C-45/20 Finanzamt N and Finanzamt G (Communication of the allocation decision)

JUDGMENT OF THE COURT (Eighth Chamber)

14 October 2021 ( *1 )

(Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Article 167, Article 168(a), Article 250 and Article 252 – Deduction of input tax – Immovable property – An office room – Photovoltaic system – Allocation decision giving rise to a right of deduction – Communication of the allocation decision – Limitation period for exercising a right to deduct – Presumption of allocation to the private assets of the taxable person where the allocation decision is not communicated – Principle of neutrality – Principle of legal certainty – Principles of equivalence and proportionality)

In Joined Cases C‑45/20 and C‑46/20,

TWO REQUESTS for a preliminary ruling under Article 267 TFEU from the Bundesfinanzhof (Federal Finance Court, Germany), made by decisions of 18 September 2019, received at the Court on 29 January 2020, in the proceedings

E

v

Finanzamt N (C‑45/20),

and

Z

v

Finanzamt G (C‑46/20),

THE COURT (Eighth Chamber),

composed of A. Prechal (Rapporteur), President of the Second Chamber, acting as President of the Eighth Chamber, J. Passer and N. Wahl, Judges,

Advocate General: E. Tanchev,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

E, by H. Weiss, Rechtsanwalt,

Finanzamt N, by B. Krimmel, acting as Agent,

the German Government, by J. Möller, S. Eisenberg and S. Heimerl, acting as Agents,

the European Commission, by J. Jokubauskaitė and R. Pethke, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 20 May 2021,

gives the following

Judgment

Legal context and the dispute

1These requests for a preliminary ruling concern the interpretation of Article 167 and Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), as amended by Council Directive 2009/162/EU of 22 December 2009 (OJ 2010 L 10, p. 14) (‘the VAT Directive’).

2The requests have been made in two sets of proceedings, namely, in Case C‑45/20, between E and Finanzamt N (Tax Office N, Germany) and, in Case C‑46/20, between Z and Finanzamt G (Tax Office G, Germany), concerning the rejection by those tax authorities of deductions of value added tax (VAT) made by E and Z, on account of the failure to take an allocation decision identifiable by the tax authorities before the statutory deadline for submitting the annual turnover-tax return expired.

Legal context

European Union law

3Under Article 2(1) of the VAT Directive:

‘The following transactions shall be subject to VAT:

the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;

…

the supply of services for consideration within the territory of a Member State by a taxable person acting as such;

…’

4Article 9(1) of that directive provides:

‘“Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.

Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.’

5Article 63 of the VAT Directive states:

‘The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.’

6In accordance with Article 167 of that directive, a ‘right of deduction shall arise at the time the deductible tax becomes chargeable’.

7Article 168 of the VAT Directive provides:

‘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:

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;

…’

8Article 168a of that directive provides:

‘1. In the case of immovable property forming part of the business assets of a taxable person and used both for purposes of the taxable person’s business and for his private use or that of his staff, or, more generally, for purposes other than those of his business, VAT on expenditure related to this property shall be deductible in accordance with the principles set out in Articles 167, 168, 169 and 173 only up to the proportion of the property’s use for purposes of the taxable person’s business.

By way of derogation from Article 26, changes in the proportion of use of immovable property referred to in the first subparagraph shall be taken into account in accordance with the principles provided for in Articles 184 to 192 as applied in the respective Member State.

2. Member States may also apply paragraph 1 in relation to VAT on expenditure related to other goods forming part of the business assets as they specify.’

9The first paragraph of Article 179 of the VAT Directive is worded as follows:

‘The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.’

10Under Articles 180 and 182 of the VAT Directive, Member States may authorise a taxable person to make a deduction which he or she has not made in accordance with Articles 178 and 179 of that directive. In that case, they are to determine the conditions and detailed rules.

11Article 250(1) of the VAT Directive provides:

‘Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.’

12Article 252 of that directive provides:

‘1. The VAT return shall be submitted by a deadline to be determined by Member States. That deadline may not be more than two months after the end of each tax period.

2. The tax period shall be set by each Member State at one month, two months or three months.

Member States may, however, set different tax periods provided that those periods do not exceed one year.’

13Article 261(1) of the VAT Directive reads as follows:

‘Member States may require the taxable person to submit a return showing all the particulars specified in Articles 250 and 251 in respect of all transactions carried out in the preceding year. That return shall provide all the information necessary for any adjustments.’

14Under Article 273 of that directive:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

German law

15Paragraph 15, entitled ‘Deduction of input tax’, of the Umsatzsteuergesetz (Law on turnover tax) of 21 February 2005 (BGBl. 2005 I, p. 386), in the version applicable to the disputes in the main proceedings (‘the UStG’), is worded as follows:

‘(1) A trader may deduct the following as input tax:

1the tax lawfully payable on goods and services provided to his or her business by another trader. …

…

Where the extent of a trader’s use of any intra-Community supply, importation or acquisition of goods for the purposes of his or her business is less than 10%, such supply, importation or acquisition shall be deemed not to have been made for the purposes of his or her business.

…

(1b) Where a trader uses immovable property both for the purposes of his or her business and for purposes other than those of his or her business, or for the private use of his or her staff, the tax on supplies, importation or intra-Community acquisition and on all other services connected with that immovable property shall not be deductible in so far as it is not related to the use of that immovable property for the purposes of the business. …’

16Paragraph 18 of that Law, entitled ‘Taxation procedure’, provides in subparagraph 3 thereof:

‘The trader must submit … for the calendar year, or where appropriate, for a shorter taxable period, a tax return in which he or she calculates himself or herself, in accordance with Paragraph 16(1) to (4) and Paragraph 17, the tax payable or the excess that results in his or her favour (tax return). …’

17Paragraph 149, entitled ‘Submission of tax returns’, of the Abgabenordnung (Tax Code, BGBl. 2002 I, p. 3866), in the version applicable to the disputes in the main proceedings (‘the AO’), provides:

‘(1) The tax laws determine who is required to submit a tax return. …

(2) Unless otherwise provided by tax legislation, tax returns relating to a calendar year or to a period determined by law must be submitted at the latest five months after the end of the calendar year or five months after the end of the period determined by law …’

The disputes in the main proceedings and the questions referred for a preliminary ruling

18The facts in Case C‑45/20 may be summarised as follows. E runs a scaffolding business and in 2014 he commissioned a firm of architects to draw up building plans for a single-family house. Those plans stated that the house would have a floor space of 149.75 m2 and that on the ground floor there would be a room described as an ‘office’, with an area of 16.57 m2. The invoices relating to the construction of that house were drawn up between October 2014 and November 2015.

19In his annual turnover-tax return for 2015, which was received at Tax Office N on 28 September 2016, E claimed for the first time a right to deduct input tax paid in respect of the construction of that office. Following a tax inspection, Tax Office N refused that deduction. E’s complaint against that refusal and his action before the Sächsisches Finanzgericht (Finance Court, Saxony, Germany) against the decision taken on that complaint were dismissed. That court justified its decision by stating, in essence, that the asset concerned had been allocated to those of the business after 31 May 2016, the date on which the deadline for submitting the annual turnover-tax return for 2015 expired, pursuant to Paragraph 149(2) of the AO.

20As regards the facts relating to Case C‑46/20, the following matters are to be noted. In 2014, Z purchased a photovoltaic system and the electricity generated by it was used in part for his own consumption and in part resold to an energy supplier. The contract for the sale of electricity, concluded in 2014 between Z and that supplier, provided for remuneration to which turnover-tax was added. On 29 February 2016, Z submitted a turnover-tax return for the year 2014 to Tax Office G. In that return, Z deducted for the first time amounts which related essentially to the input tax paid, appearing on an invoice dated 11 September 2014 for the supply and installation of his photovoltaic system. Following a tax inspection, Tax Office G refused that deduction on the ground that Z had not taken a decision allocating that asset to those of his business by 31 May 2015, the date on which the deadline for submitting the annual turnover-tax return, laid down in Paragraph 149(2) of the AO, expired. Z’s complaint against that refusal and his action before the Finanzgericht Baden-Württemberg (Finance Court, Baden-Württemberg, Germany) against the decision taken on his complaint were dismissed.

21E and Z each brought an appeal on a point of law before the referring court, the Bundesfinanzhof (Federal Finance Court, Germany), in support of which they both submit, in essence, that the tax authorities were required to take into account evidence showing their decision to allocate mixed-use assets to their business assets, such as building plans designating the use of a room as an office or the actual use of assets for the purposes of the business. E and Z also argue that the condition relating to the communication within the period laid down in Paragraph 149(2) of the AO of evidence showing a decision to allocate mixed-use assets to business assets, laid down in the referring court’s case-law, cannot be maintained in the light of the statement of the law in the judgment of 25 July 2018, Gmina Ryjewo (C‑140/17, EU:C:2018:595).

22In accordance with its case-law, the referring court considers that the appeals on a point of law of E and Z are unfounded under national law, since the evidence of the decision of the partial allocation of E’s building, or of the allocation of Z’s photovoltaic system in full, to the respective business assets was not communicated to the competent tax offices before the expiry of the deadline laid down in Paragraph 149(2) of the AO for submitting the annual turnover-tax return. In accordance with the criteria developed by that court in its case-law, the tax deduction deriving from those allocations is permissible only in so far as that communication is effected prior to that deadline.

