Súdny dvor Európskej únie·13.11.1997

C-43/96

ECLI:EU:C:1997:537

Súd: Súdny dvor Európskej únie
IČS: 61996CC0043
Zdroj: eur-lex.europa.eu ↗

COMMISSION v FRANCE

OPINION OF ADVOCATE GENERAL JACOBS delivered on 13 November 1997 *

1. In this case the Commission has brought supplied to him by another taxable per an action against France under Article 169 of son ...' the Treaty for a declaration that France is in breach of its obligations under the Sixth VAT 1 Directive, in particular Article 17(2), by not allowing taxable persons under certain cir cumstances to deduct VAT on means of transport put to business use.

3. However, Article 17(6) of the Directive provides: The relevant Community rules

2. Article 17(2) of the Sixth Directive pro vides:

'Before a period of four years at the latest has elapsed from the date of entry into force of this Directive, the Council, acting unani mously on a proposal from the Commission, 'In so far as the goods and services are used shall decide what expenditure shall not be for the purposes of his taxable transactions, eligible for a deduction of value added tax. the taxable person shall be entitled to deduct Value added tax shall in no circumstances be from the tax which he is liable to pay: deductible on expenditure which is not strictly business expenditure, such as that on luxuries, amusements or entertainment.

(a) value added tax due or paid in respect of goods or services supplied or to be

* Original language: English. 1 — Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonization of the laws of the Member States relating to Until the above rules come into force, Mem turnover taxes — Common system of value added tax: uni form basis of assessment, OJ 1977 L 145, p. 1. ber States may retain all the exclusions

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provided for under their national laws when used for aerial photography, publicity, pilot this Directive comes into force.' training or topographical or geodesic sur veys.

4. The Council has not as yet taken the decision envisaged by the first sentence of 7. The Commission claims that Article 237 that provision. of Annex II of the CGI , as interpreted and applied by the French tax authorities, is con trary to Article 17(2) of the Sixth Directive in so far as it denies taxable persons the right to deduct VAT on goods which constitute the Very tool or object' ('l'outil ou objet The contested French rules même') of their trade. By that term the Commission confines its application to cases where the goods in question 'are a necessity to such an extent that they condition in an absolute manner the exercise of the trade itself', as distinct from cases in which the goods 'contribute substantially to facilitating 5. Article 237 of Annex II of the French the exercise of the trade'. Code General des Impôts ('CGI') provides:

8. By way of example of goods used as the 'VAT shall not be deductible on vehicles or actual tool of a taxable person's trade the machines, whatever their nature, designed Commission refers in its application to the for the transport of persons or for mixed use case of a firm which uses helicopters for which constitute fixed assets or, if not, are aerial work other than the transport of pas not intended for resale in a new state.' sengers. In its letter of formal notice of 6 September 1991 the Commission also referred to the case of a driving school whose business depended on the use of motor cars for the purpose of giving driving instruction. However, following an amend 3 ment to the French legislation, permitting 6. Subject to certain exceptions the rule cov ers bicycles, motorcycles, private motor cars, boats, aeroplanes and helicopters. It does not 2 — Documentation administrative de base (D. B.) of the French apply to commercial vehicles such as vans, tax authority, série 3 CA, division D, feuillets 1532 to 1533 (version of 1 May 1990), annexed to France's defence. lorries and tractors. Helicopters do not 3 — Article 237 septies A of the CGI, introduced by Article 13 of qualify for deduction even where they are the Law of 26 July 1991.

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deduction of VAT on motor cars used Article 17(6) is a contraction of the expres exclusively for the purposes of driving sion 'expenditure which is not strictly busi instruction, the Commission no longer pur ness expenditure' in the second sentence of sues its complaint in that regard. the first subparagraph of that provision. Expenditure on goods which are the tools of a taxable person's trade cannot be regarded as expenditure which is not strictly business expenditure and therefore cannot be the sub ject of exclusions retained under the second subparagraph.

9. By contrast the Commission's application does not extend to, for example, cars used by sales representatives or by veterinary sur geons. Although considerably facilitating the exercise of a trade, such goods cannot, according to the Commission, be regarded as tools of a trade.

12. However, that analysis is incorrect. The first sentence of the first subparagraph of Article 17(6) provides for the adoption by the Council of rules specifying expenditure 10. France and the United Kingdom, which that 'shall not be eligible for a deduction of has intervened in support of France, contend value added tax'. The second sentence of the that the second subparagraph of Article 17(6) subparagraph adds that VAT shall 'in no cir of the Directive expressly permits the main cumstances be deductible on expenditure tenance of all the French provisions, which which is not strictly business expenditure, — as the Commission concedes — predate such as that on luxuries, amusements or the entry into force of the Sixth Directive. I entertainment'. 4 It is apparent from the share that view. wording and structure of the subparagraph that what was envisaged was the adoption by the Council of comprehensive rules on all the categories of expenditure which were not eligible for deduction, including — but not limited to — expenditure that was not strictly business expenditure.

