C-791/18 Stichting Schoonzicht

JUDGMENT OF THE COURT (Second Chamber)

17 September 2020 ( *1 )

(Reference for a preliminary ruling – Value added tax (VAT) – Directive 2006/112/EC – Immovable property acquired as capital goods – Deduction of input tax paid – Adjustment of the initial deduction – Single adjustment of that deduction in full after the goods in question are first used – Adjustment period)

In Case C‑791/18,

REQUEST for a preliminary ruling under Article 267 TFEU from the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), made by decision of 14 December 2018, received at the Court on 17 December 2018, in the proceedings

Stichting Schoonzicht

v

Staatssecretaris van Financiën,

THE COURT (Second Chamber),

composed of A. Arabadjiev, President of the Chamber, K. Lenaerts, President of the Court, acting as a Judge of the Second Chamber, P.G. Xuereb, T. von Danwitz and A. Kumin (Rapporteur), Judges,

Advocate General: M. Bobek,

Registrar: A. Calot Escobar,

having regard to the written procedure,

after considering the observations submitted on behalf of:

Stichting Schoonzicht, by B.G. van Zadelhoff, acting as Counsel,

the Netherlands Government, by M.K. Bulterman and M.A.M. de Ree, acting as Agents,

the Swedish Government, initially by A. Falk, J. Lundberg, C. Meyer-Seitz, H. Shev and H. Eklinder, then by C. Meyer-Seitz, H. Shev and H. Eklinder, acting as Agents,

the European Commission, by W. Roels and N. Gossement, acting as Agents,

after hearing the Opinion of the Advocate General at the sitting on 3 March 2020,

gives the following

Judgment

Legal context and the dispute

1This request for a preliminary ruling concerns the interpretation of Articles 184 to 187 and 189 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1; ‘the VAT Directive’).

2The request has been made in proceedings between Stichting Schoonzicht and the Staatssecretaris van Financiën (Secretary of State for Finance, Netherlands) concerning the adjustment in a single step on account of the use of part of an apartment complex for an exempt activity of the entire deduction of the turnover tax (VAT) initially paid in respect of the construction of that complex.

Legal context

European Union law

3In accordance with Article 14(3) of the VAT Directive, Member States may regard the handing over of certain works of construction as a supply of goods.

4Article 167 of that directive provides that a right of deduction is to 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 184 of the VAT Directive provides:

‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’

7Under Article 185 of the VAT Directive:

‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

8Article 186 of the VAT Directive provides that Member States are to lay down the detailed rules for applying Articles 184 and 185 thereof.

9Article 187 of the directive reads as follows:

‘1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.

Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used.

In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.

2. The annual adjustment shall be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof.

The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.’

10In accordance with Article 189 of the directive:

‘For the purposes of applying Articles 187 and 188, Member States may take the following measures:

define the concept of capital goods;

specify the amount of the VAT which is to be taken into consideration for adjustment;

adopt any measures needed to ensure that adjustment does not give rise to any unjustified advantage;

permit administrative simplifications.’

Netherlands law

11Article 15(4) of the Wet houdende vervanging van de bestaande omzetbelasting door een omzetbelasting volgens het stelsel van heffing over de toegevoegde waarde (Law providing for replacement of the existing turnover tax by a turnover tax according to the system of collection of value added tax), of 28 June 1968 (Stb. 1968, No 329), in the version in force at the material time in the main proceedings (‘the Law on VAT’), provides:

‘Deduction of the tax shall be made in accordance with the intended use of the goods and services at the time when the tax is invoiced to the trader or at the time when the tax becomes chargeable. If it appears, at the time at which the trader starts to use the goods or services, that he or she is deducting the same tax to an extent which is higher or lower than that to which the use of the goods or services in question entitles him or her, the excess deducted shall be chargeable from that time. The tax which becomes chargeable shall be paid in accordance with Article 14. The amount of tax which could have been deducted and was not deducted shall be refunded to him or her on request.’

12Article 12(2) and (3) of the Uitvoeringsbeschikking omzetbelasting (Implementing Decision on Turnover Tax) of 12 August 1968 (Stb. 1968, No 423), in the version in force at the material time in the main proceedings (‘the Implementing Decision’), provides:

‘2. The adjustment referred to in Article 15(4) of the [Law on VAT] shall be made on the basis of the information on the taxable period during which the trader started to use the goods or services.

3. In the declaration for the latest tax period of reference, the adjustment of the deduction shall be made on the basis of the information applicable to the entire tax year.’

13In accordance with Article 13 of the Implementing Decision:

‘(1) In derogation from Article 11, the following shall be taken into account separately for the purposes of the deduction:

immovable property and rights pertaining to such property;

movable property that the trader writes off in respect of income tax or corporate income tax, or that he or she could write off were he or she liable to either of such taxes.

(2) So far as concerns immovable property and the rights pertaining to such property, the deductions made during each of the nine tax years following the one in which the trader started to use the property in question shall be adjusted. On each occasion, the adjustment shall be made, account being had of the information on the tax year of reference, on one tenth of the input tax paid, and at the time of the declaration relating to the latest taxable period of that tax year.’

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

14The applicant in the main proceedings had had built an apartment complex comprising seven residential apartments on a plot of land belonging to it. Construction work began in 2013 and the complex was received by it in July of the following year.

15As the apartment complex was, at the time, intended for taxable purposes, the applicant in the main proceedings deducted, directly and in full, the VAT which it had been charged to it for the construction of the complex in 2013.

16From 1 August 2014, the applicant in the main proceedings leased four of the seven apartments in the complex applying an exemption from VAT despite the fact that the other three apartments remained unoccupied in 2014.

17Due to that exemption, the applicant in the main proceedings was required to adjust the VAT deduction and pay, on declaration, in a single step, the entire portion of that tax attributable to those four apartments during the period in which they had been occupied, amounting to EUR 79587 in total, pursuant to the second and third sentences of Article 15(4) of the Law on VAT.

18However, on the basis that Article 15(4) of the Law on VAT is contrary to Article 187 of the VAT Directive, in that the former provides that the entire initial deduction must be adjusted at the time at which capital goods are first used, the applicant in the main proceedings lodged an objection to the adjustment which it had thus been required to make.

