ECJ Case C-242/18 (UniCredit Leasing) – Questions – Financial lease; deduction of input VAT

The ECJ has been asked questions in Case C-242/18 on 21 May 2018

Facts:

• The predecessor of UniCredit Leasing (BA Creditanstalt Bulus) entered into a finance lease agreement with Vizatel as a lessee, whereby the lessor agreed to acquire a piece of land designated by the lessee, to erect a building thereon and lease this building together with the land to the lessee.
• The parties agreed to treat the transaction as an open-ended lease with the option to transfer the ownership to the assets at the end of the contract term.
• The tax authorities treated the agreement as the supply of a building, and raised an assessment for VAT on the full amount of the lease payments.

The ECJ is being asked the following questions:

1. If a financial leasing agreement is terminated, is it allowed to reduce the taxable amount and to refund the VAT where the VAT has been established by way of a definitive tax assessment notice on the basis of a taxable amount consisting of the sum of the monthly leasing installments due throughout the term of the agreement?
2. If yes, if a leasing agreement is terminated because of partial non-payment of the leasing installments, how can the lessor rely reduce the taxable amount to the extent of the installments that were owed but not paid, in the case where the termination is not retroactive?
3. Does the term ‘refusal’ includes the situation where, the lessor may no longer demand payment of the leasing installments from the lessee because he has terminated the leasing agreement on account of non-fulfillment of that agreement by the lessee, but is entitled, under that agreement, to compensation in the amount of all the unpaid leasing installments that would have fallen due up to the end of the term of the lease?

Preliminary questions:

1. In accordance with Article 90 (1) of Directive 2006/112 / EC on the common system of value added tax, in the event of termination of a financial lease agreement, the taxable amount may be reduced and the taxable value-added tax, which was determined on the basis of a taxable amount consisting of the total amount of the monthly lease installments for the entire duration of the contract, will be reimbursed?
2. If the first question is answered in the affirmative: in which of the cases referred to in Article 90 (1) of the Directive, the lessor may, in the event of termination of a lease contract due to partial non-payment of the lease installments, apply to a Member State appeals to require that the taxable amount be reduced in proportion to the time limits not paid in the period following the cessation of payment up to the time of termination of the contract, provided that the cancellation does not retroactive effect and this is confirmed by a clause in the agreement itself?
3. Is it possible to conclude from the interpretation of Article 90 (2) of the VAT Directive that, in a case such as this, there is an exception to Article 90 (1) of the VAT Directive?
4. On the basis of the interpretation of Article 90 (1) of the VAT Directive, it may be assumed that the term ‘cancellation’ in this provision also applies to the lessor, in the context of a finance lease agreement with expressly agreed transfer of ownership, can no longer demand payment of the lease installments by the lessee because the lessor has terminated the lease agreement for non-performance of the contract by the lessee, but in which the lessor is entitled to compensation under the contract up to the total amount of the unpaid lease installments that become due and payable up to the end of the lease term?

Source: Min BUZA (Dutch)