Keywords
Summary

Keywords

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Tax provisions ° Harmonization of laws ° Turnover tax ° Common system of value added tax ° Sixth Directive ° Scope ° Sale by a taxable person of an item of property partly reserved for his private use ° Reserved part excluded from the VAT system ° Right to deduct limited to the part used for business purposes

(Council Directive 77/388, Arts 2(1), 17(2) and 20(2))

Summary

Where a taxable person within the meaning of Article 2(1) of the Sixth Directive (77/388) on the harmonization of the laws of the Member States relating to turnover taxes sells property part of which he had chosen not to use for business purposes but to reserve for his private use, he does not act with respect to the sale of that part as a taxable person. Such a transaction is not, therefore, liable to VAT.

There is no provision in the Directive which precludes a taxable person who wishes to retain part of an item of property amongst his private assets from excluding it from the VAT system. In such a case, apportionment between the part allocated to the taxable person' s business activities and the part retained for private use must be based on the proportions of private and business use in the year of acquisition and not on a geographical division. The taxable person must, moreover, throughout his period of ownership of the property in question, demonstrate an intention to retain part of it amongst his private assets.

Where the taxable person has made that choice at the time of acquiring the property, only the part of the property assigned to his business is to be taken into account for the application of Article 17(2) of the Directive regarding the right to deduct input tax, and the adjustment of such deductions under Article 20(2) must be limited to that part.