19Since that objection was rejected, the applicant in the main proceedings brought, in respect of the relevant decision, an action before the Rechtbank Noord-Holland (District Court, North Holland, Netherlands), which was subsequently dismissed as unfounded. The applicant in the main proceedings appealed against the decision of that court before the Gerechtshof Amsterdam (Court of Appeal, Amsterdam, Netherlands).

20Since the Gerechtshof Amsterdam (Court of Appeal, Amsterdam) dismissed the appeal brought by the applicant in the main proceedings in a judgment of 11 January 2017, the applicant in the main proceedings brought an appeal on a point of law against that judgment before the referring court, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), reiterating the argument that a single adjustment of the initial deduction following the first use of capital goods is contrary to Article 187 of the VAT Directive and that the adjustment to which it had been subject should have been spread over a number of years.

21In those circumstances the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

Do Articles 184 to 187 of [the VAT Directive] preclude a national adjustment regime for capital goods which provides for an adjustment spread over a number of years, whereby in the year the goods [are first used] – which year is moreover the first adjustment year – the total amount of the initial deduction for [those capital goods] is adjusted (revised) in a single step, if, [when first used], it [becomes apparent] that that initial deduction deviates from the deduction which the taxable person is entitled to apply on the basis of the actual use of the capital good[s]?

If [the first question] is answered in the affirmative:

Must Article 189(b) or (c) of [the VAT Directive] be interpreted as meaning that the single adjustment of the initial deduction in the first year of the adjustment period referred to in [the first question] constitutes a measure which the [Kingdom of the] Netherlands may adopt for the application of Article 187 of [the VAT Directive]?’

Consideration of the questions referred

The first question

22By its first question, the referring court asks, in essence, whether Articles 184 to 187 of the VAT Directive must be interpreted as precluding a capital goods adjustment scheme, laid down in national legislation in which the adjustment is to be spread over several years, from providing that, in the year the goods in question are first used, where that year is also the first adjustment year, the total amount of the initial deduction for those capital goods is adjusted in a single step, if, when first used, it becomes apparent that that deduction deviates from the deduction which the taxable person was entitled to apply on the basis of the actual use of those goods.

23It should be noted, as a preliminary matter, that, according to the structure of the system introduced by the VAT Directive, input taxes on goods or services used by a taxable person for his or her taxable transactions may be deducted. The deduction of input taxes is linked to the collection of output taxes. Where goods or services acquired by a taxable person are used for purposes of transactions that are exempt or do not fall within the scope of VAT, no output tax can be collected or input tax deducted (judgments of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 24, and of 28 February 2018, Imofloresmira – Investimentos Imobiliários, C‑672/16, EU:C:2018:134, paragraph 30).

24It is clear from the wording of Article 168 of the VAT Directive that, for an interested party to be entitled to the right to deduct, first, it must be a ‘taxable person’ within the meaning of that directive and, second, the goods and services in question must be used for the purposes of its taxed transactions (judgments of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 52, and of 28 February 2018, Imofloresmira – Investimentos Imobiliários, C‑672/16, EU:C:2018:134, paragraph 33).

25The use to which the goods or services are put, or are intended to be put, determines the extent of the initial deduction to which the taxable person is entitled and the extent of any adjustments in the course of the following periods (see, to that effect, judgments of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 54 and the case-law cited, and of 18 October 2012, TETS Haskovo, C‑234/11, EU:C:2012:644, paragraph 29).

26The adjustment is an integral part of the VAT deduction scheme established by the VAT Directive and is intended to enhance the precision of VAT deductions so as to ensure tax neutrality, which is a fundamental principle of the common system of VAT put in place by the EU legislature in the field (see, to that effect, judgments of 21 February 2006, Halifax and Others, C‑255/02, EU:C:2006:121, paragraph 92 and the case-law cited, and of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 37). In accordance with that principle, transactions effected at an earlier stage continue to give rise to the right to deduct only to the extent that they are used to make supplies subject to VAT. The VAT Directive thus aims to establish a close and direct relationship between the right to deduct input VAT and the use of the goods and services concerned for taxable output transactions (judgment of 18 October 2012, TETS Haskovo, C‑234/11, EU:C:2012:644, paragraphs 30 and 31 and the case-law cited).

27In that regard, it should be made clear that Articles 184 and 185 of the VAT Directive set out, in general, the conditions under which the national tax authorities must require initially deducted VAT to be adjusted but do not provide for the manner in which such adjustments are to be made (judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 26).

28By contrast, Article 186 of the VAT Directive expressly makes Member States responsible for defining the conditions for such adjustments, by providing that they are to lay down the detailed rules for applying Articles 184 and 185 of the VAT Directive (see, to that effect, judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 27).

29It is only so far as concerns capital goods that Articles 187 to 192 of the VAT Directive provide for certain detailed rules for the adjustment of VAT deductions (judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 27).

30As regards, in the first place, the coming into existence of an obligation to make an adjustment, it should be noted that that obligation is defined in Article 184 of the VAT directive as broadly as possible, inasmuch as ‘the initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled’ (judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 32).

31That wording does not exclude, a priori, any foreseeable situation of undue deductions. The general scope of the adjustment obligation is supported by the express enumeration of the derogations provided for in Article 185(2) of the VAT Directive (judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 33).

32Under Article 185(1) of that directive, such an adjustment must be made inter alia when changes to factors which were taken into consideration for the determination of the amount of such a deduction occurred after the VAT return (judgment of 18 October 2012, TETS Haskovo, C‑234/11, EU:C:2012:644, paragraph 32).

33Those provisions constitute the scheme applicable to any entitlement of the tax authority to require a taxable person to make a VAT adjustment, including adjustment of deductions made in respect of capital goods (see, to that effect, judgment of 18 October 2012, TETS Haskovo, C‑234/11, EU:C:2012:644, paragraph 26).

34In the present case, according to the order for reference, the taxable person had had built a seven-apartment complex and deducted the VAT relating to its construction on the basis that it was intended for taxable purposes. Following the receipt of that apartment complex, which is, for the purposes of VAT, a supply of goods within the meaning of the national rules implementing the option provided for in Article 14(3) of the VAT Directive, the taxable person leased four of those apartments on a VAT-exempt basis.

