Joined Cases C-487/01 and C-7/02

Gemeente Leusden and Holin Groep BV cs

v

Staatssecretaris van Financiën

(Reference for a preliminary ruling from the Hoge Raad der Nederlanden)

(Turnover taxes – Common system of value added tax – Article 17 of Sixth Directive 77/388/EEC – Deduction of input tax – Amendment of national legislation withdrawing the right to opt for taxation of lettings of immovable property – Adjustment of deductions – Application to current leases)

Summary of the Judgment

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Deductions made under a right to opt for taxation granted by the Member State concerned in respect of lettings of immovable property acquired as capital goods – Withdrawal of the option and reintroduction of the exemption entailing the adjustment of deductions previously made – Whether permissible – Condition – Account to be taken of the legitimate expectation of taxpayers

(Council Directive 77/388, Arts 13(B) and (C), 17 and 20)

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Taxable transactions – Application of goods for the purposes of a business – Scope – Legislative amendment withdrawing the right to opt for taxation of a financial transaction which is generally exempt – Not included

(Council Directive 77/388, Art. 5(7)(a))

1. Articles 17 and 20 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, interpreted in accordance with the principles of the protection of legitimate expectations and legal certainty, do not preclude the withdrawal by a Member State of the right to opt for taxation of lettings of immovable property which it has granted to its taxpayers under Article 13(C) of the Sixth Directive and the consequent reintroduction of the exemption for such lettings under Article 13(B)(b) which results in the adjustment of deductions made in respect of the immovable property acquired as capital goods which is let pursuant to Article 20 of that Directive.

In such circumstances, the Member State concerned must take account of the legitimate expectation of its taxable persons when determining the arrangements for implementing the legislative amendment. The repeal of legislation from which a person liable to pay value added tax has derived an advantage in paying less tax, without there being any abuse, cannot however, as such, breach a legitimate expectation based on Community law.

(see paras 48, 82, operative part 1)

2. A legislative amendment by which a Member State withdraws the right to opt for taxation of lettings of immovable property entailing payment of amounts equivalent to deductions made previously does not constitute a situation which falls within the terms of Article 5(7)(a) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes. That provision is intended to cover the application of goods, by a taxable person, for the purposes of his business, and not a legislative amendment withdrawing the right to opt for taxation of a financial transaction which is generally exempt.

(see paras 92, 95, operative part 2)

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

(Turnover taxes – Common system of value added tax – Article 17 of the Sixth Directive 77/388/EEC – Deduction of input tax – Amendment of national legislation withdrawing the right to opt for taxation of lettings of immovable property – Adjustment of deductions – Application to current leases)

In Joined Cases C-487/01 and C-7/02,

REFERENCES to the Court under Article 234 EC by the Hoge Raad der Nederlanden (Netherlands) for a preliminary ruling in the proceedings pending before that court between

and

on the interpretation of Articles 5(7)(a), 17 and 20(2) 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 (OJ 1977 L 145, p. 1) and the principles of the protection of legitimate expectations and legal certainty,

THE COURT (Fifth Chamber),,

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

Advocate General: A. Tizzano,

after considering the written observations submitted on behalf of:

after hearing the oral observations of Gemeente Leusden, represented by R. Brouwer and H.P. Bodt, of Holin Groep BV cs, represented by R. Vermeulen, advocaat, of the Netherlands Government, represented by S. Terstal, acting as Agent, and the Commission, represented by H.M.H. Speyart and R. Lyal, acting as Agents, at the hearing on 9 January 2003,

after hearing the Opinion of the Advocate General at the sitting of 3 June 2003,

gives the following

‘Member States may treat as supplies made for consideration:

‘The taxable amount shall be:

…

‘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:

…

…

C. Options

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

…

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

‘Origin and scope of the right to deduct

1.

2.…’

‘Adjustments of deductions

1.

2.By way of derogation from the preceding subparagraph, Member States may base the adjustment on a period of five full years starting from the time at which the goods are first used.

In the case of immovable property acquired as capital goods the adjustment period may be extended up to 10 years.

3.…

4.…

6.‘In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.’

‘By way of derogation on this point from paragraphs 1 and 5, Article 11(1)(b)(5) of the [amending law] in the version applicable immediately before the entry into force of this law, remains applicable until the 10th financial year following the financial year in which the lessor began to use the immovable property, subject to the condition that:

The first question

– Observations submitted to the Court

– Reply of the Court

Articles 17 and 20(2) of the Sixth Directive interpreted in accordance with the principles of the protection of legitimate expectations and legal certainty do not preclude the withdrawal by a Member State of the right to opt for taxation of lettings of immovable property which results in the adjustment of deductions made in respect of the immovable property acquired as capital goods which is let pursuant to Article 20 of the Sixth Directive.

Where a Member State withdraws the right to opt for taxation of lettings of immovable property, it must take account of the legitimate expectation of its taxable persons when determining the arrangements for implementing the legislative amendment. The repeal of legislation from which a taxable person has derived an advantage in paying less tax, without there being any abuse, cannot however, as such, breach a legitimate expectation based on Community law.

The second question

The first question

– Observations submitted to the Court

– Reply of the Court

The second question

On those grounds,

THE COURT (Fifth Chamber),

in answer to the questions referred to it by the Hoge Raad der Nederlanden by judgments of 14 and 21 December 2001, hereby rules:

Jann

Rosas

von Bahr

Delivered in open court in Luxembourg on 29 April 2004.

R. Grass

V. Skouris

Registrar

President