23However, the referring court is uncertain whether its interpretation of national law is compatible with EU law and, in particular, with the judgment of 25 July 2018, Gmina Ryjewo (C‑140/17, EU:C:2018:595).

24In the first place, the referring court asks whether, in the absence of rules of EU law specifying the method of adoption and the time limit for communicating evidence showing a decision to allocate an asset to business assets, a Member State may require that that decision be communicated within a relatively short period, such as that referred to in Paragraph 149(2) of the AO, failing which it will be time-barred.

25According to the referring court, that requirement may be regarded as compatible with EU law in that the exercise of the right to choose to allocate an asset to business assets relates to a substantive condition governing the right of deduction. In addition, the imposition by a Member State of a period within which to communicate evidence showing the allocation decision would be justified in view of the legal vacuum left by the VAT Directive in that regard and of the principle of legal certainty. Furthermore, the imposition of such a period falls within the competence conferred on the Member States by the provisions of Title XI of the VAT Directive as regards the establishment of the formal conditions for exercising the right of deduction.

26However, the referring court considers that although the facts which gave rise to the judgment of 25 July 2018, Gmina Ryjewo (C‑140/17, EU:C:2018:595) differ from those of the present joined cases, the Court set out, in that judgment, a number of indicators by which it may be ascertained whether a taxable person has acted as such, but which are not necessarily capable of being communicated to the competent tax authorities within a relatively short period. Furthermore, according to the referring court, it could be inferred from that judgment that the requirement that an allocation decision be taken within a relatively short period infringes the principle of neutrality.

27In the second place, the referring court is uncertain as to the consequences of a failure to comply with that period. According to that court, arguably it cannot be established that an asset has been allocated to business assets in the absence of evidence, identifiable by the tax authorities, that the taxable person has chosen to make such an allocation. There is thus a presumption that any asset that has not been expressly allocated by a taxable person to the assets of his or her business must form part of his or her private assets. However, the referring court also states that it is apparent from the judgment of 25 July 2018, Gmina Ryjewo (C‑140/17, EU:C:2018:595) that the absence of a declaration of allocation does not preclude such an intention of allocation from being implied and that the question whether the person concerned acted as a taxable person must be assessed in the light of a broad interpretation of that concept. On the basis of those considerations, it could be argued that there is a presumption of ‘acquisition as a taxable person’ when a trader acquires an asset which, by its nature, may as a rule also be used for the purposes of his or her business, and which has not been allocated by that trader exclusively to his or her business.

28In those circumstances the Bundesfinanzhof (Federal Finance Court) decided to stay the proceedings and to refer the following questions, worded identically in both joined cases, to the Court of Justice for a preliminary ruling:

Does Article 168(a), read in conjunction with Article 167 of [the VAT Directive] 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 no allocation decision identifiable by the tax authorities has been communicated upon the expiry of the statutory deadline for submission of the annual VAT return?

Does Article 168(a) of [the VAT Directive] conflict with national case-law whereby allocation to private assets is assumed or presumed in the absence of (sufficient) evidence of allocation to the assets of the business?’

Consideration of the questions referred

29By its two questions, which it is appropriate to examine together, the referring court asks, in essence, whether Article 168(a) of the VAT Directive, read in conjunction with Article 167 thereof, must be interpreted as precluding national provisions interpreted by a national court in such a manner that where a taxable person has the right to decide to allocate an asset to his or her business assets and where, at the latest upon expiry of the statutory period for submitting the annual turnover-tax return, the competent national tax authority has not been put in a position to establish such an allocation of that asset by means of an express decision or sufficient evidence, it may refuse the right to deduct VAT in respect of that asset on the ground that it has been allocated to the taxable person’s private assets.

30In order to answer that question, it is necessary, first of all, to determine the conditions governing a taxable person’s right to decide to allocate an asset to his or her business assets and, then, to examine the circumstances in which the competent national authority may refuse to allow deduction where that choice has not been communicated to that authority at the latest by the expiry of the statutory deadline for submitting the annual turnover-tax return.

31In the first place, as regards the conditions governing a taxable person’s right to decide to allocate an asset to his or her business assets, it should be borne in mind that, according to the settled case-law of the Court, the right of taxable persons to deduct the VAT due or already paid on goods purchased and services received as inputs from the VAT which they are liable to pay is a fundamental principle of the common system of VAT established by EU legislation (judgment of 18 March 2021, A. (Exercise of the right of deduction), C‑895/19, EU:C:2021:216, paragraph 32 and the case-law cited). That right, provided for in Article 167 et seq. of the VAT Directive, is an integral part of the VAT scheme and in principle may not be limited (judgment of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 39 and the case-law cited).

32The deduction system is intended to relieve the taxable person entirely of the burden of the VAT due or paid in the course of all of his or her economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are in principle themselves subject to VAT, are taxed in a neutral way (judgment of 18 March 2021, A. (Exercise of the right of deduction), C‑895/19, EU:C:2021:216, paragraph 33 and the case-law cited).

33The right to deduct VAT is subject to compliance with the substantive and formal conditions laid down by the VAT Directive (see, to that effect, judgments of 21 March 2018, Volkswagen, C‑533/16, EU:C:2018:204, paragraph 40, and of 18 March 2021, A. (Exercise of the right of deduction), C‑895/19, EU:C:2021:216, paragraph 35 and the case-law cited).

34The substantive conditions for the right to deduct are those which govern the actual substance and scope of that right, such as those provided for in Chapter 1 of Title X of the VAT Directive, entitled ‘Origin and scope of right of deduction’ (judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 47 and the case-law cited). Thus, under Article 168(a) of the VAT Directive, goods in respect of which the taxable person intends to assert the right to deduct must have been acquired by him or her in that capacity at the time of acquisition. In addition, those goods must be used by the taxable person for the purposes of his or her own taxed output transactions and those goods must be supplied by another taxable person as inputs (see, to that effect, judgments of 15 September 2016, Barlis 06 – Investimentos imobiliários e Turísticos, C‑516/14, EU:C:2016:690, paragraph 40, and of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 34 and the case-law cited). In addition, Article 167 of the VAT Directive makes clear that the right to deduct input VAT arises at the time when the deductible tax becomes chargeable, namely when the goods are supplied (see, to that effect, judgment of 22 October 2015, Sveda, C‑126/14, EU:C:2015:712, paragraph 20 and the case-law cited).

35The formal conditions for the right to deduct regulate the rules governing its exercise and monitoring thereof and the smooth functioning of the VAT system, such as the obligations relating to accounts, invoicing and filing returns (see, to that effect, judgments of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 47, and of 18 March 2021, A. (Exercise of the right of deduction), C‑895/19, EU:C:2021:216, paragraph 37 and the case-law cited). Articles 250, 252 and 261 of the VAT Directive, which require taxable persons to submit VAT returns and govern the law of the Member States as regards the deadlines for so doing, thus lay down formal conditions.

36That distinction between the substantive and formal conditions governing the right of deduction is important, since, according to settled case-law, the fundamental principle of VAT neutrality requires deduction of input tax to be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements (see, to that effect, judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 45 and the case-law cited).

37Furthermore, it should be observed that, in respect of goods which may be used both for business and private purposes, a taxable person is entitled, for the purposes of VAT, to decide whether they are to be allocated to his or her business assets. Those goods include capital goods which, under Article 189(a) of the VAT Directive, may be defined by the Member States and which, according to the case-law of the Court, cover goods used for the purposes of economic activity and distinguishable by their durable nature and their value and such that the acquisition costs are not normally treated as current expenditure but are written off over several years (see, to that effect, judgment of 27 March 2019, Mydibel, C‑201/18, EU:C:2019:254, paragraph 23 and the case-law cited).

38It is settled case-law that where capital goods are used both for business and for private purposes the taxable person has the choice, for the purposes of the deduction of VAT, of (i) allocating those goods wholly to the assets of his or her business, (ii) retaining them wholly within his or her private assets, or (iii) integrating them into his or her business only to the extent to which they are actually used for business purposes (see, to that effect, judgments of 14 July 2005, Charles and Charles-Tijmens, C‑434/03, EU:C:2005:463, paragraph 23, and of 16 February 2012, Eon Aset Menidjmunt, C‑118/11, EU:C:2012:97, paragraph 53 and the case-law cited).

39Should the taxable person choose to treat capital goods used for both business and private purposes as business goods, the input VAT due on the acquisition of those goods is, in principle, immediately deductible in full (judgment of 14 July 2005, Charles and Charles-Tijmens, C‑434/03, EU:C:2005:463, paragraph 24 and the case-law cited). With regard to immovable property, Article 168a of the VAT Directive states, however, that VAT on expenditure related to that property is to be deductible only up to the proportion of the property’s use for purposes of the taxable person’s business.

40If a taxable person chooses to integrate capital goods only partly into his or her business, the input VAT payable on his or her acquisition is, in principle, deductible only to the extent to which they are actually used for the purposes of the business (see, to that effect, judgment of 16 February 2012, Eon Aset Menidjmunt, C‑118/11, EU:C:2012:97, paragraph 56 and the case-law cited).

