On November 29, 2012, the ECJ issued its decision in the case C-257/11 (Gran Via Moineşti)
Context: Directive 2006/112/EC – Value added tax – Articles 167, 168 and 185 – Right of deduction – Adjustment of deductions – Acquisition of land and buildings constructed on that land, with a view to demolishing the buildings and carrying out a construction project on the land
Article in the EU VAT Directive
Article 167 (Right to deduct VAT)
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;
(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 185 (Adjustment of deductions)
1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.
2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.
However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.
Facts
- By a contract of sale concluded on 16 March 2007, GVM acquired a plot of land and the buildings constructed on it.
- In accordance with that contract, a demolition permit for those buildings was also transferred to GVM.
- On the basis of that permit, GVM carried out demolition works, as attested in a report of 30 September 2008.
- Moreover, on 16 April 2008, a planning certificate was issued to GVM, with a view to obtaining a building permit to develop a residential complex on the land at issue.
- GVM deducted the VAT relating to all of the land and buildings purchased and drew up a VAT return, registered on 27 October 2008 with the AFP, showing a negative balance with an option for reimbursement.
- Following a tax audit, the AFP drew up, on 8 May 2009, a tax inspection report and, on 12 May 2009, issued a tax assessment stating that, given the demolition of those buildings, it was necessary to adjust the VAT relating to the demolished buildings, which had been deducted by GVM.
- By a complaint made on 19 June 2009, GVM sought the annulment of both the tax inspection report and the tax assessment, claiming that its intention had been to acquire the land at issue solely for the purposes of developing a residential complex on it and that, in those circumstances, the purchase of the buildings on that land was unavoidable. Consequently, GVM did not adjust the VAT for the purchase of those buildings, which it had initially deducted, since their demolition was part of its investment plan and the residential project was intended to be used to carry out taxed transactions.
- By a decision of 11 September 2009, the ANAF rejected that complaint on the ground that GVM had unlawfully deducted the VAT relating to those buildings, since it had purchased them not for the purposes of carrying out taxed transactions, but only in order to demolish them. In that regard, ANAF points out that those buildings had been recorded in its accounts as stock and not as fixed assets.
Questions
AG Opinion
None
Decision
1. Articles 167 and 168 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that, in circumstances such as those in the main proceedings, a company which has acquired land and buildings constructed on that land, for the purpose of demolishing the buildings and developing a residential complex on the land, has the right to deduct the value added tax relating to the acquisition of those buildings.
2. Article 185 of Directive 2006/112 must be interpreted as meaning that, in circumstances such as those in the main proceedings, the demolition of buildings, acquired together with the plot of land on which they were constructed, which is carried out with a view to developing a residential complex in place of those buildings does not result in an obligation to adjust the initial deduction of the value added tax relating to the acquisition of those buildings.
Summary
SC Gran Via Moineşti SRL (GVM) bought a plot of land with the buildings on it in 2007, in order to build housing there. She then has the buildings demolished. GVM requests a refund of the VAT charged to it for the purchase of the land and buildings. The Romanian tax authorities are of the opinion that the VAT should be revised, because there is no right to a refund for the demolished buildings. The Romanian court has referred questions for a preliminary ruling in this case. The European Court of Justice (CJEU) has ruled that GVM can deduct the VAT on the purchase of buildings that have been demolished. The CJEU considers that GVM has bought the plot of land and the buildings built on it with the aim of demolishing these buildings and then building houses on that piece of land.
Source
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