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Capital goods EU VAT case law

26 cases of the Court of Justice and the General Court of the European Union on this point of VAT law, from 1977 to 2024.

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The 26 cases, most recent first

Under each case, what the Court decided, from its summary. The summaries are AI-generated and are not official documents: open the case for the Court’s own text.

C-243/23 Drebers

Judgment · 12 September 2024 · Belgium

Adjustment period for major renovation and extension works

Works taxed as services are not themselves immovable property acquired as capital goods, but where a Member State has used the Article 190 option it must respect fiscal neutrality and the economic life of the effects of the services. Excluding significant extension or substantial renovation works whose effects last as long as a new building from the extended period is precluded. Whether Article 12(2) conversion occurred is irrelevant. Article 190, read with Article 187, has direct effect and can be invoked against the authorities.

C-293/21 Vittamed technologijos

Judgment · 6 October 2022 · Lithuania

Adjustment of deductions on voluntary liquidation and deregistration

Adjustment is required because once the taxable person no longer has, and will never have, any intention of using the capital goods for taxable transactions, the close and direct link with taxed output transactions is broken. The reasons for liquidating, even if beyond the taxable person's control, are irrelevant, and the tax authorities are not to assess them. The Court distinguished the position where liquidation itself generates taxed transactions, for example asset sales to discharge debts, or where economic activity continues. Here the assets remained unsold. Confirms that the INZO and Ryanair line protects abandoned investment only where the taxable person still intends taxable use.

C-627/21 Administraţia Judeţeană a Finanţelor Publice Sibiu and Direcţia Generală Regională a Finanţelor Publice Braşov

Order · 2 May 2022 · Romania

Deregistration for inactivity cannot trigger an irrebuttable adjustment of input tax

The Court holds that those provisions preclude such rules and practice. An irrebuttable presumption that the capital goods have been used for purposes other than economic activity denies the taxable person any possibility of proving the contrary, and so goes beyond what is necessary to ensure the correct collection of the tax and to prevent evasion. One of a series of Romanian cases on the consequences of deregistration, alongside Promexor Trade and Siemens Gamesa.

C-787/18 Sögård Fastigheter

Judgment · 26 November 2020 · Sweden

Transfer of the capital goods adjustment obligation to the purchaser of a property

The Directive precludes such legislation. Where a Member State uses Article 188(2) to relieve the seller of adjustment because the purchaser will use the property only for deductible transactions, it cannot then impose adjustment of that deduction on the purchaser when the conditions cease to be met. The person liable for amounts due on adjustment is a substantive rule. Only the taxable person who applied the deduction can be required to repay it. The Article 19 question was inadmissible as hypothetical. Confirms and extends Pactor Vastgoed. Relevant to property investors and their advisers pricing acquisitions of opted properties, and to anyone assessed on a predecessor's deductions.

C-791/18 Stichting Schoonzicht

Judgment · 17 September 2020 · Netherlands

Single-step adjustment of input tax on first use of capital goods

The Court held that Articles 184 to 187 do not preclude such a single-step adjustment. Article 187 governs only variations arising after first use, measured against the deduction entitlement for the year of first use. A discrepancy identified at the moment of first use falls under Articles 184 and 185, whose detailed rules Member States lay down under Article 186. The scheme must still allow spread adjustment for later variations, as the Netherlands rules did. The second question was not answered. Relevant to property developers and investors, and to anyone deducting input tax on capital goods on the basis of intended use.

C-374/19 Finanzamt Bad Neuenahr-Ahrweiler

Judgment · 9 July 2020 · Germany

Adjustment of deduction where taxed use of mixed-use capital goods ceases

The Court held that those provisions do not preclude an adjustment. Where taxed transactions cease but exempt transactions continue in the same premises, the premises are used from then on exclusively for exempt purposes, breaking the direct link with taxed output, and the reasoning in Imofloresmira (property left genuinely empty pending intended taxed use) does not apply. Adjustment is due even if the cessation was outside the taxable person's control. It would be otherwise if other taxed uses were found. That is for the national court to verify. Relevant to any operator of mixed-use immovable property within the adjustment period, notably care homes, hospitals, schools and other exempt providers with ancillary taxed catering or retail.

C-201/18 Mydibel

Judgment · 27 March 2019 · Belgium

Adjustment of input tax on a sale and lease back of buildings

Subject to the national court's verification of the facts and national law, no adjustment is required. Creating an emphyteutic right not subject to VAT is not in itself a change in the factors determining the deduction, and where the emphyteutic right and the leaseback are so closely linked as to form a single transaction, no supply of goods occurs because the institutions cannot dispose of the buildings as owner. Had adjustment been due, it would nevertheless respect neutrality and equal treatment. Relevant to businesses using sale and lease back of real estate as a financing tool, and to their lenders and lessors.