41It must also be observed that when such goods are acquired, it is the taxable person’s choice to act as such, that is, for the purposes of his or her economic activity, as provided for in Article 9(1) of the VAT Directive, which determines the application of the VAT system and, therefore, of the deduction mechanism (see, to that effect, judgment of 22 March 2012, Klub, C‑153/11, EU:C:2012:163, paragraphs 39 and 40 and the case-law cited). It follows that that choice is, as the Advocate General noted in points 48 and 49 of his Opinion, a substantive condition governing the right to deduct.

42According to the settled case-law of the Court, the question whether, at the time when he or she received delivery of the goods, the taxable person was acting as a taxable person is a question of fact which it is for the competent national court to determine, on the basis of objective evidence and following an examination of all the circumstances of the case before it (see, to that effect, judgments of 14 February 1985, Rompelman, 268/83, EU:C:1985:74, paragraph 24, and of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraphs 38 and 39 and the case-law cited).

43In order to determine whether a taxable person acted in that capacity when acquiring goods, the Court has clarified that although a clear and express declaration of the intention to use the goods for economic purposes at the time of their acquisition may suffice for a finding that the goods were acquired by the taxable person acting as such, the absence of such a declaration does not exclude the possibility that such an intention may be conveyed implicitly (judgment of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 47).

44The fact that that clarification was provided by the Court in response to a question referred for a preliminary ruling in a case which concerned the right to adjust deductions of VAT paid for immovable property acquired by a body governed by public law registered as a taxable person does not, contrary to the arguments of Tax Office N, affect its relevance in disputes such as those in the main proceedings. That clarification applies to all cases in which goods are allocated to the economic activity of a taxable person, in accordance with the generous interpretation of the concept of acquisition ‘as a taxable person’, provided by the Court (see, to that effect, judgment of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 54). The VAT Directive does not, therefore, make the grant of a right of deduction conditional upon the adoption and communication of an express allocation decision.

45The factors which may implicitly show that intention include, in particular, the nature of the goods concerned, the capacity in which the person acted and the period which elapsed between the acquisition of the goods and their use for the purposes of the taxable person’s economic activity (judgment of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraphs 38, 49 and 50).

46By contrast, it is irrelevant that the goods in question were not immediately used for taxable transactions, since the use to which goods are put merely determines the extent of the initial deduction or the extent of any subsequent possible adjustments but does not affect the issue of whether a right of deduction arises (judgment of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 51 and the case-law cited).

47In the present case, it will, therefore, be for the referring court to assess whether it may be inferred from all the circumstances of the disputes in the main proceedings that E and Z have each acted as a taxable person when acquiring the mixed-use assets at issue in the main proceedings, namely, respectively, an office room in a building used essentially for private purposes and a photovoltaic system partly used for private purposes, and expressed the intention of allocating them to their businesses.

48In that respect, as regards E, the allocation of a reasonable-sized room as an office on the building plans for a single-family house may constitute evidence of such an intention. However, since a room so described on the building plans for a single-family house is not necessarily, in actual fact, allocated to the use of the taxable person’s business activity, it is important to substantiate that person’s intention to allocate that room to his or her business by other objective evidence of that use. In Z’s case, the conclusion, in the year of purchase and installation of a photovoltaic system, of a contract relating to the sale of the electricity produced by that system may constitute evidence that it is allocated to an economic activity if the conditions for that sale correspond to those offered to business operators rather than to individuals.

49Furthermore, VAT deductions made by taxable persons in their tax returns are capable of establishing such an allocation decision where they are the consequence thereof. Such deductions are also evidence that a taxable person had the intention of allocating goods to his or her business at the time of their acquisition. It has thus been held that where a taxable person deducts, in his or her tax return to the tax authorities, the amounts due by way of VAT upon acquiring the goods, he or she is deemed to have allocated those goods to his or her business (see, to that effect, judgment of 11 July 1991, Lennartz, C‑97/90, EU:C:1991:315, paragraph 26). By contrast, as the Advocate General observed in points 43 and 44 of his Opinion, the absence of deductions in the provisional VAT return for the period in which the goods were acquired does not, in itself, support the conclusion that the taxable person chose not to allocate the goods concerned to his or her business.

50In the second place, as regards a taxable person’s obligation to communicate his or her allocation decision to the tax authorities at the latest by the expiry of the statutory deadline for submitting the annual turnover-tax return – in the present case, by 31 May of the year following that in which the allocation decision was taken – it must be borne in mind that, under the first paragraph of Article 179 of the VAT Directive, the right of deduction is generally exercised during the same period as that during which it has arisen, that is to say, having regard to Article 167 of the VAT Directive, at the time when the tax becomes chargeable (see, to that effect, judgment of 18 March 2021, A. (Exercise of the right of deduction), C‑895/19, EU:C:2021:216, paragraph 41 and the case-law cited).

51Nevertheless, pursuant to Articles 180 and 182 of the VAT Directive, a taxable person may be authorised to make a deduction even if he or she did not exercise his or her right during the period in which the right arose, subject to compliance with certain conditions and procedures determined by national legislation (see judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraph 37 and the case-law cited).

52Furthermore, in accordance with Article 250(1) of the VAT Directive, read in conjunction with Article 252 thereof, national legislation must lay down the obligation on the taxable person to submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made, in respect of a tax period of not more than one year, and within a deadline that may not be more than two months after the end of each tax period.

53In addition, Article 261(1) of that directive allows Member States to require the taxable person to submit a return showing all the abovementioned particulars in respect of all transactions carried out in the preceding year, without, however, setting a deadline for submitting that return.

54In the light of those provisions, the VAT Directive does not preclude obligations, such as those applicable in the present case, which require taxable persons to inform the tax authorities of their decision to allocate capital goods to their business assets by making the corresponding deductions in their provisional VAT returns and in their annual turnover-tax return that must be submitted to those authorities no later than five months after the year in which that allocation decision was taken.

55However, in so far as national case-law penalises the failure to comply with that deadline within which a taxable person is supposed expressly, or implicitly but clearly, to inform the tax authorities of that decision, by the loss of his or her right of deduction derived from that decision, it should be observed that although the adoption of an allocation decision is a substantive condition for exercising that right, as is apparent from paragraph 41 above, its communication to the tax authorities is only a formal condition. According to the settled case-law of the Court, a failure to comply with formal requirements cannot, as a rule, lead to a loss of the right to deduct (see, to that effect, judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 45 and the case-law cited).

56The case may be different if non-compliance with such formal requirements effectively prevents the production of conclusive evidence that the substantive requirements have been satisfied (see, to that effect, judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 46 and the case-law cited).

57In addition, under Article 273 of the VAT Directive, Member States may impose other obligations which they deem necessary for the correct collection of VAT and for the prevention of evasion. However, the measures that the Member States may adopt under that provision must not go further than is necessary to attain such objectives. They may not, therefore, be used in such a manner that they would have the effect of systematically undermining the right to deduct VAT and, consequently, the neutrality of VAT (see, to that effect, judgment of 12 April 2018, Biosafe – Indústria de Reciclagens, C‑8/17, EU:C:2018:249, paragraph 38 and the case-law cited). In that regard, it has been held that a penalty consisting in an absolute refusal of the right to deduct where the tax is accounted for out of time appeared disproportionate where no evasion or detriment to the budget of the State could be ascertained (see, to that effect, judgment of 12 July 2012, EMS-Bulgaria Transport, C‑284/11, EU:C:2012:458, paragraphs 68 to 70).

58In the present case, subject to verification by the referring court, the failure by E and Z to comply with the deadline by which they were they were supposed to communicate their allocation decision is not such as to prevent them from producing conclusive evidence that they had taken such a decision at the time of acquiring the capital goods at issue in the main proceedings. In addition, it does not appear that such a deadline was imposed by the German legislature in order to prevent fraud or abuse.

59However, it is also apparent from the settled case-law of the Court that the possibility of exercising the right of deduction without any temporal limit would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, in the light of his or her rights and obligations vis-à-vis the tax authority, not to be open to challenge indefinitely. Consequently, a limitation period the expiry of which has the effect of penalising a taxable person who has not been sufficiently diligent and has failed to claim deduction of input tax, by making him or her forfeit his or her right of deduction, cannot be regarded as incompatible with the regime established by the VAT Directive, in so far as, first, that limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those founded on EU law (principle of equivalence) and, secondly, that it does not in practice render impossible or excessively difficult the exercise of the right of deduction (principle of effectiveness) (judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraphs 38 and the case-law cited).

60As regards compliance with the principle of equivalence, it is clear that the period laid down in the national legislation at issue in the main proceedings corresponds to that allowed for taxpayers to submit tax returns in general. Subject to verification by the referring court, that national legislation does not, therefore, appear to have provided, in VAT matters, for a different regime from that applicable in other domestic tax matters.

61As regards compliance with the principle of effectiveness, that period does not appear, in itself, to render the exercise of the right of deduction virtually impossible or excessively difficult, since the first paragraph of Article 179 of the VAT Directive provides that that right is to be exercised, as a rule, during the same period as that in which it arose (see, by analogy, judgment of 28 July 2016, Astone, C‑332/15, EU:C:2016:614, paragraph 38).

