X Holding BV v Staatssecretaris van Financiën (C-538/08) and Oracle Nederland BV v Inspecteur van de Belastingdienst Utrecht-Gooi (C-33/09).
Date: 2010-04-15
37. In order to answer those questions, it is necessary first of all to bear in mind that the right of deduction laid down in Article 6(2) of the Sixth Directive, as an integral part of the VAT scheme, is a fundamental principle underlying the common system of VAT and in principle may not be limited (see Joined Cases C‑110/98 to C‑147/98 Gabalfrisa and Others  [2000] ECR I‑1577, paragraph 43; Case C‑409/99 Metropol and Stadler  [2002] ECR I‑81, paragraph 42; and Case C‑465/03 Kretztechnik [2005] ECR I‑4357, paragraph 33).
38. The principle of the right to deduct is, however, subject to the derogation in Article 17(6) of the Sixth Directive, and in particular the second subparagraph thereof. 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, and Case C‑371/07 Danfoss and AstraZeneca  [2008] ECR I‑9549, paragraph 28).
39. However, as none of the proposals put to the Council by the Commission under the first subparagraph of Article 17(6) of the Sixth Directive has been adopted by the Council, the Member States may retain their existing legislation in regard to exclusion from the right to deduct VAT until such time as the European Union legislature has established a common system of exclusions and thus brought about the progressive harmonisation of national VAT legislation. European Union law therefore does not yet contain any provision listing the expenditure excluded from the right to deduct VAT (see Case C-280/04 Jyske Finans [2005] ECR I‑10683, paragraph 23, and Danfoss and AstraZeneca , paragraph 29).
40. None the less, the Court has held that Article 17(6) of the Sixth Directive presupposes that the exclusions which Member States may retain pursuant to that provision were lawful under the Second Directive, which pre-dated the Sixth Directive (see Case C‑305/97 Royscot and Others [1999] ECR I‑6671, paragraph 21).
42. Article 11(4) of the Second Directive did not therefore confer on Member States an unfettered discretion to exclude all, or almost all, goods and services from the right of deduction and thereby deprive of its substance the system established by Article 11(1) of the Second Directive (see, to that effect, Royscot and Others , paragraph 24).
43. Furthermore, and in view of the strict interpretation which it must be given as a derogation, the second subparagraph of Article 17(6) of the Sixth Directive cannot be regarded as permitting a Member State to maintain a restriction of the right to deduct VAT which may also apply in a general manner to any expenditure related to the acquisition of goods, irrespective of the nature or purpose of that restriction (see Case C‑74/08 PARAT Automotive Cabrio  [2009] ECR I-0000, paragraph 28).
44. It follows from the foregoing that the option given to Member States by the second subparagraph of Article 17(6) of the Sixth Directive presupposes that those Member States adequately define the nature or the purpose of the goods and services in respect of which the right to deduct is excluded in order to ensure that that option is not used to authorise general exclusions from that system (see, to that effect, PARAT Automotive Cabrio , paragraph 29).
45. It is thus necessary to examine whether categories of expenditure that have been excluded from the right of deduction, such as those referred to in the national legislation at issue in the main proceedings, have been adequately defined.
50. As regards categories of expenditure such as those relating to the provision of food and drink as well as accommodation, these must be considered to be adequately described for the purposes of the requirements laid down by the abovementioned case-law.
51. As the Gerechtshof Amsterdam states, the category ‘food and drink’ concerns foodstuffs and beverages as well as the goods and services involved in the making and preparation of such foodstuffs and beverages. The other category of expenditure, namely that relating to the provision of accommodation, comprises, as the Gerechtshof Amsterdam points out, making accommodation available to members of the trader’s staff as well as the cost incurred in using agency or brokerage services with a view to providing such accommodation.
67. So far as concerns compliance of such a legislative amendment with Article 17(6) of the Sixth Directive, the Court has held that, where, after the entry into force of the Sixth Directive, a Member State amends the scope of existing exemptions from deduction so as to reduce that scope and thereby brings its legislation 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) thereof (see Commission v France , paragraph 22; Metropol and Stadler , paragraph 45; and Danfoss and AstraZeneca , paragraph 32).