C-487/01

OPINION OF MR TIZZANO — JOINED CASES C-487/01 AND C-7/02

OPINION OF ADVOCATE GENERAL TIZZANO delivered on 3 June 2003 1

1. By judgments of 14 and 21 December I — Legal framework 2001, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) referred to the Court of Justice, pursuant to Article 234 EC, a number of questions for a preliminary ruling concerning the A — The relevant provisions of the directive interpretation of the Sixth VAT Directive 2 (hereinafter: the 'directive'). The national court is seeking, in particular, to establish whether the principles of the protection of 2. Article 2 of the directive provides that: legitimate expectations and legal certainty mean that, following a legislative amend- ment, a Member State may not require a taxable person, under Article 20 or, in the alternative, Article 5(7)(a) of the directive, to repay, in full or in part, the VAT it has 'The following shall be subject to value deducted in accordance with the directive. added tax: The national court is also asking the Court of Justice to define the scope of the above- mentioned legislative amendment in rela- tion to leases in existence at the time the amendment entered into force. Finally, the national court is seeking to establish 1. The supply of goods or services whether the answer to the first question effected for a consideration within the would be different if account were taken territory of the country by a taxable solely of the period following the notifica- person acting as such;' tion of the draft legislation containing the abovementioned legislative amendment.

(b) in respect of supplies referred to in Article 5(6) and (7), the purchase price of the goods or of similar goods or, in the absence of a purchase price, the cost price, determined at the time of (a) the application by a taxable person for supply;' the purposes of his business of goods produced, constructed, extracted, pro- cessed, purchased or imported in the course of such business, where the value added tax on such goods, had they been acquired from another tax- 7. Article 13(B) of the directive provides: able person, would not be wholly deductible;.'

'Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall 5. Under Article 10(2) of the directive: lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse;

the tax shall become chargeable when the goods are delivered or the services are performed ...'.

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(b) the leasing or letting of immovable 2. In so far as the goods and services are property ?' used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:

'1. The right to deduct shall arise at the time (a) where that deduction was higher or when the deductible tax becomes charge- lower than that to which the taxable able. person was entitled;

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(b) where after the return is made some In the case of immovable property, acquired change occurs in the factors used to as capital goods, the adjustment period may determine the amount to be deducted, be extended up to 10 years. 3 in particular where purchases are cancelled or price reductions are obtained; however, adjustment shall not be made in cases of transactions remaining totally or partially unpaid and of destruction, loss or theft of 3. In the case of supply during the period of property duly proved or confirmed, adjustment, capital goods shall be regarded nor in the case of applications for the as if they had still been applied for business purpose of making gifts of small value use by the taxable person until expiry of the and giving samples specified in Article period of adjustment. Such business activ- 5(6). However, Member States may ities are presumed to be fully taxed in cases require adjustment in cases of transac- where the delivery of the said goods is tions remaining totally or partially taxed; they are presumed to be exempt unpaid and of theft. where the delivery is exempt. The adjust- ment shall be made only once for the whole period of adjustment still to be covered.

...' 2. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured. The annual adjustment shall be made only in respect of one-fifth of the tax imposed on the goods. The adjustment shall be made on the basis of the variations in the deduction entitlement in subsequent B — The relevant provisions of Netherlands years in relation to that for the year in legislation which the goods were acquired or manu- factured.

omzetbelasting 1968' (Law of 1968 on lands Secretary of State for Finance issued a Turnover Tax; hereinafter: 'the Law of press release indicating the intention of the 1968'). 5 The Law of 1968 was subse- Netherlands Council of Ministers to amend quently amended by the 'Wet van 18 the 1968 Law with retroactive force as of december 1995 houdende wijziging van de the date of the press release itself. Article V Wet op de Omzetbelasting 1968 enz.' (Law (9), however, provides that the new rules do of 18 December 1995 amending the Law on not apply, for a period comprising the first Turnover Tax 1968 etc.; (hereinafter: 'the financial year in which the lessor began Law of December 1995'). 6 using the property and the beginning of the tenth financial year, to leases for property concluded in writing by 18.00 hours on 31 March 1995 and fulfilling certain condi- tions. 12. In implementation of Article 13(B) and (C) of the directive, Article 11(1)(b), point 5, of the Law of 1968 provided, before its amendment by the Law of December 1995, for VAT exemption for the leasing of 15. The procedures for adjusting the VAT immovable property, although it gave the deducted in relation to immovable property lessor and lessee the possibility of opting for are governed by Article 13(2) of the taxation of the leasing of immovable regulation implementing the Law of property not for habitation, by submitting December 1968 (hereinafter: the 1968 a joint application to that effect to the tax implementing regulation). In accordance authorities. with the provisions of Article 20 of the directive, that article provides that the deduction in relation to immovable prop- erty is to be adjusted over a period of nine financial years beginning with the financial 13. As a result of the amendments made to year in which the economic operator first that provision by the Law of December used the property and that the adjustment is 1995, however, the possibility of taking up to be made annually in respect of one tenth that option became limited solely to those of the amount of VAT deducted. cases in which the lessee uses the leased immovable property for purposes in respect of which he has a full or virtually full right to deduct VAT.

