C-152/02

TERRA BAUBEDARF-HANDEL

OPINION OF ADVOCATE GENERAL STK-HACKL delivered on 16 October 2003 1

I — Introduction 3. The chargeable event and the charge- ability of tax are governed by Title VII of the Sixth Directive. The first subparagraph of Article 10(2) states: 1. The present proceedings concern a question of value added tax law of con- siderable practical importance. In issue is whether the deduction of input tax may be claimed in respect of the year in which the right arises or only in respect of the year in '2. The chargeable event shall occur and the which the business receives an invoice. tax shall become chargeable when the goods are delivered or the services are performed. Deliveries of goods other than those referred to in Article 5(4)(b) and supplies of services which give rise to successive statements of account or pay- ments shall be regarded as being completed I I— Relevant provisions at the time when the periods to which such statements of account or payments pertain expire.'

A — Community law

4. Article 17 governs the origin and scope 2. The relevant legislation is Sixth Council of the right to deduct. Paragraphs 1 and 2 Directive 77/388/EEC of 17 May 1977 on (a) state: the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment 2( 'the Sixth Directive').

'1. The right to deduct shall arise at the time 1 — Original language: German. when the deductible tax becomes charge- 2 — OJ 1977 L 145, p. 1, multiple amendments. able.

(a) in respect of deductions under Article 17(2)(a), hold an invoice, drawn up in accordance with Article 22(3);

'3. (a) Every taxable person shall issue an invoice, or other document serving as an invoice in respect of all goods and services supplied by him to another taxable person, and shall keep a copy thereof.

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Every taxable person shall likewise issue an chargeable and the deductions to be made, invoice in respect of payments on account including, where appropriate, and in so far made to him by another taxable person as it seems necessary for the establishment before the supply of goods or services is of the tax basis, the total amount of the effected or completed. transactions relative to such tax and deduc- tions, and the total amount of the exempted supplies.

5. Every taxable person shall pay the net amount of the value added tax when submitting the return. The Member States may, however, fix a different date for the payment of the amount or may demand an (c) The Member States shall determine the interim payment. Member States may criteria for considering whether a require a taxable person to submit a document serves as an invoice. statement, including the information speci- fied in paragraph 4, and concerning all transactions carried out the preceding year. This statement must provide all the infor- mation necessary for any adjustments.'

10. The Turnover Tax Guidelines 2000 1. the tax stated separately in invoices specify in the fourth sentence of Section 192 within the meaning of Paragraph 14 in (2): respect of supplies or other services per- formed for his business by other businesses. Where the separately stated amount of tax is attributable to a payment preceding performance of such transactions, it is already deductible if the invoice has been '... where receipt of services or supplies and presented and payment made'. receipt of the invoice fall within different tax periods, deduction is permissible in respect of the tax period in which both conditions are satisfied for the first time ...'

8. The second and third sentences of Paragraph 16(1) read: 11. According to the case-law of the Bundesfinanzhof (Federal Finance Court), an entitlement to deduct input tax arises in the assessment period in which the condi- tions governing entitlement under Para- graph 15(1)(1) of the UStG are all satisfied. These conditions include an invoice with a 'The tax period shall be the calendar year. separate statement of turnover tax. There- In calculating the tax, the total turnover fore Terra could not claim (retrospectively) under Paragraph 1(1) to (3) and (5) shall be the deduction concerned in respect of the taken as a basis, where the tax on this arose year at issue — 1999 — in which the in the tax period and tax liability has been relevant invoices had not yet been presented incurred.' to it.

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III— Facts, the main proceedings and the because Terra did not receive the invoices question submitted for a preliminary ruling until January 2000.

15. The Bundesfinanzhof is uncertain whether this position in national law is in accordance with Community law and the law governing deduction of input tax in the 13. The Finanzamt Osterholz-Scharmbeck other Member States. did not allow the deduction of input tax arising from these invoices in the year at issue. As grounds, it cited Paragraph 15(1) (1)of the UStG. Delivery of the supplies or other services and receipt of a relevant invoice are a condition of deduction. Where receipt of the service and receipt of the 16. On the one hand, the Court of Justice invoice fall within different tax periods, in has ruled that a taxable person has, in accordance with the direction in the fourth accordance with the Sixth Directive, the sentence of Section 192(2) of the Turnover 'right immediately to deduct'. On the other Tax Guidelines 2000, deduction is permis- hand, Article 17 relates solely to the sible in respect of the tax period in which existence of the right to deduct input tax, both conditions are satisfied for the first whilst the conditions governing the exercise time. This is the 2000 assessment year, of the right are laid down in Article 18.

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21. Immediate deduction can be guaran- Can a taxable person exercise his right to teed in practice only through retroactive deduct input tax only in respect of the effect. It would be disproportionate to deny calendar year in which he holds an invoice this retroactive effect. Moreover, the appro- pursuant to Article 18(1)(a) of Directive priate authorisation of the Member States is 77/388/EEC or must the right to deduct lacking. Finally, retroactive effect protects always be exercised (even if retrospectively) the taxable person from external restric- in respect of the calendar year in which the tions, such as supervening changes in the right to deduct pursuant to Article 17(1) of legal situation or the fact that the issuer of Directive 77/388/EEC arose? the invoice can decide its date.

