Case C-137/02

Finanzamt Offenbach am Main-Land

v

Faxworld Vorgründungsgesellschaft Peter Hünninghausen und Wolfgang Klein GbR

(Reference for a preliminary ruling from the Bundesfinanzhof)

(Reference for a preliminary ruling – Interpretation of the Sixth VAT Directive – Right of a Vorgründungsgesellschaft (civil-law partnership the object of which is to prepare the means necessary for the activities of a capital company yet to be formed) to deduct input VAT – Transfer for consideration of the totality of those means upon formation of the capital company – Transfer not subject to VAT in consequence of the exercise by the Member State concerned of the option provided for in Article 5(8) of the Sixth VAT Directive)

Summary of the Judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Civil-law partnership founded for the sole purpose of setting up a capital company – Transfer of the totality of its assets to that capital company once founded – Member State not regarding such a transfer as a supply of goods – Right to deduct

(Council Directive 77/388, Arts 5(8), 6(5) and 17(2))

A partnership established for the sole purpose of founding a capital company is entitled to deduct the input tax paid on supplies of goods and services where its only output transaction in the performance of its object was to effect by formal act the transfer for consideration of the supplies obtained to that capital company once founded and where, because the Member State concerned has exercised the options provided for in Articles 5(8) and 6(5) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 95/7, a transfer of a totality of assets is not deemed to be a supply of goods or services.

Even if that partnership does not intend to effect itself taxable operations, its sole object being to prepare the activities of the capital company, the tax which it wishes to deduct relates none the less to supplies acquired for the purpose of effecting taxable transactions, even though those transactions are only the planned transactions of the capital company.

(see paras 41, 43, operative part)

JUDGMENT OF THE COURT (Fifth Chamber) 29 April 2004 (1)

(Reference for a preliminary ruling – Interpretation of the Sixth VAT Directive – Right of a Vorgründungsgesellschaft (civil-law partnership the object of which is to prepare the means necessary for the activities of a capital company yet to be formed) to deduct input VAT – Transfer for consideration of the totality of those means upon formation of the capital company – Transfer not subject to VAT in consequence of the exercise by the Member State concerned of the option provided for in Article 5(8) of the Sixth VAT Directive)

In Case C-137/02,

REFERENCE to the Court under Article 234 EC by the Bundesfinanzhof (Germany) for a preliminary ruling in the proceedings pending before that court between

and

on the interpretation of Article 17(2) 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 (OJ 1977 L 145, p. 1), as amended by Council Directive 95/7/EC of 10 April 1995 (OJ 1995 L 102, p. 18),

THE COURT (Fifth Chamber),,

composed of: P. Jann, acting for the President of the Fifth Chamber, A. Rosas and S. von Bahr (Rapporteur), Judges,

Advocate General: F.G. Jacobs,

after considering the written observations submitted on behalf of:

after hearing the oral observations of the Finanzamt Offenbach am Main-Land, represented by J. Aue, acting as Agent, Faxworld Vorgründungsgesellschaft Peter Hünninghausen und Wolfgang Klein GbR, represented by R.W. Horn, the German Government, represented by M. Lumma, and the Commission, represented by K. Gross, assisted by A. Böhlke, at the hearing on 11 September 2003,

after hearing the Opinion of the Advocate General at the sitting on 23 October 2003,

gives the following

‘1.

2.‘In the event of a transfer, whether for consideration or not or as a contribution to a company, of a totality of assets or part thereof, Member States may consider that no supply of goods has taken place and in that event the recipient shall be treated as the successor to the transferor. Where appropriate, Member States may take the necessary measures to prevent distortion of competition in cases where the recipient is not wholly liable to tax.’

‘1.

2.…’.

‘(1a) Transactions in the context of the transfer of a business to another trader for the purposes of his undertaking are not subject to [VAT]. A transfer of a business takes place where an undertaking or separately managed business unit forming part of an undertaking is in its entirety transferred, whether for consideration or not, or brought in as a contribution to a company. The recipient trader takes the place of the transferor.’

‘Is a partnership which has been established for the sole purpose of forming a limited company entitled to deduct input tax paid on goods and services procured by it if, after that company has been formed, that partnership effects by formal act a transfer for consideration of the procured goods and services to the subsequently founded limited company and, from the outset, did not intend to carry out any other output transactions and if, in the Member State concerned, a transfer of a totality of assets is not deemed to be a supply of goods or services (first sentence of Article 5(8) and Article 6(5) of the Sixth Directive …)?’

On those grounds,

THE COURT (Fifth Chamber),

in answer to the question referred to it by the Bundesfinanzhof by order of 23 January 2002, hereby rules:

Jann

Rosas

von Bahr

Delivered in open court in Luxembourg on 29 April 2004.

R. Grass

V. Skouris

Registrar

President