Keywords
Summary

Keywords

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Supply of goods — Definition — Goods under a financial leasing contract — Non-recovery of those goods by the leasing company after the termination of the contract — Not included — Possibility of the administration to require adjustment

(Council Directive 2006/112, Arts 16, 18 and 184 to 186)

Summary

Articles 16 and 18 of Directive 2006/112 on the common system of value added tax must be interpreted as meaning that the impossibility, for a leasing company, of recovering from the lessee the goods let under a financial leasing contract following its termination as a result of the lessee’s breach, despite the steps undertaken by that company to recover those goods and despite the lack of any consideration following such termination, may not be treated as a supply of goods for consideration for the purposes of those articles.

Such an impossibility does not fall within any of the situations referred to in Article 16. First, the goods in question cannot be regarded as being intended for the private use of the taxable person or of his staff, since they are not in their possession. Secondly, the fact that the lessee remains in possession of those goods without providing any form of consideration is the result of the lessee’s allegedly wrongful conduct and not of the disposal free of charge of those goods by the lessor in favour of the lessee. Thirdly, the goods cannot be considered as being applied for purposes other than those of the business of the taxable person, since their hiring out and thus being made available for the use of the lessee constitute the very essence of the economic activity of the lessor. The fact that the lessor does not actually recover those goods after the termination of the financial leasing contract in no way means that he has applied them for purposes other than those of his business. Lastly, Article 18 does not apply in such a situation either.

However, those considerations do not affect any right of the tax authorities to require adjustment on the part of a taxable person under the conditions prescribed in that regard in Directive 2006/112. The adjustment provided for in Articles 184 to 186 of that Directive is an integral part of the VAT deduction scheme established by that act.

(see paras 25, 26, 28, 32, 33, operative part)