On 2 May 2019, the European Court of Judgment gave its judgment in case C‑225/18 (Grupa Lotos S.A.). The case deals with the question if VAT can be deducted in costs are being recharged.
Decision
Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as:
– precluding national legislation, such as that at issue in the main proceedings, which provides for the scope of an exclusion from the right to deduct value added tax (VAT) to be extended, after the accession of the Member State concerned to the European Union, and which means that a taxable person, providing tourism services, is deprived, from the entry into force of that extension, of the right to deduct VAT paid on the purchase of overnight accommodation and catering services which that taxable person re-invoices to other taxable persons in the context of the provision of tourism services and
– not precluding national legislation, such as that at issue in the main proceedings, which provides for the exclusion from the right to deduct VAT paid on the purchase of overnight accommodation and catering services, that exclusion having been introduced before the accession of the Member State concerned to the European Union and maintained thereafter, in accordance with the second paragraph of Article 176 of Directive 2006/112, and which means that a taxable person, who does not provide tourism services, is deprived of the right to deduct VAT paid on the purchase of such overnight accommodation and catering services which that taxable person re-invoices to other taxable persons.
Facts (simplified):
Grupa Lotos, subject to VAT in Poland, acquired overnight accommodation and catering services purchased in part for its own use and, in part, for resale to its subsidiaries, themselves taxable persons in that Member State.
Grupa Lotos applied for a tax ruling from the Polish tax authorities, asking, in particular, whether, on the assumption that it purchased overnight accommodation and catering services which it then re-invoiced to other VAT taxable persons, it had the right to deduct input VAT under the general rules.
In the view of Grupa Lotos, since, first, an operator who acquires in his own name services in order to resell them must be considered a service provider (himself) and, secondly, the overnight accommodation and catering services are subject to VAT when resold by Grupa Lotos, it ought to be possible to deduct the input VAT paid on their purchase. Even though, in Poland, there is an exclusion from the right to deduct input VAT in relation to overnight accommodation and catering services, which Grupa Lotos does not feel should apply as Grupa Lotos is not the final consumer of those services, but a service provider like VAT taxable persons who provide those types of service.
The Polish tax authorities rejected Grupa Lotos’ view, on the ground that the exclusion from the right to deduct made no distinction according to whether the taxable person, who initially purchases overnight accommodation and catering services, then acts as a final consumer or as a service provider.
The Polish Supreme Administrative Court decided to refer the following question to the Court of Justice for a preliminary ruling:
‘Are Article 168 of [the VAT] Directive and the principles of neutrality and proportionality contrary to a provision such as that in Article 88(1)(4) of the Law [on VAT], under which a reduction or refund of input VAT does not apply to acquisitions by a taxable person of overnight accommodation and catering services, with the exception of the purchase of ready meals prepared for passengers by taxable persons providing passenger transport services, even where those provisions were introduced into the law on the basis of Article 17(6) of the Sixth [Directive] …?’
Considerations:
25 It should be recalled, first, that, in accordance with settled case-law, the right of deduction provided for in Article 168(a) of the VAT Directive is an integral part of the VAT scheme and in principle may not be limited.
26 The deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities. The common system of VAT consequently ensures neutrality of taxation of all economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT.
28 Secondly, it is also apparent from the case-law that derogations from the right to deduct VAT are permitted only in the cases expressly provided for by the provisions of the directives governing that tax and are to be interpreted strictly.
Judgment:
The ECJ rules as follows:
Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as:
– precluding national legislation, such as that at issue in the main proceedings, which provides for the scope of an exclusion from the right to deduct value added tax (VAT) to be extended, after the accession of the Member State concerned to the European Union, and which means that a taxable person, providing tourism services, is deprived, from the entry into force of that extension, of the right to deduct VAT paid on the purchase of overnight accommodation and catering services which that taxable person re-invoices to other taxable persons in the context of the provision of tourism services and
– not precluding national legislation, such as that at issue in the main proceedings, which provides for the exclusion from the right to deduct VAT paid on the purchase of overnight accommodation and catering services, that exclusion having been introduced before the accession of the Member State concerned to the European Union and maintained thereafter, in accordance with the second paragraph of Article 176 of Directive 2006/112, and which means that a taxable person, who does not provide tourism services, is deprived of the right to deduct VAT paid on the purchase of such overnight accommodation and catering services which that taxable person re-invoices to other taxable persons.
Source: curia.europa.eu
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