35In so far as the initial deduction was calculated by taking into account the use of the complex for taxable purposes, the lease of those four apartments exempt from VAT led to a change in the factors which must be taken into account in order to determine the amount of that deduction and, on account of the actual use of the goods, resulted in that deduction being higher than that which the taxable person was entitled to deduct.

36Accordingly, such a situation is covered by Article 184 and Article 185(1) of the VAT Directive where the tax authorities must require the taxable person to adjust the initial deduction of VAT.

37It must therefore be determined, in the second place, whether the adjustment of the initial deduction at the time the goods are first used, where it becomes apparent at that time that the deduction was higher than that which the taxable person was entitled to deduct on account of the actual use of the goods, constitutes detailed rules for applying Articles 184 and 185 of the VAT Directive which the Member State is responsible for laying down pursuant to Article 186 of that directive, or rules provided for in Article 187 of the VAT Directive on capital goods.

38In that regard, Article 187(1) of the VAT Directive, which is drafted in terms which leave no doubt as to its binding nature (see, to that effect, judgment of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 26, and order of 5 June 2014, Gmina Międzyzdroje, C‑500/13, EU:C:2014:1750, paragraph 24), provides, in the first subparagraph thereof, in respect of capital goods, for a five-year adjustment period, including that in which the goods in question were acquired or manufactured. The second subparagraph of Article 187(1) of that directive, however, permits Member States to base the adjustment on a full five-year period starting from the time at which the goods are first used. The third subparagraph of Article 187(1) provides that the adjustment period may be extended up to 20 years in the case of immovable property acquired as capital goods.

39The annual adjustment is, in accordance with the first subparagraph of Article 187(2) of the VAT Directive, to be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof. The second subparagraph of Article 187(2) of the VAT Directive states that that adjustment is to be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods in question were acquired, manufactured or, where applicable, used for the first time.

40It is clear from the second and third subparagraphs of Article 187(1) of the VAT Directive that a Member State may provide that the adjustment period begins with the first use of the capital goods in question, which may extend over a period of 20 years in the case of immovable property acquired as capital goods.

41Consequently, where a Member State avails itself of that option, Article 187(2) of the VAT Directive requires it to verify, in respect of each full year until the end of the adjustment period, whether there have been any variations in the deduction entitlement in relation to the year in which the capital goods were used for the first time and, if so, to make the adjustment relating to the corresponding proportion of the VAT charged on the capital goods in question.

42It follows that, where that is the case, the relevant factor is the deduction entitlement relating to the year in which the capital goods in question were first used and that the adjustment spread out under Article 187 of the VAT Directive covers variations following the use of the goods for the first time compared with the deduction entitlement for that year of their first use.

43However, Article 187 of the VAT Directive does not govern the rules for the adjustment which must be applied if, at the precise time of the first use of the capital goods, the deduction entitlement is higher or lower than the initial deduction.

44That interpretation is borne out by the objective and purpose of the adjustment provided for in Article 187 et seq. of the VAT Directive.

45The adjustment period and the spread-out adjustment provided for in Article 187 of the VAT Directive in respect of capital goods is explained and justified inter alia by the purposes to which such goods are put which, over several years, may alter (see, to that effect, judgments of 15 December 2005, Centralan Property, C‑63/04, EU:C:2005:773, paragraph 55, and of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 25, and order of 5 June 2014, Gmina Międzyzdroje, C‑500/13, EU:C:2014:1750, paragraph 20).

46The period set out in Article 187 of the VAT Directive for adjustment of deductions thus enables inaccuracies to be avoided in the calculation of deductions and unjustified advantages or disadvantages for a taxable person where, in particular, changes occur in the factors initially taken into consideration in order to determine the amount of deductions after the declaration has been made or, where relevant, after being used for the first time (see, to that effect, judgment of 30 March 2006, Uudenkaupungin kaupunki, C‑184/04, EU:C:2006:214, paragraph 25, and order of 5 June 2014, Gmina Międzyzdroje, C‑500/13, EU:C:2014:1750, paragraph 20).

47As the Advocate General observed, in essence, in point 47 of his Opinion, the logic underlying the adjustment which must be made where variations in the factors initially taken into consideration to determine the amount to be deducted occur during the use of the capital goods concerned is different from that underlying the adjustment which must be made where the initial deduction is lower or higher than that to which the taxable person is entitled when the goods are first used on account of the actual use of those goods.

48The determination of the rules for the adjustment of the initial deduction at the time the capital goods in question are first used, where it becomes apparent at that time that that deduction was higher than that which the taxable person was entitled to deduct on account of the actual use of the goods, does not fall within the scope of Article 187 of the VAT Directive but within that of Articles 184 and 185 of that directive, the latter of which the Member States are responsible for determining pursuant to Article 186 of the VAT Directive.

49In that regard, it should be noted, in the third place, that, in exercising their discretion when adopting detailed rules for Articles 184 and 185 of the VAT Directive, the Member States must have regard to the aims and broad logic of that directive and, in particular, to the principle of fiscal neutrality on which the common system of VAT is based (see, by analogy, judgments of 13 March 2008, Securenta, C‑437/06, EU:C:2008:166, paragraphs 35 and 36, and of 25 July 2018, Gmina Ryjewo, C‑140/17, EU:C:2018:595, paragraph 58 and the case-law cited).

50It should be noted, first, that national rules which, as those at issue in the main proceedings, take the time at which capital goods are first used as the relevant time for determining whether the initial VAT deduction corresponds to the deduction which the taxable person was entitled to make in view of the actual use of those goods and provide that the taxpayer is liable, at that time, to pay the excess tax deducted in full if the initial deduction exceeded the amount which the taxable person was entitled to deduct, are consistent with the principle of fiscal neutrality, as set out in paragraph 26 above, in so far as that principle requires that undue deductions be adjusted in any case (see, to that effect, judgment of 11 April 2018, SEB bankas, C‑532/16, EU:C:2018:228, paragraph 38).

51Second, those national rules do not preclude an adjustment of the variations following the use of capital goods for the first time which is spread out, as provided for in Article 187 of the VAT Directive.