11. The Commission contends that France 4 — In the light of other language versions it would appear that reads the second subparagraph of Article the term 'in no circumstances' should be understood as 17(6) out of context. In its view the term meaning 'not in any event': see, for example, the Dutch ('in elk geval'), French ('en tout état de cause'), German ('auf 'exclusions' in the second subparagraph of jeden Fall') and Italian ('comunque') language versions.

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13. Under the second subparagraph of 15. Accordingly, Article 17(6) of the pro Article 17(6) Member States are permitted posal provided: 'until the above rules come into force' to retain 'all the exclusions' provided for under their national laws when the Directive came into force. Thus the second subparagraph is linked not to the second sentence of the first subparagraph but to the first: Member States are entitled under the second subparagraph 'Value added tax on the following shall not to retain all the exclusions in the areas which be deductible: are to be the subject of common rules adopted by the Council under the first sen tence of Article 17(6).

(a) expenditure on accommodation, lodging, restaurants, food, drink, entertainment and passenger transport, unless incurred by an undertaking whose principal or subsidiary business is the pursuit of such activities;

14. The above analysis is consistent with the legislative history of Article 17(6). In its explanatory memorandum accompanying its (b) expenditure on luxuries; 5 proposal for the Sixth Council Directive the Commission explained that:

'certain expenditure, even though incurred in the ordinary course of business, is also incurred for private purposes, and appor tionment of such expenditure between "busi ness" and "private" purposes could not be 6 adequately supervised'. 16. Thus it is clear first that, in drafting the proposal, the Commission's concern was not 5 — Bulletin of the European Communities, Supplement 11/73. merely that certain items of expenditure 6 — Cited in note 5, p. 18. incurred by taxable persons were not strictly

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business expenditure but also that certain ries, contained detailed provisions on expenditure, although incurred in connection means of transport. Article 1(1) of the pro with the normal operation of the business, posal provided that VAT was not to be was difficult to apportion between business deductible on 'the purchase, manufacture, 7 and private use. Secondly, it is apparent importation, leasing or hire, use, modifica from a comparison of the proposed and tion, repair or maintenance of passenger cars, adopted texts of Article 17(6) that, although, pleasure boats, private aircraft or motor at the moment of the adoption of the Sixth cycles'. 'Passenger car' was defined as 'any Directive, Member States were in substantial road vehicle (including any trailer) other agreement with regard to certain categories than one which, by its design and equip of expenditure, in particular luxuries, amuse ment, is intended solely for the transport of ments and entertainment, no agreement goods or is intended for industrial or agricul could be reached on the treatment of passen tural use or has a seating capacity of more ger transport. than nine persons including the driver'. Article 1(2) provided exceptions for vehicles or craft which were:

'(a) used for carriage for hire or reward; 17. Further guidance as to what the Com mission itself considered to be the scope of the matters upon which a decision was deferred at the moment of the adoption of the Sixth Directive is provided by the proposals submitted by the Commission under the first sentence of Article 17(6). The Commission's proposal of 25 January 1983 8 for a Twelfth Council Directive, in addition to laying down rules disallowing deduction (b) used for driving training or instruction; of tax on transport expenses, 9 accom 10 modation, food and drink, entertainment expenditure 11 and amusements and luxu

7 — See also to the same effect the second recital in the preamble to the proposal for a Twelfth Council Directive on the har- monization of the laws of the Member States relating to turnover taxes — Common system of value added tax: expenditure not eligible for deduction of value added tax, COM (82) 87 final, OJ 1983 C 37, p. 8. (c) hired out; 8 — Cited in note 7. 9 — Article 2. 10 — Article 3. 11 — Article 4. 12 — Article 5.

