Case C-334/10

X

v

Staatssecretaris van Financiën

(Reference for a preliminary ruling from the Hoge Raad der Nederlanden)

‛Sixth VAT Directive — Article 6(2), first subparagraph, (a) and (b), Article 11A(1)(c) and Article 17(2) — Part of a capital item forming part of the assets of a business — Temporary use for private purposes — Permanent alterations to that item — Payment of VAT in respect of the permanent alterations — Right to deduct’

Summary of the Judgment

Harmonisation of tax legislation — Common system of value added tax — Deduction of input tax — Capital items — Temporary use for private purposes of part of an item forming part of the assets of a business — Right to deduct expenditure incurred in respect of permanent alterations to that item — Condition — Intention to use the altered item for business purposes — Criteria for assessment

(Council Directive 77/388, Arts 6(2) first subpara., (a) and (b), 11A(1)(c) and 17(2))

Article 6(2), first subparagraph, (a) and (b), Article 11A(1)(c) and Article 17(2) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7, must be interpreted as meaning that, first, a taxable person who makes temporary use for private purposes of part of a capital item forming part of the assets of his business is entitled, under those provisions, to deduct the input value added tax on the expenditure incurred in carrying out permanent alterations to that item even though those alterations were carried out with a view to that temporary use for private purposes and, secondly, that right to deduct exists irrespective of whether the taxable person was charged VAT and deducted that VAT upon the acquisition of the capital item to which those alterations were made.

In that regard, it is in particular a taxable person’s intention, confirmed by objective evidence, to use an item or a service for business purposes which makes it possible to determine whether, at the time when he carries out the input transaction, the taxable person is acting as such and must therefore be entitled to deduct the value added tax payable or paid in respect of that item or those services.

That evidence includes, inter alia, the nature of the goods concerned and the period between the acquisition of those goods and their use for the purposes of the taxable person’s economic activity. However, the fact that goods acquired for the purposes of an economic activity are not used immediately for those economic activities is not, in principle, capable of affecting the right to deduct the input value added tax. The use of an item initially only for private purposes is consistent with the principle of fiscal neutrality which forms an integral part of the common system of value added tax and may be regarded as constituting mixed use of a capital item which forms part of the assets of the business.

(see paras 19, 23, 31, 32, 34, 43, operative part)

Case C-334/10

X

v

Staatssecretaris van Financiën

(Reference for a preliminary ruling from the Hoge Raad der Nederlanden)

‛Sixth VAT Directive — Article 6(2), first subparagraph, (a) and (b), Article 11A(1)(c) and Article 17(2) — Part of a capital item forming part of the assets of a business — Temporary use for private purposes — Permanent alterations to that item — Payment of VAT in respect of the permanent alterations — Right to deduct’

Summary of the Judgment

Harmonisation of tax legislation — Common system of value added tax — Deduction of input tax — Capital items — Temporary use for private purposes of part of an item forming part of the assets of a business — Right to deduct expenditure incurred in respect of permanent alterations to that item — Condition — Intention to use the altered item for business purposes — Criteria for assessment

(Council Directive 77/388, Arts 6(2) first subpara., (a) and (b), 11A(1)(c) and 17(2))

Article 6(2), first subparagraph, (a) and (b), Article 11A(1)(c) and Article 17(2) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7, must be interpreted as meaning that, first, a taxable person who makes temporary use for private purposes of part of a capital item forming part of the assets of his business is entitled, under those provisions, to deduct the input value added tax on the expenditure incurred in carrying out permanent alterations to that item even though those alterations were carried out with a view to that temporary use for private purposes and, secondly, that right to deduct exists irrespective of whether the taxable person was charged VAT and deducted that VAT upon the acquisition of the capital item to which those alterations were made.

In that regard, it is in particular a taxable person’s intention, confirmed by objective evidence, to use an item or a service for business purposes which makes it possible to determine whether, at the time when he carries out the input transaction, the taxable person is acting as such and must therefore be entitled to deduct the value added tax payable or paid in respect of that item or those services.

That evidence includes, inter alia, the nature of the goods concerned and the period between the acquisition of those goods and their use for the purposes of the taxable person’s economic activity. However, the fact that goods acquired for the purposes of an economic activity are not used immediately for those economic activities is not, in principle, capable of affecting the right to deduct the input value added tax. The use of an item initially only for private purposes is consistent with the principle of fiscal neutrality which forms an integral part of the common system of value added tax and may be regarded as constituting mixed use of a capital item which forms part of the assets of the business.

(see paras 19, 23, 31, 32, 34, 43, operative part)