52It is clear from the order for reference that, in accordance with Article 13 of the Implementing Decision, after the first adjustment period, the trader must, after each of the following nine tax years, verify, on the basis of the information on each subsequent tax year, whether there have been any variations in the use of the capital goods in question compared with the first adjustment period and, if so, that adjustment is to be made, in the course of each of those nine tax years, in respect of a tenth of the VAT relating to the acquisition of those capital goods which that trader has been charged.

53Lastly, in the fourth place, it should be noted that the conclusion that the rules relating to the adjustment of the initial deduction at the time that the capital goods are first used, where it becomes apparent at that time that that initial deduction was higher than that which the taxable person was entitled to make on account of the actual use of those goods, do not fall within the scope of Article 187 of the VAT Directive, is not called in question by the considerations set out in the order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750).

54Indeed, in that order, the Court held that Article 187 of the VAT Directive would preclude a system permitting the adjustment of deductions over a period of less than five years and therefore also preclude a system of one-off adjustment, such as the one invoked by the applicant in the main proceedings in the case which gave rise to that order (order of 5 June 2014, Gmina Międzyzdroje, C‑500/13, EU:C:2014:1750, paragraph 27).

55However, as the Advocate General stated in point 61 of his Opinion, the Court reached that conclusion in a legal and factual context different from that arising from the application of the national rules at issue in the main proceedings. In the case which gave rise to the order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750), first, the capital goods in question were initially used in activities not conferring entitlement to deduct VAT and subsequently used in activities conferring such entitlement. Second, the purpose of those capital goods changed notwithstanding that the goods had already been used for the purpose not conferring entitlement to deduct VAT (order of 5 June 2014, Gmina Międzyzdroje, C‑500/13, EU:C:2014:1750, paragraphs 12 and 13).

56That does not apply to the case in the main proceedings where the change in the use of the immovable property in question took place at the time that those capital goods were first used.

57In addition, as follows from paragraphs 51 and 52 above, the rules at issue in the main proceedings do not preclude an adjustment of the variations following the use of capital goods for the first time which is spread out, as provided for in Article 187 of the VAT Directive.

58In the light of all of the foregoing considerations, the answer to the first question is that Articles 184 to 187 of the VAT Directive must be interpreted as not precluding a capital goods adjustment scheme, laid down in national rules in which the adjustment is to be spread over several years, from providing that, in the year the goods in question are first used, where that year is also the first adjustment year, the total amount of the initial deduction for those capital goods is adjusted in a single step, if, when first used, it becomes apparent that that deduction deviates from the deduction which the taxable person was entitled to apply on the basis of the actual use of those goods.

The second question

59In view of the answer given to the first question, it is unnecessary to answer the second question.

Costs

60Since 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 (Second Chamber) hereby rules:

Articles 184 to 187 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding a capital goods adjustment scheme, laid down in national rules in which the adjustment is to be spread over several years, from providing that, in the year the goods in question are first used, where that year is also the first adjustment year, the total amount of the initial deduction for those capital goods is adjusted in a single step, if, when first used, it becomes apparent that that deduction deviates from the deduction which the taxable person was entitled to apply on the basis of the actual use of those goods.

Signatures

[Signatures]

( *1 ) Language of the case: Dutch.

OPINION OF ADVOCATE GENERAL

BOBEK

delivered on 3 March 2020 ¹

(Reference for a preliminary ruling — Value added tax — Adjustment of deductions — Capital goods — Difference between intended use and first actual use — Directive 2006/112/EC — Articles 185 and 187 — Applicability)

I. Introduction

1The present case concerns the way in which an initial deduction of value added tax (VAT) should be adjusted by a trader who changed his intentions as to the use of an apartment complex. The deduction in this case was made while the apartment complex was still under construction. At that time, the trader intended to use it for taxable purposes. However, some of the apartments were subsequently rented out, with the result that the first use of those apartments was tax exempt.

2Under those circumstances, the Netherlands authorities asked the trader to pay back, in a single step, the entire part of the initial deduction corresponding to the apartments that were subsequently rented out. Indeed, under the national legislation, if it appears, at the time at which the trader starts to use goods for the first time, that that trader has deducted VAT to a greater extent than his or her entitlement based on the use of the goods, the excess of the VAT initially deducted must be adjusted in one step.

3The legal question that arises is whether that legislation complies with Article 187 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’), ² according to which the adjustment of deductions made in respect of capital goods is to be carried out in proportionate fractions spread over a period of several years.

II. Legal framework

A. EU law: the VAT Directive

4Article 184 et seq. of the VAT Directive concern the adjustment of deductions.

5Article 184 provides that ‘the initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled’.

6Pursuant to Article 185 of that directive:

‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.

2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16.

However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

7Article 186 of the VAT Directive states that ‘Member States shall lay down the detailed rules for applying Articles 184 and 185’.

8Article 187 of the VAT Directive is worded as follows:

‘1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.

Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used.

In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.

2. The annual adjustment shall be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof.

The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.’

9Under Article 189 of the VAT Directive:

‘For the purposes of applying Articles 187 and 188, Member States may take the following measures:

…

specify the amount of the VAT which is to be taken into consideration for adjustment;

…’

B. Netherlands law

10The provisions on the adjustment of deductions appear in Article 15(4) of the Wet van 28 juni 1968, houdende vervanging van de bestaande omzetbelasting door een omzetbelasting volgens het stelsel van heffing over de toegevoegde waarde (Law of 28 June 1968, providing for replacement of the existing turnover tax by a turnover tax according to the system of collection of value added tax) (‘OB’) and in Articles 12 and 13 of the Uitvoeringsbeschikking omzetbelasting 1968 (Implementing decision on turnover tax 1968) (‘the Implementing Decision’).

11Article 15(4) of the OB provides:

‘Deduction of the tax is made in accordance with the intended use of the goods and services at the time when the tax is invoiced to the trader or at the time when the tax becomes chargeable. If it appears, at the time at which the trader starts to use the goods or services, that he is deducting the tax relating to them to an extent which is higher or lower than that to which the use of the goods or services entitles him, the excess deducted shall be chargeable from that time. The tax which becomes chargeable shall be paid in accordance with Article 14. The amount of tax which could have been deducted and was not deducted shall be refunded to him on request.’