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22. The other language versions are not 27. As grounds, the German Government much clearer and do not exclude retroactive and the Commission cite Article 18(2) of effect. In certain Member States — Den- the Sixth Directive. Due to the lack of mark and Sweden — it is even allowed. clarity of the German language version they rely on other language versions.

23. The problem of refusal to grant retro- active effect also arises in relation to 28. The German Government further reimbursement of other taxes. In so far as maintains that the two periods must co- refusal is a result of national procedural incide for reasons of logic. Retroactive law, it must be asked if this is not contrary deduction of input tax conflicts with the to Community law. principle of fiscal neutrality, as the French Government also points out, since retro- activity would preclude deduction of input tax in certain cases.

B — Assessment

35. Whereas the right to deduct input tax therefore arises with performance of the services, according to Article 18(1) of the 32. First it is necessary to consider the Sixth Directive it can only be exercised distinction, also clearly drawn in the case- when the taxable person holds an invoice or law of the Court, 3between the origin of the other document serving as an invoice. 6 right to deduct input tax, governed by Article 17 of the Sixth Directive, and the exercise of the right, the conditions for which are governed by Article 18.

38. Legal guidelines for the interpretation of a directive cannot be derived from the implementing measures taken by the Mem- ber States, for this would lead to the 41. In favour of retroactive effect, and opposite of the principle of interpretation against exercise of the right to deduct input in conformity with directives. tax only in respect of the period in which the invoice comes into the taxable person's possession, i.e. the period of the return, there is however case-law of the Court 8 according to which the right to deduct input tax can be exercised immediately. 39. In the face of the ambiguity of Article 18(2) of the Sixth Directive in the version of the language of the main proceedings and therefore of this reference for a preliminary ruling it is necessary to fall back on the other language versions. In such situations the Court of Justice is guided by the language versions of those provisions which were authentic at the time of adoption of 42. The judgments making up the body of the Sixth Directive. 7 this case-law tend in favour of this immedi- ate exercise referring not only to the origin of the right but also to its exercise, as in these judgments the Court of Justice expressly cited Article 17 et seq. — that is, not only the provisions on the origin of the right to deduct, but also those on its 40. With regard to Article 18 of the Sixth exercise. Directive those are — apart from the German version — the Danish, English, 8 — Case C-97/90 Lennartz [1991] ECR I-3795, paragraph 27, Case C-62/93 BP Supergas [1995] ECR I-1883, paragraph 18, Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others [2000] ECR I-1577, paragraph 47, and Breitsohl, 7 — Reisdorf, paragraph 22, cited in footnote 6 above. paragraph 34, cited in footnote 5 above.

46. In relation to the mention by the German Government of refusal to permit deduction of tax in certain cases of retro- active effect, it must be said, as Terra correctly states, that this is a consequence of national procedural law and does not 44. The question of retroactive effect must result from Community law. Should also be examined in the light of the national procedural law however bring principle of fiscal neutrality, which accord- about a refusal to permit deduction of tax ing to the case-law of the Court 9 is where this is neither expressly provided for important also in connection with the nor covered by the discretion of the deduction of input tax. The principle of Member States in procedural matters, such neutrality as it applies here, in relation to provisions of procedural law would have to inward transactions, would be infringed if be adapted accordingly. deduction were excluded or restricted. Relief is therefore required, and in principle deduction of input tax without retroactive effect, that is, in respect of the period of the return, would provide that. The principle of neutrality is to be understood however as requiring not any relief, but full relief. Accordingly, the principle of neutrality would be infringed if the taxable person 47. On the question of whether retroactive were not released from all liability for value effect or its exclusion must be expressly added tax which he did not owe. provided for in the Directive, this raises the question of whether the Member States need authorisation for the stipulation of retroactive effect. However, this question 9 — See inter alia Case 268/83 Rompelman [1985] ECR 655, only arises where retroactive effect does not paragraph 23, Case C-110/94 Inzo [1996] ECR I-857, paragraph 16, Gabalfrisa, paragraph 45, cited in footnote 8 already result from the construction of above, and Breitsohl, paragraph 37, cited in footnote 5 above. express provisions of Community law.

50. In contrast, at issue in the present case is the application of conditions which the Sixth Directive itself lays down. A Member 54. In view of the unclear wording of State requires no additional authorisation Article 18 of the Sixth Directive on the in respect of conditions set out in a point at issue it is necessary to rely on the directive. On the contrary: it is even under principle of fiscal neutrality and the require- an obligation to transpose all conditions ment of full relief associated with it. It into national law and to apply them. follows from this that the right to deduct input tax must be exercised in respect of the period in which the right to deduct arose, as 10 — Gabalfrisa, paragraph 53 et seq., cited in footnote 8 above. only then can full relief be ensured.

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V — Conclusion

55. The reply to the question referred to the Court should therefore be:

Article 18 of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment is to be interpreted as meaning that the right to deduct input tax must be exercised in respect of the calendar year in which the right to deduct pursuant to Article 17(1) of the Sixth Directive arose.