ural grass pitch into an artificial grass pitch 19. The Municipality of Leusden brought in a sports ground that it owned. On 1 an action against that decision before the January 1992, that sports ground was let to Gerechtshof te Amsterdam (Amsterdam the Mixed Hockey Club (hereinafter: the Court of Appeal) which, however, ruled 'Hockey Club'). against it. The Municipality of Leusden therefore appealed against that Court's ruling before the Hoge Raad, claiming, among other things, that the adjustment to the deduction of VAT consequent on the legislative amendment was incompatible with the principles of legitimate expectation 17. Even though it was not entitled to and legal certainty cited in the Court's deduct VAT, the Hockey Club together, judgments of 3 December 1998 in Case with the Municipality of Leusden, opted for C-381/97 Belgocodex 7 and 8 June 2000 in taxation of the letting in accordance with Case C-396/98 Schloßstraße. 8 Article 11 of the Law of 1968. Under Article 17 of the directive, according to which VAT on goods or services is deduc- tible only in so far as those goods or services are used for purposes which are also subject to VAT, that would have 20. The Hoge Raad had doubts concerning enabled the Municipality of Leusden to the interpretation to be given to the relevant deduct the full amount of VAT relating to provisions of the directive since the facts of the work it had carried out on the sports this case in some respects differed from ground. those of the cases cited above, it therefore stayed proceedings and referred the follow- ing questions to the Court for a preliminary ruling:

2. If the answer to the first question is in the affirmative, is the legislative amendment 23. Although G&S claims to have entered inapplicable only in respect of the deducted into a commitment to lease the office tax mentioned in Question 1, or is it also building to the ING Bank before 31 March inapplicable — until the period of adjust- 1995, the lease was not drawn up in writing ment has expired — in respect of the taxed until December 1995 and took effect as of 1 status (subject to the provisions of Article January 1996. 13(C) of the Directive) of the letting referred to in Question 1 ?'

24. Subsequently, ING Bank and the Holin Group applied to the Tax Inspector for the VAT exemption to be waived in accordance with Article 11 of the Law of 1968. But their application was rejected because, Case C-7/02 following the entry into force of the Law of December 1995, Article 11 of the Law of 1968 had been amended and, since the lease had not been drawn up in writing by 18.00 hours on 31 March 1995, it could not be covered by the transitional arrangements under Article V(9) of the Law of December 1995.

21. In the course of 1994 and 1995, G&S Properties BV (hereinafter: 'G&S'), a mem- ber of the Holin Groep BV cs. (hereinafter: the 'Holin Group') had built on land it 25. The Tax Inspector further established owned a building complex made up of that the Holin Group had constructed the premises for use as offices, and it deducted building in question as part of its own the VAT charged in this respect. business, that it was using it to meet its own

business requirements; and that, had the fraud or abuse or any question of a immovable property been acquired by third change in planned use, as mentioned in parties, the Holin Group would not have paragraphs 50 and 51 of the judgment been able to deduct VAT. Therefore, on the of the Court of Justice in Schloßstraße basis of Article 3(1 )(h) of the Law of 1968, — the charging of tax on the basis of which is based on Article 5(7)(a) of the the abovementioned Article 5(7)(a) Sixth Directive, the Inspector demanded when a taxable person has deducted that the Holin Group pay the VAT pre- VAT which he has paid for goods viously deducted in respect of the construc- delivered, or services provided, to him tion work on the property in question. with a view to the planned leasing, subject to VAT, of a particular immo- vable property, on the simple ground that, as a result of a legislative amend- ment, the taxable person no longer has 26. The Holin Group brought an action the right to waive the exemption for against that decision before the Gerechtshof that lease? Amsterdam, which dismissed the action. On appeal to the Hoge Raad, the Holin Group claimed that, by charging VAT in accordance with the national provision based on Article 5(7)(a) of the directive as a result of the legislative amendment, the 2. Would an affirmative response to the decision at issue was incompatible with the first question also apply to a right to principles of the protection of legitimate deduct arising in the period between expectations and legal certainty cited in the notification of the legislative amend- Court's Belgocodex and Schloßstraße judg- ment mentioned in Question 1 and its ments. entry into force? In other words, in the event of an affirmative response to Question 1, can tax still be charged, on the basis of Article 5(7)(a), on the elements of the cost price referred to in 27. As the Hoge Raad had doubts con- Article 11(A)(1)(b) of the Sixth Direc- cerning the interpretation to be given to the tive which were incurred after that relevant provisions of the directive since the notification date?' facts of this case in some respects differed from those of the cases cited above, it stayed proceedings and referred the follow- ing questions to the Court for a preliminary ruling:

