise to a different interpretation, with regard to the scope of the exclusions under consideration, depending on whether the Member State concerned acceded to the European Union prior to 1 January 1979 or after that date. In those circumstances, the intervention of Article 176 of that directive did not affect the case-law relating to the interpretation of Article 17(6) of the Sixth Directive.
30. The Court has ruled that the Member States are not empowered to maintain exclusions from the right to deduct VAT which apply in a general manner to any expenditure related to the acquisition of goods or services (see, to that effect, Case C‑74/08 PARAT Automotive Cabrio  [2009] ECR I‑3459, paragraphs 28 and 29, and X Holding and Oracle Nederland , paragraph 44).
31. With regard, finally, to the view put forward by the Polish Government that the national legislation responds to the need to prevent tax evasion, it should be noted that, although the Court recognised, in Case C‑255/02 Halifax and Others  [2006] ECR I‑1609, paragraph 70, that the principle of prohibiting abusive practices also applies to the sphere of VAT, that principle cannot allow Member States to widen the scope of the derogation scheme here at issue. Furthermore, although, as is stated by the referring court, the restrictions provided for by Polish law were based on the need to prevent certain types of tax evasion and avoidance, Article 27 of the Sixth Directive provides, to that end, for a special procedure allowing the Council to authorise any Member State to introduce special derogating measures.