Case C‑132/16

Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Sofia

v

‘Iberdrola Inmobiliaria Real Estate Investments’ EOOD

(Request for a preliminary ruling
from the Varhoven administrativen sad)

(Reference for a preliminary ruling — Taxation — Common system of value added tax — Directive 2006/112/EC — Article 26(1)(b) and Articles 168 and 176 — Deduction of input tax — Services relating to construction or improvement of a property belonging to a third party — Use of services by the third party and by the taxable person — Service supplied free of charge to the third party — Entry of costs incurred for services carried out in the accounts as part of the taxable person’s general costs — Determination of the existence of a direct and immediate link with the economic activity of the taxable person)

Summary — Judgment of the Court (First Chamber), 14 September 2017

1. Harmonisation of fiscal legislation—Common system of value added tax—Deduction of input tax—Restrictions on the right to deduct—Retention of the exceptions from the right to deduct in place at the date of accession to the European Union—Conditions—Exemptions of a non-general nature

   (Council Directive 2006/112, Art. 176)

2. Harmonisation of fiscal legislation—Common system of value added tax—Deduction of input tax—Origin and scope of right to deduct—Goods and services used for the purposes of the taxable person’s taxable transactions—Need for a direct and immediate link between the input transaction and the taxable person’s activity—Fact which is capable of showing such a link—Essential nature of the supply of services to allow the taxable person to carry out its economic activity

   (Council Directive 2006/112, Art. 168(a))

3. Harmonisation of fiscal legislation—Common system of value added tax—Deduction of input tax—Origin and scope of right to deduct—Goods and services used for the purposes of the taxable person’s taxable transactions—Supply by the taxable person of services consisting of the construction or improvement of a property belonging to a third party—Third party enjoying the results of those services free of charge—Services used by both the taxable person and by the third party in the context of their economic activities—Right to deduction—Conditions—Supply of input services being a component of the price of a taxed output transaction carried out by the taxable person—Limits—Supply of input services must be necessary for the transaction and proportionate to that purpose

   (Council Directive 2006/112, Art. 168(a))

1.  See the text of the decision.

   (see para. 21)

2.  See the text of the decision.

   (see paras 28-34)

3.  Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a taxable person has the right to deduct input value added tax in respect of a supply of services consisting of the construction or improvement of a property owned by a third party when that third party enjoys the results of those services free of charge and when those services are used both by the taxable person and by the third party in the context of their economic activity, in so far as those services do not exceed that which is necessary to allow that taxable person to carry out the taxable output transactions and where their cost is included in the price of those transactions.

   (see paras 36, 37, 40, operative part)