Gabalfrisa SL and Others v Agencia Estatal de Administración Tributaria (AEAT).
Date: 2000-03-21
33 In order to determine whether a body making a reference is a court or tribunal for the purposes of Article 177 of the Treaty, which is a question governed by Community law alone, the Court takes account of a number of factors, such as whether the body is established by law, whether it is permanent, whether its jurisdiction is compulsory, whether its procedure is inter partes, whether it applies rules of law and whether it is independent (see, in particular, Case C-54/96 Dorsch Consult v Bundesbaugesellschaft Berlin [1997] ECR I-4961, paragraph 23, and the case-law cited therein).
39 Finally, it is important to note that Article 90 of Law No 230/1963 ensures a separation of functions between, on the one hand, the departments of the tax authority responsible for management, clearance and recovery and, on the other hand, the Tribunales Económico-Administrativos which rule on complaints lodged against the decisions of those departments without receiving any instruction from the tax authority.
43 It should be noted, first, that the Court has consistently held that the right to deduct 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. The right to deduct must be exercised immediately in respect of all the taxes charged on transactions relating to inputs (see, in particular, Case C-62/93 BP Supergas v Greek State [1995] ECR I-1883, paragraph 18).
44 Next, it must be recalled that the deduction system is meant 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 that all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT, are taxed in a wholly neutral way (see, in particular, Case 268/83 Rompelman v Minister van Financiën [1985] ECR 655, paragraph 19, and Case C-37/95 Ghent Coal Terminal [1998] ECR I-1, paragraph 15).
45 As the Court held in Rompelman, paragraph 23, and in Case C-110/94 INZO v Belgian State [1996] ECR I-857, paragraph 16, the principle that VAT should be neutral as regards the tax burden on a business requires that the first investment expenditure incurred for the purposes of and with the view to commencing a business must be regarded as an economic activity and it would be contrary to that principle if such an activity did not commence until the business was actually exploited, that is to say until it began to yield taxable income. Any other interpretation of Article 4 of the directive would burden the trader with the cost of VAT in the course of his economic activity without allowing him to deduct it in accordance with Article 17, and would create an arbitrary distinction between investment expenditure incurred before actual exploitation of a business and expenditure incurred during exploitation.
46 Article 4 of the Sixth Directive does not, however, preclude the tax authority from requiring objective evidence in support of the declared intention to commence economic activities which will give rise to taxable transactions. In that context, it is important to state that a taxable person acquires that status definitively only if he made the declaration of intention to begin the envisaged economic activities in good faith. In cases of fraud or abuse, in which, for example, the person concerned, on the pretext of intending to pursue a particular economic activity, in fact sought to acquire as his private assets goods in respect of which a deduction could be made, the tax authority may claim repayment of the sums retroactively on the ground that those deductions were made on the basis of false declarations (Rompelman, paragraph 24, and INZO, paragraphs 23 and 24).
47 It follows that a person who has the intention, confirmed by objective evidence, to commence independently an economic activity within the meaning of Article 4 of the Sixth Directive and who incurs the first investment expenditure for those purposes must be regarded as a taxable person. Acting in that capacity, he has therefore, in accordance with Article 17 et seq. of the Sixth Directive, the right immediately to deduct the VAT payable or paid on the investment expenditure incurred for the purposes of the transactions which he intends to carry out and which give rise to the right to deduct, without having to wait for the actual exploitation of his business to begin.
51 In that regard, it is important to note that, as the Commission rightly pointed out, Article 22(1) of the Sixth Directive imposes only the obligation for taxable persons to state when their activity commences, changes or ceases, but in no way authorises Member States, in the event of such a declaration not being submitted, to defer the exercise of the right to deduct until the time at which taxable transactions actually begin to be carried out on a regular basis or to deprive the taxable person of the exercise of that right.
52 Furthermore, it must be noted that the measures which the Member States may adopt under Article 22(8) of the Sixth Directive in order to ensure the correct levying and collection of the tax and for the prevention of fraud must not go further than is necessary to attain such objectives. They may not therefore be used in such a way that they would have the effect of systematically undermining the right to deduct VAT, which is a fundamental principle of the common system of VAT established by the relevant Community legislation (see, to that effect, Joined Cases C-286/94, C-340/95, C-401/95 and C-47/96 Molenheide and Others v Belgian State [1997] ECR I-7281, paragraph 47).
53 The fact remains that the national legislation at issue in the main proceedings not only makes the exercise of the right to deduct VAT paid by a taxable person liable thereto before he starts regularly carrying out taxable transactions conditional upon the submission of an express request and compliance with a time-limit of one year between such a request and the actual commencement of taxable transactions, but also penalises infringement of those requirements by systematic deferment of the exercise of the right to deduct until the time at which taxable transactions actually begin to be carried out on a regular basis. Such legislation may even lead to the forfeiture of that right if those transactions do not commence or if the right to deduct is not exercised within five years from the time at which that right arises.
54 In those circumstances, such legislation goes beyond what is necessary to attain the objectives of ensuring the correct levying and collection of the tax and preventing fraud.