32. The Municipality of Leusden points out that it drew up its own investment plans and fixed the rent for letting the sports ground to the Hockey Club, relying, at the time the sports ground was converted, on IV — Legal analysis the legislation then in force, under which it was entitled to deduct all of the VAT applicable to expenditure on that conver- sion work. The lease contained no clause allowing it, in the event of legislative A — The first questions referred in Cases amendments of the kind at issue, to adjust C-487/01 and C-7/02 the rent so that the lessee had to bear the financial burden consequent on the amend- ment; therefore, to avoid having to meet that cost, the Municipality of Leusden would now have to bring an action before 29. By its first question in Case C-487/01, the courts — obviously with no guarantee the national court is essentially asking the as to the outcome — to secure adjustment Court of Justice to clarify whether, follow- of the rent under Article 258 of Book VI of ing a legislative amendment, the principles the Netherlands Civil Code. of the protection of legitimate expectations and legal certainty prevent a Member State from requiring a taxable person to repay the tax that person has deducted, in accordance with Article 20 of the directive. 33. In support of its arguments, the Muni- cipality of Leusden cites the Schloßtraße judgment and the Opinion of Advocate General Geelhoed in Case C-17/01, Sud- 30. The first question in Case C-7/02 is holz. 9It contends that it is apparent from fundamentally the same as that in Case C-487/01, the only difference being that it is raised in relation to Article 5(7)(a) rather 9 — Opinion of Advocate General Geelhoed in Case C-17/01 than Article 20 of the directive. Sudholz [2004] ECR I-4245.

34. The Holin Group, too, claims to have relied, from the start of construction work on the building subsequently leased to the ING Bank, on the possibility of opting for 37. In relation, first of all, to Case taxation of that lease on the basis of the C-487/01, the Netherlands Government version of Article 11 of the Law of 1968 points out that, according to Article 20 of which was in force at the time. The building the directive, the VAT deducted is to be had been constructed specifically in order to adjusted whenever, in the context of activ- be leased to the ING Bank, as is clear from ities subject to VAT, the use of the goods or the fact that it included safes. Moreover, as services in relation to which the deduction early as 31 March 1995, it had a pre- was made, does not subsequently take place contractual undertaking with the ING Bank or takes place in a different way from that concerning the future leasing of the building initially declared by the taxable person. and stipulating that the rent would be That rule applies not only in cases in which subject to VAT. the actual use of the goods or services differs from that initially intended by the taxable person but also in instances in which that use is no longer feasible because of a legislative amendment. In point of fact, again, according to the Netherlands Gov- ernment, had the legislature wished to 35. The Holin Group therefore considers preclude factors outside the control of the that, in the light of the principles of the taxable person, such as a legislative amend- protection of legitimate expectations and ment, from resulting in adjustment, it ought legal certainty and, more particularly, the to have made specific provision for this. way in which the Court applied them in the However, Article 20(1 )(b) of the directive abovementioned judgment in Schloßtraße, provides that even in cases of theft, that is the Netherlands tax authorities could not, to say, in a situation over which the taxable as a result of the amendment to Article 11 person clearly has no control, the Member of the Law of 1968, claim repayment of the States may require adjustment of the VAT it had deducted, by way of either an deduction.

