NCC Construction Danmark A/S v Skatteministeriet.
Date: 2009-10-29
23. It should be borne in mind at the outset that, in determining the scope of a provision of Community law, its wording, context and objectives must all be taken into account (Case C‑162/91 Tenuta il Bosco  [1992] ECR I‑5279, paragraph 11; Case C‑315/00 Maierhofer  [2003] ECR I‑563, paragraph 27; and Case C‑280/04 Jyske Finans  [2005] ECR I‑10683, paragraph 34).
24. Furthermore, it follows from the need for uniform application of Community law and from the principle of equality that the terms of a provision of Community law which makes no express reference to the law of the Member States for the purpose of determining its meaning and scope must normally be given an autonomous and uniform interpretation throughout the Community (see to that effect, inter alia, Case C‑321/02 Harbs  [2004] ECR I‑7101, paragraph 28, and Case C‑195/06 Österreichischer Rundfunk  [2007] ECR I‑0000, paragraph 24).
27. As regards, first, its context, Article 19 of the Sixth Directive is part of Title XI thereof, which sets out the rules governing deduction. The right to deduct, which is laid down in Article 17(2) of that directive, and relates to the input tax on the goods and services used by the taxable person for the purposes of his taxable transactions, is meant 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 consequently ensures complete neutrality of taxation of all economic activities, provided that they are themselves subject in principle to VAT (see, inter alia, Case C‑435/05 Investrand  [2007] ECR I‑1315, paragraph 22 and the case-law cited).
30. As regards, next, the objective of Article 19(2), this is, in particular, apparent from the Explanatory Memorandum to the proposal for the Sixth Directive, which was submitted by the Commission of the European Communities to the Council of the European Communities on 29 June 1973 (see Bulletin of the European Communities, supplement 11/73, p. 20). In the words of that Memorandum ‘[t]he factors mentioned in this paragraph must be excluded from the calculation of the proportion lest, being unrepresentative of the taxable person’s business activity, they should deprive the amount of any real significance. Such is the case with sales of capital items and real estate and financial transactions which are only ancillary operations, that is to say are only of secondary importance in relation to the total turnover of the business. These factors are only excluded if they are not part of the usual business activity of the taxable person’.
31. In that regard, as is apparent from the case-law of the Court in which it took that objective as its basis, an economic activity cannot be classified as ‘incidental’ for the purposes of Article 19(2) of the Sixth Directive if it constitutes the direct, permanent and necessary extension of the business (Case C‑306/94 Régie dauphinoise  [1996] ECR I‑3695, paragraph 22), or if it entails a significant use of goods and services subject to VAT (Case C‑77/01 EDM  [2004] ECR I‑4295, paragraph 76).
33. With regard to the fulfilment of the first condition, the sale of buildings that a building company has built on its own account cannot be regarded as an activity incidental to its taxable business activity, which consists of the construction of buildings on behalf of third parties or on its own account. Indeed, as it arises from the same construction activity, it is a direct extension thereof. The general organisation of its activities requires it, from the start and on a regular and permanent basis, to plan the construction of a certain number of buildings on its own account, however few they may be, which it intends subsequently to sell itself. The resulting activity of sales of real estate does not therefore appear to be incidental, but is the necessary consequence of a deliberate intention on the part of the company to develop in the context of its business, the activity of selling buildings which it has constructed on its own account. It contributes to the business objectives of the taxable person and is carried out with a commercial purpose (see, by analogy, EDM , paragraph 67).
39. First of all, it should be noted that the principle of fiscal neutrality resulting from the provisions of Article 17(2) of the Sixth Directive implies that a taxable person may deduct all the VAT levied on goods and services acquired for the exercise of his taxable activities (see, to that effect, Case C‑98/07 Nordania Finans and BG Factoring  [2008] ECR I‑1281, paragraph 19).
40. In that regard, it is necessary to add that, according to settled case-law, the principle of fiscal neutrality, and, in particular, the right to deduct, as an integral part of the VAT scheme, is a fundamental principle underlying the common system of VAT established by the relevant Community legislation (see Case C‑25/07 Sosnowska  [2008] ECR I‑5129, paragraphs 14 and 15, and Case C‑74/08 PARAT Automotive Cabrio  [2009] ECR I‑0000, paragraph 15).
41. That principle of fiscal neutrality was intended by the Community legislature to reflect, in matters relating to VAT, the general principle of equal treatment (see, to that effect, Case C‑309/06 Marks & Spencer  [2008] ECR I‑2283, paragraph 49, and the case-law cited).
42. However, while that latter principle, like the other general principles of Community law, has constitutional status, the principle of fiscal neutrality requires legislation to be drafted and enacted, which requires a measure of secondary Community law (see, by analogy, with regard to the protection of minority shareholders, Case C‑101/08 Audiolux and Others  [2009] ECR I‑0000, paragraph 63).
44. It is also appropriate to point out that the general principle of equal treatment, of which the principle of fiscal neutrality is a particular expression at the level of secondary Community law and in the specific area of taxation, requires similar situations not to be treated differently unless differentiation is objectively justified ( Marks & Spencer , paragraph 51 and the case-law cited). It requires, in particular, that different types of economic operators in comparable situations be treated in the same way in order to avoid any distortion of competition within the internal market, in accordance with the provisions of Article 3(1)(g) EC.
45. In implementing the provisions of the Sixth Directive, the Member States were obliged to take into account the principle of equal treatment, like the other general principles of Community law, which, having constitutional status, bind those Member States when they take action in the field of Community law (see, to that effect, Case C‑107/97 Rombi and Arkopharma  [2000] ECR I‑3367, paragraph 65, and Case C‑396/98 Schloßstrasse  [2000] ECR I‑4279, paragraph 44).