62However, Member States must, in accordance with the principle of proportionality, employ means which, whilst enabling them effectively to attain the objective pursued by national legislation, are the least detrimental to the principles laid down by EU legislation, such as the fundamental principle of the right to deduct VAT (judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraph 50 and the case-law cited).

63It is, therefore, necessary for the referring court to assess whether the limitation period at issue in the main proceedings, which corresponds to that laid down in Article 149(2) of the AO for the submission of the annual turnover-tax return, namely 31 May of the year following that in which the allocation decision was taken, is proportionate to the objective of ensuring compliance with the principle of legal certainty.

64In that regard, account must be taken, in the first place, of both of the possibility for the national authorities of imposing penalties on a negligent taxable person that would be less detrimental to the principle of neutrality than the outright rejection of the right of deduction, such as administrative financial penalties, and of the fact that a period expiring after 31 May of the year following that in which the allocation decision was taken does not appear, prima facie, incompatible with observance of the principle of legal certainty and, in the second place, of the pre-eminent place of the right of deduction in the common VAT system.

65In the light of all the foregoing considerations, the answer to the questions referred is that Article 168(a) of the VAT Directive, read in conjunction with Article 167 thereof, must be interpreted as not precluding national provisions interpreted by a national court in such a manner that where a taxable person has the right to decide to allocate an asset to his or her business assets and where, at the latest upon expiry of the statutory period for submitting the annual turnover-tax return, the competent national tax authority has not been put in a position to establish such an allocation of that asset by means of an express decision or sufficient evidence, that authority may refuse the right to deduct VAT in respect of that asset on the ground that it has been allocated to the taxable person’s private assets, unless the specific legal arrangements under which that option may be exercised show that it does not comply with the principle of proportionality.

Costs

66Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Operative part

On those grounds, the Court (Eighth Chamber) hereby rules:

Article 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2009/162/EU of 22 December 2009, read in conjunction with Article 167 of Council Directive 2006/112/EC, must be interpreted as not precluding national provisions interpreted by a national court in such a manner that where a taxable person has the right to decide to allocate an asset to his or her business assets and where, at the latest upon expiry of the statutory period for submitting the annual turnover-tax return, the competent national tax authority has not been put in a position to establish such an allocation of that asset by means of an express decision or sufficient evidence, that authority may refuse the right to deduct value added tax in respect of that asset on the ground that it has been allocated to the taxable person’s private assets, unless the specific legal arrangements under which that option may be exercised show that it does not comply with the principle of proportionality.

Signatures

[Signatures]

( *1 ) Language of the case: German

OPINION OF ADVOCATE GENERAL

TANCHEV

delivered on 20 May 2021 ¹

(Request for a preliminary ruling – Value added tax – Deduction of input tax – Council Directive 2006/112/EC, as amended by Council Directive 2009/162/EC – Articles 167 and 168(a) – Installation of a photovoltaic energy system – Establishment of an office in an otherwise private family dwelling – Immovable property – Mixed-use assets – Allocation to assets of a business – Compatibility with EU law of a Member State time limit for allocation and presumption of allocation to private assets absent evidence to the contrary – Loss of the right to deduct input tax)

1These requests for a preliminary ruling from the Bundesfinanzhof (Federal Finance Court, Germany, ‘the referring court’), seek clarification of the Court’s case-law on allocation of capital goods ² and, more specifically, immovable property ³ used for both business and private purposes (‘mixed-use assets’), to a taxpayers private assets, or to the assets of a taxpayer’s business, or to a combination of both (‘the allocation decision’). More specifically, the questions address the consequences flowing from the allocation decision for the right to deduct input tax, under Articles 167 and 168(a) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, ⁴ as amended by Council Directive 2009/162/EC of 22 December 2009 amending various provisions of Directive 2006/112/EC on the common system of value added tax ⁵ (‘the VAT Directive’).

2The questions ask about the compatibility with EU law, particularly in the light of the Court’s ruling in the judgment of 25 July 2018, Gmina Ryjewo, ⁶ of what is in effect a limitation period under German law for communication to the German tax authorities of the allocation decision, the expiry of which has been interpreted in the case-law of the referring court as resulting in the loss of the right to deduct input tax. The same appears to follow from the presumption in the referring court’s case-law of allocation of mixed-use assets to a taxpayer’s private assets, which applies in the absence of sufficient indications to the contrary.

3I have reached the conclusion that, in the circumstances of the main proceedings, an interpretation of Member State law in the case-law of the referring court, and pursuant to which a taxable person loses the right to deduct input tax for failure to communicate an allocation decision with respect to mixed-use assets within the time limit for so doing operative under Member State law, is incompatible with Articles 167 and 168(a) of the VAT Directive, for inconsistency with the principles of fiscal neutrality and proportionality, given that there is no indication in the case file of any active concern with respect to tax evasion. ⁷ The same conclusion applies to the aforementioned assumption of allocation to the private assets of the taxpayer when it results in loss of the right to deduct.

I. Legal framework

A. EU law

4Article 167 of the VAT Directive states:

‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’

5Article 168(a) of the VAT Directive states:

‘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:

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;

…’

6Article 168a(1) of the VAT Directive states:

‘1. In the case of immovable property forming part of the business assets of a taxable person and used both for purposes of the taxable person’s business and for his private use or that of his staff, or, more generally, for purposes other than those of his business, VAT on expenditure related to this property shall be deductible in accordance with the principles set out in Articles 167, 168, 169 and 173 only up to the proportion of the property’s use for purposes of the taxable person’s business.

By way of derogation from Article 26, changes in the proportion of use of immovable property referred to in the first subparagraph shall be taken into account in accordance with the principles provided for in Articles 184 to 192 as applied in the respective Member State.’

7Article 250(1) of the VAT Directive states:

‘Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.’

B. German law

8Paragraph 15(1) of the Umsatzsteuergesetz (Law on value added tax; ‘the UStG’) states:

‘A trader may deduct the following as input tax:

1. the tax lawfully payable on goods and services provided to his business by another trader. …’

9Paragraph 18(3) of the UStG states:

‘The trader must transfer by electronic means, in the prescribed form, for the civil year or for a shorter taxable period, a tax return in which he calculates himself, in conformity with Paragraph 16(1) to (4) and Paragraph 17, the tax payable or the excess that results in his favour (tax declaration). In the cases envisaged by Paragraph 16(3) and (4), the fiscal declaration must be transmitted in a deadline of one month after the expiry of the shorter taxable period. In order to avoid undue hardship, the Finanzamt can on demand renounce electronic transmission. In such a case, the trader must transmit a tax declaration on the form provided by the administration and sign it manually.’

10Paragraph 149(2) of the Abgabenordnung (Fiscal Code), in the version in force at the time of the litigation, ⁸ states:

‘Unless otherwise stated in fiscal law, fiscal declarations which relate to a civil year or a moment determined by law must be deposited at the latest five months thereafter …’

II. Facts, procedure and the questions referred

A. C‑45/20, E v Finanzamt N (‘Case E’)

11The applicant in Case E runs a scaffolding business. In 2014, he put together a draft for the construction of a family house which, in conformity with architectural plans dated 29 July 2014, included on its ground floor a 16.57 m2 office. The house was otherwise reserved for private purposes and was to have a total surface area of 149.75 m2. The bills for the construction of the house, including the office, were established in the period running from October 2014 to November 2014. ⁹

12E did not seek pro-rata deduction of input tax with respect to the office in the provisional (monthly) declarations he was required to deposit for the years 2014 and 2015, by virtue of the second sentence of Paragraph 18(2) of the UStG, but sought it for the first time in his annual VAT declaration for the year 2015, under the first sentence of Paragraph 18(3) of the UStG. ¹⁰ That declaration was received by the Finanzamt (‘Tax Office’) on 28 September 2016.

13The Tax Office, by a decision of 5 April 2017, fixed E’s turnover tax for 2015, without allowing the deduction of [X] euros, corresponding, according to E, to the input tax relevant to the office in question. The Tax Office rejected the objection as unfounded by decision of 17 January 2018. An appeal introduced with respect to this claim was equally rejected. In its judgment of 19 March 2018, the Sächsisches Finanzgericht (Finance Court, Saxony, Germany) indicated that the deduction of input tax sought was not possible, because the allocation of the good to business assets had not occurred in time, that is to say, by 31 May 2015.

14The order for reference states that, according to the case-law of the referring court, it follows from the principle of immediate deduction of the input tax incurred that the allocation decision must be taken upon the acquisition or production of the good in question. ¹¹ The case-law of the referring court further provides that, for reasons of practicability, the taxable person can communicate the allocation decision by indicators testifying to this. However, pursuant to Paragraph 18(3) of the UStG, this is to be at the latest and definitively, in a turnover tax declaration for the year covering the acquisition. ¹² This moment is set in the case-law of the referring court at the expiry of the general legal time limit for the deposit of the final tax declaration, pursuant to Paragraph 149(2) of the Fiscal Code. That moment in the main proceedings was 31 May of the following year, namely 2015. ¹³ Further, pursuant to the case-law of the referring court, extension of the deadline for the deposit of the final tax declaration does not amount to an extension of the deadline with respect to communication of the elements attesting to the allocation decision. ¹⁴

15By his appeal to the referring court E argued that it was not essential for him to have communicated to the Tax Office the further elements indicating his allocation decision via the declaration concerning his turnover taxes, given that the architectural plans for the effective use of the office exclusively for business purposes constituted sufficient indicators of its allocation to the assets of the business.

