Intercommunale voor zeewaterontzilting (INZO) v Belgian State.
Date: 1996-02-29
11 Inzo contested that claim before the Rechtbank van Eerste Aanleg, Bruges. Referring in particular to the judgment of the Court in Case 268/83 Rompelman v Minister van Financiën [1985] ECR 655, Inzo claimed that it had indicated by unequivocal acts that it intended regularly to carry out taxable transactions. It referred in this connection to its articles of association and the fact that it had recruited staff, established an organization to enable its objects to be attained and obtained certain loans.
15 In Rompelman the Court held, at paragraph 22, that the economic activities referred to Article 4(1) may consist in several consecutive transactions and that preparatory acts, such as the acquisition of business assets and therefore the purchase of immovable property, must themselves be treated as constituting economic activity.
16 Also in Rompelman, the Court held, at paragraph 23, that 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 that it would be contrary to that principle if such an activity did not commence until the property 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 immovable property and expenditure incurred during exploitation.
17 It follows from Rompelman that even the first investment expenditure incurred for the purposes of a business may be regarded as an economic activity within the meaning of Article 4 of the directive and that, in that context, the tax authority must take into account the declared intention of the business.
18 Where the tax authority has accepted that a company which has declared its intention to begin an economic activity giving rise to taxable transactions has the status of a taxable person for the purposes of VAT, the carrying out of a study into the technical and economic aspects of the activity envisaged may therefore be regarded as an economic activity within the meaning of Article 4 of the directive, even if the purpose of that study is to investigate the degree of profitability of the activity envisaged.
20 Contrary to the submissions of the Belgian and German Governments, entitlement to that reduction is retained, even if it was subsequently decided, in view of the results of that study, not to move to the operational phase but to put the company into liquidation, with the result that the economic activity envisaged did not give rise to taxed transactions.
21 As the Commission has observed, it is contrary to the principle of legal certainty for the rights and obligations of taxable persons to depend on facts, circumstances or events which occurred after the tax authority made a finding in respect of those rights and obligations. It follows that, as from the time when the tax authority 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.
22 Any other interpretation of the directive would, moreover, 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 taxable transactions.
23 Finally, as the Court held in Rompelman, at paragraph 24, it is for the person applying to deduct VAT to show that the conditions for deduction are met and Article 4 does not 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.
24 In that context, as the Commission has stated, a taxable person acquires that status definitively only if the person concerned 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.