On March 3, 2016 on the website of the Court of Justice of the European Union the opinion of Advocate General Kokott in Case C‑229/15 Minister Finansów versus Jan Mateusiak was published (ECLI:EU:C:2016:138).

Must Article 18(c) of the VAT Directive be interpreted as meaning that, on expiry of the adjustment period referred to in Article 187 of the directive, a taxable person’s fixed assets upon the acquisition of which he deducted VAT, should not be subject to tax and included in the winding-up inventory at the time he ceases his activity, if the period laid down in law for adjusting the input tax on the acquisition thereof, which arises from the estimated period for using those assets in the taxable person’s economic activity, has passed, or as meaning that the fixed assets are subject to tax at the time the taxable person ceases his economic activity, regardless of the adjustment period?

Introduction

·        This Polish request for a preliminary ruling concerns a very particular chargeable event for VAT. If a taxable person ceases to carry out his economic activity, Member States can tax the business assets still retained at that time. This is provided that the taxable person previously acquired the goods concerned, forming part of the business assets, exempt from VAT by virtue of the deduction of input tax. This taxation is intended avoid a situation in which a taxable person can in effect make private use of goods exempt from VAT.

·        In the main proceedings, a taxable person is planning to cease his economic activity. His business assets include part of a building which he constructed some time ago and on which he claimed deduction of input tax. The taxable person has now raised the question whether taxation of that part of the building is precluded on the ground that its construction took place so long ago. In fact, the period allowed for subsequent adjustment of the deduction in respect of the acquisition of the part of the building concerned has already expired. However, if such an adjustment of the deduction is no longer possible, there is also no longer any reason for making that correction indirectly by taxing the part of the building in question on cessation of the activity.

·        The present case therefore concerns the different techniques for making subsequent corrections to deductions of input tax. The EU legislation governing VAT offers various systems in this context, which in some cases appear to overlap. The Court will therefore need to give its attention to defining the respective functions of those systems.

The dispute in the main proceedings and the question referred for a preliminary ruling

·        The subject-matter of the main proceedings is a question of interpretation concerning the VAT legislation, which Mr Mateusiak raised with the Polish tax authorities in 2013.

·        Between 1997 and 1999, Mr Mateusiak constructed a residential and commercial building. From the outset, that building was used by him in part for private purposes and in part for his activity as a notary. Mr Mateusiak claimed a right to deduct input tax only in respect of the services which he had obtained for the construction of the part of the building used for commercial purposes.

·        Mr Mateusiak now wishes to know from the Polish tax authorities whether, if he ceases his activity as a notary, he must make the part of the building used for commercial purposes subject to VAT. He takes the view in this regard that such taxation must no longer take place once the adjustment period for the correction of the deduction of input tax in respect of the building has expired. The Polish tax authorities were unable to agree with that view. Mr Mateusiak then brought an action.

·        The Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) considers EU law decisive for the case and on 19 May 2015 referred the following question to the Court of Justice under Article 267 TFEU:

·        Must Article 18(c) of the VAT Directive be interpreted as meaning that, on expiry of the adjustment period referred to in Article 187 of the directive, a taxable person’s fixed assets upon the acquisition of which he deducted VAT, should not be subject to tax and included in the winding-up inventory at the time he ceases his activity, if the period laid down in law for adjusting the input tax on the acquisition thereof, which arises from the estimated period for using those assets in the taxable person’s economic activity, has passed, or as meaning that the fixed assets are subject to tax at the time the taxable person ceases his economic activity, regardless of the adjustment period?

·        In September 2015, Mr Mateusiak, the Hellenic Republic, the Republic of Poland and the European Commission submitted written observations on this question.

Conclusion

The Advocate General proposes that the Court should answer the question referred by the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) as follows:

Article 18(c) of Directive 2006/112/EC must also be applied to goods for which, under Article 187(1) of that directive, the period for the adjustment of deductions of input tax under Article 187(1) has already expired at the time of cessation of the economic activity.

For further information click here to be forwarded to the text of the opinion as published on the website of the CJEU, which will open in a new window.

Did you know that in our section CJEU Rulings we have made a selection of rulings of the CJEU? We have organized these rulings based on the subject they relate to (e.g. Freedom of establishment, Free movement of capital, Indirect taxes on the raising of capital, etc).

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