12Article 12(2) and (3) of the Implementing Decision is worded as follows:

‘(2) The adjustment referred to in Article 15(4) [of the OB] is made on the basis of the data of the taxable period during which the trader started to use the goods or services.

(3) In the declaration for the final tax period, the adjustment of the deduction is to be made on the basis of the data applicable to the entire tax year.’

13Article 13 of the Implementing Decision, so far as is relevant here, is worded as follows:

‘(1) In derogation from Article 11, the following are taken into account separately for the purposes of the deduction:

immovable property and rights pertaining to such property;

movable property that the trader writes off in respect of income tax or corporate income tax, or that he could write off were he liable to such a tax.

(2) So far as concerns immovable property and the rights pertaining to such property, adjustment of deductions is to be made during each of the nine tax years following the one in which the trader has started to use the property in question. On each occasion, the adjustment is to be made on one tenth of the input tax paid, account being had of the tax year data contained in the declaration relating to the final taxable period of that tax year.’

III. Facts, procedure and questions referred

14Stichting Schoonzicht, which has its seat in Amsterdam, had an apartment complex built on a plot of land owned by it. The complex comprised seven residential apartments. Construction started in 2013 and the complex was delivered in July 2014.

15The apartment complex was originally intended to be used for taxable purposes. Accordingly, Stichting Schoonzicht deducted the VAT on that supply in full.

16Subsequently, from 1 August 2014, Stichting Schoonzicht rented out four of the apartments. It follows from the order for reference that that was the first use of (a part of) the apartment complex and that, contrary to the initial intention, it was VAT exempt. The other three apartments remained unoccupied in 2014.

17For that reason, in accordance with Netherlands legislation, the corresponding part of the initial deduction was adjusted pursuant to Article 15(4) of the OB. That meant that Stichting Schoonzicht owed the part of the VAT corresponding to the four rented apartments, amounting to EUR 79587. According to the order for reference, the adjustment was made in respect of the third quarter of 2014 (1 July to 30 September 2014) during which the apartment complex was first used.

18Stichting Schoonzicht paid the VAT and lodged an objection to that self-assessment. It considered that, in the case of capital goods, adjustment in full of the initial deduction at the time when capital goods are first used, as provided for in Article 15(4) of the OB, is contrary to Article 187 of the VAT Directive.

19That objection was dismissed by the Inspecteur van de Belastingdienst (tax inspector). Stichting Schoonzicht brought an appeal before the Rechtbank Noord-Holland (District Court, North Holland, Netherlands). That court declared the appeal unfounded, after which Stichting Schoonzicht brought a further appeal before the Gerechtshof Amsterdam (Court of Appeal, Amsterdam, Netherlands). That court also held the regime in Article 15(4) of the OB to be compatible with the VAT Directive and declared the (further) appeal unfounded. According to the Gerechtshof Amsterdam (Court of Appeal, Amsterdam), the Netherlands legislature used the option afforded to Member States by Article 189(b) of the VAT Directive to specify the amount of the VAT to be taken into consideration in the adjustment for capital goods. In the view of that court, the single adjustment provided for in Article 15(4) of the OB must be regarded as a ‘pre-adjustment correction’, which precedes the standard adjustment procedure and is not regulated (and therefore not precluded) by the VAT Directive. The VAT Directive does not preclude such a correction since it breaches neither the principle of tax neutrality nor the proportionality principle.

20Stichting Schoonzicht lodged an appeal in cassation against that judgment before the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), the referring court.

21In the main proceedings, Stichting Schoonzicht reiterates the argument that the single adjustment of the initial deduction upon the entry into use of the capital goods is contrary to Article 187 of the VAT Directive. In its view, the adjustment regime in Article 187 of the VAT Directive should be considered independently of what is laid down in Articles 184 and 185 of that directive. Article 187 of the VAT Directive provides for a special regime for capital goods that supersedes the general regime in Articles 184 and 185. The adjustment of the initial deduction for capital goods pursuant to Article 187 must be spread over a number of years and at the end of each adjustment year, only a proportional part of the initial deduction may be adjusted. The adjustment under Article 187 of the VAT Directive relating to the four apartments can be made at the earliest at the time of the declaration concerning the last quarter of 2014, regardless of whether those apartments had been used for the first time during that year. Such an adjustment must then concern only one tenth of the deduction obtained in 2013.

22The referring court entertains doubts about the compatibility of the ‘first-use full adjustment’ requirement provided for under Netherlands law with Article 187 of the VAT Directive.

23In those circumstances, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) stayed the proceedings and referred the following questions to the Court:

Do Articles 184 to 187 of [the VAT Directive] preclude a national adjustment regime for capital goods which provides for an adjustment spread over a number of years, whereby in the year the goods enter into use — which year is moreover the first adjustment year — the total amount of the initial deduction for that capital good is adjusted (revised) in a single step, if, upon the entry into use thereof, it turns out that that initial deduction deviates from the deduction which the taxable person is entitled to apply on the basis of the actual use of the capital good?

If Question 1 is answered in the affirmative:

Must Article 189(b) or (c) of [the VAT Directive] be interpreted as meaning that the single adjustment of the initial deduction in the first year of the adjustment period referred to in Question 1 constitutes a measure which the Netherlands may adopt for the application of Article 187 of [the VAT Directive]?’

24Written observations have been submitted by Stichting Schoonzicht, the Netherlands and Swedish Governments and the European Commission.

IV. Analysis

25I consider that the national regime at issue is compatible with the VAT Directive. To arrive at that conclusion, I will first make some introductory clarifications about the applicable (or potentially applicable) rules of the VAT Directive (A). I will then conclude that the ‘first-use full adjustment’ requirement does not fall under Article 187 of the VAT Directive but under Articles 184 to 186, with which it complies (B).