B. C‑46/20, Z v Finanzamt G (‘Case Z’)

16Case Z concerns the deduction as input tax of VAT incurred in 2014 in installing a photovoltaic energy system. The applicant Z used some of the electricity generated by the system himself and supplied the rest to a power supplier’s transmission system. The contract relevant to the injection of energy into the electricity network was concluded during the financial year in question, and envisaged remuneration to which tax was added.

17On 29 February 2016, Z filed a turnover tax declaration for the contested financial year and declared input tax in the amount of [X] euros. The amount related to the input tax concerning, essentially, the tax appearing on the bill of 11 September 2014 for the delivery and the installation of the photovoltaic energy system. Z had filed no declaration relevant to this system. The defendant Finanzamt G initially approved the turnover tax declaration for the contested year.

18After a special turnover tax check, the Tax Office took the view that the deduction of the input tax featuring in the bill of 11 September 2014 could not be granted. According to the Tax Office, Z had not allocated the good in question to business assets in time, that is, by 31 May 2015.

19The Tax Office therefore fixed Z’s turnover tax for the contested year by a decision of 30 November 2016, last modified by a decision of 27 March 2017. A complaint was rejected by a decision of 18 May 2017, as was an appeal. In its judgment of 12 September 2018, the Finanzgericht Baden-Württemberg (Finance Court, Baden- Württemberg, Germany), held that Z, who had a right to choose how to allocate the photovoltaic energy system in issue, had not allocated it in good time to assets of the business. This resulted from case-law binding the Finanzgericht (Finance Court) (see point 14 above). This approach remained valid in the light of subsequent case-law of the Court.

20Before the Finanzgericht (Finance Court) Z argued that, particularly in the light of Gmina Ryjewo, the case-law of the referring court relevant to the communication, within a brief time limit, of the elements evidencing the allocation of mixed-use assets, had to be questioned.

21The order for reference states that the Tax Office defended the decision taken in the complaint, and observed that the applicant, prior to the commercial exploitation of the photovoltaic energy system, was not acting as a trader in the sense of the legislation on turnover tax, and in the scenario on which the Court gave its judgment in Gmina Ryjewo, the right of allocation was non-existent.

22In those circumstances, the referring court decided to stay the proceedings in both C‑45/20 and C‑46/20 and sent the following questions to the Court for a preliminary ruling:

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 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 no allocation decision identifiable by the tax authorities has been communicated upon the expiry of the statutory deadline for submission of the annual VAT return?

Does Article 168(a) of [Directive 2006/112] conflict with national case-law whereby allocation to private assets is assumed or presumed in the absence of (sufficient) evidence of allocation to the assets of the business?’

23Written questions were addressed by the Court to the Federal Republic of Germany and the Commission. The Federal Republic of Germany responded on 14 December 2020, and the Commission on 16 December 2020.

24Written observations on the questions referred for a preliminary ruling were submitted by Finanzamt N (with respect to Case E), the Federal Republic of Germany and the Commission. There was no hearing.

III. Preliminary observations

25I propose responding to the issues raised in the order for reference in the following sequence.

26The first issue to be addressed must necessarily be whether both E and Z had a right to deduct input tax at the time of the acquisition of the mixed-use assets in question, namely a house in Case E and a photovoltaic energy system in Case Z. This assessment is linked directly to the allocation decision, because, as pointed out in the written observations of the Federal Republic of Germany, whether or not input tax is deductible depends on the manner in which that person allocated the mixed-use assets concerned. ¹⁵

27Secondly, as further suggested in the written observations of the Federal Republic of Germany, equally central to the resolution of the dispute in the main proceedings is whether or not an identifiable allocation decision with respect to the mixed-use assets is a substantive or formal requirement in EU VAT law. This is so because failure of a taxable person to comply with a formal requirement, unlike substantive requirements, does not necessarily deprive that taxable person of its right to deduct input tax. ¹⁶ As will be explained below, I have reached the conclusion that the existence of an identifiable allocation decision is a substantive requirement of the right to deduct input tax on mixed-use assets, but one which can be determined by elements attesting, objectively, to the existence of the allocation decision. To date, the case-law has not required taxable persons to make a specific and dedicated declaration to Member State tax authorities with respect to the allocation decision. In this section, I will also address the scope of Member State discretion with respect to imposing time limits for the communication of an identifiable allocation to the national tax authorities.

28Thirdly, after addressing these issues I will then conclude by answering the questions referred.

29As for the relevance of Gmina Ryjewo, it is important to note that Gmina Ryjewo did not concern the consequences flowing from (i) allocation of mixed-use capital goods wholly to the assets of the business, (ii) their retention wholly within private assets, thereby excluding them entirely from the system of VAT, or (iii) integrating them into a business only to the extent to which they are actually used for business purposes. ¹⁷

30Gmina Ryjewo rather concerned the consequences following when immovable property was used by a municipality initially for the purposes of non-taxable transactions, but later taxable transactions, and what this meant with respect to deduction of input tax incurred in the construction of that immovable property. In consequence, I agree with submissions made in the written observations of Finanzamt N to the effect that, contrary to views that may have been expressed in legal doctrine, Gmina Ryjewo does not stand for the proposition that it is no longer necessary for an allocation decision to be made with respect to mixed-use assets in order to determine if the taxable person is acting as such.

31Both the Federal Republic of Germany and Finanzamt N have argued, in their written observations, in favour of minimising the impact of Gmina Ryjewo to the outcome of the main proceedings due, inter alia, to the differences between what was in issue in Gmina Ryjewo, and what is in issue in the main proceedings. It suffices to say that reference will be made in this Opinion to Gmina Ryjewo to the extent that it is pertinent to the legal problem to be here resolved.

IV. Assessment

A. Existence of the right to deduct

32Article 167 of the VAT Directive is the starting point in the case-law. Pursuant to Article 167, a right to deduction arises at the time the deductible event becomes chargeable. The capacity in which the person is acting at that time is crucial in determining the existence of the right to deduct. ¹⁸

33Pursuant to Article 168(a) of the VAT Directive, the goods or services relied on to give entitlement to that right must be used by the taxable person for the purposes of his or her own taxed output transactions and those goods or services must be supplied by another taxable person as inputs. ¹⁹ Given that both the office in issue and the photovoltaic energy system appear to have been used for business purposes, this requirement will be satisfied if they were supplied by another taxable person as inputs. ²⁰

34Under the established case-law of the Court, there is no right to deduct input tax with respect to goods allocated wholly to private assets. ²¹ There is a partial right to deduct if mixed-use goods are partly allocated to business assets. The part which is not used for providing taxable business services or deliveries does not fall within the VAT system and cannot be taken into account for the purposes of Article 168(a) of Directive 2006/112. ²² However, if mixed-use assets are allocated wholly to the business assets then all input tax is deductible. ²³ If a taxable person chooses to treat capital goods used for both business and private purposes, as business assets, the VAT due as input tax on the acquisition of those assets is in principle wholly and immediately deductible. ²⁴

35However, an important amendment to the VAT Directive that was introduced by Directive 2009/162, namely Article 168a, is pertinent to the main proceedings. As can be seen in point 6 above, VAT on expenditure related to immovable property shall be deductible only up to the proportion of the property’s use for purposes of the taxable person’s business. While this is a matter for verification by the referring court, both the office within the house in Case E and the photovoltaic energy system in Case Z would seem to be immovable property. ²⁵

36What is sought by the applicants in the main proceedings, in any event, is partial deduction of input tax, in the light of partial allocation of mixed-use assets to business assets. In Case E, the deduction sought is partial because it relates only to the office in the house. In Case Z, the deduction sought is partial because the deduction sought with respect to the photovoltaic energy system is proportionate and linked to the extent to which it is used for economic purposes. ²⁶

37It is settled case-law that a person who incurs investment expenditure with the intention, confirmed by objective evidence, of engaging in economic activity within the meaning of Article 9(1) of the VAT Directive must be regarded as a taxable person. ²⁷ It is to be recalled that, pursuant to Article 168 of the VAT Directive, VAT is deductible in so far as the goods and services are used for the purposes of the taxed transactions of a taxable person. Acting in the capacity of a taxable person, he or she has, therefore, in accordance with Article 167 et seq. of that directive, the right immediately to deduct the VAT payable or paid on the investment expenditure incurred for the purposes of the transactions which he or she intends to carry out and which give rise to the right to deduct. That right to deduct arises, in accordance with Articles 63 and 167 of the VAT Directive, at the time when the tax becomes chargeable, namely when the goods are delivered. ²⁸

38I take the view, however, that under the established case-law, the taxable person is not, in effect, bound to deduct input tax as soon as the right to do so arises in two important contexts which are relevant to the main proceedings. First, while Finanzamt N and the Federal Republic of Germany are right to assert that the Court has held that the right to deduct input tax must be exercised immediately in respect of all the taxes charged on transactions relating to inputs, ²⁹ this does not mean that EU law permits Member States, in all circumstances, effectively to cancel the right to deduct in the event of non-compliance with the time limit set by Member State law for making an application for deduction to the tax authorities, particularly in the absence of evidence of fraud. ³⁰ This will be further elaborated upon in points 50 to 60 below.