C-140/17 Gmina Ryjewo

Judgment · 25 July 2018 · Poland

Adjustment of input tax where a public body changes the use of capital goods

Adjustment is not precluded, provided the national court finds on all the facts that the body acted as a taxable person when it acquired the goods. An express declaration of intended economic use is not required. Intention may be implied, and the concept of acquisition "as a taxable person" is to be construed generously. Relevant evidence includes the dual-use nature of the property and prior VAT registration. Waterschap Zeeuws Vlaanderen is distinguished because there the body acquired the goods acting as a public authority. Public bodies and other partly non-economic actors that failed to deduct on acquisition are not automatically shut out of capital goods adjustment when property is later put to taxable use.

C-532/16 SEB bankas

Judgment · 11 April 2018 · Lithuania

Adjustment of a deduction that was never available

Article 184 covers undue deductions generally, including where no right of deduction ever existed because the transaction was exempt. However, the capital goods mechanism in Articles 187 to 189 presupposes an existing right of deduction and a later change in the factors determining it, so it does not apply. Under Article 186 the Member States set the trigger date and the adjustment period, subject to legal certainty and legitimate expectations. A mandatory time limit starting from the vendor's unilateral credit note years later may breach legal certainty. Confirms that taxpayers cannot resist clawback of a deduction on an exempt supply by pointing to the five or twenty year capital goods spreading rules.

C-229/15 Mateusiak

Judgment · 16 June 2016 · Poland

Taxation of business assets retained on cessation of activity

A Member State may treat the retained goods as a supply for consideration even after the adjustment period has expired. Article 18(c) imposes no time condition and does not cross-refer to the adjustment rules in Articles 184 to 192. It creates a new taxable transaction on cessation rather than a retroactive correction. Taxation therefore applies whatever the interval since acquisition, provided the goods still have a residual value at cessation, the taxable amount under Article 74 being the value determined at that time. Relevant to sole traders, professional practices and small companies in Member States that have implemented Article 18(c), and to advisers planning cessations, retirements and deregistrations.

C-126/14 Sveda

Judgment · 22 October 2015 · Lithuania

Deduction on assets provided free to the public as a means of attracting customers

The input VAT on those capital goods is deductible. A person incurring investment expenditure with an intention, confirmed by objective evidence, of carrying out economic activity acts as a taxable person, and the immediate provision of the assets to the public free of charge neither exempts nor takes the transaction outside VAT. The link may be with a particular output transaction or with the economic activity as a whole. Establishing that link on objective evidence is for the national court. The subsidy condition and adjustment periods do not affect the origin of the right. Useful for any business that constructs infrastructure open to the public without charge as a customer draw.

C-500/13 Gmina Międzyzdroje

Order · 5 June 2014 · Poland

Ten-year capital goods adjustment period and the refusal of a one-off adjustment

By reasoned order, the Court held that those provisions and the neutrality principle do not preclude such rules. Article 187 applies where goods initially used for non-deductible purposes are later put to deductible use, and its terms are binding. An adjustment period of at least five years (extendable to twenty for immovable property) is an essential element of the system. A ten-year period running from first use is a proper transposition, and Article 187 precludes any one-off adjustment within a single tax year. Confirms that a change of use of immovable property from non-economic or exempt to taxable activity gives access to input VAT only in annual fractions over the national adjustment period, not as an immediate lump-sum credit.

C-210/11 Medicom and Maison Patrice Alard

Judgment · 18 July 2013 · Belgium

Rent-free occupation of company property by managers and the letting exemption

Without rent in money there is no letting. The exemption cannot apply, and treatment of the occupation as a benefit in kind for income tax purposes is irrelevant, since it is not shown that the managers gave up salary or that part of their work was consideration. Nor need the taxable person show any direct link between the private use and its taxable transactions. The national court must still verify, on all the evidence, whether the features of a letting are present. Confirms and extends Seeling for corporate owner-occupiers.

C-153/11 Klub

Judgment · 22 March 2012 · Bulgaria

Deduction on capital goods not yet brought into use

A taxable person who acquires capital goods acting as such and allocates them to the assets of the business may deduct the VAT in the tax period in which the tax became chargeable, even if the goods are not immediately used for business purposes. Whether the person acquired the goods for the purposes of his economic activity is a question of fact for the national court, assessed on all circumstances including the nature of the asset, the interval before business use and steps taken to obtain the necessary authorisations, as is any fraud or abuse. Confirms that absence of immediate use, and even absence of a permit allowing use, does not of itself defeat deduction on capital goods.

