Keywords
Summary

Keywords

Tax provisions - Harmonisation of laws - Turnover taxes - Common system of value added tax - Deduction of input tax - National legislation allowing an employer to deduct, as input tax, a certain percentage of an allowance paid to an employee for business use of a private vehicle - Not permissible

(Council Directive 77/388, Arts 17(2)(a) and 18(1)(a))

Summary

$$A Member State fails to fulfil its obligations under Articles 17(2)(a) and 18(1)(a) of the Sixth Directive (77/388) on the harmonisation of the laws of the Member States relating to turnover taxes if it provides that an employer who is a taxable person for the purposes of value added tax may deduct part of an allowance paid to an employee for business use of a private car.

It follows from the wording of Article 17(2)(a) of the Sixth Directive that the right to deduct which that provision confers on a taxable person concerns value added tax paid in respect of goods and services supplied to that taxable person by another taxable person. The fact that an employee uses his own vehicle in connection with his employer's business cannot have the effect of transforming the employee into a taxable person within the meaning of the Sixth Directive or, therefore, Article 17(2)(a) thereof, even if the costs linked to such use give rise to reimbursement by the employer. Also, use by an employee of his own vehicle in connection with his employer's business cannot constitute a supply of goods, within the meaning of the Sixth Directive, to his employer. Accordingly, neither the vehicle belonging to the employee nor the fuel consumed by that vehicle can be regarded as supplied to the taxable employer, within the meaning of Article 17(2)(a), simply because depreciation of the vehicle and fuel costs linked to such use give rise to partial reimbursement by the employer.

In the absence of any supply of goods or services between two taxable persons and, therefore, of any possibility of an invoice or a document considered to be an invoice being delivered by one such taxable person to another, the deduction of value added tax authorised under the national legislation in question can, by definition, only occur in breach of the requirements laid down for exercise of a right to deduct by Article 18(1)(a) of the Sixth Directive.

( see paras 44, 46-48, 75-77 and operative part )