Article 174 Directive 2006/112/EC
Proportional deduction
Title X · Deductions › Chapter 2 · Proportional deduction
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Text of Article 174
1.The deductible proportion shall be made up of a fraction comprising the following amounts:
(a)as numerator, the total amount, exclusive of VAT, of turnover per year attributable to transactions in respect of which VAT is deductible pursuant to Articles 168 and 169;
(b)as denominator, the total amount, exclusive of VAT, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which VAT is not deductible.
Member States may include in the denominator the amount of subsidies, other than those directly linked to the price of supplies of goods or services referred to in Article 73.
2.By way of derogation from paragraph 1, the following amounts shall be excluded from the calculation of the deductible proportion:
(a)the amount of turnover attributable to supplies of capital goods used by the taxable person for the purposes of his business;
(b)the amount of turnover attributable to incidental real estate and financial transactions;
(c)the amount of turnover attributable to the transactions specified in points (b) to (g) of Article 135(1) in so far as those transactions are incidental.
3.Where Member States exercise the option under Article 191 not to require adjustment in respect of capital goods, they may include disposals of capital goods in the calculation of the deductible proportion.
Consolidated version on EUR-Lex (CELEX 02006L0112-20250414). © European Union. Only the Official Journal is authentic.
Case law on Article 174: 13 cases
Judgments, orders and Advocate General opinions of the Court of Justice and the General Court that cite Article 174 of Directive 2006/112/EC, most recent first.
- C-513/24 Oblastní nemocnice Kolín Judgment · 19 March 2026 · Czechia
- C-695/19 Rádio Popular Judgment · 8 July 2021 · Portugal · cites Article 174(1), (2), (2)(b), (2)(c)
- C-21/20 Balgarska natsionalna televizia Opinion · 25 March 2021 · Bulgaria · cites Article 174(1)
- C-716/18 AJPF Caraş-Severin and DGRFP Timişoara Judgment · 9 July 2020 · Romania · cites Article 174(2), (2)(b), (2)(c)
- C-661/18 CTT - Correios de Portugal Judgment · 30 April 2020 · Portugal
- C-165/17 Morgan Stanley & Co International Judgment · 24 January 2019 · France · cites Article 174(1)
- C-566/17 Związek Gmin Zagłębia Miedziowego Opinion · 6 December 2018 · Poland
- C-153/17 Volkswagen Financial Services (UK) Judgment · 18 October 2018 · United Kingdom
- C-378/15 Mercedes Benz Italia Opinion · 29 June 2016 · Italy
- C-151/13 Le Rayon d’Or Judgment · 27 March 2014 · France · cites Article 174(1)
- C-91/12 PFC Clinic Judgment · 21 March 2013 · Sweden
- C-388/11 Le Crédit Lyonnais Opinion · 28 February 2013 · France
- C-460/07 Puffer Opinion · 11 December 2008 · Austria
VAT Committee guidelines on Article 174: 7
Not binding. Positions agreed in the VAT Committee set up under Article 398 of Directive 2006/112/EC and published by the Commission.
- Meeting 102 · 30 March 2015 · document 5.2. Article 174 – allocation of turnover and deduction – implications of CJEU Case C-388/11 Le Crédit Lyonnais
- Meeting 101 · 20 October 2014 · document 4.12. Article 174 – treatment of payments under EU Framework Programmes – subsidies not linked to price – link to consideration not sufficiently direct
- Meeting 028 · 1990-07-09-10 · document II.4. Article 19(2)* – financial transfers to a commercial or industrial sector operated by a body governed by public law – subsidies not linked to the price – possible inclusion in deductible proportion
- Meeting 018 · 1985-03-08-09 · document II.c) Article 19(1), second indent* – taxable amount – subsidies – whether or not linked to the price – possible inclusion in deductible proportion
- Meeting 015 · 1982-12-08-09 · document I.a) Article 19(1)* – calculation of deductible proportion – exchange transactions – total remuneration (margin, commission and costs) to be taken into account
- Meeting 013 · 1981-12-15-16 · document II.b) Article 17(5)* – exemption – interest on credit transactions – transactions in shares – exchange transactions – impact on deductible proportion
- Meeting 011 · 1981-03-10-11 · document II.a) Article 19* – right of deduction – deductible proportion – credit transactions and sales of shares – elements to be included in denominator of fraction