Case C‑378/15

Mercedes Benz Italia SpA

v

Agenzia delle Entrate Direzione Provinciale Roma 3

(Request for a preliminary ruling
from the Commissione tributaria regionale di Roma)

(Reference for a preliminary ruling — Taxation — Value added tax — Directive 77/388/EEC — Article 17(5), third subparagraph, point (d) — Scope — Application of a deductible proportion to the value added tax charged on the acquisition of all goods and services used by a taxable person — Incidental transactions — Use of turnover as an indicator)

Summary — Judgment of the Court (Third Chamber), 14 December 2016

Harmonisation of fiscal legislation — Common system of value added tax — Deduction of input tax — Goods and services used both for transactions in respect of which VAT is deductible and for transactions in respect of which it is not deductible — Proportional deduction — Calculation — National legislation and practice requiring the taxable person to apply to all the goods and services acquired a deductible proportion based on turnover — Identification of operations classifiable as incidental — Use of turnover as an index — Lawfulness — Conditions

(Council Directive 77/388, Arts 17(5) and 19)

Point (d) of the third subparagraph of Article 17(5) and Article 19 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes must be interpreted as not precluding national rules and practice which require a taxable person to apply to all goods and services which he has acquired a deductible proportion based on turnover, without providing for a method of calculation which is based on the nature and actual destination of each of the goods and services acquired and which objectively reflects the portion of the expenditure actually to be attributed to each of the taxed and untaxed activities.

It follows from point (d) of the third subparagraph of Article 17(5) of Directive 77/388, read in conjunction with the first and second subparagraphs of Article 17(5) and Article 19(1) of that directive, that the method of calculating the right to deduct value added tax (VAT) for which it provides implies, in principle, the use of a proportion that is based on turnover.

Next, concerning an obligation for the taxable person to apply that proportion that is based on turnover to all the goods and services he has acquired, the first subparagraph of Article 17(5) of the Sixth Directive refers expressly, in point (d) of the third subparagraph of Article 17(5) of that directive, both to transactions in respect of which VAT is deductible and to those in respect of which it is not. Accordingly, the expression ‘all transactions referred to therein’, referred to in point (d) of the third subparagraph of Article 17(5) of that directive must be understood as referring to the two types of transactions referred to in the first subparagraph of Article 17(5) of that directive. Unlike the first subparagraph of Article 17(5) of the Sixth Directive, point (d) of the third subparagraph of Article 17(5) of that directive does not use the expression ‘both’ to refer to those two types of transactions. In the absence of such a clarification, point (d) of the third subparagraph of Article 17(5) of the Sixth Directive must be understood as referring to all of the goods and services used by the taxable person concerned in order to carry out both transactions in respect of which VAT is deductible and those in respect of which it is not, without it being necessary that those goods and services be used for both of those types of transactions. Moreover, to interpret point (d) of the third subparagraph of Article 17(5) of the Sixth Directive as applying only to goods and services used to carry out ‘both’ transactions in respect of which VAT is deductible and those in respect of which it is not would give that provision the same scope as the first subparagraph of Article 17(5) of that directive, from which that provision is, however, supposed to derogate. These considerations are, furthermore, supported by one of the objectives pursued by the Sixth Directive, which is, as is clear from the seventeenth recital of that directive, to authorise the use of rules which are relatively simple to apply. In applying the calculation rule provided for in point (d) of the third subparagraph of Article 17(5) of the Sixth Directive, taxable persons are not obliged to assign the goods and services which they purchase either to transactions in respect of which VAT is deductible or to transactions in respect of which it is not, or to those two types of transactions, and consequently the national tax authorities do not have to verify whether that assignment has been correctly carried out.

Moreover, the third subparagraph of Article 17(5)(d) and Article 19 of the Sixth Directive do not preclude national legislation and practice which requires a taxable person to refer to the composition of its turnover in order to identify transactions qualifying as ‘incidental’, in so far as the assessment carried out for that purpose also takes account of the relationship between those transactions and the taxable activities of that taxable person and, as the case may be, of the use which they entail of the goods and services which are subject to VAT.

In that regard, even if the composition of the turnover of the taxable person constitutes a relevant factor in determining whether certain transactions must be regarded as ‘incidental’ within the meaning of the second sentence of Article 19(2) of the Sixth Directive, the fact that income greater than that produced by the activity stated by the undertaking concerned to be its main activity is generated by such transactions cannot, by itself, suffice to preclude their classification as ‘incidental transactions’ within the meaning of that provision.

(see paras 32, 36-38, 40, 43, 44, 47, 49, 50, operative part)