Case C-25/11

Varzim Sol — Turismo, Jogo e Animação SA

v

Fazenda Pública

(Reference for a preliminary ruling from the Supremo Tribunal Administrativo)

‛Taxation — Sixth VAT Directive — Deduction of input tax — Article 17(2) and (5) and Article 19 — ‘Subsidies’ used for the purchase of goods and services — Restriction of the right to deduct’

Summary of the Judgment

1. Questions referred for a preliminary ruling — Admissibility — Need to provide the Court with sufficient information on the factual and legislative context — Scope

   (Art. 267 TFEU; Statute of the Court of Justice, Art. 23)

2. Tax provisions — Harmonisation of laws — Turnover taxes — Common system of value added tax — Deduction of input tax — Restrictions of the right of deduction — Subsidies

   (Council Directive 77/388, Arts 17(2) and (5), 19)

1.  The information that must be provided to the Court of Justice in an order for reference does not serve only to enable the Court to provide answers which will be of use to the national court; it must also enable the Governments of the Member States and other interested parties to submit observations in accordance with Article 23 of the Statute of the Court of Justice. For those purposes, it is necessary for the national court to define the factual and legislative context of the questions it asks, or, at the very least, to explain the factual circumstances on which those questions are based.

   Accordingly, where the information provided by the national court is sufficient to explain the subject-matter of the dispute in the main proceedings and the main issues raised by that dispute for the Union legal order, and also to enable, first, the Member States to submit their observations in accordance with Article 23 of the Statute of the Court and to participate effectively in the proceedings before the Court and, second, the Court to provide an answer which will be of use to the national court, the reference for a preliminary ruling must be regarded as admissible.

   (see paras 30-31)

2.  Article 17(2) and (5) and Article 19 of Sixth Council Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as precluding a Member State, where it authorises mixed taxable persons to make the deduction provided for in those provisions on the basis of the use of all or part of the goods and services, from calculating the deductible amount, for sectors in which such taxable persons carry out taxable transactions only, by including untaxed ‘subsidies’ in the denominator of the fraction used to determine the deductible proportion.

   Since the taxable person was authorised to make the deduction on the basis of the method of actual use, the provisions of Article 19 of the Sixth Directive are not applicable and therefore cannot limit the right to deduct in those sectors as provided for in that directive.

   (see paras 42, 43, operative part)

Case C-25/11

Varzim Sol — Turismo, Jogo e Animação SA

v

Fazenda Pública

(Reference for a preliminary ruling from the Supremo Tribunal Administrativo)

‛Taxation — Sixth VAT Directive — Deduction of input tax — Article 17(2) and (5) and Article 19 — ‘Subsidies’ used for the purchase of goods and services — Restriction of the right to deduct’

Summary of the Judgment

1. Questions referred for a preliminary ruling — Admissibility — Need to provide the Court with sufficient information on the factual and legislative context — Scope

   (Art. 267 TFEU; Statute of the Court of Justice, Art. 23)

2. Tax provisions — Harmonisation of laws — Turnover taxes — Common system of value added tax — Deduction of input tax — Restrictions of the right of deduction — Subsidies

   (Council Directive 77/388, Arts 17(2) and (5), 19)

1.  The information that must be provided to the Court of Justice in an order for reference does not serve only to enable the Court to provide answers which will be of use to the national court; it must also enable the Governments of the Member States and other interested parties to submit observations in accordance with Article 23 of the Statute of the Court of Justice. For those purposes, it is necessary for the national court to define the factual and legislative context of the questions it asks, or, at the very least, to explain the factual circumstances on which those questions are based.

   Accordingly, where the information provided by the national court is sufficient to explain the subject-matter of the dispute in the main proceedings and the main issues raised by that dispute for the Union legal order, and also to enable, first, the Member States to submit their observations in accordance with Article 23 of the Statute of the Court and to participate effectively in the proceedings before the Court and, second, the Court to provide an answer which will be of use to the national court, the reference for a preliminary ruling must be regarded as admissible.

   (see paras 30-31)

2.  Article 17(2) and (5) and Article 19 of Sixth Council Directive 77/388/EEC on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as precluding a Member State, where it authorises mixed taxable persons to make the deduction provided for in those provisions on the basis of the use of all or part of the goods and services, from calculating the deductible amount, for sectors in which such taxable persons carry out taxable transactions only, by including untaxed ‘subsidies’ in the denominator of the fraction used to determine the deductible proportion.

   Since the taxable person was authorised to make the deduction on the basis of the method of actual use, the provisions of Article 19 of the Sixth Directive are not applicable and therefore cannot limit the right to deduct in those sectors as provided for in that directive.

   (see paras 42, 43, operative part)