P. Charles and T. S. Charles-Tijmens v Staatssecretaris van Financiën.
Date: 2005-07-14
23. It is settled case-law that, where capital goods are used both for business and for private purposes the taxpayer has the choice, for the purposes of VAT, of (i) allocating those goods wholly to the assets of his business, (ii) retaining them wholly within his private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into his business only to the extent to which they are actually used for business purposes (see, to that effect, in particular, Armbrecht , paragraph 20; Bakcsi , paragraphs 25 and 26; Seeling , paragraph 40; and Case C-25/03 HE [2005] ECR I-0000, paragraph 46).
24. Should the taxable person choose to treat capital goods used for both business and private purposes as business goods, the input VAT due on the acquisition of those goods is, in principle, immediately deductible in full (see, in particular, Case C‑97/90 Lennartz [1991] ECR I-3795, paragraph 26, Bakcsi , paragraph 25, and Seeling, paragraph 41).
25. It follows from Article 6(2)(a) of the Sixth Directive that when the input VAT paid on goods forming part of the assets of a business is wholly or partly deductible, their use for the private purposes of the taxable person or of his staff or for purposes other than those of his business is treated as a supply of services for consideration. That use, which is therefore a taxable transaction within the meaning of Article 17(2) of that directive is, under Article 11A(1)(c) thereof, taxed on the basis of the cost of providing the services (see, to that effect, Lennartz , paragraph 26, Bakcsi,  paragraph 30, and Seeling , paragraph 42).
27. Next, the second subparagraph of Article 6(2) must generally be interpreted as meaning that the Member States may refrain from treating certain supplies or uses as supplies of services for consideration, in particular in order to simplify administrative procedures relating to collection of VAT (see, to that effect, Case C-155/01 Cookies World [2003] ECR I-8785, paragraph 59).
28. On the other hand, the second subparagraph of Article 6(2) of the Sixth Directive cannot have the result that it is possible for the Member States to refuse to allow taxable persons who have chosen to treat capital goods used both for business and private purposes as business goods to deduct immediately and in full the input VAT due on the acquisition of those goods, which they are entitled to do in accordance with the settled case-law cited in paragraph 24 of this judgment. Such a restriction on the right to deduct would be contrary to that provision.
30. Accordingly, a taxable person has, first, the right to choose to allocate wholly to his business capital goods which he uses in part for the purposes of the business and in part for purposes other than those of his business and, where appropriate, the right to immediate deduction in full of the VAT due on the acquisition of those goods and, second, the corresponding obligation to pay VAT on the amount of expenditure incurred for the use of those goods for purposes other than those of the business (see, to that effect, Seeling , paragraph 43).
31. As regards Article 17(6) of the Sixth Directive, it is true that, as the Netherlands Government maintains, that provision makes it possible for a Member State to retain a national system which existed before the Sixth Directive came into force. However, that provision presupposes that the exclusions which Member States may retain pursuant to it were lawful under the Second Directive, which predated the Sixth Directive (see Case C-305/97 Royscot and Others  [1999] ECR I-6671, paragraph 21).
32. While Article 11(1) of the Second Directive introduced the right of deduction, Article 11(4) provided that the Member States could exclude from the deduction system ‘certain goods and services … in particular those capable of being exclusively or partially used for the private needs of the taxable person or of his staff’.
33. The latter provision did not therefore confer on Member States an unfettered discretion to exclude all and any goods and services from the system of the right of deduction and thereby negate the system established by Article 11(1) of the Second Directive (see Royscot , paragraph 24).
35. It follows that Article 17(6) of the Sixth Directive, read in conjunction with Article 11(4) of the Second Directive, does not authorise Member States to retain a general exclusion from the deduction system of all goods of the taxable person in so far as they are used for his private purposes.