Metropol Treuhand WirtschaftsstreuhandgmbH v Finanzlandesdirektion für Steiermark and Michael Stadler v Finanzlandesdirektion für Vorarlberg.
Date: 2002-01-08
41 It should be noted, first, that the Sixth Directive entered into force for the Republic of Austria on the date of its accession to the European Union, 1 January 1995. That is therefore the material date for the purposes of the application of the second subparagraph of Article 17(6) of the Sixth Directive as regards that Member State.
42 Second, according to the fundamental principle which underlies the VAT system and which follows from Article 2 of the First and Sixth Directives, VAT applies to each transaction by way of production or distribution after deduction has been made of the VAT which has been levied directly on transactions relating to inputs. It is settled case-law that the right of deduction provided for in Article 17 et seq. of the Sixth Directive is an integral part of the VAT scheme and in principle may not be limited. That right must be exercised immediately in respect of all the taxes charged on input transactions. Any limitation on the right to deduct VAT affects the level of the tax burden and must be applied in a similar manner in all the Member States. Consequently, derogations are permitted only in the cases expressly provided for in the Sixth Directive (see, inter alia, Joined Cases C-177/99 and C-181/99 Ampafrance and Sanofi [2000] ECR I-7013, paragraph 34 and the case-law cited therein).
43 Article 17(2) of the Sixth Directive sets out in express and specific terms the principle of the taxable person's right to deduct the amounts invoiced as VAT for goods supplied or services rendered to him, in so far as such goods or services are used for the purposes of his taxable transactions.
44 The principle of the right to deduct VAT is none the less subject to the derogation in Article 17(6) of the Sixth Directive, and in particular the second subparagraph. 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-345/99 Commission v France [2001] ECR I-4493, paragraph 19). It is for the Community legislature to establish the Community system of exclusions from the right to deduct VAT and thereby to bring about the progressive harmonisation of national VAT legislation (see Case C-305/97 Royscot and Others [1999] ECR I-6671, paragraph 31).
45 Therefore, as the Court has already held in Case C-345/99 Commission v France, paragraph 22, where, after the entry into force of the Sixth Directive, the legislation of a Member State is amended so as to reduce the scope of existing exemptions and thereby brings itself into line with the objective of the Sixth Directive, that legislation must be considered to be covered by the derogation in the second subparagraph of Article 17(6) of the Sixth Directive and is not in breach of Article 17(2).
46 On the other hand, national legislation does not constitute a derogation permitted by the second subparagraph of Article 17(6) of the Sixth Directive, and infringes Article 17(2), if its effect is to increase, after the entry into force of the Sixth Directive, the extent of existing exclusions, thus diverging from the objective of that directive (Case C-40/00 Commission v France [2001] ECR I-4539, paragraph 17).
47 Finally, interpretation of the national legislation in order to determine its content at the date of entry into force of the Sixth Directive and to establish whether the effect of the 1996 regulations was to extend, after the entry into force of the Sixth Directive, the scope of existing exclusions is in principle, as the Austrian Government rightly submitted, within the jurisdiction of the national court. It is, however, for the Court of Justice to supply the national court with guidance on interpreting the Community concept of national laws within the meaning of the second subparagraph of Article 17(6) of the Sixth Directive, in order to enable it to carry out that determination.
48 In this respect, first, the second subparagraph of Article 17(6) of the Sixth Directive contains a freezing (or standstill) clause which provides for the retention of national exclusions from the right to deduct VAT which were applicable before the Sixth Directive entered into force (Ampafrance and Sanofi, paragraph 5). The objective of that provision is to allow the Member States, pending the establishment by the Council of the Community system of exclusions from the right to deduct VAT, to maintain any rules of national law excluding the right to deduct which were actually applied by their public authorities at the date of entry into force of the Sixth Directive.
49 In view of that objective, it follows that the term national laws within the meaning of the second subparagraph of Article 17(6) of the Sixth Directive does not refer only to legislative acts in the strict sense, but also to administrative measures and practices of the public authorities of the Member State concerned.
59 Provisions laying down derogations from the principle of the right to deduct VAT, which ensures the neutrality of that tax, are to be interpreted strictly.
61 That consultation enables the Commission and the other Member States to control the use by a Member State of the possibility of derogating from the general system of deducting VAT, by checking in particular whether the national measure in question satisfies the condition of adoption for cyclical economic reasons.
62 Article 17(7) of the Sixth Directive thus lays down a procedural obligation which the Member States must observe in order to be able to make use of the derogation it sets out (see, by analogy, with respect to Article 27(5) of the Sixth Directive, which also provides for derogations from the scheme of the directive, Case 324/82 Commission v Belgium [1984] ECR 1861, paragraph 28).
63 Consultation of the VAT Committee is thus clearly a condition precedent to the adoption of any measure on the basis of that provision.
64 By virtue of the general duty stated in the third paragraph of Article 189 of the EC Treaty (now the third paragraph of Article 249 EC), Member States are bound to observe all the provisions of the Sixth Directive (see Case C-97/90 Lennartz [1991] ECR I-3795, paragraph 33). In so far as an exclusion from the system of deductions has not been established in accordance with Article 17(7), which imposes a duty of consultation on the Member States, the national tax authorities may not rely as against a taxable person on a provision derogating from the principle of the right to deduct VAT set out in Article 17(1) of the Sixth Directive (see, by analogy, concerning Article 27(1) and (5) of the Sixth Directive, Lennartz, paragraph 33).
65 In the main proceedings, it is common ground that the Austrian authorities did not consult the VAT Committee before adopting the 1996 regulations, contrary to the requirement in the first sentence of Article 17(7) of the directive. The Austrian Government may not therefore rely on those regulations to the detriment of taxable persons (see, by analogy, concerning Article 27(1) and (5) of the Sixth Directive, Lennartz, paragraph 34).
68 It follows that the first sentence of Article 17(7) of the Sixth Directive does not authorise a Member State to adopt measures excluding goods from the system of deducting VAT which contain no indication as to their limitation in time and/or which form part of a package of structural adjustment measures whose aim is to reduce the budget deficit and allow State debt to be repaid.