AES-3C Maritza East 1 EOOD v Direktor na Direktsia ‘Obzhalvane i upravlenie na izpalnenieto’ pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite, Plovdiv.
Date: 2013-07-18
25. With a view to answering that question, it should be recalled, firstly, that the right of deduction provided for in Article 168(a) of Directive 2006/112 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-29/08 SKF  [2009] ECR I-10413, paragraph 55).
26. The deduction system 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 thus ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see, inter alia, SKF , paragraph 56 and the case-law cited).
27. In accordance with settled case-law, the existence of a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to the right to deduct is necessary, in principle, before the taxable person is entitled to deduct input VAT and in order to determine the extent of such entitlement. The right to deduct VAT charged on the acquisition of input goods or services presupposes that the expenditure incurred in acquiring them was a component of the cost of the output transactions that gave rise to the right to deduct ( SKF , paragraph 57 and the case-law cited).
28. A taxable person also has a right to deduct even where there is no direct and immediate link between a particular input transaction and an output transaction or 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 have a direct and immediate link with the taxable person’s economic activity as a whole (see, inter alia, SKF , paragraph 58 and the case-law cited).
29. It is, moreover, clear from the case-law of the Court that Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1) is to be interpreted as meaning that transport provided for employees free of charge by the employer between their homes and the workplace in a company vehicle serves, in principle, the employees’ private purposes and thus serves purposes other than those of the business. However, this does not apply to cases where, having regard to certain circumstances, such as the difficulty of finding other suitable means of transport and changes in the place of work, the requirements of the business make it necessary for the employer to provide transport for employees, in which case the supply of those transport services is not effected for purposes other than those of the business (see, to that effect, Fillibeck , paragraph 34).
33. Next it must be borne in mind that the Court has already held that the fact that personal benefit may be derived by employees from such transport must be regarded as being of only secondary importance compared to the needs of the business (see, to that effect, Fillibeck , paragraph 30).
37. Finally, it must be noted that the interpretation that, in a situation such as that at issue in the main proceedings, the taxable person can be entitled, pursuant to Articles 168(a) and 176 of Directive 2006/112, to the right to a deduction in respect of the expenses incurred for the needs of its business also more closely meets the objectives of the VAT system of ensuring legal certainty and a correct and coherent application of the provisions of that directive (see, to that effect, Case C‑108/99 Cantor Fitzgerald International  [2001] ECR I‑7257, paragraph 33).
38. By dissociating the right to a deduction of the input VAT paid in respect of expenses incurred for the needs of the economic activity of a taxable person from the legal relation which links the taxable person to the persons working for its undertaking – and for whose work those expenses were incurred – that interpretation simplifies the application of the provisions of the Sixth Directive and contributes to ensuring accurate and reliable collection of VAT (see, to that effect, Case C‑421/10 Stoppelkamp  [2011] ECR I‑0000, paragraph 34, and Case C‑218/10 ADV Allround  [2012] ECR I‑0000, paragraph 31).
41. In order to answer that question, it must first be noted that the interpretation of the national legislation in order to determine its content at the date of accession of a new Member State to the European Union and to establish whether the effect of that legislation was to extend, after that accession, the scope of existing exclusions is in principle within the jurisdiction of the national court (see, to that effect, Case C‑414/07 Magoora  [2008] ECR I‑10921, paragraph 32).
42. Next, it must be observed that, in proceedings under Article 267 TFEU, which is based on a clear separation of functions between the national courts and the Court of Justice, any assessment of the facts in the case is a matter for the national court. However, in order to give the national court a useful answer, the Court may, in a spirit of cooperation with national courts, provide it with all the guidance that it deems necessary (see, to that effect, Magoora , paragraph 33).
43. In that regard, it must be pointed out that the second paragraph of Article 176 of Directive 2006/112 contains a ‘standstill’ clause, which provides for the retention by States acceding to the European Union, of national exclusions from the right to deduct VAT which were applicable before the date of their accession (see, to that effect, Joined Cases C‑177/99 and C‑181/99 Ampafrance and Sanofi  [2000] ECR I‑7013, paragraph 5). None the less, the ‘standstill’ clause, provided for in the second paragraph of Article 176 of Directive 2006/112, is not intended to allow a new Member State to amend its domestic legislation on its accession to the European Union in a way which diverts that legislation from the objectives of that directive ( Magoora , paragraph 39).
