On February 10, 2022, the ECJ issued its decision in the case C-9/20 (Grundstücksgemeinschaft Kollaustraße 136)/
Context: Reference for a preliminary ruling – Taxation – Value added tax (VAT) – Directive 2006/112/EC – Point (b) of the first paragraph of Article 66 – Chargeability of VAT – The time the payment is received – Article 167 – Origin and scope of the right of input VAT deduction – Article 167a – Derogation – Cash accounting – Letting and subletting of a property used for industrial or commercial purposes.
The German verdict (before brought to ECJ_ can be read here.
Articles in the EU VAT Directive
Articles 66, 66a, 167, 167a of the EU VAT Directive 2006/112/EC.
Article 66 (Chargeable event)
By way of derogation from Articles 63, 64 and 65, Member States may provide that VAT is to become chargeable, in respect of certain transactions or certain categories of taxable person at one of the following times:
(a) no later than the time the invoice is issued;
(b) no later than the time the payment is received;
(c) where an invoice is not issued, or is issued late, within a specified time no later than on expiry of the time-limit for issue of invoices imposed by Member States pursuant to the second paragraph of Article 222 or where no such time-limit has been imposed by the Member State, within a specified period from the date of the chargeable event.
The derogation provided for in the first paragraph shall not, however, apply to supplies of services in respect of which VAT is payable by the customer pursuant to Article 196 and to supplies or transfers of goods referred to in Article 67.
Article 66a
By way of derogation from Articles 63, 64 and 65, the chargeable event of the supply of goods by a taxable person who is deemed to have received and supplied the goods in accordance with Article 14a and of the supply of goods to that taxable person shall occur and VAT shall become chargeable at the time when the payment has been accepted.
Article 167 (Right to deduct VAT)
A right of deduction shall arise at the time the deductible tax becomes chargeable.
Article 167a
Member States may provide within an optional scheme that the right of deduction of a taxable person whose VAT solely becomes chargeable in accordance with Article 66(b) be postponed until the VAT on the goods or services supplied to him has been paid to his supplier.
Member States which apply the optional scheme referred to in the first paragraph shall set a threshold for taxable persons using the scheme within their territory, based on the annual turnover of the taxable person calculated in accordance with Article 288. That threshold may not be higher than EUR 500000 or the equivalent in national currency. Member States may increase that threshold up to EUR 2000000 or the equivalent in national currency after consulting the VAT Committee. However, such consultation of the VAT Committee shall not be required for Member States which applied a threshold higher than EUR 500000 or the equivalent in national currency on 31 December 2012.
Member States shall inform the VAT Committee of national legislative measures adopted pursuant to the first paragraph.
Facts
The German court raised questions on 18 February 2020 regarding the lease of real estate for business purposes and the moment input VAT can be deducted.
- Applicant was leasing property intended for business purposes.
- Applicant and its landlord had validly waived a the VAT exemption and opted for VAT.
- To both, the German tax authorities had authorised to report/pay the VAT based on cashflow.
- From 2004 onwards, deferral of payment was granted for part of the rent payable by the applicant.
- As a result, in the years 2013 to 2016 applicant made payments for the lease in the years 2009 to 2012.
- These payments included 19% VAT.
- Applicant always exercised its right to deduct input VAT in the period in which the payment was made.
- However, the inspector was of the opinion that the law on deduction of input VAT had already arisen at the time the transaction was carried out, and should therefore have been exercised each time for the period in question.
- The question is, among other things, whether the right to deduct input VAT in accordance with Article 167 of the VAT Directive without exception always arises only at the time when the deductible tax becomes chargeable, or whether the Member States may derogate from this principle.
Questions
Does Article 167 of Directive 2006/112/EC of 28 November 2006 on the common system of valued added tax preclude a provision of national law according to which the right of input tax deduction already arises at the time the transaction is performed, even if, under national law, the tax claim against the supplier or service provider arises only when the remuneration is received and the remuneration has not yet been paid?
If the first question is answered in the negative: Does Article 167 of Directive 2006/112/EC of 28 November 2006 on the common system of valued added tax preclude a provision of national law according to which the right of input tax deduction cannot be asserted for the tax period in which the remuneration has been paid if the tax claim against the supplier or service provider arises only when the remuneration is received, the service has already been provided in an earlier tax period and, under national law, due to the matter being time-barred, it is no longer possible to assert the input tax claim for that earlier tax period?
AG Opinion
Article 167 of Directive 2006/112/EC of 28 November 2006 on the common system of valued added tax must be interpreted as precluding a provision of national law according to which the right to deduct input tax arises already at the time the transaction is performed even if, in accordance with a national derogation pursuant to Article 66(b) of the that directive, the tax claim against the supplier or service provider arises only when the remuneration is received and the remuneration has not yet been paid.
Decision
Art. 167 of Council Directive 2006/112/EC of November 28, 2006 on the common system of VAT in the version amended by Council Directive 2010/45/EU of July 13, 2010 is to be interpreted in such a way that it precludes national regulation, according to which the right to deduct arises as soon as the transaction is carried out if the tax is chargeable against the supplier or service provider following a national derogation pursuant to Article 66(1)(b) of Directive 2006/112 as amended by Directive 2010/ 45 amended version only arises when the fee is received and this has not yet been paid.
Summary
Grundstücksgemeinschaft Kollaustraße 136 rents a building that it in turn rents out to various tenants. It has been opted for VAT-taxed rental. From 2004, GK has been granted a deferment of payment for the rent owed. In 2016, a waiver will be granted for an amount of unpaid rent of € 22,000. GK only deducts input tax in the return period or calendar year in which the payment is made. According to the German tax authorities, GK should have deducted the input tax in the years to which the payments related, and not in the (subsequent) years in which the rents were actually paid. GK disagrees. The German court is asking questions for a preliminary ruling in this case.
The EU Court of Justice has ruled that the German provision, according to which the right to deduct input tax already arises at the time when the transaction is performed, is contrary to EU law. It is important, however, that Germany has made use of the option in the VAT Directive that the service provider only owes the VAT at the time of receipt of the compensation and this compensation has not yet been paid.
Source
ECJ Cases referred to
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