Keywords
Summary

Keywords

1. Tax provisions - Harmonisation of laws - Turnover taxes - Common system of value added tax - Deduction of input tax - Transactions carried out with a view to the realisation of a planned economic activity - Acquisition of the status of taxable person - Recognition by the tax authority - Not relevant - Failure of the economic activity envisaged - No impact on the right to deduct

(Council Directive 77/388, Arts 4 and 17)

2. Tax provisions - Harmonisation of laws - Turnover taxes - Common system of value added tax - Supply of buildings and the land on which they stand - Authorisation to Member States to retain on a transitional basis the exemption and the right of option relating to those supplies - Scope - Impossible to dissociate buildings from the land on which they stand

(Council Directive 77/388, Arts 4(3)(a), 28(3)(b) and (c), and Annexes F, point 16, and G, point 1(b))

Summary

1. Articles 4 and 17 of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes are to be interpreted as meaning that the right to deduct the value added tax paid on transactions carried out with a view to the realisation of a planned economic activity still exists even where the tax authority is aware, from the time of the first tax assessment, that the economic activity envisaged, which was to give rise to taxable transactions, will not be taken up.

The arising of the right to deduct the VAT paid on the first investment expenditure is in no way dependent upon formal recognition of the status of taxable person by the tax authority. The only effect of that recognition is that such status, once recognised, cannot, save in situations of fraud or abuse, be withdrawn from the taxpayer with retrospective effect, without infringing the principles of the protection of legitimate expectations and legal certainty. A person who has the intention, confirmed by objective evidence, to commence independently an economic activity within the meaning of Article 4 of the Sixth Directive and who incurs the first investment expenditure for those purposes must be regarded as a taxable person. Acting in that capacity, he has therefore, in accordance with Article 17 et seq. of the Sixth Directive, the right immediately to deduct the VAT payable or paid on the investment expenditure incurred for the purposes of the transactions which he intends to carry out and which give rise to the right to deduct, without having to wait for the actual exploitation of his business to begin.

( see paras 34, 38, 42, operative part 1 )

2. It follows from the distinction in Article 4(3) of the Sixth Directive 77/388 between, on the one hand, the supply of building land, described as any unimproved or improved land defined as such by the Member States, and, on the other, the supply before first occupation of buildings or parts of buildings and the land on which they stand, any structure fixed to or in the ground being regarded as a building within the meaning of that provision, and from the wording of Article 4(3)(a) of the directive, which refers to the supply ... of buildings or parts of buildings and the land on which they stand, that, for the purposes of value added tax, buildings or parts of buildings and the land on which they stand cannot be dissociated from each other.

In those circumstances, the exemption and the right of option referred to in Article 28(3)(b) and (c) of the Sixth Directive, read in combination with Annex F, point 16, and Annex G, point 1(b), which authorise Member States during the transitional period to continue to exempt the supply before first occupation of a building or part of a building and land on which it stands and to grant taxable persons the right to opt for taxation of such a supply, must relate inseparably to buildings or parts of buildings and the land on which they stand.

( see paras 47, 49-51 )