ECJ cases C-45/20 and C-46/20 (Finanzamt N) – Questions – Input VAT, allocation of mixed used purchases to the business

The European Court of Justice recevied questions in two combined cases: C-45/20 and C-46/20 (Finanzamt N). The cases both deal with the question if input VAT can be deducted on costs that were used for both taxable and exempt activities.

Article in the EU VAT Directive

167, 168(a) of Council Directive 2006/112/EC (Right to deduct VAT)

Article 167
A right of deduction shall arise at the time the deductible tax becomes chargeable.

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;


Case C-45/20 concerns the deduction of VAT on the construction of a commercially used office in an otherwise privately used single-family dwelling. The applicant (E) claims deduction of input tax which he submitted for the first time in his delayed annual turnover tax return for 2015.

Case C-46/20 concerns the deduction of VAT paid in 2014 on the construction of a photovoltaic installation. The applicant used part of the electricity generated himself and partly supplied it to an energy supplier. The applicant (Z) claims deduction of input tax which he submitted for the first time in his annual turnover tax return for 2014, which was submitted late. Objections and appeals were unsuccessful in both cases. The cases are now before the highest federal court in tax matters (Bundesfinanzhof).


According to national case law, the full/partial earmarking of an asset for the company requires that the taxpayer has made a choice of earmarking in good time, explicitly laid down in documents. Since the criteria laid down by the Federal Finance Court for this purpose – a destination known to the tax authorities before the expiry of the deadline for submission of the annual turnover tax return – were not met in the present cases, deduction of input tax would not be possible.

In the light of the judgment of the Court of Justice in Gmina Ryjewo (C-140/17), the question has arisen whether the criteria developed and applied so far by the Bundesfinanzhof for the exercise of the right of option of destination are compatible with EU law. The first preliminary question is intended to clarify whether a Member State may prescribe a limitation period for the allocation of the assets of an undertaking. The second question concerns the legal effect of exceeding the time-limit.

Source: (Dutch)


The questions referred for a preliminary ruling in Cases C-45/20 and C-46/20 are identical, the facts and circumstances being briefly described below. In both cases, the deduction of input tax was rejected by the Finanzamt on the ground that the goods in question had not been timely allocated to the business.

Does Article 168(a), read in conjunction with Article 167 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax 1 conflict with national case-law precluding the right to deduct VAT in cases in which the trader is entitled to choose the allocation of a supply at the time of purchase if the tax authorities have not adopted a decision on its allocation on expiry of the statutory deadline for submission of the annual VAT return?

Does Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax conflict with national case-law whereby allocation to private assets is assumed or presumed in the absence of (sufficient) evidence for allocation to the assets of the business?

AG Opinion


Personal comments/VATupdate 

See also here some German background:


Similar ECJ cases

How did countries implement the case?  Your feedback appreciated!  Let us know





* click here if you have interesting news to share *