39. Furthermore, the Netherlands Govern- ment and the Commission both point out that the circumstances of this case differ from those in Schloßtraße, on which the Court was asked to give a ruling. Schloßtraße concerned a legislative amend- ment which jeopardised, with retroactive effect, a deduction which had already been 42. As regards Case C-7/02, the Nether- made, thus totally depriving the taxable lands Government points out that the person of his previously acquired right to charging of VAT to the Holin Group in deduct VAT, whereas this case involves the accordance with Article 5(7)(a) of the legal adjustment of a deduction, on the directive is merely an indirect consequence basis of Article 20 of the directive, not with of the legislative amendment in question. retroactive effect but solely in relation to According to that article, in fact, VAT the years of the ten-year adjustment period becomes chargeable once the taxable per- that had yet to elapse at the time the son has the goods for the purposes of his legislative amendment entered into force. own business. In this case, that happened on 1 January 1996, on commencement of the lease, that is to say at a point in time after the legislative amendment had entered into force. This case is therefore signifi- cantly different from Schloßtraße in which the taxable person was deprived of a right 40. The Netherlands Government also to deduct which had already arisen, as a claims that the Municipality of Leusden result of a legislative amendment with could have avoided the financial loss retroactive effect. resulting from the adjustment by agreeing with the Hockey Club to review the rent or referring the matter to the courts under 10 — Case 8/81 [1982] ECR 53, paragraph 44. Article 258 of Book VI of the Netherlands 11 — Case 207/87 [1988] ECR 4433, paragraphs 14 ro 16. Civil Code. 12 — Case C-136/99 [2000] ECR I-6109, paragraph 23.

44. The Commission also endorsed that 46. The Netherlands Government then view at the hearing, modifying the stance it cites the Court's case-law, in relation to had previously taken in its written observa- both cases, and in particular the Racke, 14 tions. 13 Decker 15 and Zuckerfabrik 16 judgments, according to which the temporal effects of a Community act may exceptionally be per- mitted to run from a date subsequent to its publication, if the objective to be attained so requires, and without prejudice to the 45. The United Kingdom Government, for full protection of the legitimate expecta- its part, argues that the purpose of Article 5 tions of those concerned. The Netherlands (7)(a) of the directive is not to adjust the Government considers that those condi- deduction of VAT but to ensure respect for tions are met in both cases at issue. First, the principle of fiscal neutrality. Moreover, the Law of December 1995 was designed to it is the responsibility of taxable persons, put a stop to certain abuses which had when entering into contracts with third resulted from Article 11 of the Law of 1968 parties, to insert into those contracts clauses before it was amended. Secondly, that law had provided for transitional arrangements applicable to many leases that were up and 13 — In its observations, in fact, the Commission started from running. Those transitional arrangements the premiss that in order to determine whether the tax did not, however, extend to leases — such under Article 5(7)(a) of the directive was chargeable to the Holin Group, it was necessary to establish the date when the lease was concluded rather than the date when it took effect. Assuming, therefore, that the contract was con- cluded before 29 December 1995, it bad maintained that, since the lease was not yet subject to VAT in accordance 14 — Case 98/78 [1979] ECR 69, paragraph 20. with the legislation in force on that date, by charging the tax in question to the Holin Group, the Netherlands tax 15 — Case 99/78 [1979] ECR 101, paragraph 8. authority had violated the principles of the protection of 1 6 — J o i n e d Cases C-143/88 and C-92/89 [1991] ECR I-415, legitimate expectations and legal certainty. paragraph 49.

47. The French and Netherlands Govern- ments finally claim that it would be incompatible with the principle of VAT 50. The Court then explained that any neutrality if the Municipality of Leusden person acquiring goods or services with the and the Holin Group were not subject to intention, confirmed by objective evidence, adjustment under Article 20 of the directive to use those goods or services in the exercise and to VAT in accordance with Article 5(7) of an economic activity, is acting in the (a) of the directive respectively. In the view capacity of a taxable person in accordance of these Governments, the result would with Article 4 of the directive and therefore constitute unwarranted discrimination acquires the right to deduct the VAT against all taxable persons wishing, after payable on such expenditure. 18 In the the Law of December 1995 had entered absence of any provision empowering the into force, to have work carried out on immovable property they intended to rent out. They would not in fact be entitled to 17 — Case 97/90 Lennarlz [1991] ECR I-3795, paragraph 8. deduct VAT in relation to such work, even 18 — See Case 268/83 Rompelman [1985] ECR 655, paragraphs 22 to 24; Case C-110/94 Inzo [1996] ECR I-857, though they were in the same circumstances paragraphs 15 to 19; Case C-37/95 Ghent Coal Terminal as the Municipality of Leusden and the [1998] ECR I-1, paragraph 17; Joined Cases C-110/98 and C-147/98 Gabalfrisa [2000] ECR I-1577, paragraph 47; Holin group prior to the entry into force of Case C-396/98, cited in footnote 8 above, paragraph 36; and Case C-400/98 Breitsohl [2000] ECR I-4321, para- that law. graph 34).

