Finanzamt Köln-Nord v Wolfram Becker.
Date: 2013-02-21
19. In order to answer the first question it should, first, be recalled, as the Court has previously held, that the existence of a direct and immediate link between a particular input transaction and one or more output transactions giving rise to the right to deduct is, in principle, necessary before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement (see Midland Bank , paragraph 24; Case C-408/98 Abbey National  [2001] ECR I-1361, paragraph 26; and Investrand , paragraph 23). The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them is part of the cost components of the taxable output transactions giving rise to the right to deduct (see Midland Bank , paragraph 30; and Abbey National , paragraph 28).
20. It is however also accepted that a taxable person has a right to deduct even where there is no direct and immediate link between a particular input transaction and one or more output 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, in effect, have a direct and immediate link with the taxable person’s economic activity as a whole (see, to that effect, inter alia, Midland Bank , paragraph 31, and Case C-465/03 Kretztechnik  [2005] ECR I-4357, paragraph 36).
22. Finally, it is apparent from the case-law that, in the context of the direct-link test, which the tax authorities and national courts are to apply, they should consider all the circumstances surrounding the transactions at issue (see, to that effect, Midland Bank , paragraph 25) and take account only of the transactions which are objectively linked to the taxable person’s taxable activity.
23. The obligation to take account only of the objective content of the transaction at issue is the most compatible with the aim pursued by the common system of VAT, which seeks to ensure legal certainty and to facilitate the application of VAT (see, to that effect, BLP Group , paragraph 24; Case C-108/99 Cantor Fitzgerald International  [2001] ECR I-7257, paragraph 33; and Case C-29/08 SKF  [2009] ECR I-10413, paragraph 47).
24. The Court has, furthermore, held that it is also in the light of their objective content that it is necessary to determine whether there is a direct and immediate link between the supply of goods or services utilised and a taxable output transaction or, exceptionally, a taxable input transaction (see, to that effect, Midland Bank , paragraph 32, and, by analogy, with regard to the evidence to be taken into account so as to establish the taxable person’s declared intention to allocate specific goods to a transaction subject to VAT, Case 268/83 Rompelman  [1985] ECR 655, p. 24).
29. In those circumstances, as the German government claimed, the fact that the existence of the direct and immediate link between a supply of services and the overall taxable economic activity must be determined in the light of the objective content of that supply of services does not preclude that the exclusive reason for the transaction at issue can also be taken into account, since that reason must be considered as a criterion for determining the objective content. Where it is clear that a transaction has not been performed for the purposes of the taxable activities of a taxable person, that transaction cannot be considered as having a direct and immediate link with those activities within the meaning of the Court’s case-law, even if that transaction would, in the light of its objective content, be subject to VAT.
33. Therefore, the answer to the first question referred is that the existence of a direct and immediate link between a given transaction and the taxable person’s activity as a whole for the purposes of determining whether the goods and services were used by that person ‘for the purposes of taxable transactions’ within the meaning of Article 17(2)(a) of the sixth directive depends on the objective content of the goods or services acquired by that taxable person. In this case, the supplies of lawyers’ services, whose purpose is to avoid criminal penalties against natural persons, managing directors of a taxable undertaking, do not give that undertaking the right to deduct as input tax the VAT due on the services supplied.
The second question