Keywords
Summary

Keywords

1. Tax provisions Harmonisation of laws Turnover taxes Common system of value added tax Sixth Directive Scope Use of an item for both business and private purposes Possibility for a taxable person to retain the item within his private assets and to exclude it entirely from the system of value added tax

(Council Directive 77/388)

2. Tax provisions Harmonisation of laws Turnover taxes Common system of value added tax Sixth Directive Scope Use of an item for both business and private purposes Retention of the item within the private or business assets of the taxable person Effect on the system of the tax in the event of the sale of the item

(Council Directive 77/388, Arts 2(1), 5(6) and 11.A(1)(a))

Summary

1. A taxable person who acquires a capital item in order to use it for both business and private purposes may retain it wholly within his private assets and thereby exclude it entirely from the system of value added tax.

The use, for business or private purposes, to which a taxable person actually puts a capital item need be taken into account for the purpose of determining how that item has been assigned only if the taxable person requests the right to deduct, wholly or in part, the input value added tax paid in respect of the acquisition.

The tax arrangements applicable to the supply of a capital item must be dissociated from those concerning the taxable expenses incurred for its use and maintenance.

( see paras 29, 33 and 34, and operative part 1 )

2. Where a taxable person has chosen to incorporate wholly into his business assets a capital item which he uses for both business and private purposes, the sale of that item is subject in full to value added tax, in accordance with Articles 2(1) and 11.A(1)(a) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes. Where a taxable person assigns to his business assets only the part of the item used for business purposes, only the sale of that part is subject to value added tax. The fact that the item was purchased second-hand from a non-taxable person and that the taxable person was therefore not authorised to deduct the residual value added tax on that item is irrelevant in this regard. However, if the taxable person withdraws such an item from his business, the value added tax on that item must be considered not to be deductible for the purposes of Article 5(6) of the Sixth Directive and no tax may therefore be levied on that withdrawal under that provision. If the taxable person subsequently sells the item, he will be carrying out that transaction in a private capacity and the transaction will therefore be excluded from the system of value added tax.

( see para. 47, and operative part 2 )