On June 16, 2016 the Court of Justice of the European Union (CJEU) judged in Case C-186/15 Kreissparkasse Wiedenbrück versus Finanzamt Wiedenbrück (ECLI:EU:C:2016:452).
This request for a preliminary ruling concerns the interpretation of Article 173(2), Article 175(1) and Article 184 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1).
The request has been made in proceedings between Kreissparkasse Wiedenbrück (‘the Kreissparkasse’) and Finanzamt Wiedenbrück (Wiedenbrück Tax Office, Germany) concerning the calculation of the right to deduct value added tax (‘VAT’) due or paid upon the acquisition of goods or services used to carry out both transactions in respect of which VAT is deductible and transactions in respect of which VAT is not deductible (‘mixed use goods and services’).
The main proceedings and the questions referred for a preliminary ruling
· The Kreissparkasse is a credit institution.
· The Kreissparkasse established that the deductible proportion of the VAT attributable to its acquisition of mixed use goods and services was 13.55% for the year 2009 and 13.18% for the year 2010, percentages which it rounded up to 14%. In calculating, for those financial years, the amount of adjustments it needed to make under Article 15a of the UStG because of its waiver of a tax exemption scheme with respect to transactions with its professional clients, the Kreissparkasse also applied deductible proportions which it rounded up to 14%.
· Following a tax inspection carried out in 2011 in relation to those financial years, the Kreissparkasse was required, by virtue of two decisions of the Wiedenbrück Tax Office of 3 January 2012, to effect a further tax adjustment on the ground that it had wrongly rounded up the deductible proportions of VAT to the next whole number.
· The Kreissparkasse lodged an objection to those decisions, relying on the provisions of Article 175(1) of Directive 2006/112, according to which, the applicant claims, the deductible proportion must be rounded up to a figure not exceeding the next whole number.
· By decision of 13 June 2012, Wiedenbrück Tax Office dismissed that objection on the ground that, in essence, Article 175(1) of Directive 2006/112 is only applicable when the Member State concerned has not made use of the option set out in Article 173(2) of that directive to derogate from the calculation method set out in the second subparagraph of Article 173(1) of that directive. According to the Tax Office, the Federal Republic of Germany has made use of that option since, in accordance with the third sentence of Article 15(4) of the UStG, the deductible proportion must be established, as far as possible, according to the so-called method of ‘economic allocation’.
· By proceedings brought before the Finanzgericht Münster (Finance Court, Münster, Germany) on 16 July 2012, the Kreissparkasse contested the Wiedenbrück Tax Office’s decision of 13 June 2012. The referring court states that, in paragraph 21 of the judgment of 18 December 2008 in Royal Bank of Scotland (C‑488/07, EU:C:2008:750), the Court held that the rounding-up rule laid down in the second subparagraph of Article 19(1) of the Sixth Directive is not applicable when the goods and services at issue are subject to one of the special sets of rules laid down in the third subparagraph of Article 17(5) of that directive. It is however in doubt as to whether this solution is also valid for Article 175(1) of Directive 2006/112.
· In those circumstances, the Finanzgericht Münster (Finance Court, Münster) decided to stay proceedings and to refer the following questions to the Court for a preliminary ruling:
(1) Are the Member States required to apply the rounding-up rule in Article 175(1) of Directive 2006/112 in cases where the deductible proportion is calculated in accordance with one of the special methods set out in headings (a), (b), (c) or (d) of Article 173(2) of that directive?
(2) Are the Member States required to apply the rounding-up rule in Article 175(1) of Directive 2006/112 when tax is adjusted in accordance with Article 184 et seq. of that directive, where the deductible proportion within the meaning of Article 175(1) of that directive is calculated in accordance with one of the special methods set out in headings (a), (b), (c) or (d) of Article 173(2) of that directive or in accordance with headings (a), (b), (c) or (d) of the third subparagraph of Article 17(5) of the Sixth Directive?
(3) Are the Member States required to adjust deductions in accordance with Article 184 et seq. of Directive 2006/112 by applying the rounding-up rule (second question) in such a way as to round the amount subject to adjustment up or down to a whole percentage in favour of the taxable person?’
The CJEU judged as follows:
1) Article 175(1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that the Member States are not required to apply the rounding-up rule laid down in that provision where the deductible proportion is calculated in accordance with one of the derogating methods set out in Article 173(2) of that directive.
2) Article 184 et seq. of Directive 2006/112 must be interpreted as meaning that the Member States are required to apply the rounding-up rule laid down in Article 175(1) of that directive in the event of adjustment where, under their national legislation, the deductible proportion has been calculated in accordance with one of the methods set out in Article 173(2) of that directive or in the third subparagraph of Article 17(5) 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, only where that rule was applied to determine the initial amount of the deduction.
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