Administration de l'enregistrement et des domaines v Eurodental Sàrl.
Date: 2006-12-07
26. Under Article 17(2)(a) of the Sixth Directive, where a taxable person supplies goods or services to another taxable person who uses them for an exempt transaction pursuant to Article 13A of the directive, the latter person is not, as a rule, entitled to deduct the input VAT paid as, in such a case, the goods and services concerned are not used for taxable transactions (see, to that effect, Case 8/81 Becker  [1982] ECR 53, paragraph 44, and Case C-302/93 Debouche  [1996] ECR I-4495, paragraph 16).
28. As regards transactions of an intra-Community nature, Article 15(1) to (3) of the Sixth Directive, in the version applicable before 1 January 1993, provided for the exemption of supplies of goods and supplies of services relating to goods which were dispatched or transported to a destination outside of the territory of the Member State. As from that date, the exemption of those supplies to another Member State has been provided for in the first subparagraph of Article 28cA(a) of that directive. Under Article 17(3)(b) of the directive, as amended by Article 28f(1) thereof, the deduction of input VAT on such transactions is permitted in the Member State of the departure of the dispatch or intra-Community transport of the goods (see Case C-245/04 EMAG Handel Eder  [2006] ECR I-3227, paragraph 30).
33. It is only by way of exception that the Sixth Directive provides, in particular in Article 17(3)(b), for the right to deduct VAT on goods or services used for exempt transactions (see, to that effect, Case C-4/94 BLP  [1995] ECR I-983, paragraph 23). Therefore, the terms used by the directive in that regard must be interpreted strictly.
41. It is thus apparent from the objective of the common system of VAT and of the transitional arrangements introduced by Directive 91/680 for the taxation of trade between the Member States that a taxable person who benefits from exemption and is consequently not entitled to deduct input tax within the territory of a Member State is not entitled to so either where the transaction concerned is of an intra-Community nature (see, to that effect, Debouche , paragraph 15).
43. Secondly, as regards the scheme of the Sixth Directive, it must be pointed out that the exemptions provided for in Article 13A, as they benefit only certain activities in the public interest which are listed and described in detail in that provision, are of a specific nature (see, to that effect, Case C-307/01 D’Ambrumenil and Dispute Resolution Services  [2003] ECR I-13989, paragraph 54). On the other hand, the exemption for transactions of an intra-Community nature which arises from Article 15 of that directive, for the period before 1 January 1993, and is provided for in Article 28c thereof, for the period after that date, is of a general nature, as it refers in an unspecified manner to economic transactions between the Member States.
46. Thirdly and lastly, as regards the principle of fiscal neutrality, it must be recalled that that principle precludes, in particular, treating similar supplies of services, which are thus in competition with each other, differently for VAT purposes (see, to that effect, Case C-498/03 Kingscrest Associates and Montecello  [2005] ECR I-4427, paragraph 54).
47. If the transactions at issue in the main proceedings gave rise to the right to deduct tax where they were of an intra-Community nature, that principle would not be observed as the same transactions do not give rise to a deduction where they are carried out within the territory of a Member State. Consequently, taxable persons carrying out intra-Community transactions would be treated more favourably than taxable persons effecting domestic transactions (see, to that effect, Debouche , paragraph 19).
50. It must be borne in mind that the Community system of VAT is the result of a gradual harmonisation of national legislation pursuant to Articles 93 EC and 94 EC. The Court has consistently held that this harmonisation, as brought about by successive directives and in particular by the Sixth Directive, is still only partial (Case C-165/88 ORO Amsterdam Beheer and Concerto  [1989] ECR I-4081, paragraph 21).
51. Thus, the harmonisation envisaged has not yet been achieved in so far as Article 28(3)(a) of the Sixth Directive authorises the Member States to retain certain provisions of their national legislation predating that directive which would, without that authorisation, be incompatible with the directive (see, to that effect, Case C-36/99 Idéal tourisme  [2000] ECR I-6049, paragraph 38).
52. Whilst it is true that a Member State which, like the Federal Republic of Germany, retains such provisions in its national legislation does not infringe the Sixth Directive (see, to that effect, Idéal tourisme , paragraph 38), the fact remains that the taxation allowed by Article 28(3)(a) of the directive is not harmonised taxation that is an integral part of the VAT regime as arranged by the Sixth Directive for certain activities in the public interest, but taxation authorised only for a transitional period (see, to that effect, Case C-169/00 Commission  v Finland [2002] ECR I-2433, paragraph 34). The objective of Article 28(4) of the Sixth Directive is the abolition of such derogating and transitional arrangements (see, to that effect, Case C-136/97 Norbury Developments  [1999] ECR I-2491, paragraph 20, and Idéal tourisme , paragraph 32).
54. The exceptions provided for in Article 28(3)(a) of the Sixth Directive must be strictly interpreted (see, to that effect, Commission  v Finland , paragraph 34) and their scope cannot therefore be extended to Member States which have complied with the principle enshrined in the Sixth Directive in exempting certain activities in the public interest listed in Article 13 of that directive.  It cannot be accepted that the obligation of those Member States not to allow the deduction, under Article 17(2)(a) of the directive, of input VAT on those exempt activities can be affected by the decision of another Member State to opt for derogating and transitional arrangements, particularly because the abolition of those arrangements is the objective of Article 28(4) of the Sixth Directive.
55. Such an extension would also be contrary to Article 28(3)(a) of the Sixth Directive since that provision does not permit a Member State which, like the Grand Duchy of Luxembourg, exempts the transaction at issue in accordance with the harmonised system, as is provided for in Article 13 of the directive, to introduce or reintroduce a taxation scheme in respect of that transaction, thus giving rise to the right to deduct input VAT, even for the purpose of remedying a possible distortion of competition undermining the Community principle of equal treatment, which is reflected in the area of VAT by the principle of fiscal neutrality (see, to that effect, Case C-35/90 Commission  v Spain  [1991] ECR I‑5073, paragraphs 8 and 9, and Idéal tourisme , paragraph 33). On the other hand, in view of the transitional nature of the derogating taxation arrangements chosen by the Federal Republic of Germany, there is nothing to prevent it, in accordance with the objective of Article 28(4) of the Sixth Directive, from also deciding to exempt, as generally required by that directive, the transaction in question in order to remove such a distortion of competition (see, to that effect, Idéal tourisme , paragraph 33).
56. In that regard, it must, in particular, be emphasised that the fact that maintenance of the derogating and transitional arrangements in question in certain Member States may, in some circumstances, give rise to distortions of competition in Germany, cannot in any way authorise that Member State to create itself distortions of competition to the detriment of the Member States which have transposed the provisions of the Sixth Directive (see, to that effect, Case C-74/91 Commission  v Germany  [1992] ECR I-5437, paragraph 25). That would be the case here if Eurodental were permitted to deduct VAT in Luxembourg, since, in such a situation, domestic transactions in that Member State, which do not give rise to the right to deduct input VAT, would be treated less favourably than intra-Community transactions which originated there.
57. As regards the particular situation relied on by the German Government, it is therefore for the Community legislature to do everything necessary to establish the definitive Community system of exemptions from VAT and thereby to bring about the progressive harmonisation of national VAT laws, which is the only means of abolishing the distortions of competition stemming from the existence of the derogating and transitional arrangements permitted by the Sixth Directive (see, to that effect, Case C-305/97 Royscot and Others  [1999]  ECR I‑6671, paragraph 31, and Idéal tourisme , paragraph 39).