Portugal wanted to know if it was entitled to limit the deductibility of VAT on expenditure on food to 50%, even where the taxable person demonstrates that the expenditure is exclusively attributable to its taxable economic activity.
Article in EU VAT Directive
Article 168(a) and Article 176 of Council Directive 2006/112/EC
Question
Must Article 168(a) and Article 176 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and the principles of VAT neutrality and of proportionality be interpreted as meaning that the Portuguese legislature is entitled, under Article 21(1)(d) and 21(2)(d) of the Código do Imposto sobre o Valor Acrescentado (Value Added Tax Code), as approved by Decree No 394-B/84 of 26 December 1984, to limit the deductibility of the input VAT on expenditure on food to 50%, even where the taxable person demonstrates that all that expenditure has been fully applied to the carrying on of its taxed economic activity?
Order
The ECJ issued an order, which is only available in Portuguese and French. An English unofficial translation is attached.
Article 168 (a) and Article 176 of Council Directive 2006/112 / EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that does not preclude national legislation which, after the accession of the State – the Member State concerned to the European Union reduces the scope of excluded from the right expenses to deduct value-added tax by authorizing, under certain conditions, a partial deduction of value added tax on such expenses, among which, namely, those related to food, even if the taxable person proves that these expenses were fully allocated to the exercise of his taxable economic activity.
Order C‑630.19 PAGE Internacional
Source
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