Court of Justice of the European Community

Judgment of 10 July 2014

Case C-183/13

In this Judgment, delivered within a reference for a preliminary ruling on the  interpretation of the provisions of the Sixth Directive corresponding to  article 23 of the  VAT Code, in the version in force until 31/12/2007, the Court of Justice of the European  Union states that, when calculating the deduction pro rata of input VAT, Member States  may apply a different calculation formula than the one based on turnover, provided such  formula enables to determine the deduction  pro rata of residual VAT more accurately  than the one resulting from the application of the turnover method.

Accordingly, the  taxpayer – a bank engaged, among other things, in the activity of  financial lease of movable property, subject to VAT – may be required, when calculating  the deductible VAT pro rata regarding mixed-use assets and services, to only consider,  as regards the rent paid by customers under the financial leasing contracts subject to  tax, the portion corresponding to interest and not the entire amount of the rents  concerned. However, this requirement is conditional upon the finding that, in the case  under consideration, the mixed-use assets and services are predominantly consumed in  connection with the non-taxed activity rather than in connection with the taxed car  leasing business.

Court of Justice of the European Court

Judgment of 17 July 2014

Case C-272/13

In this Judgment, delivered within a reference for a preliminary ruling, the Court of  Justice of the European Union states that, in view of the preponderant position which the  right to deduct has in the common VAT system, a penalty consisting of a refusal of the  right to deduct is not compatible with the VAT Directive, unless it is proved that the  conduct subject to penalty amounts to fraud or causes detriment to the State budget.

Accordingly, the Court of Justice concludes that a penalty that makes a transaction  subject to a double imposition of VAT, granting only one possibility to deduct, is not in  accordance with the principle of neutrality of this tax.

In the same vein, although the payment of default interest may constitute an adequate  penalty in the case of infringement of a formal obligation, the payment of default interest  is disproportionate where the amount thereof corresponds to the amount of deductible  tax, thereby depriving the taxpayer of its right to deduction.

Court of Justice of the European Court

Judgment of 17 July 2014

Case C-438/13

In this Judgment, delivered within a reference for a preliminary ruling, the Court of  Justice of the European Union clarifies that the impossibility of a leasing company  recovering the movable assets leased, after the termination of the contract as a result of  the lessee’s breach, cannot be considered a supply of goods for consideration for the  purposes of the settlement of VAT whenever the leasing company’s efforts to recover the  assets are proven.