JUDGMENT OF THE COURT (First Chamber)
14 November 2000 (1)
(Sixth VAT Directive - Deduction of input tax - Undertaking subject to tax on only one part of its operations - Deductible proportion - Calculation - Holding company collecting share dividends and loan interest from its subsidiaries - Involvement in management of subsidiaries)
In Case C-142/99,
REFERENCE to the Court under Article 177 of the EC Treaty (now Article 234 EC) by the Tribunal de Première Instance de Tournai, Belgium, for a preliminary ruling in the proceedings pending before that court between
Floridienne SA
Berginvest SA
and
Belgian State
on the interpretation of Article 19 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),
THE COURT (First Chamber),
composed of: M. Wathelet, President of the Chamber, P. Jann and L. Sevón (Rapporteur), Judges,
Advocate General: N. Fennelly,
Registrar: H.A. Rühl, Principal Administrator,
after considering the written observations submitted on behalf of:
- Floridienne SA and Berginvest SA, by P. Malherbe, D. Waelbroeck and P.-P. Hendrickx, of the Brussels Bar,
- the Belgian State, by A. Snoecx, Adviser in the Directorate-General for Legal Affairs of the Ministry of Foreign Affairs, Foreign Trade and Development Cooperation, acting as Agent, assisted by B. van de Walle de Ghelcke, of the Brussels Bar,
- the Commission of the European Communities, by E. Traversa, Legal Adviser, and H. Michard, of its Legal Service, acting as Agents,
having regard to the Report for the Hearing,
after hearing the oral observations of Floridienne SA and Berginvest SA, the Belgian Government and the Commission at the hearing on 17 February 2000,
after hearing the Opinion of the Advocate General at the sitting on 4 April 2000,
gives the following
The Community legislation
'1. The proportion deductible under the first subparagraph of Article 17(5) shall be made up of a fraction having:
as numerator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions in respect of which value added tax is deductible under Article 17(2) and (3),
as denominator, the total amount, exclusive of value added tax, of turnover per year attributable to transactions included in the numerator and to transactions in respect of which value added tax is not deductible. The Member States mayalso include in the denominator the amount of subsidies, other than those specified in Article 11A(1)(a).
The proportion shall be determined on an annual basis, fixed as a percentage and rounded up to a figure not exceeding the next unit.
2. By way of derogation from the provisions of paragraph 1, there shall be excluded from the calculation of the deductible proportion, amounts of turnover attributable to the supplies of capital goods used by the taxable person for the purposes of his business. Amounts of turnover attributable to transactions specified in Article 13B(d), in so far as these are incidental transactions, and to incidental real estate and financial transactions shall also be excluded. Where Member States exercise the option provided under Article 20(5) not to require adjustment in respect of capital goods, they may include disposals of capital goods in the calculation of the deductible proportion.
The facts in the main proceedings and the question referred for a preliminary ruling
'Must share dividends and interest on loans always be excluded from the denominator of the fraction used to calculate the deductible proportion, even where the company receiving such dividends and interest has involved itself in the management of the undertakings paying them, save in the exercise of its rights as shareholder?
The question referred for a preliminary ruling
- share dividends paid by its subsidiaries to a holding company which is a taxable person in respect of other activities and which supplies management services to those subsidiaries, and
- interest paid by the subsidiaries to the holding company on loans it has made to them, where the loan transactions do not constitute, for the purposes of Article 4(2) of the Sixth Directive, an economic activity of the holding company.
Costs
33. The costs incurred by the Belgian Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.
On those grounds,
THE COURT (First Chamber),
in answer to the question referred to it by the Tribunal de Première Instance, Tournai, by judgment of 31 March 1999, hereby rules:
Article 19 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 is to be interpreted as meaning that the following must be excluded from the denominator of the fraction used to calculate the deductible proportions:
- share dividends paid by its subsidiaries to a holding company which is a taxable person in respect of other activities and which supplies management services to those subsidiaries, and
- interest paid by the subsidiaries to the holding company on loans it has made to them, where the loan transactions do not constitute, for the purposes of Article 4(2) of the Sixth Directive, an economic activity of the holding company.
Wathelet
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Delivered in open court in Luxembourg on 14 November 2000.
R. Grass M. Wathelet
Registrar President of the First Chamber
1: Language of the case: French.