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(d) part of the stock in trade of a business'. Article 17(6) (now withdrawn following continued disagreement in the Council) sought the adoption of common rules on the restrictions to be imposed on input tax deductions on means of transport in general and on the scope of the exceptions to be made for certain types of business such as 18. On 20 February 1984 the Commission driving schools or car-hire firms or, more 13 presented an amended proposal in which it generally, for taxable persons able to show altered the treatment of passenger cars and exclusive business use. In other words, they motor cycles. Under a new paragraph la, were directed precisely at the matters which inserted into Article 1, Member States were are the subject of the present case. to restrict the right of deduction to a propor tion of the VAT on such goods. In addition it proposed the insertion of a new Article 3a providing as follows:

'A taxable person may request application of 20. During the proceedings the Commission Article 17(2) of Directive 77/388/EEC in has stressed the severe disruption to the VAT respect of the items of expenditure listed in system caused by rules disallowing deduc Articles 1, 2 and 3 above if he can furnish tion of tax on passenger vehicles and craft. It proof that such expenditure has been made argues that France has not shown why exclusively for business purposes. motor cars and other craft are singled out for special treatment and contends that the French rules are disproportionate to the aim of preventing tax evasion. Private use of such goods could be dealt with in the normal way, that is to say, either by means of an adjust ment of a taxable person's input tax deduc Member States shall maintain in force or tion under Articles 17 and 19 or by means of introduce arrangements for verifying ex post an output tax charge under Articles 5(6) and facto that such expenditure was indeed made 6(2). exclusively for business purposes.'

19. Thus the Commission's proposals sub mitted pursuant to the first sentence of

21. I do not think it is necessary for France 13 — COM (84) 84 final, OJ 1984 C 56, p. 7. in these proceedings to explain the merits of

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its rules. As I have explained, it is clear from of expenditure on motor vehicles for the the text and legislative history of Article purposes of income and corporation taxes. 4 17(6), and from the proposals submitted by the Commission pursuant to the first sen tence of that provision, that as yet there are no common rules on deduction of VAT on passenger vehicles and craft and that, pend ing the adoption of such rules, Member States are entitled to retain all the exclusions in that area which they applied at the moment when the Sixth Directive came into 23. That is not to say that the Council's fail force. Article 17(6) does not, as the Commis ure to reach agreement is not regrettable. As sion seems to suggest, merely confer on the Commission explained with commend Member States the power to retain anti- able clarity at the hearing, rules preventing evasion measures whose legality falls to be taxable persons from deducting VAT on such tested judicially against the principle of pro important categories of expenditure severely portionality. disrupt the functioning and neutrality of the VAT system. I doubt moreover whether the risk of tax evasion can justify total exclusion of such goods from the deduction mecha nism.

24. It is however equally clear that the prob lem calls for a legislative solution. That point is amply demonstrated by the weaknesses of the criterion suggested by the Commission 22. I do not in any event find it altogether in these proceedings. The mere fact that a surprising that some Member Sates consider passenger vehicle or craft constitutes a 'tool that passenger vehicles and craft merit special of the trade' does not remove the possibility treatment. As the Commission itself sug of tax evasion or non-taxation of final con gested in the explanatory memorandum to sumption. Conversely, a vehicle or craft its proposal for a Sixth Directive, the private which is not a 'tool of the trade' may never use of such goods is particularly difficult to theless be essential for the running of a busi monitor; moreover, in the case of luxury ness, as is shown by the examples which the vehicles the final consumption and business Commission itself gives as cases outside the elements may be indistinguishable. In addi tion the extremely high value of such goods provides considerable incentive for unde 14 — See, for example, as regards France, Fiscal 1996, Francis clared private use. For similar reasons some Lefebvre, pp. 162 to 163 and 309, and, as regards the United Kingdom, UK Tax Guide, Butterworths, 1995-96, pp. 479 Member States also restrict the deductibility to 480.

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scope of its challenge, namely motor vehicles at paragraphs 78 and 79 of my Opinion in used by travelling sales representatives or Lennartz are of assistance to it. As the veterinary surgeons in rural areas. The — United Kingdom points out, in that Opinion perhaps necessarily — simplistic criterion I merely suggested that Article 17(6) did not proposed to the Court by the Commission authorize a general exclusion such as a rule in these proceedings may be contrasted with treating goods as being used wholly for pri the rather more sophisticated set of rules vate purposes where the element of business which it put forward in its proposal for a use was very small. Drawing support from Twelfth Directive. It is in any event clear the proposal for a Sixth Directive and the that, as France and the United Kingdom proposal for a Twelfth Directive I concluded point out, the criterion proposed here has no that the measures falling within the contem basis in the Sixth Directive. plation of the last sentence of Article 17(6) were those concerning specific categories of goods, such as motor vehicles, whose use for business purposes was difficult to verify. The 25. Contrary to the Commission's assertion, French rules in issue here clearly fall within I do not think the comments which I made that category.

Conclusion

26. Accordingly , I am of the opinion that the Court should :

(1) dismiss the Commission's application ;

(2) order the Commission to pay the costs .

15 — Case C-97/90 Lennartz [1991] ECR I-3795.

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