Gemeente Leusden (C-487/01) and Holin Groep BV cs (C-7/02) v Staatssecretaris van Financiën.
Date: 2004-04-29
47. The Netherlands Government recalls that although as a general rule the principle of legal certainty precludes a Community measure from having retroactive effect, it may exceptionally be otherwise when the purpose to be achieved so demands and when the legitimate expectations of those concerned are duly respected (Case 98/78 Racke  [1979] ECR 69, paragraph 20; Case 99/78 Decker  [1979] ECR 101, paragraph 8; and Joined Cases C-143/88 and C-92/89 Zuckerfabrik Süderdithmarschen and Zuckerfabrik Soest  [1991] ECR I‑415, paragraph 49). It points out in that connection that the measure was justified by the abuses recorded and that the legitimate expectations of the traders were protected. First, the legislative amendment was announced beforehand and was therefore not a surprise. Second, the Netherlands legislature made provision for transitional arrangements applicable to many situations. The only situations not covered were those in which the rent for property was low compared with the investment cost, that is to say, those situations which had features characteristic of abuses such as those the law sought to prevent. Finally, the Netherlands Government  pointed out that, as is clear from the debates prior to adoption of the legislation, parties to leases for immovable property were given a period of time to allow them to make arrangements to deal with the consequences entailed by the future law.
– Reply of the Court
55. The first argument is refuted by Article 20 of the Sixth Directive. According to Article 20(1)(b), Member States may require adjustment in cases of transactions remaining totally or partially unpaid and of theft. It therefore follows from that provision that a taxable person may be obliged to adjust deductions in circumstances outside his control.
57. The principles of the protection of legitimate expectations and legal certainty form part of the Community legal order. They must accordingly be observed by the Community institutions (Case 74/74 CNTA  v Commission  [1975] ECR 533),  but also by the Member States when they exercise the powers conferred on them by Community directives ( Belgocodex , paragraph 26; Schlossstrasse , paragraph 44; and Case C-62/00 Marks & Spencer  [2002] ECR I-6325, paragraph 44).
59. The Court has consistently held that, although in general the principle of legal certainty precludes a Community measure from taking effect from a point in time before its publication, it may exceptionally be otherwise where the purpose to be achieved so demands and where the legitimate expectations of those concerned are duly respected. That case-law also applies where the retroactivity is not expressly laid down by the measure itself but is the result of its content (Case C-368/89 Crispoltoni   [1991] ECR I‑3695, paragraph 17).
60. As regards the national rules adopted by the Member States in the area of VAT, the Court has held inter alia that the status of taxable person, once recognised, cannot, save in situations of fraud or abuse, be withdrawn from the taxpayer with retrospective effect, without infringing the principles of the protection of legitimate expectations and legal certainty, as that would retrospectively deprive the taxable person of the right to deduct VAT on the investment expenditure he had incurred (see, to that effect, Case C-400/98 Breitsohl  [2000] ECR I‑4321, paragraphs 34 to 38).
66. As regards the expectation which a taxable person might have as regards the opportunities for deduction which might act as an incentive for him to accept a rent of an amount which reflects those opportunities, it must be observed that it is not based on any provision of the Sixth Directive. Rather, Article 13(C) of the Sixth Directive allows the Member States to grant their taxable persons the right to opt for taxation of lettings of immovable property but also allows them to restrict the scope of that right or withdraw it. As we are dealing with a directive on fiscal matters, of which certain provisions, such as Article 13(C), give wide powers to the Member States, a legislative amendment adopted under the directive cannot be considered to be unforeseeable.
70. Although Article 20 of the Sixth Directive does not, as such, breach the above principles, it cannot none the less be ruled out that the national legislature has breached them in that, without taking account of a legitimate expectation of taxable persons which had to be protected, it suddenly and unexpectedly withdrew the right to opt for taxation of lettings of immovable property, when the objective to be attained did not require it, without allowing taxable persons bound by leases current at the time of entry into force of the law the time to adjust to the new legislative situation.
76. In that connection, it must be borne in mind that, under Article 13(B) of the Sixth Directive, Member States are to exempt the leasing or letting of immovable property under conditions which they are to lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse. That wording demonstrates that preventing possible tax evasion, avoidance and abuse is an objective recognised and encouraged by the Sixth Directive.
77. It would be contrary to that objective to prohibit a Member State to require immediate application of its law withdrawing the right to opt for taxation of certain lettings of immovable property entailing an obligation to adjust deductions made, where that State has become aware that the right of option was being used as part of tax avoidance schemes. A taxable person cannot thus justify a legitimate expectation of maintenance of a legislative framework allowing tax evasion, avoidance and abuse.
81. In any event, a taxable person cannot rely on there being no legislative amendment, but can only call into question the arrangements for the implementation of such an amendment. In the present case, it appears that the Netherlands legislature took steps to prevent taxable persons from being taken unawares by implementation of the law in relation to adjustments of the right to deduct. A press release reported the planned legislative amendment on 31 March 1995 and the legislature made provision for transition from taxed letting to exempt letting only from the entry into force of the law, in order to allow the parties to a lease time to confer before that date on the implications of the legislative amendment.
90. As the governments submitting observations and the Commission have observed, treatment as supplies made for consideration under Article 5(7)(a) of the Sixth Directive and the adjustment refer red to in Article 20(2) of that directive are two mechanisms with the same economic effect, that is to say, they oblige a taxable person to pay amounts equivalent to the deductions to which he was not entitled.