A. Applicable (and potentially applicable) rules of the VAT Directive

26Pursuant to Article 167 of the VAT Directive, ‘a right of deduction shall arise at the time the deductible tax becomes chargeable’. In this context, the Court has noted repeatedly that the right of deduction ‘is an integral part of the VAT scheme and in principle may not be limited’. ³ It also held that ‘the deduction system is intended to relieve the trader entirely of the burden of the VAT payable or paid in the course of all his economic activities, provided that his activities are themselves subject, in principle, to VAT’. ⁴

27Article 184 et seq. of the VAT Directive lay down more detailed rules applicable to the right of deduction by setting out the adjustment mechanism. ⁵ That mechanism ensures that transactions carried out at an earlier stage continue to give rise to the right to deduct only to the extent that they are used to make supplies subject to VAT. ⁶ In other words, ‘that mechanism … aims to establish a close and direct relationship between the right to deduct input VAT paid and the use of the goods or services concerned for taxable output transactions’. ⁷

28The deduction regime under the VAT Directive comprises general rules (Articles 184 to 186), as well as specific rules that apply to capital goods (Articles 187 to 192).

29First, as regards the general rules, Article 184 of the VAT Directive states that ‘the initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled’. Article 185(1) further provides that that ‘adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained’. ⁸

30Pursuant to Article 186, the detailed rules for applying Articles 184 and 185 are for the Member States to define. ⁹

31Second, Article 187 et seq. of the VAT Directive set out specific rules concerning the adjustment of deductions in respect of capital goods. ¹⁰ Those specific rules define some aspects of the way in which the adjustment is to be made.

32For what is relevant here, three aspects should be mentioned.

33First, the adjustment is to be spread over 5 years, which can be extended up to 20 years for immovable property acquired as capital goods. It follows from the order for reference that the Netherlands chose to apply an adjustment period of 10 years to immovable property acquired as capital goods. That period would thus be potentially relevant with regard to the apartment complex at issue in the main proceedings.

34Second, according to Article 187(1) of the VAT Directive, the period of adjustment includes the year in which the goods at issue were acquired or manufactured, but the Member States may base the adjustment on a period starting from the time when the goods are first used. It follows from the order for reference that the latter option has been chosen by the Netherlands.

35Third, under Article 187(2), the annual adjustment is to be made only in respect of one fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof. That corresponding fraction is one tenth under the Netherlands regime.

B. The classification of the ‘first-use full adjustment’ requirement

36By the first question, the referring court wishes to ascertain whether the provisions of the VAT Directive relating to the adjustment of deductions preclude the ‘first-use full adjustment’ requirement.

37Responding to that question requires an examination of whether the ‘first-use full adjustment’ requirement falls under the general regime of adjustment in the VAT Directive (Article 184 et seq.), or under the specific regime (Article 187 et seq.), or potentially under neither of them.

38Stichting Schoonzicht argues that the general regime in Articles 184 to 186 of the VAT Directive should not apply to the situation at issue because the adjustment concerns immovable goods and falls under Article 187 of that directive, which implies that the adjustment should be spread over 10 years. Because Article 15(4) of the OB requires the corresponding part of the initial deduction to be paid back in a single step, it runs counter to Article 187 of the VAT Directive.

39The Netherlands and Swedish Governments, as well as the Commission, conclude the contrary. In their view, in principle, the ‘first-use full adjustment’ requirement falls within the general regime of adjustment provided for by the VAT Directive and thus complies with it.

40I agree with the latter view.

41It is true that Article 187 of the VAT Directive states that ‘adjustment shall be spread over five [or more] years including that in which the goods were acquired or manufactured [or used]’. ¹¹ It is also true that the Member States have an obligation to provide for an adjustment regime for capital goods, ¹² as noted by the referring court.

42Those elements, however, do not answer the question as to how a discrepancy between the intended use, on the one hand, and the first actual use, on the other hand, should be rectified.

43Indeed, while the right to deduct an amount of VAT due in respect of goods and services supplied by another taxable person under Articles 167 and 168 of the VAT Directive can be exercised immediately and in full, even if the goods concerned are not used immediately for the purposes of the company’s economic activity, ¹³ the entitlement to deduct exists in so far as those goods and services are used for the purposes of taxed transactions. ¹⁴ Indeed, as Advocate General Kokott has put it, ‘under Article 167 in conjunction with Article 63 of the VAT Directive, the deduction is normally allowed at the time of acquisition of goods, on the basis of their intended use. … The normal condition for this is that the taxable person uses the acquired goods for the purpose of carrying out taxed transactions. According to the case-law, the rules on adjustment are then intended to enhance the precision of deductions by monitoring, after the date of the acquisition of goods, the extent to which the taxable person actually uses those goods for deductible purposes’. ¹⁵

44In the present case, and according to the order for reference, the right to deduct emerged when the corresponding input VAT became chargeable, based on the declared intention of Stichting Schoonzicht (in 2013). However, in my view, the extent of the right to deduct in respect of the four rented apartments was reduced to zero as a consequence of the change in use, which transformed the transaction by Stichting Schoonzicht from an intended taxable one to an actual non-taxable one prior to the first use of the goods.

45As noted above, the specificity of the adjustment regime for capital goods under Article 187 of the VAT Directive consists in the possibility of spreading the adjustment of deductions over a period of several years.

46That regime relies on the premiss that ‘the likelihood of … changes [in use] is particularly significant in the case of capital goods, which are often used over a number of years, during which the purposes to which they are put may alter’. ¹⁶

47As the Swedish Government and the Commission argue, in principle, that premiss relates to changes in use occurring in the period during which the capital goods are used. It is nevertheless a very different thing to extend that logic to the period preceding that use or, more specifically, to the period that starts with the declaration of the intended use and ends with the first taxable period marking the beginning of the actual use.

48It is true that, under Article 12(2) of the Implementing Decision, the obligation to adjust relates to the first taxable period in which the goods began to be used and one has to acknowledge, in that context, that the beginning of the use forms part of the use itself. Thus, one could say that the time of the first use comes within the scope of Article 187 of the VAT Directive. However, it seems reasonable, and rather logical, to place the verification of whether the previously declared intended use corresponds to the actual use at the moment when that actual use occurs for the first time, because (failing a previous self-correction by that trader where that is possible) verification at an earlier stage would be somewhat challenging, if possible at all.

49That conclusion is supported by the need to ensure respect for the principle of tax neutrality, in both of its aspects, as generally understood.

50First, according to one aspect of that principle, the trader should be relieved of the VAT burden ‘inasmuch as the purpose of the economic activity itself is to achieve sales revenue that is (in principle) subject to tax’. ¹⁷ Conversely, in my view, if it appears that the trader starts using the goods for a non-taxable transaction, contrary to the previously declared intention, it means that when the goods entered into use, the previously existing reason justifying the trader being relieved of the VAT burden simply disappeared.

