Opinion of Advocate General Bobek delivered on 3 March 2020.

• Jurisdiction: European Union
• Date: 03 March 2020
• Court: Court of Justice (European Union)

Provisional text

OPINION OF ADVOCATE GENERAL

BOBEK

delivered on 3 March 2020(1)

Case C‑791/18

Stichting Schoonzicht

Joined parties:

Staatssecretaris van Financiën

(Request for a preliminary ruling from the Hoge Raad der Nederlanden (Supreme Court of the Netherlands))

(Reference for a preliminary ruling — Value added tax — Adjustment of deductions — Capital goods — Difference between intended use and first actual use — Directive 2006/112/EC — Articles 185 and 187 — Applicability)

I. Introduction

1. The present case concerns the way in which an initial deduction of value added tax (VAT) should be adjusted by a trader who changed his intentions as to the use of an apartment complex. The deduction in this case was made while the apartment complex was still under construction. At that time, the trader intended to use it for taxable purposes. However, some of the apartments were subsequently rented out, with the result that the first use of those apartments was tax exempt.

2. Under those circumstances, the Netherlands authorities asked the trader to pay back, in a single step, the entire part of the initial deduction corresponding to the apartments that were subsequently rented out. Indeed, under the national legislation, if it appears, at the time at which the trader starts to use goods for the first time, that that trader has deducted VAT to a greater extent than his or her entitlement based on the use of the goods, the excess of the VAT initially deducted must be adjusted in one step.

3. The legal question that arises is whether that legislation complies with Article 187 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’), (2) according to which the adjustment of deductions made in respect of capital goods is to be carried out in proportionate fractions spread over a period of several years.

II. Legal framework

A. EU law: the VAT Directive

4. Article 184 et seq. of the VAT Directive concern the adjustment of deductions.

5. Article 184 provides that ‘the initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled’.

6. Pursuant to Article 185 of that directive:

‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

7. Article 186 of the VAT Directive states that ‘Member States shall lay down the detailed rules for applying Articles 184 and 185’.

8. Article 187 of the VAT Directive is worded as follows:

‘1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.

Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used.

In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.

2. The annual adjustment shall be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof.

The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.’

9. Under Article 189 of the VAT Directive:

‘For the purposes of applying Articles 187 and 188, Member States may take the following measures:

…

(b) specify the amount of the VAT which is to be taken into consideration for adjustment;

…’

B. Netherlands law

10. The provisions on the adjustment of deductions appear in Article 15(4) of the Wet van 28 juni 1968, houdende vervanging van de bestaande omzetbelasting door een omzetbelasting volgens het stelsel van heffing over de toegevoegde waarde (Law of 28 June 1968, providing for replacement of the existing turnover tax by a turnover tax according to the system of collection of value added tax) (‘OB’) and in Articles 12 and 13 of the Uitvoeringsbeschikking omzetbelasting 1968 (Implementing decision on turnover tax 1968) (‘the Implementing Decision’).

11. Article 15(4) of the OB provides:

‘Deduction of the tax is made in accordance with the intended use of the goods and services at the time when the tax is invoiced to the trader or at the time when the tax becomes chargeable. If it appears, at the time at which the trader starts to use the goods or services, that he is deducting the tax relating to them to an extent which is higher or lower than that to which the use of the goods or services entitles him, the excess deducted shall be chargeable from that time. The tax which becomes chargeable shall be paid in accordance with Article 14. The amount of tax which could have been deducted and was not deducted shall be refunded to him on request.’

12. Article 12(2) and (3) of the Implementing Decision is worded as follows:

‘(2) The adjustment referred to in Article 15(4) [of the OB] is made on the basis of the data of the taxable period during which the trader started to use the goods or services.

(3) In the declaration for the final tax period, the adjustment of the deduction is to be made on the basis of the data applicable to the entire tax year.’

13. Article 13 of the Implementing Decision, so far as is relevant here, is worded as follows:

‘(1) In derogation from Article 11, the following are taken into account separately for the purposes of the deduction:

(a) immovable property and rights pertaining to such property;

(b) movable property that the trader writes off in respect of income tax or corporate income tax, or that he could write off were he liable to such a tax.

(2) So far as concerns immovable property and the rights pertaining to such property, adjustment of deductions is to be made during each of the nine tax years following the one in which the trader has started to use the property in question. On each occasion, the adjustment is to be made on one tenth of the input tax paid, account being had of the tax year data contained in the declaration relating to the final taxable period of that tax year.’

III. Facts, procedure and questions referred

14. Stichting Schoonzicht, which has its seat in Amsterdam, had an apartment complex built on a plot of land owned by it. The complex comprised seven residential apartments. Construction started in 2013 and the complex was delivered in July 2014.

15. The apartment complex was originally intended to be used for taxable purposes. Accordingly, Stichting Schoonzicht deducted the VAT on that supply in full.

16. Subsequently, from 1 August 2014, Stichting Schoonzicht rented out four of the apartments. It follows from the order for reference that that was the first use of (a part of) the apartment complex and that, contrary to the initial intention, it was VAT exempt. The other three apartments remained unoccupied in 2014.

17. For that reason, in accordance with Netherlands legislation, the corresponding part of the initial deduction was adjusted pursuant to Article 15(4) of the OB. That meant that Stichting Schoonzicht owed the part of the VAT corresponding to the four rented apartments, amounting to EUR 79 587. According to the order for reference, the adjustment was made in respect of the third quarter of 2014 (1 July to 30 September 2014) during which the apartment complex was first used.

18. Stichting Schoonzicht paid the VAT and lodged an objection to that self-assessment. It considered that, in the case of capital goods, adjustment in full of the initial deduction at the time when capital goods are first used, as provided for in Article 15(4) of the OB, is contrary to Article 187 of the VAT Directive.

19. That objection was dismissed by the Inspecteur van de Belastingdienst (tax inspector). Stichting Schoonzicht brought an appeal before the Rechtbank Noord-Holland (District Court, North Holland, Netherlands). That court declared the appeal unfounded, after which Stichting Schoonzicht brought a further appeal before the Gerechtshof Amsterdam (Court of Appeal, Amsterdam, Netherlands). That court also held the regime in Article 15(4) of the OB to be compatible with the VAT Directive and declared the (further) appeal unfounded. According to the Gerechtshof Amsterdam (Court of Appeal, Amsterdam), the Netherlands legislature used the option afforded to Member States by Article 189(b) of the VAT Directive to specify the amount of the VAT to be taken into consideration in the adjustment for capital goods. In the view of that court, the single adjustment provided for in Article 15(4) of the OB must be regarded as a ‘pre-adjustment correction’, which precedes the standard adjustment procedure and is not regulated (and therefore not precluded) by the VAT Directive. The VAT Directive does not preclude such a correction since it breaches neither the principle of tax neutrality nor the proportionality principle.

20. Stichting Schoonzicht lodged an appeal in cassation against that judgment before the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), the referring court.

21. In the main proceedings, Stichting Schoonzicht reiterates the argument that the single adjustment of the initial deduction upon the entry into use of the capital...