Imofloresmira - Investimentos Imobiliários SA v Autoridade Tributária e Aduaneira.
Date: 2018-02-28
30


As a preliminary point, it should be borne in mind that, according to the structure of the system introduced by the VAT Directive, input taxes on goods or services used by a taxable person for its taxed transactions may be deducted. The deduction of input taxes is linked to the collection of output taxes. Where goods or services acquired by a taxable person are used for the purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (see, to that effect, judgment of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 24).
31


The taxation of leasing and letting transactions is a power which the EU legislature has conferred on the Member States in derogation from the general rule established in Article 135(1)(l) of the VAT Directive according to which leasing and letting transactions are exempt from VAT. The right to deduct attached to that taxation does not therefore operate automatically, but only if the Member States have made use of the power under Article 137(1)(d) of the VAT Directive and subject to the taxable persons exercising the right of option allowed to them (judgment of 12 January 2006, Turn- und Sportunion Waldburg, C‑246/04, EU:C:2006:22, paragraph 26 and the case-law cited).
33


Furthermore, it is clear from the wording of Article 168 of the VAT Directive that, for an interested party to be entitled to the right to deduct, first, it must be a ‘taxable person’ within the meaning of that directive and, secondly, the goods and services in question must be used for the purposes of its taxed transactions (judgment of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 52).
35


Under Article 167 of the VAT Directive, a right of deduction arises at the time the deductible tax becomes chargeable. Consequently, only the capacity in which a person is acting at that time can determine the existence of the right to deduct (see, to that effect, judgments of 11 July 1991, Lennartz, C‑97/90, EU:C:1991:315, paragraph 8, and of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 38).
36


It follows that, once the tax authority has accepted, on the basis of information provided by a business, that it should be accorded the status of a taxable person, that status cannot, in principle, subsequently be withdrawn retroactively on account of the fact that certain events have or have not occurred (see, to that effect, judgment of 29 February 1996, INZO, C‑110/94, EU:C:1996:67, paragraph 21), save in cases of fraud or abuse.
37


It should be remembered that, according to settled case-law, the right to deduct provided for in Article 167 to 172 of the VAT Directive is an integral part of the VAT scheme and, in principle, may not be limited. It is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (judgment of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 50 and the case-law cited).
38


The deduction arrangement 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 therefore ensures complete neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT (judgment of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 51 and the case-law cited).
39


It is important to recall also that it is the acquisition of goods or services by a taxable person acting as such that gives rise to the application of the VAT system and therefore of the deduction mechanism. The use to which the goods or services are put, or intended to be put, merely determines the extent of the initial deduction to which the taxable person is entitled under Article 168 of the VAT Directive and the extent of any adjustments in the course of the following periods (see, to that effect, judgment of 11 July 1991, Lennartz, C‑97/90, EU:C:1991:315, paragraph 15).
40


It follows therefore that the entitlement to a reduction is retained in principle, even if subsequently, by reason of circumstances beyond its control, the taxable person does not make use of those goods and services which gave rise to a deduction in the context of taxed transactions (see, to that effect, judgments of 29 February 1996, INZO, C‑110/94, EU:C:1996:67, paragraph 20, and of 15 January 1998, Ghent Coal Terminal, C‑37/95, EU:C:1998:1, paragraphs 19 and 20).
43


Any other interpretation of the VAT Directive would be contrary to the principle that VAT should be neutral as regards the tax burden on a business. It would be liable to create, as regards the tax treatment of the same investment activities, unjustified differences between businesses already carrying out taxable transactions and other businesses seeking by investment to commence activities which will in future be a source of taxable transactions. Likewise, arbitrary differences would be established between the latter businesses, in that final acceptance of the deductions would depend on whether or not the investment resulted in taxed transactions (judgment of 29 February 1996, INZO, C‑110/94, EU:C:1996:67, paragraph 22).
46


In the first place, although it is true that the need to adjust the tax deducted may also exist as a result of circumstances outside the taxable persons’ control (see, to that effect, judgment of 29 April 2004, Gemeente Leusden and Holin Groep, C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 55), the fact remains that that provision cannot interfere with the fundamental principles underpinning the system introduced by the VAT Directive, and in particular the principle of fiscal neutrality.
47


Contrary to what the Portuguese Government maintains, to take the view that it is sufficient, in order to establish the existence of ‘change’ for the purposes of Article 185 of the VAT Directive, for a property to remain empty after the termination of the lease to which it was subject, due to circumstances outside the owner’s control, even where it has been established that the owner still intends to use it for a taxed activity and undertakes the necessary steps to that end, would be tantamount to restricting the right of deduction through the provisions applicable to adjustments.
48


Secondly, even if Article 137(2) of the VAT Directive leaves Member States a wide discretionary power to determine the rules governing the exercise of the right of option and even to withdraw it (see, to that effect, judgment of 12 January 2006, Turn- und Sportunion Waldburg, C‑246/04, EU:C:2006:22, paragraphs 27 to 30), the Member States could not use that power to infringe Articles 167 and 168 of that directive by revoking a right of deduction which has already been acquired.
49


A limitation of VAT deductions connected with taxed operations, after the right of option has been exercised, would not concern the ‘scope’ of the right of option which Member States may restrict by virtue of Article 137(2) of the TVA Directive, but the consequences of exercising that right (see, to that effect, judgment of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 46).
50


Finally, 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, with retroactive effect, repayment of the sums deducted on the ground that those deductions were made on the basis of false declarations (judgment of 21 March 2000, Gabalfrisa and Others, C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 46).
51


It that regard, it should be noted that preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the VAT Directive, as is recalled in Article 131 (judgment of 29 April 2004, Gemeente Leusden and Holin Groep, C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 76).
52


Consequently, if the tax authorities were to conclude that the right to deduct has been exercised fraudulently or abusively, which is a matter for the referring court to ascertain, they would be entitled to demand, with retrospective effect, repayment of the amounts deducted (judgment of 3 March 2005, Fini H, C‑32/03, EU:C:2005:128, paragraph 33 and the case-law cited).
59


In that regard, it must be noted that a limitation of the temporal effects of a judgment is an exceptional measure which assumes that there is a risk of serious economic repercussions owing in particular to the large number of legal relationships entered into in good faith on the basis of rules considered to be validly in force and that it appears that individuals and national authorities have been led to adopt practices which do not comply with EU law by reason of objective, significant uncertainty regarding the implications of European Union provisions, to which the conduct of other Member States or the European Commission may even have contributed (see, inter alia, judgment of 19 December 2013, Endress, C‑209/12, EU:C:2013:864, paragraph 36 and the case-law cited).
60


It should be noted that a restriction of a taxable person’s right to deduct VAT constitutes an exception to a fundamental principle of the common system of VAT, the legality of which, according to settled case-law, is acknowledged only in exceptional circumstances (see, to that effect, judgment of 19 October 2017, Paper Consult, C‑101/16, EU:C:2017:775, paragraph 67).
61


It is apparent from the case-law of the Court that there is no objective and significant uncertainty as to the scope of EU law, in particular the provisions of the VAT Directive with regard to the extent of the right to deduct and its role within the system introduced by that directive (see, to that effect, judgment of 19 October 2017, Paper Consult, C‑101/16, EU:C:2017:775, paragraph 68).