C-515/07 Vereniging Noordelijke Land- en Tuinbouw Organisatie

Judgment · 12 February 2009 · Netherlands

Input tax on goods used for non-economic activities of an association

Articles 6(2)(a) and 17(2) do not apply to the use of business goods and services for transactions other than the taxable person's taxed transactions. Input VAT attributable to those transactions is not deductible. Unlike private use of a capital asset (Charles and Charles-Tijmens), non-economic activities falling outside the scope of VAT are not purposes "other than those of the business" where, as here, they constitute the association's principal object. The second question did not require an answer. Confirms Securenta for mixed economic and non-economic actors.

C-98/07 Nordania Finans and BG Factoring

Judgment · 6 March 2008 · Denmark

Sales of leased vehicles in the deductible proportion

The expression does not cover such goods. The exclusion targets sales that are unusual in relation to the taxable person's normal activities and so do not consume mixed-use goods and services in proportion to the turnover generated. Where, as here, sale of the vehicles on termination of the leases is an integral part of the undertaking's usual business, that turnover must be included in the fraction. The concept is autonomous and uniform. The Member States' power to define capital goods under Article 20(4) applies only to adjustments. For a leasing or hire company with mixed taxable and exempt turnover, end-of-lease disposal proceeds enter both the numerator and the denominator of the pro rata, which normally improves recovery on overheads where the disposals are taxable. Relevant to vehicle leasing, equipment rental and asset finance groups with exempt financial activities.

C-184/04 Uudenkaupungin kaupunki

Judgment · 30 March 2006 · Finland

Adjustment of input tax where property moves from exempt to taxed letting

Adjustment of deductions on capital goods under Article 20 is mandatory, subject only to the Article 20(5) derogation, and is not an alternative to taxing private-use applications under Articles 5(6) and 6(2), which concern private use only. Adjustment applies where the goods were first used in non-taxable activity giving no deduction and later in taxable activity. Neither Article 13(C) nor Article 17(6) permits the six-month cut-off: Member States may set procedural conditions for exercising the option but not shorten the adjustment period. No temporal limitation. Property owners and public bodies letting immovable property in Member States operating an option to tax can recover pre-option construction and refurbishment VAT through the capital goods adjustment mechanism, notwithstanding domestic time limits tied to first use.

C-63/04 Centralan Property

Judgment · 15 December 2005 · United Kingdom

Capital goods adjustment where a building is disposed of by two linked supplies

Provided each transaction transfers the right to dispose of the property as owner under Article 5(1), a matter for the national court, both are supplies for Article 20(3) purposes, and the goods are treated for the rest of the adjustment period as used partly for taxable and partly for exempt activities in proportion to the respective values of the two transactions. The holding is confined to inextricably linked transactions, one exempt and one taxable. No need to consider abuse of rights. Apportionment by value applies on a capital goods disposal even though Article 20(3) contains no express apportionment mechanism and speaks of a single supply.

C-243/03 Commission v France

Judgment · 6 October 2005 · France

Restriction of input tax deduction on subsidised capital goods

France had failed to fulfil its obligations. Apart from Article 11A(1)(a) (subsidies directly linked to price) and the option in Article 19(1) to include other subsidies in the denominator of the deductible proportion, the Sixth Directive makes no provision for subsidies in the VAT calculation. The pass-on of depreciation condition is a limitation not provided for and therefore unlawful. Article 2 of the First Directive states only the principle of deduction. Article 19 applies solely to mixed taxable persons and only in the situations it covers. Grant-funded businesses (public bodies, research, transport, infrastructure, health and cultural operators) cannot have deduction cut back merely because an asset was subsidised.

C-434/03 Charles and Charles-Tijmens

Judgment · 14 July 2005 · Netherlands

Full allocation of mixed-use capital goods to the business

Those provisions preclude such legislation. The derogation in the second subparagraph of Article 6(2) allows Member States to refrain from treating certain private uses as supplies for consideration for simplification purposes, but cannot be used to deny immediate deduction in full where the taxable person has opted for full allocation, nor generally to waive taxation of private use. The Article 17(6) standstill does not save the rule, since Article 11(4) of the Second Directive permitted exclusions for certain goods only, not a general exclusion of all private use. Confirms and hardens the Lennartz/Seeling line.