39Secondly, as argued in the written observations of the Commission, the making of a specific application to the taxation authorities for the deduction of input tax is not essential to proving the existence of an allocation decision as at the time of the acquisition of the mixed-use assets in issue.

40Whether a taxable person acts as such for the purposes of an economic activity (see Article 9(1) of the VAT Directive) is a question of fact which must be assessed in the light of all the circumstances of the case, including the nature of the asset concerned and the period between the acquisition of the asset and its use for the purposes of the taxable person’s economic activity. It is for the referring court to make that assessment. ³¹

41Importantly, the Court held in Gmina Ryjewo that ‘although a clear and express declaration of the intention to use the goods for economic purposes at the time of their acquisition may suffice for a finding that the goods were acquired by the taxable person acting as such, the absence of such a declaration does not exclude the possibility that such an intention may be conveyed implicitly’. ³² As mentioned above, the Court so interpreted ‘economic activity’ in Article 9(1) of the VAT Directive in the context of the dispute in Gmina Ryjewo in which the right to deduct was sought with respect to a change in the purpose to which a capital asset was put from a non-economic one to an economic one. ³³ Since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, ³⁴ the principle set in Gmina Ryjewo must apply equally to establishing the existence of an allocation decision. I agree with the Commission when it argues that this interpretation is the only one consistent with the broad concept of acquisition as a ‘taxable person’ established in the case-law. ³⁵

42What needs to be determined, therefore, is whether E and Z acquired or produced the capital goods concerned with the intention, confirmed by objective evidence, of carrying out an economic activity and did, consequently, act as taxable persons within the meaning of Article 9(1) of the VAT Directive. ³⁶ Is there a direct and immediate link between a particular input transaction and a particular output transaction or transactions giving rise to entitlement to deduct? ³⁷

43While this assessment is for the referring court, there is nothing in the case file to indicate the absence of the requisite link with respect to either the construction of the office in Case E ³⁸ or the photovoltaic energy system in Case Z, in the light of the objective content of the transactions in question ³⁹ as described in the order for reference. The period between the acquisition of these assets and their use for the purposes of the taxable persons’ economic activities was relatively short. Both the office in question and the photovoltaic energy system were goods, by their nature, fit for such purposes. ⁴⁰ Most importantly, for the purposes of the main proceedings, the absence of an immediate request to the fiscal authorities for deduction of input tax is not conclusively determinative of whether a right to deduct existed at the time of acquisition, even though, under the case-law of the referring court, invocation of the right to deduct is a serious indicator of allocation of assets to the business. ⁴¹

44Thus, the failure of E to declare the office in provisional tax declarations is not an obstacle in and of itself to the right to deduct input tax. Further, no direct support is found in the Court’s case-law for any requirement under German law for an applicant in the position of either E or Z to supply an active declaration of the existence of an allocation decision at acquisition, even if deduction of input tax is sought after the VAT declaration relevant to the period of the acquisition of the goods. In the light of the ruling in Gmina Ryjewo, what is required are elements attesting objectively to the existence of the allocation decision to business assets, such a decision being necessary to determine if VAT is deductible with respect to mixed-use assets. ⁴² Seeking deduction in the VAT declaration relevant to the period of the acquisition can prove the existence of an allocation decision, ⁴³ but this is not, under the case-law of the Court, absolutely obligatory. It is for the referring court to determine whether the plans for the effective use of the office in Case E, and the bill of 11 September 2014 for the delivery and installation of the photovoltaic energy system in Case Z constituted elements sufficient to attest, objectively, to the existence of an allocation decision, in combination with all other pertinent facts before it.

45This approach also respects the foundations of the VAT rules on adjustments and deductions. It is noteworthy that ‘adjustment periods for deductions do not have, as such, any effect on the origin of the right to deduction of VAT … which … is determined solely by the capacity in which the interested party is acting when acquiring the goods concerned’. ⁴⁴ The purpose of the system of adjustment of deductions is to ensure the accuracy of deductions and hence the neutrality of the tax burden. ⁴⁵ Indeed, it is established in the case-law of the Court that the detailed rules governing the exercise of the right to deduct are only formal requirements or conditions. ⁴⁶

46Finally, as mentioned in point 21 above, doubt has been expressed as to whether Z was acting as a trader at the time of the acquisition of the photovoltaic energy system, while querying Z’s right to deduct in the light of the ruling in Gmina Ryjewo. However, the photovoltaic energy system was used, at least partially, for the purposes of Z’s own taxed output transactions, the investment was incurred for engaging in an economic activity, and the deduction was for the purposes of transactions Z intended to carry out (point 37 above). Further, contrary to providing indications that would limit Z’s potential for categorisation as a ‘taxable person’, Gmina Ryjewo supports generous interpretation of the term ‘taxable person’. ⁴⁷

47In conclusion, while this is a matter for the referring court to verify in the light of the legal principles discussed above, E would seem to have had a right to partial deduction of input tax on acquisition of the office in question, as did Z on acquisition of the photovoltaic energy system.

B. Identifiable allocation decision as a substantive or formal requirement and the time limit for its communication to fiscal authorities

1. Identifiable allocation decision

48Under the established case-law of the Court, Member State tax authorities must have the information necessary to establish that the substantive requirements giving rise to the right to deduct input tax paid in a given case have been satisfied, notwithstanding any alleged failure to satisfy formal conditions. ⁴⁸ As has been explained above, the allocation decision is essential to establishing the right to deduct. It is not a mere formal requirement for the purposes of control. ⁴⁹ Nor is it an obligation relating to accounts and tax returns. ⁵⁰ On the contrary, absence of an identifiable allocation decision prevents the production of conclusive evidence that the substantive requirements have been satisfied, ⁵¹ given that it is the allocation decision itself that determines if deduction of input tax with respect to mixed-use assets is possible at all, and the extent to which it is deductible.

49Therefore, as argued in the written observations of Finanzamt N, existence of an identifiable allocation decision is a material requirement, but it is to be underscored that deduction of the input tax in the VAT declaration period relevant to the pertinent acquisition is only one element, albeit a potentially determinative one, attesting to the existence of the allocation decision. ⁵² Equally, the absence of such a declaration does not absolutely preclude the existence of an allocation decision.

2. The time limit for communication of an allocation decision

50The tax authorities are to have the necessary data to establish that the substantive conditions for deduction of VAT paid as input tax are met, which is for the referring court to verify. ⁵³ Where the tax authority has the information necessary to establish that the taxable person, as the recipient of the supplies in question, is liable to VAT, it cannot, in relation to the right of that taxable person to deduct that input tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes. ⁵⁴

51The question therefore arises as to whether the imposition of the time limit in issue, the resulting loss of the right to deduct arising from the referring court’s case-law, and a presumption in the case-law of the referring court of allocation to private assets in the absence of evidence of allocation to the assets of the business, are additional conditions having such an effect.

52Pursuant to Articles 167 and 179 of the VAT Directive, the right to deduct is generally exercised during the same period as that in which it has arisen, namely, at the time the tax becomes chargeable. ⁵⁵ However, pursuant to Articles 180 and 182 of the VAT Directive, a taxable person may be authorised to make a deduction beyond this period, subject to certain conditions and procedures determined by national legislation. ⁵⁶

53It is already established in the case-law that imposition by Member States of time limits in which to deduct input VAT are accepted in EU law to secure legal certainty, subject to the requirements of effectiveness and equivalence. ⁵⁷ It is for the referring court to determine whether the outer time limit of 31 May 2015, with respect to the annual VAT return for 2014, for communication of the allocation decision, which is effectively a time limit for exercise of the right to deduct input tax, complies with the principles of effectiveness and equivalence.

54Under the case-law of the Court, with respect to the principle of effectiveness, the total duration of the limitation period is to be taken into account, and Member State courts are to consider whether that time limit renders the right to deduct input tax impossible in practice or excessively difficult. ⁵⁸

55Absent the loss in toto under Member State law of the right to deduct input tax for failure to communicate to the tax authorities, by 31 May 2015, the elements attesting, objectively, to the existence of an allocation decision, the time limit in issue would not seem to be objectionable from the perspective of EU law. ⁵⁹

56However, it is further established in the case-law that penalising the failure on the part of the taxable person to comply with the obligations relating to accounts and tax returns through denial of the right of deduction, goes further than is necessary to attain the objective of ensuring the correct application of those obligations, since EU law does not prevent Member States from imposing, where necessary, a fine or a financial penalty proportionate to the seriousness of the offence, ⁶⁰ as proportionate alternatives to cancellation of the right to deduct.