51Applying the above to the present case, it appears that the right to deduct emerged when Stichting Schoonzicht became liable for the input VAT and the intended use of those goods was declared taxable. However, when that intention changed, leading to a tax-exempt transaction, there was no longer any reason for that trader to be relieved of the deducted tax. The reason for the deduction ceased to exist upon (or even before ¹⁸) the beginning of the actual use.

52According to its second aspect, the principle of tax neutrality also ‘precludes economic operators who effect the same transactions being treated differently in respect of the levying of VAT’. ¹⁹ Indeed, that facet of the principle of tax neutrality ‘precludes treating similar supplies …, which are thus in competition with each other, differently for VAT purposes’. ²⁰

53As regards the present case, I am of the view that if the position of Stichting Schoonzicht were accepted, the resulting situation would run counter to the abovementioned second aspect of the principle of tax neutrality.

54Indeed, as contemplated by the referring court and argued by the Netherlands and Swedish Governments, as well as by the Commission, such an outcome would confer an unjustified financial advantage upon a trader who declares that the given capital goods would be used for taxable purposes, hence maintaining at his or her disposal the funds corresponding to the initial deduction, even though neither the first actual use nor subsequent use during the adjustment period would entitle that trader to any such deduction. In other words, fixing the analysis to the time of the declared intention, irrespective of the first actual use, would mean that the Member State, in effect, would be financing such a trader, who would only have to pay the funds back in proportionate fractions over the applicable adjustment period of several years. ²¹

55Conversely, a trader making exactly the same non-taxable use of similar capital goods would not obtain such financial advantage if, ab initio, he or she abstained from making any deduction based on his or her ab initio intention to use the capital goods for non-taxable purposes.

56The first actual use of the capital goods is the same in the case of both of these hypothetical traders, but they would receive very different VAT deduction treatment based merely on the difference between their declared (and presumably bona fide) intentions as to the use of the goods concerned. In all other respects, their situations are the same.

57I am of the view that the VAT deduction treatment in both cases should also be the same.

58It follows from Article 15(4) of the OB that the Netherlands legislation aims at eliminating the undesirable result described above by requiring that the extent of the right to deduct be brought into line with the situation as it exists as at the time of first actual use (after which the adjustment regime for capital goods is triggered). In doing so, that legislation contributes, in my view, to maintaining tax neutrality in both meanings explained above. That seems to be a fortiori the case given that the legislation works both ways: not only to the ‘detriment’ of a trader whose intention changes from taxable to non-taxable use, but also to the advantage of a trader whose intention changes from non-taxable to taxable use.

59For those reasons, I am of the view that the situation at issue in the main proceedings does not fall under (and thus is not incompatible with) Article 187 et seq. of the VAT Directive.

60That conclusion is not contradicted by the order adopted by the Court in Gmina Międzyzdroje, in which the Court stated that Article 187 of the VAT Directive applies ‘in cases of adjustment of deductions … where goods the use of which is not eligible for deduction are then put to a use which is eligible’. ²² The Court added that Article 187 of the VAT Directive ‘would preclude a system permitting the adjustment of deductions over a period of less than five years and therefore also preclude a system of one-off adjustment … which would allow for the adjustment to be made during a single tax year’. ²³

61The facts of that case, as further described in the order, ²⁴ demonstrate that those statements were made in a context in which the goods at issue had already entered into use. Only then did the change in use (or in the intention as to that use) occur. That differs, however, considerably from the situation at issue in the main proceedings. I thus consider that Article 187 of the VAT Directive does not apply to the case at hand.

62The next question that arises is whether the situation at issue falls under Article 184 et seq. of that directive.

63I think that it does.

64In SEB bankas, the Court interpreted the general adjustment regime under the VAT Directive rather broadly. It stated that the wording of Article 184 ‘does not exclude, a priori, any foreseeable situation of undue deductions’. ²⁵ It interpreted that provision as applying to a ‘situation in which a deduction has been made when there was no right of deduction’ as that scenario came ‘within the scope of the first situation envisaged in Article 184 of the VAT Directive, namely that in which the initial deduction made is higher than that to which the taxable person was entitled’. ²⁶

65The present case clearly represents a ‘situation of undue deduction’ within the meaning outlined by the Court in SEB bankas. It is true that that case concerned a situation in which a deduction had been made although no right of deduction existed ab initio. In the present case, the right of deduction emerged, but for the reasons explained above, it subsequently extinguished in respect of the four apartments. That being said, once it is accepted that Articles 184 to 186 of the VAT Directive govern situations where it is necessary to correct a deduction unduly made, as the Court did in SEB bankas, then the same conclusion must also apply to situations in which a pre-existing right of deduction in effect reduces to zero before the goods at issue are first used.

66I consider that the situations in SEB bankas and in the present case represent two variations of the same problem: how to correct a deduction granted when that deduction should never have been (SEB bankas), or should no longer be (in casu), granted. For that reason, I am of the view that the solution adopted by the Court in SEB bankas should be applied in the present case to conclude that the situation at issue falls under, and is compliant with, the general regime of adjustment of deductions governed by Articles 184 to 186 of the VAT Directive.

67For the reasons explained above, I also conclude that the ‘first-use full adjustment’ requirement provided for under the national legislation at issue does not fall under Article 187 et seq. of the VAT Directive, but falls under, and is compliant with, Articles 184 to 186 of that directive.

C. Second question referred

68Since I am of the view that the relevant provisions of the VAT Directive do not oppose the national adjustment regime at issue, there is no need to answer the second question posed by the referring court.

V. Conclusion

Conclusion

69In the light of the considerations above, I suggest that the Court reply to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) as follows:

A national adjustment regime for capital goods which provides that in the year in which the goods enter into use the total amount of the initial deduction may be adjusted in a single step if, upon entry into use, it turns out that that initial deduction deviates from the deduction to which the taxable person is entitled on the basis of the actual use of the capital goods, does not fall under Article 187 et seq. of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, but falls under Articles 184 to 186 of that directive. Those provisions do not oppose such a national adjustment regime.

¹ Original language: English.

