Keywords
Summary

Keywords

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Tax provisions ° Harmonization of laws ° Turnover taxes ° Common system of value added tax ° Deduction of input tax ° Goods and services used both for transactions in respect of which VAT is deductible and transactions in respect of which it is not deductible ° Deductible proportion ° Calculation ° Receipt by a company managing immovable property of interest on investments of sums paid by owners and lessees ° Included

(Council Directive 77/388, Art. 19(2))

Summary

By virtue of Article 19(1) of the Sixth Directive 77/388 on the harmonization of the laws of the Member States relating to turnover taxes, an undertaking which uses goods and services in order to carry out both transactions in respect of which VAT is deductible and transactions in respect of which it is not deductible may deduct, from the VAT which it is liable to pay, a proportion of the amount of VAT which it has paid corresponding to a fraction having, as denominator, the total amount of turnover attributable to transactions in respect of which VAT is deductible and to transactions in respect of which it is not deductible, disregarding, pursuant to Article 19(2), the amount of turnover relating to transactions that are exempt by virtue of Article 13B(d) when those transactions are incidental.

Article 19(2) must be interpreted as meaning that the interest realized by a company managing immovable property on treasury placements made for its own account of funds paid by the owners or lessees is to be included in that denominator. Although that interest is a return for services subject to VAT that are exempt under Article 13B(d), the placements in question cannot be characterized as incidental transactions, since the receipt of interest from them constitutes the direct, permanent and necessary extension of the taxable activity of property management companies.