53. That said, in order to answer the two questions referred, it will first be necessary to determine whether, in the light of the case-law set out above, the Municipality of 51. But above all, it is apparent from the Leusden and the Holin Group actually Court's many judgments that the principles acquired the right to deduct VAT pursuant of legal certainty and the protection of to Article 17 of the directive before 29 legitimate expectations generally prevent December 1995, that is to say before the the right to deduct VAT, once established, entry into force of the amendment to Article from subsequently being limited as a result 11 of the Law of 1968. It will then be of facts, circumstances or events outside the necessary to consider, in the light of that control of the taxable person. 20 same case-law, whether, in the circum- stances of the cases at issue, the Nether- lands tax authority was entitled to ask the Municipality of Leusden for VAT adjust- ment in accordance with Article 20 of the directive and/or to tax the Holin Group in accordance with Article 5(7)(a) of the 52. More particularly, for the purposes of directive. this case, the Court ruled in Schloßstraße that 'provided that the national court finds that the intention to commence economic activities giving rise to taxable transactions was declared in good faith and that that intention is supported by objective evi- The acquisition by the Municipality of dence, the taxable person is entitled imme- Leusden and the Holin Group of the right diately to deduct the VAT due or paid on to deduct VAT within the meaning of the the goods or services supplied with a view directive to the performance of the economic activ- ities which it envisages carrying out, and the principles of the protection of legitimate

57. The same applies as regards the Holin Group which, as is apparent from the order for reference, acquired the right to deduct VAT, pursuant to Article 17 of the direc- tive, on the construction work on the immovable property leased to the ING 55. Applying those principles to Case Bank, 23 and also exercised that right in 487/01, I would first point out that, full. 24 according to the submissions of the Muni- cipality of Leusden, at the time it undertook the conversion work on the sports ground, its intention was not only to let it out but also to exercise, together with the future lessee, the option for taxation of the lease, on the basis of the version of Article 11 of the Law of 1968 that was in force at the time. That this continued to be its intention, 58. In that light, I shall therefore now move including at the time the VAT relating to on to consider whether, in the two cases at that work became chargeable within the issue, the Netherlands tax authority was meaning of Article 10 of the directive, and entitled to seek adjustment of the VAT that this point in time predated the entry deducted by the Municipality of Leusden into force of the Law of December 1995, is pursuant to Article 20 of the directive and/ not only common ground, but seems to me or to tax the Holin group pursuant to to be fully borne out by the facts, given that Article 5(7)(a) of the directive. the work was completed in 1991, the sports ground was leased to the Hockey Club as of 1 January 1992 and the right to opt for taxation of that lease was actually exer- 23 — See paragraph 3.4.5 of the order for reference, in which the Hoge Raad states that: 'the present case ? involve[s] the cised. charging of a tax on the basis of Article 5(7)(a) of the Sixth Directive, which in practice has the result that the right to deduct which arose pursuant to Article 17 of the Sixth Directive will be adjusted' (emphasis added). 24 — See paragraph 3.1.1 of the order for reference in which the Hoge Raad states that: The party concerned deducted the 22 — Case 97/90, cited in footnote 17 above, paragraph 21. turnover tax charged in this respect'.

Applicability to the Municipality of Leus- 62. That, in my view, is patently incompa- den of Article 20 of the directive tible with the C o u r t ' s ruling in Schloßstraße, namely that a national legis- lative amendment cannot deprive the tax- able person of a right to deduct VAT which he acquired in good faith within the mean- ing of the directive (see point 52 above). 59. There seems to me to be no doubt that the Municipality of Leusden was asked to make the VAT adjustment pursuant to Article 20 of the directive solely because, as a result of the entry into force of the Law of December 1995, the lease of the sports ground to the Hockey Club, for which purpose the Municipality had acquired and 63. That case-law notwithstanding, the exercised the right to deduct in accordance Netherlands Government argues that Arti- with Article 17 of the directive, could no cle 20 of the directive is applicable even in longer be subject to VAT. circumstances in which the actual use of the goods or services differs from the use originally intended for reasons beyond the control of the taxable person, as in the case of theft, and that there is, consequently, no reason not to apply the provision to instances of legislative amendment also. 60. In other words, it seems to me that it cannot be disputed that, in this case, there is causal link between the entry into force of that Law and the request to the Munici- pality of Leusden that, by means of an adjustment pursuant to Article 20 of the directive, it should refund the VAT it had previously deducted under the abovemen- tioned Law. 64. But I fail to see how all of that can corroborate the argument of the Nether- lands Government. Article 20(1 )(b) of the directive actually provides, as a general rule, that adjustment may not be sought in cases of 'destruction, loss or theft of property duly proved or confirmed', that 61. In those circumstances, I consider the is to say in circumstances clearly beyond the application of an adjustment, pursuant to control of the taxable person; and it allows Article 20 of the directive, to be tantamount the Member States to derogate from that to revoking the right to deduct a taxable rule only in cases of theft. It therefore seems person had acquired under the directive, to me that the provision tends rather to solely because a legislative amendment has support the opposite view to that of the transformed an activity formerly subject to Netherlands Government, confirming, as it VAT into an activity which is no longer does, that, save for the exceptions specifi- subject to VAT. cally listed in that article, adjustment

