Hausgemeinschaft Jörg und Stefanie Wollny v Finanzamt Landshut.
Date: 2006-09-14
20. First, according to the aim of the system introduced by the Sixth Directive, input taxes on goods or services used by a taxable person for his taxable transactions may be deducted. The deduction of input taxes is linked to the collection of output taxes. In so far as goods or services are used for the purposes of transactions that are taxable as outputs, deduction of the input tax on them is required in order to avoid double taxation. However, where goods or services acquired by a taxable person are used for 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 Case C-184/04 Uudenkaupungin kaupunki  [2006] ECR I‑0000, paragraph 24).
21. 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 (Case C‑434/03 Charles and Charles-Tijmens  [2005] ECR I-7037, paragraph 23).
22. 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 or construction of those goods is, as a rule, immediately deductible in full ( Seeling , paragraph 41, and Charles and Charles-Tijmens , paragraph 24).
23. However, pursuant to Article 6(2)(a) of the Sixth Directive, 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 11(A)(1)(c) thereof, taxed on the basis of the cost of providing the services ( Charles and Charles-Tijmens , paragraph 25).
24. Consequently, where a taxable person chooses to treat an entire building as forming part of the assets of his business and uses part of that building for private purposes he is, on the one hand, entitled to deduct the input VAT paid on all construction costs relating to that building and, on the other, subject to the corresponding obligation to pay VAT on the amount of expenditure incurred to effect such use ( Seeling , paragraph 43).
26. The expression at issue appears in a provision of community law which does not refer to the law of the Member States for the determining of its meaning and its scope. It follows that the interpretation, in general terms, of that expression cannot be left to the discretion of each Member State (see, to that effect, Case 51/76 Verbond van Nederlandse Ondernemingen  [1977] ECR 113, paragraphs 10 and 11).
27.  In a general sense, that expression corresponds to expenses which relate to the goods themselves (see Enkler , cited above, paragraph 36). It includes expenses, such as acquisition and construction costs, relating to the goods in respect of which VAT was deductible, and without which the private use in question could not have taken place.
28. However, as the Sixth Directive does not contain the guidance necessary for defining uniformly and precisely the rules for establishing the full cost concerned, it must be accepted that the Member States therefore have a certain margin of discretion as regards those rules provided that they do not fail to have regard to the aims and role of the provision at issue within the scheme of the Sixth Directive (see, to that effect, Verbond van Nederlandse Ondernemingen , cited above, paragraphs 16 and 17).
30. The purpose of Article 11(A)(1)(c) is to define the taxable amount of private use – or, more generally, of use for purposes other than those of the business –  of goods forming part of the assets of a taxable person’s business, as Article 6(2)(a) of the Sixth Directive treats such use as a supply of services for consideration which is therefore subject to VAT.
31. The purpose of that treatment is to prevent a taxable person who was able to deduct VAT on the acquisition or construction of goods forming part of the assets of his business from avoiding payment of that tax when he uses those goods or a part thereof for private purposes (see Case 50/88 Kühne  [1989] ECR 1925, paragraph 8).
32. As emphasised by the German Government and, at the hearing, by the United Kingdom Government, the purpose of that device is, firstly, to ensure equal treatment as between a taxable person and a final consumer by preventing the former from enjoying an advantage to which he is not entitled by comparison with the latter who buys the goods and pays VAT on them (see, to that effect, Enkler , paragraphs 33 and 35, and Case C-412/03 Hotel Scandic Gåsabäck  [2005] ECR I-743, paragraph 23).
33. Secondly, the aim is to ensure, in accordance with the underlying purpose of the system introduced by the Sixth Directive (see paragraph 20 of this judgment), a correspondence between deduction of input VAT and charging of output VAT (see, to that effect, the Opinion of Advocate General Jacobs in Charles and Charles-Tijmens , paragraph 60).
34. Although its scope is not exactly the same as that of Article 6(2)(a) of the Sixth Directive, the system of adjustment of deductions introduced by Article 20 of that directive finds application, like Article 6(2)(a), in situations where goods, the use of which is eligible for deduction, are then put to a use which is not eligible for deduction (see Uudenkaupungin kaupunki , paragraph 30). As the Advocate General observed at paragraph 98 of his Opinion, both Article 6(2) and Article 20 of the Sixth Directive relate to situations in which goods are used simultaneously for business and for private purposes.
35. Furthermore, the aim of the system of adjustment is analogous to that of the levying of VAT on the private use of immovable property. It is a matter, firstly, of avoiding giving an unjustified economic advantage to a taxable person by comparison with a final consumer, by obliging the taxable person to pay amounts equivalent to the deductions to which he was not entitled (see, to that effect, Joined Cases C-487/01 and C-7/02 Gemeente Leusden and Holin Groep  [2004] ECR I-5337, paragraph 90, and Uudenkaupungin kaupunki , paragraph 30).
36. It is a matter, secondly, of ensuring a correspondence between deduction of input tax and charging of output tax (see the Opinion of Advocate General Jacobs in Charles and Charles-Tijmens , paragraph 60).
38. As the German Government emphasised at the hearing and as the Advocate General observed at paragraph 95 of his Opinion, that approach also contributes to reducing the cash-flow advantage which the levying of VAT in instalments gives a taxable person using business property for private purposes by comparison with the final consumer who must pay the whole of the VAT on acquiring or constructing such a building.
41. It is true that, as the household submitted, the Court, in paragraph 36 of Enkler , referred in the context of Articles 6(2) and 11(A)(1)(c) to expenses ‘such as the writing-off of depreciation’.
45. The Court however held that such private use did not amount to a letting for the purposes of Article 13B(b) of the Sixth Directive ( Seeling , paragraphs 49 to 52).
46. Against that background it stated in paragraph 54 of Seeling  that, while authorising a taxable person to treat a building as forming in its entirety part of the assets of his business, and thus to deduct input VAT on all the construction costs, may produce the result that there will be untaxed end use, because the adjustment period provided for in Article 20(2) of the Sixth Directive is capable of correcting to a limited extent only the deduction of input tax made when the building was constructed, that is a consequence of a deliberate choice on the part of the Community legislature and cannot have the effect of requiring that Article 13B(b) of that directive be given a broad interpretation.