57In short, Member State action must not have an excessive effect on the principle of VAT neutrality. ⁶¹ More specifically, when no issue arises with respect to tax evasion or detriment to the budget of the State, the Court has held that, in view of the dominant position of the right to deduct in the common system of VAT, loss of the right to deduct if the tax is accounted for out of time appears disproportionate. ⁶² Belated accounting cannot, per se, be equated with evasion. ⁶³ An appropriate response, in such circumstances, is an administrative fine, ⁶⁴ or payment of default interest. ⁶⁵

58The Court has further held that since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incumbent upon the competent tax authorities to establish, to the requisite legal standard, that the objective evidence establishing the existence of a fraud or abuse is present. It is for the national courts subsequently to determine whether the tax authorities concerned have established the existence of such objective evidence. ⁶⁶ Such evidence does not appear in the case file.

59The position would be different if breach of the deadline of 31 May 2015 meant that the substantive requirement of elements attesting objectively to the existence of the partial allocation to business assets could not be satisfied. ⁶⁷ However, if communication of the allocation decision, through sufficient elements attesting to its objective existence, was received by the tax authorities on 28 September 2016 in Case E and on 29 February 2016 in Case Z, the substantive requirements for deduction of VAT might well be met. ⁶⁸ Further, the period of delay of both E and Z could not be described as administratively unmanageable. E’s request for deduction of input tax was received by the Tax Office on 28 September 2016, that is, 16 months after the deadline of 31 May 2015, and Z filed a turnover tax declaration on 29 February 2016, nine months after the expiry of the 31 May 2015 deadline.

60For the sake of completeness, it could be added that doubt over compliance with the principle of proportionality, and excessive impact on the principle of neutrality, might also arise with respect to the case-law of the referring court, mentioned in point 14 above, to the effect that an extension of the deadline for filing annual accounts does not extend the deadline for the communication of the allocation decision with respect to mixed-use assets. It might also be queried by reference to the principle of equivalence.

V. Answers to the questions referred

61I have reached the conclusion that, in the circumstances of the main proceedings, 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, but no allocation decision identifiable by the tax authorities has been communicated to those tax authorities upon the expiry of the statutory deadline for submission of the annual VAT return, is incompatible with Article 168(a), read in conjunction with Article 167 of the VAT Directive. The same must necessarily apply to a presumption of allocation of mixed use assets to private assets when the penalty is, equally, the loss of the right to deduct.

62Under the established case-law of the Court, the right of deduction forms an integral part of the VAT scheme and in principle may not be limited. The deduction rules are intended to free the taxable person completely of the burden of the VAT accruing or paid in all its economic activities. The common system of VAT therefore ensures that all economic activities, whatever their purpose or results, provided that they are, in principle, themselves subject to VAT, are taxed in a neutral way. ⁶⁹

63Pursuant to Article 273 of the VAT Directive, Member States may adopt measures to ensure the correct collection of VAT and prevent evasion, but such measures must be consistent with the principles of proportionality, and neutrality, ⁷⁰ and must not systematically undermine the right to deduct VAT. ⁷¹

64Finally, given that the order for reference queries, principally, the compatibility of the case-law of the referring court with pertinent principles of EU law, it is to be recalled that the requirement to interpret national law in conformity with EU law includes the obligation, on national courts, to change their established case-law where necessary if that case-law is based on an interpretation of national law that is incompatible with EU law. ⁷²

VI. Conclusion

65I therefore propose the following answers to the questions referred by the Bundesfinanzhof (Federal Finance Court, Germany):

In the circumstances of the main proceedings, 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, but no allocation decision identifiable by the tax authorities has been communicated to those tax authorities upon the expiry of the statutory deadline for submission of the annual VAT return, is incompatible with 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, as amended by Council Directive 2009/162/EC of 22 December 2009.

2In the circumstances of the main proceedings, national case-law whereby allocation to private assets is assumed or presumed in the absence of (sufficient) evidence of allocation to the assets of the business is incompatible with Article 168(a) of Directive 2006/112, as amended by Council Directive 2009/162.’

¹ Original language: English.

² It is, however, for the referring court to ascertain in the light of national law whether the goods here in issue are ‘capital goods’. Under Article 189(a) of the VAT Directive, Member States may define the concept of ‘capital goods’. The Court has ruled that that concept covers goods used for the purposes of economic activity and distinguishable by their durable nature and their value and such that the acquisition costs are not normally treated as current expenditure but are written off over several years. See, for example, judgment of 27 March 2019, Mydibel (C‑201/18, EU:C:2019:254, paragraph 23), referring to judgment of 16 February 2012, Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraph 35).

³ See further point 35 below.

⁴ OJ 2006 L 347, p. 1.

⁵ OJ 2010 L 10, p. 14.

⁶ C‑140/17, EU:C:2018:595 (‘Gmina Ryjewo’).

⁷ Judgment of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraphs 65 to 70). See also, for example, judgment of 12 April 2018, Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2018:249, paragraph 39), referring to judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 52 and the case-law cited). See also recently judgments of 26 April 2018, Zabrus Siret, (C‑81/17, EU:C:2018:283, paragraphs 32 to 34 and 49 to 51), and of 2 July 2020, Terracult (C‑835/18, EU:C:2020:520, paragraphs 37 and 38).

⁸ According to the written observations of the Federal Republic of Germany, the version in force from 1 November 2011 is the relevant version.

⁹ According to the written observations of Finanzamt N.

¹⁰ According to the written observations of the Finanzamt N.

¹¹ BFH-Urteile in BFHE 234, 519, BStBl II 2014, 76, Rz 23; in BFH/NV 2012, 808, Rz 18; in BFH/NV 2012, 1828, Rz 28ff.; in BFH/NV 2013, 266, Rz 38.

¹² BFH-Urteile in BFHE 234, 519, BStBl II 2014, 76, Rz 24ff., 34; in BFHE 234, 531, BStB1 II 2014, 81, Rz 24ff.; in BFH/NV 2013, 266, Rz 40f; BFH-Beschluss in BFH/NV 2017, 922, Rz 5, jeweils m.w.N, and the case-law respectively cited.

¹³ BFH-Urteile in BFHE 234, 519, BSt1 II2014, 76, Rz 33 ff.; in BFH/NV 2013, 266, Rz 40f.; in BFH/NV 2014, 1097, Rz 14;BFH-Beschlüsse in BFH/NV 2014, 914, Rz 6; in BFH/NV 2017, 922, Rz 5. According to the order for reference, it is now 31 July of the following year.

¹⁴ BFH-Urteile in BFHE 234, 531, BStB1 II 2014, 81, Rz 36 f; in BFH/NV 2012, 808, Rz, 18.

¹⁵ For example, judgment of 22 March 2012, Klub (C‑153/11, EU:C:2012:163, paragraphs 38 and 39, and the case-law cited).

¹⁶ For example, judgment of 12 April 2018, Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2018:249, paragraphs 30 to 33 and the case-law cited). See also, for example, judgments of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraphs 60 to 63), and of 15 November 2017, Geissel and Butin (C‑374/16 and C‑375/16, EU:C:2017:867, paragraph 40).

¹⁷ Judgment of 23 April 2009, Puffer (C‑460/07, EU:C:2009:254, paragraph 39 and the case-law cited). See also, for example, judgments of 16 February 2012, Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraph 53), and of 9 July 2015, Trgovina Prizma (C‑331/14, EU:C:2015:456, paragraph 20).

¹⁸ Opinion of Advocate General Kokott in Gmina Ryjewo (C‑140/17, EU:C:2018:273, point 28), referring to judgment of 11 July 1991, Lennartz (C‑97/90, EU:C:1991:315, paragraphs 8 and 9); and judgments of 28 February 2018, Imofloresmira – Investimentos Imobiliários (C‑672/16, EU:C:2018:134, paragraph 35), and of 30 March 2006, Uudenkaupungin kaupunki (C‑184/04, EU:C:2006:214, paragraph 38).

¹⁹ For example, judgment of 15 September 2016, Barlis 06 – Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 40), referring to judgment of 22 October 2015, PPUH Stehcemp (C‑277/14, EU:C:2015:719, paragraph 28).

²⁰ This element not addressed directly in the case file. However, it is not in dispute that both E and Z paid input tax on the goods in question.

²¹ For example, judgment of 8 March 2001, Bakcsi (C‑415/98, EU:C:2001:136, paragraph 27). In the context of land, see judgment of 9 July 2015, Trgovina Prizma (C‑331/14, EU:C:2015:456, paragraph 21).

²² Judgment of 4 October 1995, Armbrecht (C‑291/92, EU:C:1995:304, paragraph 28).

²³ Judgment of 22 March 2012, Klub (C‑153/11, EU:C:2012:163, paragraph 38 and the case-law cited).

²⁴ For example, judgment of 18 July 2013, Medicom and Maison Patrice Alard (C‑210/11 and C‑211/11, EU:C:2013:479, paragraph 24).

²⁵ Article 13b of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value added tax (recast) (OJ 2011 L 77, p. 1), as amended by Council Implementing Regulation (EU) No 1402/2013 of 7 October 2013 amending Implementing Regulation (EU) No 282/2011 as regards the place of supply of services (OJ 2013 L 284, p. 1). See further, for example, judgment of 15 November 2012, Leichenich (C‑532/11, EU:C:2012:720).

