VATupdate

Flashback on ECJ cases C-269/00 (Seeling) – Use for private purposes of a taxable person of a home in a building that fully belongs to a business

On May 8, 2003, the ECJ issued its decision in the case C-269/00 (Seeling).

Context: Sixth VAT Directive – Articles 6(2)(a) and 13B(b) – Private use by the taxable person of a dwelling in a building forming, in its entirety, part of the assets of the business – Such use not equivalent to the leasing or letting of immovable property.


Article in the EU VAT Directive

Articles 6(2)(a), 13B(b) and 17(2)(a) of Sixth Council Directive (Articles 26, 135(1)l, 135(2) and 168 of the EU VAT Directive 2006/112/EC).

Article 26 (Taxable transaction – Supply of services)
1. Each of the following transactions shall be treated as a supply of services for consideration:
(a) the use of goods forming part of the assets of a business for the private use of a taxable person or of his staff or, more generally, for purposes other than those of his business, where the VAT on such goods was wholly or partly deductible;
(b) the supply of services carried out free of charge by a taxable person for his private use or for that of his staff or, more generally, for purposes other than those of his business.
2. Member States may derogate from paragraph 1, provided that such derogation does not lead to distortion of competition.

Article 135 (Exemption)
1. Member States shall exempt the following transactions:
(l) the leasing or letting of immovable property.

2. The following shall be excluded from the exemption provided for in point (l) of paragraph 1:
(a) the provision of accommodation, as defined in the laws of the Member States, in the hotel sector or in sectors with a similar function, including the provision of accommodation in holiday camps or on sites developed for use as camping sites;
(b) the letting of premises and sites for the parking of vehicles;
(c) the letting of permanently installed equipment and machinery;
(d) the hire of safes.
Member States may apply further exclusions to the scope of the exemption referred to in point (l) of paragraph 1.

Article 168 (Right to deduct VAT)
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.


Facts

  •  Mr Seeling owns a tree-surgery and horticultural business which is subject to the normal tax rules. In 1995 he erected a building which he treated as forming, in its entirety, part of the assets of his business. Since its completion he has used it partly for business and partly for residential purposes.
  • In his VAT declaration for 1995 Mr Seeling claimed the deduction in full of the amount of VAT paid as input tax for the construction of the building. He declared as taxable personal use the private use of a dwelling in the building.
  • However, the Finanzamt regarded the private use of part of the building as being exempt personal use and refused the corresponding deductions.
  • The Finanzgericht (Finance Court) (Germany) confirmed the decision of the Finanzamt and dismissed Mr Seeling’s appeal.
  • Mr Seeling brought an appeal on a point of law (Revision) against that decision before the Bundesfinanzhof. He argued that it follows from Community law that his private use of part of the building is taxable and therefore deduction of the amount of the input tax attributable to that part of the building is not precluded.
  • After observing that it is the Court’s case-law (Case C-258/95 Fillibeck [1997] ECR I-5577, paragraph 25) that Article 6(2)(a) of the Sixth Directive is designed to ensure equal treatment as between taxable persons and final consumers, the Bundesgerichtshof questioned the scope of that equivalence of treatment. It queried in particular whether the partial use of goods forming part of the assets of a business for the private use of the taxable person may be regarded as an exempt ”leasing or letting of immovable property”, within the meaning of Article 13B(b) of the Sixth Directive. According to it, that question was not conclusively settled by the judgment in Case C-291/92 Armbrecht [1995] ECR I-2775.

Questions

May a Member State treat the use for private residential purposes of a dwelling in business premises forming as a whole part of the assets of the business – which is equated to a supply of services for consideration under Article 6(2)(a) of Directive 77/388/EEC – as tax-exempt (in accordance with Article 13B(b) of that directive, but without the possibility of waiving the exemption), with the result that deduction under Article 17(2)(a) of the directive of the value added tax which arose in connection with the construction of the premises is precluded to that extent?


AG Opinion

A Member State may not treat the use for private residential purposes of a dwelling in business premises forming as a whole part of the assets of the business as tax-exempt in accordance with Article 13(B)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment.


Decision 

Articles 6(2)(a) and 13B(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, must be interpreted as precluding national legislation which treats as an exempt supply of services, on the basis that it constitutes a leasing or letting of immovable property within the meaning of Article 13B(b), the private use by a taxable person of part of a building which is treated as forming, in its entirety, part of the assets of his business.


Summary

Use for private purposes of a taxable person of a home in a building that fully belongs to a business – Not assimilated to leasing and letting of immovable property

The first subparagraph of Article 6(2)(a) and 13B(b) of the Sixth Directive must be interpreted as precluding national legislation prohibiting the use of part of a whole to exempt the building belonging to the business for private purposes of the taxpayer from tax as being a lease or rental of immovable property within the meaning of Article 13, B, under b.


Source


Similar ECJ cases


Reference to the case in the other EU MS


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