(September 10, 2014)

On September 10, 2014 the European Court of Justice (ECJ) ruled in case C-92/13 Gemeente 's-Hertogenbosch versus Staatssecretaris van Financiën. The following question was referred to the ECJ for a preliminary ruling:

Should Article 5(7)(a) of the Sixth Directive be interpreted as meaning that supplies are made for consideration in a situation in which a municipality takes first occupation of a building which it has had built on its own land and which it is to use at the rate of 94% for its activities as a public authority and at the rate of 6% for its activities as taxable person, including 1% for exempt activities to which no right of deduction applies?

The ECJ ruled as follows:

Article 5(7)(a) of 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 must be interpreted as applying to a situation, such as that at issue in the main proceedings, in which a municipality takes first occupation of a building which it has had built on its own land and of which it intends to use 94% of the area for its activities as a public authority and 6% of that area for its activities as a taxable person, including 1% for exempt activities in respect of which no right to deduct VAT exists. However, the subsequent use of the building for the activities of the municipality may give rise to a right to deduct the tax paid in respect of the application provided for by that provision only in the proportion corresponding to its use for the purposes of the taxable transactions, pursuant to Article 17(5) of that directive. 

Click here for the text of the ruling.

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