²⁶ On the importance of apportionment with respect to mixed-use assets, see judgment of 8 May 2019, Związek Gmin Zagłębia Miedziowego (C‑566/17, EU:C:2019:390).

²⁷ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 20),

²⁸ Ibid., referring to judgments of 29 November 2012, Gran Via Moineşti (C‑257/11, EU:C:2012:759, paragraph 27), and of 22 March 2012, Klub (C‑153/11, EU:C:2012:163, paragraph 36 and the case-law cited).

²⁹ For example, judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 44).

³⁰ Judgment of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraphs 65 to 70). See further, for example, judgment of 12 April 2018, Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2018:249, paragraph 39), referring to judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 52 and the case-law cited). See also recently judgments of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraphs 32 to 34 and 49 to 51), and of 2 July 2020, Terracult, C‑835/18, EU:C:2020:520, paragraphs 37 and 38).

³¹ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 21), referring to judgment of 22 March 2012, Klub (C‑153/11, EU:C:2012:163, paragraphs 40 and 41). See also, for example, judgment of 8 March 2001, Bakcsi (C‑415/98, EU:C:2001:136, paragraph 29).

³² Judgment of 25 July 2018, Gmina Ryjewo (C‑140/17, EU:C:2018:595, paragraph 47).

³³ Point 30 above.

³⁴ See further point 58 below.

³⁵ Gmina Ryjewo (paragraph 54).

³⁶ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 23).

³⁷ Ibid., paragraph 27, referring to judgment of 29 October 2009, AB SKF (C‑29/08, EU:C:2009:665, paragraph 57). As the Court observed in its judgment of 16 February 2012, Eon Aset Menidjmunt (C‑118/11, EU:C:2012:97, paragraphs 45 and 47 and the case-law cited), ‘the criterion relating to the use of goods or services for the purposes of transactions within the scope of the undertaking’s economic activity varies according to whether a service or capital goods are being acquired’ (paragraph 45). The right to deduct arises in all events ‘where the costs of the services in question are part of his general costs and are, as such, components of the price of the goods or services which he supplies’ (paragraph 47). See also on the existence of the requisite link, judgment of 8 May 2019, Związek Gmin Zagłębia Miedziowego (C‑566/17, EU:C:2019:390, paragraph 27 and the case-law cited).

³⁸ Case E is indeed similar to that considered by the Court in the judgment of 21 April 2005, HE (C‑25/03, EU:C:2005:241, see particularly paragraph 52).

³⁹ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 29), referring to judgment of 21 February 2013, Becker (C‑104/12, EU:C:2013:99, paragraphs 22, 23 and 33).

⁴⁰ With respect to the building of the office and the acquisition of the photovoltaic energy system, it does not appear from the case file that either E or Z were acting in a private capacity. See, for example, judgment of 9 July 2015, Trgovina Prizma (C‑331/14, EU:C:2015:456, paragraph 21 and the case-law cited).

⁴¹ BFH-Urteile in BFHE 234, 531, BStB1 II 2014, 81, Rz23; in BFH/NV 2013, 266, Rz 37; BFH-Beschluss vom 20.09.2012 – VB 109/11, BFH/NV 2013, 98, Rz 3.

⁴² It is to be noted, however, that Member State rules of evidence must not undermine the effectiveness of EU law and must be consistent with the rights guaranteed by EU law, in particular by the Charter of Fundamental Rights of the European Union. See e.g. judgment of 4 June 2020, C.F. (Tax audit) (C‑430/19, EU:C:2020:429, paragraph 45), referring to judgment of 16 October 2019, Glencore Agriculture Hungary (C‑189/18, EU:C:2019:861, paragraph 37).

⁴³ As pointed out in the written observations of the Federal Republic of Germany, the Court so held in its judgment of 11 July 1991, Lennartz (C‑97/90, EU:C:1991:315, paragraph 26).

⁴⁴ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 36), referring to judgment of 11 July 1991Lennartz (C‑97/90, EU:C:1991:315, paragraphs 8 and 20).

⁴⁵ For example, judgment of 30 March 2006, Uudenkaupungin kaupunki (C‑184/04, EU:C:2006:214, paragraph 26).

⁴⁶ For example, judgment of 19 October 2017, Paper Consult (C‑101/16, EU:C:2017:775, paragraph 40).

⁴⁷ Judgment of 25 July 2018 (C‑140/17, EU:C:2018:595, paragraphs 54 and 55).

⁴⁸ Judgment of 7 March 2018, Dobre (C‑159/17, EU:C:2018:161, paragraph 38).

⁴⁹ See judgment of 7 March 2018, Dobre (C‑159/17, EU:C:2018:161, paragraph 32).

⁵⁰ Ibid., paragraph 34.

⁵¹ Ibid., paragraph 35, referring to the judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 46).

⁵² Point 44 above.

⁵³ Judgment of 12 September 2018, Siemens Gamesa Renewable Energy România (C‑69/17, EU:C:2018:703, paragraph 43).

⁵⁴ Judgment of 7 August 2018, TGE Gas Engineering (C‑16/17, EU:C:2018:647, paragraph 46 and the case-law cited). See similarly, for example, judgment of 15 September 2016, Barlis 06 – Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 42 and the case-law cited).

⁵⁵ Judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 31).

⁵⁶ Ibid., paragraph 32 and the case-law cited. In the judgment of 27 March 2019, Mydibel (C‑201/18, EU:C:2019:254, paragraph 22), the Court observed that ‘Article 187 of [the VAT Directive] describes certain detailed rules for the adjustment of VAT deduction as regards capital goods. In particular, it is clear from Article 187(1) of that directive that, as regards such goods, adjustment is spread over five years and that period may be extended up to 20 years for immovable property acquired as capital goods.’

⁵⁷ Ibid., paragraphs 33 to 38 and the case-law cited. See also e.g. judgment of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraph 38) and the judgment of 2 July 2020, Terracult (C‑835/18, EU:C:2020:520, paragraph 32).

⁵⁸ Judgments of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraphs 52 and 58), and of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraphs 38 and 41). See also, for example, the judgment of 2 July 2020, Terracult (C‑835/18, EU:C:2020:520, paragraph 32).

⁵⁹ This is subject to the principle that Member State time limits cannot ‘be used in such a way that they would have the effect of systematically undermining the right to deduct VAT’. See judgment of 21 March 2018, Volkswagen (C‑533/16, EU:C:2018:204, paragraph 48).

⁶⁰ Judgment of 12 September 2018, Siemens Gamesa Renewable Energy România (C‑69/17, EU:C:2018:703, paragraph 37), referring to judgments of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 63), and of 7 March 2018, Dobre (C‑159/17, EU:C:2018:161, paragraph 34). See also, for example, judgment of 15 September 2016, Barlis 06 – Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraphs 47 and 48).

⁶¹ Judgment of 8 May 2019, EN.SA. (C‑712/17, EU:C:2019:374, paragraph 33).

⁶² Judgment of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraphs 65 to 70). See also judgment of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraph 51). C.f. judgment of 19 October 2017, Paper Consult (C‑101/16, EU:C:2017:775, paragraph 43).

⁶³ Judgment of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraph 74). See also judgment of 19 October 2017, Paper Consult (C‑101/16, EU:C:2017:775, paragraph 56), where the Court held that while ‘failure to file tax declarations laid down by law may be regarded as indicative of evasion, it does not prove irrefutably that VAT evasion has occurred.’

⁶⁴ Judgment of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraph 49).

⁶⁵ Judgment of 12 July 2012, EMS-Bulgaria Transport (C‑284/11, EU:C:2012:458, paragraph 75).

⁶⁶ Judgment of 12 April 2018, Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2018:249, paragraph 39), referring to judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 52).

⁶⁷ It is for the taxable person seeking deduction of VAT to establish that he or she meets the conditions for eligibility. The tax authorities may thus require the taxable person himself or herself to produce the evidence they consider necessary for determining whether or not the deduction requested should be granted. See judgment of 15 September 2016, Barlis 06 – Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraph 46 and the case-law cited).

⁶⁸ This is different from the situation I considered in my Opinion in Vădan (C‑664/16, EU:C:2018:346, see in particular point 80) in which retention of invoices prevented the production of conclusive evidence that the substantive requirements had been satisfied.

⁶⁹ Judgment of 26 April 2017, Farkas (C‑564/15, EU:C:2017:302, paragraphs 42 to 43 and the case-law cited). See also, for example, judgments of 15 September 2016, Barlis 06 – Investimentos Imobiliários e Turísticos (C‑516/14, EU:C:2016:690, paragraphs 37 to 39); of 26 April 2018, Zabrus Siret (C‑81/17, EU:C:2018:283, paragraphs 32 to 34); and of 21 November 2018, Fontana (C‑648/16, EU:C:2018:932, paragraphs 39 to 40).

⁷⁰ Judgment of 21 November 2018, Fontana (C‑648/16, EU:C:2018:932, paragraph 35 and the case-law cited).

⁷¹ Judgment of 28 July 2016, Astone (C‑332/15, EU:C:2016:614, paragraph 49 and the case-law cited).

⁷² For example, judgment of 4 March 2020, Telecom Italia (C‑34/19, EU:C:2020:148, paragraph 60 and the case-law cited).