I/S Fini H v Skatteministeriet.
Date: 2005-03-03
19. The Court observes, first of all, that Article 4(1) of the Sixth Directive defines ‘taxable person’ by reference to the term ‘economic activity’. It is the existence of such an activity which establishes the status of ‘taxable person’ to whom the Sixth Directive gives the right to deduct.
21. The case-law also makes clear that an economic activity within the meaning of the Sixth Directive need not consist of a single act but may consist of a series of consecutive acts (see, in particular, Case 268/83 Rompelman  [1985] ECR 655, paragraph 22).
22. Accordingly, preparatory acts must be regarded as economic activities within the meaning of the Sixth Directive. Any person performing such preparatory acts is consequently regarded as a taxable person within the meaning of Article 4 of that directive and is entitled to deduct ( Rompelman , paragraph 23, and Case C‑110/94 INZO  [1996] ECR I‑857, paragraph 18). Entitlement to deduct is retained, even if it is subsequently decided, in view of the results of a profitability study, not to move to the operational phase but to put the company into liquidation, with the result that the economic activity envisaged does not give rise to taxed transactions ( INZO , paragraph 20).
23. With respect to the transfer of a totality of assets, the Court has held that, where the taxable person no longer effects transactions after using services provided for that purpose, the costs of those services must be regarded as part of the economic activity of his business as a whole before the transfer and that he must be recognised as being entitled to deduct. Any other interpretation would amount to drawing an arbitrary distinction between, on the one hand, expenditure incurred for the purposes of a business before it is actually operated and that incurred during its operation and, on the other hand, the expenditure incurred in order to terminate its operation (see Case C‑408/98 Abbey National  [2001] ECR I‑1361, paragraph 35, and Case C‑137/02 Faxworld  [2004] ECR I‑0000, paragraph 39).
25. Such an interpretation is justified by the deduction system, with regard to which the Court has repeatedly held that it 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 their purpose or results, provided that they are themselves subject in principle to VAT (see, to that effect, Rompelman , paragraph 19; Case C-37/95 Ghent Coal Terminal  [1998] ECR I-1, paragraph 15; Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others  [2000] ECR I-1577, paragraph 44; and Case C-98/98 Midland Bank  [2000] ECR I-4177, paragraph 19; and Abbey National , paragraph 24).
26. However, a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to entitlement to deduct is necessary before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement ( Midland Bank , paragraph 24).
32. In that regard, the Court has already held that Community law cannot be relied on for abusive or fraudulent ends (see, inter alia, Case C‑367/96 Kefalas and Others  [1998] ECR I‑2843, paragraph 20, and Case C‑373/97 Diamantis  [2000] ECR I‑1705, paragraph 33). That would be the case, for example, if Fini H, whilst relying on the right to deduct VAT in respect of the payment of rent and charges relating to the period after the cessation of the restaurant business, continued to use the premises previously used as a restaurant as premises for purely private purposes.
33. If the tax authorities were to conclude that the right to deduct has been exercised fraudulently or abusively, they would be entitled to demand, with retrospective effect, repayment of the amounts deducted (see, inter alia, Rompelman , paragraph 24; INZO , paragraph 24; and Gabalfrisa , paragraph 46).
34. It is, in any event, a matter for the national court to refuse to allow the right to deduct where it is established, on the basis of objective evidence, that that right is being relied on for fraudulent or abusive ends.