VATupdate

Flashback on ECJ Cases – C-560/11 (Debiasi) – No right to deduct for VAT exempt transactions, pro rata VAT deduction in case of mixed taxpayers

On Dcember 13, 2012, the ECJ issued its decision in the case C-560/11 (Debiasi).

Context: Articles 53 (2) and 94 of the Rules of Procedure of the Court – Manifest inadmissibility – Article 99 of the Rules of Procedure – Answer leaving no room for any reasonable doubt – Taxation – VAT – Article 17 (2) (a), of the Sixth VAT Directive – Deduction of input tax – Public or private health facilities carrying out an exempt activity – National legislation excluding the deduction of the tax relating to the purchase of goods or services used in exempt activities – Prorata of deduction


Article in the EU VAT Directive

Articles 17(2)(a), 17(5) and 19 of the Sixth VAT Directive (Artcile 168 and 174/175 of the EU VAT Directive 2006/112/EC).

Article 17(2)(a)

2. Insofar as the goods and services are used for the purposes of his taxed transactions, the taxable person is authorized to deduct from the tax for which he is liable:

(a) the [VAT] due or paid for the goods which are or will be delivered to him and for the services which are or will be rendered to him by another taxable person;

Article 19

The deduction pro rata, provided for in the first subparagraph of Article 17 (5), results from a fraction comprising:

– in the numerator, the total amount, determined per year, of turnover, [VAT] excluded, relating to transactions giving rise to the right to deduct in accordance with Article 17 (2) and (3);

– in the denominator, the total amount, determined per year, of turnover, [VAT] excluded, relating to transactions appearing in the numerator as well as to transactions which do not give rise to the right to deduct. Member States may also include in the denominator the amount of subsidies other than those referred to in Article 11 (A) (1) (a).

The pro rata is determined on an annual basis, fixed as a percentage and rounded to a figure which does not exceed the higher unit.

5. As regards goods and services which are used by a taxable person to carry out both transactions giving rise to the right to deduct referred to in paragraphs 2 and 3 and transactions not giving rise to the right to deduct. accepted only for the part of the [VAT] which is proportional to the amount relating to the first operations.

This pro rata is determined for all the transactions carried out by the taxable person in accordance with Article 19.

However, Member States may:

(a) authorize the taxable person to determine a pro rata for each sector of his activity, if separate accounts are kept for each of these sectors;

b) require the taxable person to determine a pro rata for each sector of his activity and to keep separate accounts for each of these sectors;

c) authorize or require the taxable person to make the deduction following the allocation of all or part of the goods and services;

d) authorize or require the taxable person to make the deduction, in accordance with the rule provided for in the first subparagraph, for all the goods and services used for all the transactions referred to therein;

(e) provide, where the [VAT] which cannot be deducted by the taxable person is insignificant, that it will not be taken into account.

 


Facts

  • Mr Debiasi is a professional gynecologist. He lodged with Agenzia a request for the reimbursement of the VAT paid for the acquisition of goods and services for the needs of his activity which was not the subject of a deduction because of the inclusion of the exempt transactions referred to in Article 10 (1), points 18 and 19, of DPR 633/72 in the calculation of the pro-rata of non-deductibility of VAT resulting from the combined application of Articles 19 (5) , and 19 bis of DPR n ° 633/72.
  • That request was based on the alleged incompatibility of the applicable national rules with Article 17 (2) (a) of the Sixth Directive. It was tacitly rejected by the Agenzia.
  • Mr Debiasi then appealed against that rejection decision to the Commissione tributaria provinciale di Parma.
  • Sharing the applicant’s doubts as to the compatibility of the national rules with EU law, the Commissione tributaria provinciale di Parma, by decision of 7 July 2010, referred the first request to the Court for a preliminary ruling.
  • By order of 15 April 2011, the Court ruled that this request for a preliminary ruling was manifestly inadmissible on account of the deficiencies in the order for reference in defining the factual framework and the national legal framework, and the lack of explanation of the precise grounds for which the requested interpretation of EU law seemed necessary for the referring court for the purposes of resolving the dispute in the main proceedings and the impossibility of determining with certainty the provisions of EU law the interpretation of which she requested (order of 15 April 2011, Debiasi, C-613/10, points 25 to 29).
  • The Commissione tributaria provinciale di Parma then adopted a new order for reference to take account of the Debiasi order, cited above. It therefore provided details of the relevant national rules, of the facts of the dispute in the main proceedings and of the reasons which lead it to doubt the compatibility of the applicable national rules with EU law.

Questions

Is there a conflict between national legislation and Community law, in particular between, on the one hand, Articles 19(5) and 19a of Presidential Decree No 633/72 and, on the other, Article 17(2)(a) of Directive 77/388/EEC,  document COM (2001) 260 final of 23 May 2001 and document COM (2000) 348 final of 7 June 2000, and ‘unequal treatment’ as regards the VAT rules applied by the various Member States of the European Union, given that different rates of VAT are applied to the same healthcare services?


AG Opinion

None


Decision (Order)

Articles 17 (2) and (5) and 19 of Sixth Council Directive 77/388 / EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to turnover taxes – System common value added tax: uniform base, must be interpreted as meaning that they do not preclude national legislation, such as that at issue in the main proceedings, which does not authorize the deduction of the tax on the added value paid upstream for the acquisition of goods and services used for the needs of exempt activities and which therefore provides forthat the right to deduct this tax of a mixed taxable person is calculated on the basis of a pro rata corresponding to the ratio between the amount of transactions giving rise to the right to deduct and the total amount of transactions carried out during the year, including exempt medico-health services.


Summary

National legislation is permitted which does not allow the deduction of input tax on the purchase of goods and services used for exempt activities and which therefore provides that the right of a mixed taxpayer to deduct this tax is calculated on the basis of a pro rata corresponding to the ratio between the amount of the transactions for which there is a right to deduct and the total amount of the transactions performed during the year, including exempt medical-sanitary services.


Source:


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