On Nov 26, 2020, the ECJ issued his judgment in the case C-787/18 Skatteverket v Sögård Fastigheter AB related to a VAT adjustment on sale of capital goods
Articles of the EU VAT Directive
Article 188(2) of the VAT Directive (Right to deduct VAT – Adjustment of deductions)
Facts
A Swedish referral asking, where a property is sold under national law introduced in accordance with Article 188(2) of the VAT Directive and the seller has not adjusted its VAT due to the intention of the purchaser to use the property exclusively for transactions giving rise to a right of deduction, does that then preclude, in a case where the adjustment period continues to run, the purchaser being required to adjust the deduction at a subsequent time when the purchaser in turn transfers the property to someone who does not intend to use the property for such transactions?
Questions
- If a seller of a property, on the basis of the rules introduced by the Member State in accordance with Article 188(2) of the VAT Directive, (1) has not adjusted a deduction of input tax because the purchaser intends to use the property exclusively for transactions giving rise to a right of deduction, does that then preclude, in a case where the adjustment period continues to run, the purchaser being required to adjust the deduction at a subsequent time when the purchaser in turn transfers the property to someone who does not intend to use the property for such transactions?
- Does it alter the answer to the first question if the first transfer referred to in that question constitutes a transfer of assets as referred to in Article 19 of the VAT Directive?
AG Opinion
None
Decision
Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax is to be interpreted as precluding national legislation which, while providing, on the basis of Article 188(2) of that directive that the transferor of a real estate property is not obliged to regularise an input value added tax deduction when the transferee will only use the property for transactions giving rise to a right of deduction, also requires the transferee to regularise this deduction for the remaining period of the regularisation period, when he in turn transfers the real estate property in question to a third party who will not use it for such transactions.
Conclusion
The EU Court of Justice ruled that Sweden is acting in breach of EU law by recovering the revision VAT from the previous owner from Sögård Fastigheter AB. The revision of a VAT deduction cannot result in it being charged to a taxable person other than the taxable person who made the deduction.
The Swedish Sögård Fastigheter AB buys a property in 2012 that it rents with VAT. The seller had also let the property with VAT and deducted the input tax on the refurbishment of the property. At the time of the sale, the parties did not agree that the seller would revise the applied VAT deduction. In 2013, Sögård Fastigheter AB sold the property to two private individuals who use the property VAT-free. The Swedish tax authorities then requests Sögård Fastigheter AB to review the deduction of input tax by the previous owner. The Swedish court has referred questions in this case.
The EU Court of Justice ruled that Sweden is acting in breach of EU law by recovering the revision VAT from the previous owner from Sögård Fastigheter AB. According to the EU Court of Justice, Sweden cannot require Sögård Fastigheter AB to pay the revision VAT from its seller when transferring a property to a non-VAT registered private individual. The revision of a VAT deduction cannot result in it being charged to a taxable person other than the taxable person who made the deduction.
Source Curia
Newsletters