44. The objective of that provision is therefore 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 Directive 2006/112 (see, to that effect, Magoora , paragraph 35).
45. However, it must be recalled, according to the settled case-law of the Court, that national legislation does not constitute a derogation permitted by the second paragraph of Article 176 of Directive 2006/112 if its effect is to increase, after the entry into force of that directive, the extent of existing exclusions actually applied, thus diverging from the objective of that directive (see, to that effect, Magoora , paragraphs 37 and 38).
46. In those conditions, the repealing, on the date of accession of the Republic of Bulgaria to the European Union, of internal provisions and their replacement, on the same date, by other internal provisions does not permit, as such, the presumption that the Member State concerned disregarded the second paragraph of Article 176 of Directive 2006/112 provided, however, that that replacement did not lead to an increase, from that date, in the extent of earlier national exclusions.
47. In the main proceedings, it is, therefore, as pointed out in paragraph 41 of this judgment, for the referring court, which alone has jurisdiction to interpret its national law, to assess whether the amendments made, on the accession of the Republic of Bulgaria to the European Union, to the national law in question had the effect of increasing, as compared with the earlier national provisions, the scope of the limitations on the right to a deduction of input VAT paid in respect of the acquisition of goods and services which can be regarded as having a direct and immediate link with the general costs connected with the economic activities of a taxable person as a whole.
48. However, it must be noted in that regard that, according to the request for a preliminary ruling itself, the amendment made to the ZDDS when the Republic of Bulgaria acceded to the European Union had the effect of extending the scope of the limitations as compared with the situation existing before that accession, since none of the limitations in the exhaustive list contained in the ZDDS in force before that accession were connected with the destination of supplies or services free of charge which, having regard to the case-law referred to in paragraph 44 of the present judgment, is contrary to the second paragraph of Article 176 of Directive 2006/112.
49. The fact that the Court has held, in paragraph 72 of its judgment in Case C‑118/11 Eon Aset Menidjmunt  [2012] ECR I‑0000, that Article 70(1) of the ZDDS does not restrict the right to deduct within the meaning of Article 176 of Directive 2006/112 is not, as such, capable of calling this finding into question.
50. Firstly, the Court stated, in paragraph 73 of that judgment, that a Member State cannot refuse to allow taxable persons who have chosen to treat capital goods used both for business and private purposes as business assets to deduct immediately and in full the input VAT payable on the acquisition of those goods, which they are entitled to do in accordance with the settled case-law of the Court.
51. Secondly, as is apparent from paragraphs 45 and 46 of the present judgment, account must also be taken of the actual application of the national provisions on exclusions from the right to a deduction of VAT and the effects which follow for the taxable persons.
52. As follows from paragraph 39 of the present judgment, Directive 2006/112 must be interpreted as precluding national legislation, such as that referred to in the first question, which has the effect of depriving a taxable person from the right to a deduction of input VAT paid in respect of costs which can be regarded as having a direct and immediate link with the general costs connected with all the economic activities of that taxable person.
53. It is for the referring court to interpret domestic law, so far as possible, in the light of the wording and the purpose of Directive 2006/112 with a view to achieving the results sought by the latter, favouring the interpretation of the national rules which is the most consistent with that purpose in order thereby to achieve an outcome compatible with the provisions of the directive (see, to that effect, Case C-212/04 Adeneler and Others  [2006] ECR I-6057, paragraph 124), setting aside, if necessary, any provision of national law which may conflict with that law (see, to that effect, Case C-144/04 Mangold  [2005] ECR I-9981, paragraph 77).
54. Having regard to all those considerations, the answer to the second question is that the second paragraph of Article 176 of Directive 2006/112 is to be interpreted as precluding a Member State, on its accession to the European Union, from introducing a limitation on the right to a deduction under a national legislative provision which provides for the exclusion from the right to a deduction of goods and services intended to be supplied free of charge or for activities outside the scope of the taxable person’s economic activity, when such an exclusion was not provided for in the national legislation in force until the date of that accession.
It is for the referring court to interpret the provisions of domestic law at issue in the main proceedings, so far as possible, in accordance with European Union law. Where such an interpretation proves impossible, the referring court is required to set aside those provisions on the ground that they are incompatible with the second paragraph of Article 176 of Directive 2006/112.
The third question