Case C-269/03

Administration de l’enregistrement et des domaines

and

État du grand-duché de Luxembourg

v

Vermietungsgesellschaft Objekt Kirchberg SARL

(Reference for a preliminary ruling from the Cour d’appel (Luxembourg))

(Sixth VAT Directive – Article 13(C) – Exemption of transactions of leasing or letting of immovable property – Right of option for taxation – Deduction of input tax – Obtaining prior approval of the tax authorities)

Summary of the Judgment

Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Exemptions laid down by the Sixth Directive – Exemption of transactions of leasing or letting of immovable property – Taxpayers’ right of option – Right to deduct conditional on obtaining prior approval – Whether permissible

(Council Directive 77/388, Art. 13(C))

The provisions of subparagraph (a) of the first paragraph and of the second paragraph of Article 13(C) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes do not preclude a Member State, which has exercised the power conferred by those provisions to allow taxpayers a right of option for taxation on leasing or letting transactions of immovable property, from adopting legislation which makes full deduction of the input VAT paid conditional upon non-retroactive, prior approval of the tax authorities.

(see para. 30, operative part)

JUDGMENT OF THE COURT (First Chamber) 9 September 2004 (1)

(Sixth VAT Directive – Article 13(C) – Exemption of transactions of leasing or letting of immovable property – Right of option for taxation – Deduction of input tax – Obtaining prior approval of the tax authorities)

In Case C-269/03,REFERENCE for a preliminary ruling under Article 234 ECfrom the Cour d'appel (Luxembourg), made by decision of 18 June 2003, received on 20 June 2003, in the proceedings:

v

THE COURT (First Chamber),,

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

Advocate General: L.A. Geelhoed,

having regard to the written procedure,after considering the observations submitted on behalf of:

having regard to the Report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 25 March 2004,

gives the following

‘B. Other exemptions

Without prejudice to other Community provisions, Member States shall exempt the following under conditions which they shall lay down for the purpose of ensuring the correct and straightforward application of the exemptions and of preventing any possible evasion, avoidance or abuse:

...

(b) the leasing or letting of immovable property …:

...

C. Options

Member States may allow taxpayers a right of option for taxation in cases of:

(a) letting and leasing of immovable property;

...

Member States may restrict the scope of this right of option and shall fix the details of its use.’

‘The following are exempted from value added tax within the limits and under the conditions to be laid down by Grand-Ducal Regulation:

…

(g) the leasing or letting of immovable property …’

…

(b) any person who, by written privately negotiated contract, leases or lets immovable property to a taxable person’.

‘The right of option can be exercised only in respect of immovable property which is used exclusively or, in the case of mixed use, mainly by … the tenant for the pursuit of activities permitting it to deduct input tax.’

‘Any person exercising the right of option must lodge a written declaration of option for approval by the Registration Authority.

In the case of a supply for consideration, the approval must have been obtained prior to the formal completion of the official document evidencing the transaction. The Authority shall decide on the declaration of option by the end of the month in which it is submitted.

In the case of letting, application of the tax shall be authorised from the first day of the month following that in which the declaration of option was approved. The administrative decision must be made during the month within which that declaration is received.’

‘Does subparagraph (a) of the first paragraph of Article 13(C) of the Sixth … Directive … permit a Member State which has exercised the power to allow taxpayers a right of option for taxation in cases of letting and leasing of immovable property to make full deduction of the input VAT conditional upon non-retroactive approval of the tax authorities first being obtained?’

On those grounds, the Court (First Chamber) hereby rules:

Signatures.