cannot be made in instances in which, for 67. If that is so, then, in my view, the claim reasons beyond the taxable person's con- by the Netherlands Government and the trol, goods cannot be used for the taxable Commission that the circumstances of this activity originally intended. case are in any event different from those which gave rise to the judgment in Schloßstraße because the issue in that case was a legislative amendment which preju- diced, with retroactive effect, a deduction that had already been granted, whereas the present case concerns the lawful adjustment 65. But the Netherlands Government and of a deduction, on the basis of Article 20 of the Commission further contend — and this the directive, solely in relation to the years seems to me central to their arguments — of the ten-year adjustment period still to that Article 20 of the directive does not run at the time the legislative amendment provide a comprehensive list of cases of entered into force, cannot be upheld. adjustment. The first sentence of Article 20 (1), and especially the expression 'in parti- cular', clearly indicate that the cases listed immediately thereafter do not constitute an exhaustive list. The directive does not therefore exclude the situation in which adjustment is the result of a legislative 68. That claim cannot be upheld because it amendment. is based on the extensive interpretation of Article 20 which I challenged a little earlier. But it also fails because, despite all the finely honed arguments to the contrary, it is hard to see how it can be denied that a legislative amendment has retroactive char- acter simply because it does not go as far as to revoke legal situations that have now 66. I must, however, point out that, even ceased to exist but 'is limited' to precluding though there is no doubt that Article 20 the future enjoyment of a right legitimately contains a non-exhaustive list of possible acquired under the earlier legislation. cases of adjustment, it seems to me difficult, to say the least, to maintain that the cases not specifically listed can include legislative amendments, since that would call in question fundamental principles of Com- munity law. In fact, it seems to me clear that, given the implications of adjustment in 69. Finally, that claim cannot be upheld a situation of that nature, the legislature because, in my view, it is caught up in a ought to have made specific provision for it, vicious circle. According to the Commis- had it intended to include it under Article sion, in fact, in Schloßstraße, the Court 20. The fact that the legislature made no mentioned the possible application of Arti- mention of that situation has therefore, of cle 20 of the directive as one of the cases in necessity, to be interpreted as meaning that which a right to deduct may be revoked. it is excluded; that, moreover, is consistent That leads the Commission to conclude that with the general rule I mentioned a little any revocation of this right founded on earlier. Article 20 is legitimate, including, therefore,

71. I shall now consider other arguments advanced by the Netherlands Government in support of its own case. In the first place, 75. Nor, finally, am I convinced by the it contends that there has been no violation argument of the French and Netherlands of the principle of protection of legitimate Governments that if the Municipality of expectations because as early as December Leusden were not subject to any obligation 1994, the Netherlands Secretary of State for to adjust, the result would be unwarranted Finance had stated his intention of amend- discrimination against all those taxable ing Article 11 of the Law of 1968; that intention was later confirmed on 21 March 1995 in response to a parliamentary ques- 25 — Case 8/81, cited in footnote 11 above. tion and on 31 March 1995 in a press 26 — Case 207/87, cited m footnote 12 above. release. 27 — Case C-136/99, cited in footnote 13 above.

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persons who, despite finding themselves, point out that the Holin Group too after the Law of December 1995 had acquired, prior to the entry into force of entered into force, in the same position as the Law of December 1995, a right to the Municipality of Leusden prior to that deduct VAT in relation to the construction Law, could not, unlike the Municipality, work on the immovable property leased to benefit from the right to deduct VAT. the ING Bank (see point 57 above).

