On March 1, 2012. the ECJ issued its decision in the case C-280/10 ( Polski Trawertyn). The case relates to the deduction of input VAT in case an invoice, before start of the activities of a partnership, is issued in the name of the partners rather than in the name of the partnership.
Context: Deduction of input tax paid in respect of transactions conducted with a view to carrying out planned economic activity — Purchase of land by the partners of a partnership — Invoices drawn up prior to registration of the partnership seeking the deduction
Article in the EU VAT Directive
Article 9, 168, 169, 178(a) of Council Directive 2006/112/EC
Article 9
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.
Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
Article 169
In addition to the deduction referred to in Article 168, the taxable person shall be entitled to deduct the VAT referred to therein in so far as the goods and services are used for the purposes of the following:
(a) transactions relating to the activities referred to in the second subparagraph of Article 9(1), carried out outside the Member State in which that tax is due or paid, in respect of which VAT would be deductible if they had been carried out within that Member State;
(b) transactions which are exempt pursuant to Articles 138, 142 or 144, Articles 146 to 149, Articles 151, 152, 153 or 156, Article 157(1)(b), Articles 158 to 161 or Article 164;
(c) transactions which are exempt pursuant to points (a) to (f) of Article 135(1), where the customer is established outside the Community or where those transactions relate directly to goods to be exported out of the Community.
Article 178
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
Facts
- On 22 December 2006 Pawel Józef Granatowicz and Marcin Michal Wasiewicz jointly acquired an open-cast stone quarry — a transaction which was subject to VAT and in respect of which an invoice, bearing the same date, was issued in both names.
- On 26 April 2007 a partnership agreement was executed by notarial deed, thereby creating the general partnership, the Kopalnia Odkrywkowa Polski Trawertyn P. Granatowicz, M. Wasiewicz, spólka jawna (‘the partnership’), and, at the same time, the partners, Messrs Granatowicz and Wasiewicz, made a contribution in kind to the partnership consisting of the quarry. The notary issued an invoice in the name of the partnership in respect of the execution of the original and six extracts of the notarial deed.
- The partnership was registered on 5 June 2007 and came into existence for VAT purposes on 14 June of that year.
- In its June 2007 VAT return the partnership deducted the input VAT relating to the purchase of the quarry and the provision of notarial services, amounting to PLN 289 718.
- Following an inspection, the Polish tax authorities found that there were two irregularities in the return filed by the partnership. The first was that the invoice submitted in respect of the purchase of the immovable property was issued in the name of the ‘future partners’ and not in that of the partnership. The second was that the invoice for the execution of the notarial deed and the six extracts was issued in the name of the partnership, when this had not yet been legally formed.
- The administrative review proceedings brought by the partnership in respect of the decision of the Polish tax authorities were heard by the Director Izby Skarbowej (Director of the Tax Office), who upheld the contested decision on the same grounds.
- The partnership then brought an action in the Wojewódzki Sąd Administracyjny w Poznaniu (Regional Administrative Court, Poznań), which court also accepted the arguments of the authorities in relation to both the invoice for the purchase of the property and the invoice for the execution of the notarial deeds.
Questions
AG Opinion
(1) Articles 9 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding a Member State from providing that a partnership is entitled to deduct input VAT in specific circumstances such as those in the present case, where two natural persons, acting as ‘future partners’, acquire immovable property which is brought by way of a contribution in kind to a partnership formed subsequent to such acquisition in which those persons are the partners.
If the Member State does not allow for that possibility, Directive 2006/112 precludes a situation where the ‘future partners’ are unable to claim repayment of the input VAT. In those circumstances, the national authorities must ensure that the ‘future partners’ are in a position to exercise the right to repayment on substantive and procedural terms which do not make it excessively difficult, and in accordance with the principle of fiscal neutrality.
(2) Article 178(a), in conjunction with Article 168 of Directive 2006/112, must be interpreted as precluding a national rule or practice which, in specific circumstances such as those in the present case, prevents the recovery of input VAT:
(a) where, in the case of deduction by the partnership, an invoice has been issued either in the names of the ‘future partners’ or in that of the partnership although at a date prior to its formation,
(b) or where, in the case of repayment in favour of the ‘future partners’, an invoice has been issued in the name of the partnership at a date prior to its formation.
Decision
1. Articles 9, 168 and 169 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 which permits neither partners nor their partnership to exercise the right to deduct input VAT on investment costs incurred by those partners, before the creation and registration of the partnership, for the purposes of and with the view to its economic activity.
2. Articles 168 and 178(a) of Directive 2006/112 must be interpreted as precluding national legislation under which, in circumstances such as those at issue in the main proceedings, the input VAT paid cannot be deducted by a partnership when the invoice, drawn up before the registration and identification of the partnership for the purposes of value added tax, was issued in the name of the partners of that partnership.
Summary
Not permitted is a national regulation that denies both the members of a company and that company itself the possibility of claiming a right to deduct the input tax on investment expenditure incurred by the partners before the incorporation and registration of that company, for the benefit of the company and in view of its economic activity.
Not permitted is national legislation, the application of which means that a company cannot deduct input tax when the invoice, which was drawn up before the registration and identification of that company for VAT purposes, is issued in the name of the partners of that company .
Source
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