² OJ 2006 L 347, p. 1, as amended.

³ See, for instance, judgments of 21 March 2000, Gabalfrisa and Others (C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 43 and the case-law cited), and of 30 September 2010, Uszodaépítő (C‑392/09, EU:C:2010:569, paragraph 34 and the case-law cited).

⁴ Judgment of 3 October 2019, Altic (C‑329/18, EU:C:2019:831, paragraph 26 and the case-law cited). See also judgments of 18 October 2012, TETS Haskovo (C‑234/11, EU:C:2012:644, paragraph 27 and the case-law cited), and of 17 October 2018, Ryanair (C‑249/17, EU:C:2018:834, paragraph 23 and the case-law cited).

⁵ Judgment of 15 December 2005, Centralan Property (C‑63/04, EU:C:2005:773, paragraph 57). See also order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750, paragraph 24 and the case-law cited).

⁶ See, for example, judgments of 13 March 2014, FIRIN (C‑107/13, EU:C:2014:151, paragraph 50 and the case-law cited), and of 16 June 2016, Mateusiak (C‑229/15, EU:C:2016:454, paragraph 28 and the case-law cited).

⁷ Ibid.

⁸ Judgments of 16 June 2016, Mateusiak (C‑229/15, EU:C:2016:454, paragraph 29 and the case-law cited), and of 16 June 2016, Kreissparkasse Wiedenbrück (C‑186/15, EU:C:2016:452, paragraph 47).

⁹ Accordingly, the Court stated that while ‘the provisions of Articles 184 and 185 …, set down an obligation to adjust unauthorised VAT deductions … they do not, however, provide for the manner in which such adjustments are to be made’, except, as regards capital goods. Judgment of 11 April 2018, SEB bankas (C‑532/16, EU:C:2018:228, paragraph 26).

¹⁰ The concept of capital goods is to be defined by the Member States. See Article 189(a) of the VAT Directive. Under Article 190 of the VAT Directive, ‘for the purposes of Articles 187, 188, 189 and 191, Member States may regard as capital goods those services which have characteristics similar to those normally attributed to capital goods’.

¹¹ Emphasis added.

¹² See, in this sense, order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750, paragraphs 24 and 27 and the case-law cited).

¹³ Judgment of 22 March 2012, Klub (C‑153/11, EU:C:2012:163, paragraph 45).

¹⁴ Judgment of 22 October 2015, Sveda (C‑126/14, EU:C:2015:712, paragraph 18 and the case-law cited). See, however, specific situations dealt with, for example, in the judgments of 8 June 2000, Schloßstraße (C‑396/98, EU:C:2000:303, paragraph 42 and the case-law cited); of 8 June 2000, Breitsohl (C‑400/98, EU:C:2000:304, paragraph 41), or of 28 February 2018, Imofloresmira - Investimentos Imobiliários (C‑672/16, EU:C:2018:134, paragraph 42). In the latter judgment, the Court stated that ‘a taxable person retains the right of deduction where that right has arisen, even if that taxable person could not, for reasons beyond its control, use the goods or services giving rise to the deduction in the context of taxed transactions.’

¹⁵ Opinion in Mateusiak (C‑229/15, EU:C:2016:138, point 24 and the case-law cited). See also Opinion of Advocate General Kokott in TETS Haskovo (C‑234/11, EU:C:2012:352, points 27 and 28 and the case-law cited).

¹⁶ Judgment of 30 March 2006, Uudenkaupungin kaupunki (C‑184/04, EU:C:2006:214, paragraph 25), concerning the equivalent provision — Article 20 — of the Sixth Directive.

¹⁷ Opinion of Advocate General Kokott in AGROBET CZ (C‑446/18, EU:C:2019:1137, point 57 and the case-law cited).

¹⁸ It follows from the order for reference that the four apartments at issue were rented out from August 2014. Subject to verification by the referring court, I find it hard to imagine that the taxable or non-taxable nature of the transaction would somehow crystallise only on the first day of the rental (that is, the actual use) as I would assume that the necessary contracts (revealing the nature of the transaction) were likely to have been prepared beforehand.

¹⁹ Opinion of Advocate General Kokott in AGROBET CZ (C‑446/18, EU:C:2019:1137, point 57 and the case-law cited).

²⁰ See, for instance, judgments of 9 March 2017, Oxycure Belgium (C‑573/15, EU:C:2017:189, paragraph 30 and the case-law cited); of 27 June 2019, Belgisch Syndicaat van Chiropraxie and Others (C‑597/17, EU:C:2019:544, paragraph 28 and the case-law cited); and of 19 December 2019, Segler-Vereinigung Cuxhaven (C‑715/18, EU:C:2019:1138, paragraph 36 and the case-law cited).

²¹ I wish to stress very clearly that there is no evidence or even a hint at any irregularity in the present case. However, in general and beyond the facts of the present case, one cannot overlook the incentive for abuse that could be created by the possibility of paying back the amount corresponding to the undue deduction in instalments upon a declaration of a (fictitious) intention.

²² Order of 5 June 2014 (C‑500/13, EU:C:2014:1750, paragraph 23). That case concerned legislation providing, like in the present case, for an adjustment period of 10 years for immovable property acquired as capital goods, running from the point when the goods are first used. Gmina Międzyzdroje paid VAT on goods and services supplied in connection with works on a sports hall that it owned. In the course of those works, it considered changing the system of the management of that property and leasing it to a commercial company. It then sought to deduct in one step the VAT paid, as the use of the sports hall at issue changed from non-taxable to taxable. That was refused by the tax authorities, which considered that the situation was governed by the regime implementing Article 187 of the VAT Directive.

²³ Order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750, paragraph 27).

²⁴ See the presentation of the facts in the order of 5 June 2014, Gmina Międzyzdroje (C‑500/13, EU:C:2014:1750, paragraphs 10 and 12, especially paragraph 12 in fine, ‘except that no one-tenth adjustment could be made in respect of the hall in 2010 for activities not conferring entitlement to deduction’).

²⁵ Judgment of 11 April 2018 (C‑532/16, EU:C:2018:228, paragraph 33).

²⁶ Judgment of 11 April 2018, SEB bankas (C‑532/16, EU:C:2018:228, paragraph 34).