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81. In those circumstances, and as correctly 84. I therefore consider that there is a pointed out by the national court 28 and the specific causal link between the entry into Commission in its written observations, the force of the Law of December 1995 and the practical effect of accepting that Article 5(7) revocation of the right to deduct VAT (a) of the directive is applicable to the Holin previously acquired by the Holin Group Group as regards those same construction as a result of the charging of VAT to that works would be to compel the Holin Group Group in accordance with Article 5(7)(a) of to repay the VAT previously deducted and the directive. That, in my view, confirms thereby revoke the right to deduct VAT it that in this case the Law was applied had acquired prior to the entry into force of retroactively. the Law of December 1995.

85. However the Netherlands Government further claims that, in any event, the conditions which justify the adoption of a Community act with retroactive effect, in 82. Nor, in my view, can there be any the light of the abovementioned case-law of doubt that it was specifically as a result of the Court of Justice (see point 40 above), the entry into force of that Law that the are present in this case. According to that conditions for Article 5(7)(a) of the direc- case-law, that possibility may in fact tive to apply to the Holin Group were met. exceptionally be permitted 'when the pur- That provision actually applies only in pose to be achieved so demands and the cases in which any acquisition from third legitimate expectations of those concerned parties of the goods used by a taxable are duly respected'. 29 person for the purposes of his business do not confer on him the right wholly to deduct VAT.

91. In that connection, the Netherlands Government simply claims, as we have seen, that the purpose of the Law of December 1995 was to combat abuses 88. However, the second question resulting from the inadequacy of the referred 30 appears to suggest that the Holin legislation previously in force. Group had acquired the right in question at a point subsequent to the announcements.

92. Aside from the fact that, in the question referred, the national court expressly ruled 89. Even in those circumstances, I should, out that the Holin Group had committed however, be inclined to rule out, as does the fraud or an abuse in this connection, it Commission in its written observations, seems to me that the argument of the that a press release concerning only a Netherlands Government fails to properly legislative proposal — of still uncertain to take account of the actual scope of the outcome, therefore — can affect the forma- case-law that has been cited. tion of a legitimate expectation concerning the inviolability of a right acquired on the basis of the legislation in force.

93. It seems to me in fact that it would be a distortion of the case-law to infer that the mere need to pursue the declared purpose of an act could of itself be sufficient to 90. But even assuming that, being now in a justify that act violating rights already position to anticipate the future amendment acquired, for the obvious reason that it is to the Law, the Holin Group could not fully precisely the violation and not just the

30 — I am thinking in particular of the passage which refers to a '... right to deduct arising in the period between notifica- 31 — See, among many, Case 108/81 Amylum [1982] ECR tion of the legislative amendment mentioned in Question 1 3107, paragraphs 5-6 and Case C-143/88, cited in footnote and its entry into force?'. 16 above, paragraphs 50 to 54.

95. However, the United Kingdom Gov- ernment maintains that the retroactive effect of the Law of December 1995 as of 99. In my view, if a company artificially 31 March 1995, that is to say the date on fixes the date of the event giving rise to the which the Netherlands Secretary of State tax, that is a clear example of the kind of for Finance issued the press release announ- fraud or abuse which justifies, under the cing the intention of adopting the Law, was directive, the full repayment of any VAT necessary in order to prevent a form of that company has deducted. abuse known in the United Kingdom as a 'prepayment scheme' — which some tax- able persons might otherwise engage in 32 — Case C-110/94, cited in footnote 18 above, paragraph 24; during the period between the notification Joined Cases C-110/98 and C-147/98, cited in footnote 18 above, paragraph 46; Case C-396/98, cited in footnote 8 and the entry into force of the law. above, paragraph 40.

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100. However, in this case, as I mentioned charging of the tax to the Holin Group above, the national court has ruled out any under Article 5(7)(a) of the directive. fraud or abuse on the part of the Holin Group. Therefore, were the Law of Decem- ber 1995 applicable to that Group, it would be unjustifiably deprived, retroactively, of a right to deduct VAT which it had acquired in good faith. Conclusions on the two questions analysed

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lease, on the basis of the legislation in force, submits to the Court',3 the latter has, on with the effect that, during this period, the several occasions, held that 'it has no Hockey Club would still be required to pay jurisdiction to give a preliminary ruling on VAT on the lease for the sports ground. a question submitted by a national court where it is quite obvious that the inter- pretation or assessment of the validity of a provision of Community law sought by that court bears no relation to the actual facts of the main action or its purpose, or where the 106. The Netherlands Government main- problem is hypothetical'. 34 tains that since the first question referred in this case ought to be answered in the negative, there is no need to answer the second.