C-378/02 Waterschap Zeeuws Vlaanderen

Judgment · 2 June 2005 · Netherlands

Adjustment of input tax on capital goods bought by a public authority

The public body cannot adjust in order to deduct that VAT. Only a person acting as a taxable person at the time of acquisition acquires a right to deduct under Articles 2 and 17. Article 20 merely governs the calculation of adjustments and cannot create a deduction or convert non-taxable input tax into deductible tax. A public authority is not comparable to a taxable person with mixed taxable and exempt activities. The capacity in which it acted on acquisition is decisive. The second question therefore did not need answering. Confirms Lennartz for the public sector.

C-487/01 Gemeente Leusden and Holin Groep

Judgment · 29 April 2004 · Netherlands

Withdrawal of the option to tax property lettings and capital goods adjustments

Withdrawal of the option is permitted and may carry with it adjustment of deductions on let immovable property under Article 20(2), which is not an exhaustive list and covers legislative change. Adjustment may arise from circumstances outside the taxpayer's control. The Member State must, however, respect legitimate expectations in the implementing arrangements, though repeal of advantageous legislation is not in itself a breach. Article 5(7)(a) concerns application of goods for business purposes and cannot be used for such a legislative withdrawal. Landlords and developers who deducted input VAT on the basis of an opted-to-tax letting cannot resist adjustment merely because the option was removed by law rather than by their own choice. Relevant to property funds, local authority sports and leisure lettings, and sale-and-leaseback style structures relying on the option.

C-415/98 Bakcsi

Judgment · 8 March 2001 · Germany

Allocation of mixed-use capital goods to private assets

A taxable person may keep a mixed-use capital item wholly within his private assets, excluding it entirely from VAT. Actual business use matters only if input deduction on acquisition is claimed, and deducting VAT on repairs does not itself allocate the item. If the item is wholly allocated to the business, its sale is fully taxable even though no residual VAT was deductible. But withdrawal under Article 5(6) is untaxed where no deduction arose, and a later sale is then made privately and outside VAT. Confirms the taxpayer's free choice of allocation for mixed-use capital goods, and separates the treatment of the asset from deduction on running and repair costs.

C-291/92 Armbrecht

Judgment · 4 October 1995 · Germany

Retaining part of a mixed-use building in private assets on sale

A taxable person may keep part of an asset devoted to private use outside the VAT system. On sale of that part he does not act as a taxable person under Article 2(1), and a national option to tax under Article 13(C) cannot bring a supply outside the tax within it. Correspondingly, only the part assigned to the business counts for Article 17(2), and the Article 20(2) adjustment is limited to that part. Apportionment must follow the proportions of private and business use in the year of acquisition, not a geographical split, and the private intention must be maintained throughout ownership. Confirms the taxable person's choice, alongside Lennartz full allocation, to keep the privately used share of mixed-use immovable property wholly outside the VAT system, with deduction and capital goods adjustment restricted accordingly. Relevant to hoteliers, guesthouses, professionals and any trader occupying part of business premises as a dwelling, and to advisers structuring acquisitions and later disposals.

C-97/90 Lennartz

Judgment · 11 July 1991 · Germany

Capacity at the time of acquisition and the de minimis threshold for business use

Article 20(2) applies only where the goods were acquired by a person acting as a taxable person and allocated to his economic activity. It creates no right to deduct and cannot convert tax on non-taxable transactions into deductible tax. Immediate use is not required. Whether acquisition was for business purposes is a question of fact, judged on all circumstances including the nature of the goods and the interval before business use. Deduction is available however small the genuine business use, subject only to an authorised Article 27 derogation. The point of acquisition is decisive.

C-51/76 Verbond nederlandse ondernemingen v Inspecteur der invoerrechten en accijnzen

Judgment · 1 February 1977 · Netherlands

Meaning of capital goods and the direct effect of the deduction right

Capital goods is a Community concept. Goods used for business purposes, distinguishable by their durable nature and value, whose acquisition costs are normally written off over several years rather than treated as current expenditure. The individual undertaking's own accounting choices are not decisive. Normal sectoral practice is. Member States retain a margin of discretion over durability, value and write-off rules, provided they respect the essential difference between capital goods and goods used in day to day running. National courts must police that limit when Article 11(1) is invoked. The foundational ruling on the boundary between capital goods and general costs, and an early statement that a taxable person may invoke a directive to test whether national derogations stay within their permitted limits.

Related topics

Adjustment of deductions · Right of deduction · Immovable property · Immovable property acquired as capital goods · Harmonisation of fiscal legislation · Taxable transactions · Origin and scope of right of deduction · Direct effect · Fiscal neutrality · Equal treatment