Case C‑672/16

Imofloresmira — Investimentos Imobiliários SA

v

Autoridade Tributária e Aduaneira

(Request for a preliminary ruling from the Tribunal Arbitral Tributário (Centro de Arbitragem Administrativa — CAAD)

(Reference for a preliminary ruling — Value added tax — TVA Directive — Exemption of the leasing and letting of immovable property — Right of option available to taxpayers — Implementation by the Member States — Deduction of input tax — Use for the purposes of the taxable person’s taxed transactions — Adjustment of the initial deduction — Not permissible)

Summary — Judgment of the Court (Seventh Chamber), 28 February 2018

1.        Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Adjustment of the initial deduction — Change in the factors used to determine the amount of tax to be deducted — Meaning — Circumstances outside the taxable persons’ control — Included — Condition — Respect for the fundamental principles of the system introduced by the VAT Directive — Restriction on the right of deduction through the provisions applicable to adjustments or revocation of a right of deduction which has already been acquired — Not permissible

(Council Directive 2006/112, Art. 185(1))

2.        Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Adjustment of the initial deduction — Use of goods and services allocated to the business for the purposes of transactions other than the taxable transactions of the taxable person — Property subject to the taxation option, which remained unoccupied for more than two years despite the taxable person’s proven intention to rent it — National legislation making provision for the adjustment of the initial deduction — Not permissible

(Council Directive 2006/112, Arts 167, 168, 184, 185 and 187)

3.        Questions referred for a preliminary ruling — Interpretation — Temporal effects of judgments by way of interpretation — Retroactive effect — Limitation by the Court — Conditions — Good faith of those concerned — Requirements — Existence of exceptional circumstances

(Art. 267 TFEU)

1.      See the text of the decision.

(see paragraphs 45-49)

2.      Articles 167, 168, 184, 185 and 187 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted to the effect that they preclude national legislation which provides for the adjustment of the value added tax initially deducted on the ground that a property, for which the right to opt for taxation was exercised, is regarded as no longer being used by the taxable person for the purposes of its own taxed transactions, where that property has remained unoccupied for more than two years, even though it is established that the taxable person has sought to rent it during that period.

It is important to recall also that it is the acquisition of goods or services by a taxable person acting as such that gives rise to the application of the VAT system and therefore of the deduction mechanism. The use to which the goods or services are put, or intended to be put, merely determines the extent of the initial deduction to which the taxable person is entitled under Article 168 of the VAT Directive and the extent of any adjustments in the course of the following periods (see, to that effect, judgment of 11 July 1991, Lennartz, C‑97/90, EU:C:1991:315, paragraph 15).

It follows therefore that the entitlement to a reduction is retained in principle, even if subsequently, by reason of circumstances beyond its control, the taxable person does not make use of those goods and services which gave rise to a deduction in the context of taxed transactions (see, to that effect, judgments of 29 February 1996, INZO, C‑110/94, EU:C:1996:67, paragraph 20, and of 15 January 1998, Ghent Coal Terminal, C‑37/95, EU:C:1998:1, paragraphs 19 and 20).

Any other interpretation of the VAT Directive would be contrary to the principle that VAT should be neutral as regards the tax burden on a business.

(see paragraphs 39, 40, 43, 53, operative part)

3.      See the text of the decision.

(see paragraphs 59-61)