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111. That said, I would point out that it is question referred by the Hoge Raad in Case not clear from either the order for reference C-487/01 is hypothetical and has therefore or the other documents in the file that an to be declared inadmissible. answer to the question at issue would assist the national court in deciding the case before it.

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tion of legitimate expectations, the right to on a transaction relating to inputs only in deduct VAT acquired by the lessors of so far as the outcome serves the purposes of immovable property under that legislation, a taxable transaction relating to outputs. no principle of Community law, in my view, prevents that State, when making the amendment, from depriving its own ex- chequer — albeit unintentionally — of the right to continue levying the tax on the lessee of such immovable property.

120. Neither of those principles seems to me to have been violated in this case. At the time when the Municipality of Leusden deducted the VAT chargeable on the con- version work on the sports ground, it actually did so for the purpose of an activity 118. But the French Government claims — letting the sports ground to the Hockey that if the Netherlands exchequer were not Club — which was at that time taxable allowed to continue to levy VAT on lessees under the national legislation then in force. of immovable property who opted to pay Therefore, the Municipality of Leusden that tax under legislation that has now been acquired and exercised the right to deduct repealed, VAT neutrality and the proper VAT in full compliance with the above- operation of the VAT regime would be mentioned principles. jeopardised.

122. If I have properly understood, by its second question in Case C-7/02, the national Court is actually asking the Court for elucidation on two points. Firstly, it is asking whether an affirmative answer to the first question, namely the inviolability of the right to deduct VAT acquired by the 124. The French Government for its part Holin Group prior to the entry into force of contends that if, in answer to the first the Law of December 1995, also applies to question in this case, the Court holds that the period subsequent to the press release of the tax under Article 5(7)(a) of the directive 31 March 1995 in which the Netherlands is not applicable to adjust a VAT deduction Secretary of Finance announced the pro- made for the purposes of a taxable activity posed amendment to Article 11 of the Law which subsequently ceased to be taxable as of 1968. If the answer to that question is in a result of a legislative amendment, that tax the negative, the Hoge Raad is asking is inapplicable to the Holin Group as whether the Holin Group is required to regards the whole of the period prior to pay a tax in accordance with Article 5(7)(a) the legislative amendment. Furthermore, it of the directive, to be calculated, in would not be possible, in accordance with accordance with Article 11(A)(1)(b)of the Article 11(A)(1)(b) of the directive, to directive, 38 on the basis of the construction calculate that tax exclusively on the basis costs of the buildings leased to the ING of the expenditure on construction work on Bank and incurred after the date of that the immovable property incurred after the press release. press release was issued.

126. The Commission, finally, points out 128. I shall therefore confine myself to in its written observations 39 that the press referring to my comments on the first release could not have affected the forma- question, namely that if, on the one hand, tion on the part of the Holin Group of a it is at least questionable, as the Commis- legitimate expectation concerning the char- sion rightly points out, whether, after the geability of VAT on the future lease of the press release was issued, the Holin Group immovable property in question. The Com- could have remained absolutely confident mission comments that the press release of the right to deduct VAT it had acquired actually related only to proposed legislation (see point 89 above), on the other, there by the Netherlands Government, and that it seems, in this case, to be no valid justifica- was not certain whether it would be passed, tion for that right to have been revoked by or passed unamended, by the Netherlands the Law of December 1995, (see points 90- parliament. Consequently, even during the 101 above). period between the press release and the final adoption of the new rules, the legisla- tion in force was likely to foster a legitimate expectation on the part of taxable persons.

127. For myself, I consider that by this question, the national court is in fact merely 129. On those grounds, therefore, I con- reformulating the first question submitted sider that the reply here must be that the in this case, highlighting the fact that the answer to the first question also applies to the period following the announcement, by the Netherlands Secretary of State for Finance in a press release, that the Nether- 39 — Although, at the hearing, the Commission changed its lands Government intended to introduce stance, as compared with its written observations, in relation to the first question submitted in this case (see amendments to the VAT legislation in point 43 above), it made no further comment on the second question at the hearing. force.

(3) As regards the second question raised in Case C-7/02, the answer to the first question also applies to the period following the announcement, in the press release issued by the Netherlands Secretary of State for Finance, that the Netherlands Government intended to introduce amendments to the VAT legislation in force.

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