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World Journal of VAT/GST Law Volume 1, 2012 - Issue 1
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Original Articles

The right of a partnership to deduct input VAT paid in respect of preparatory activities conducted by future partners: a commentary on Case C-280/10 Polski Trawertyn

Marta Papis Doctoral candidate, Lund University, Sweden (Department of Business Law, School of Economics and Management), graduate of Lund University, Sweden and University of Łódź, Poland.
Pages 99-110 | Published online: 07 May 2015

  • Case C-280/10 Kopalnia Odkrywkowa Polski Trawertyn P Granatowicz, M Wąsiewicz spółka jawna v Dyrektor Izby Skarbowej w Poznaniu [2012] ECR 0000.
  • Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax [2006] OJ L347/1, hereinafter ‘VAT Directive’.
  • The Court of Justice has dealt extensively with the issue of the right to deduct input VAT incurred on preparatory activities; see Cases 268/83 Rompelman [1985] ECR 655; C-97/90 Lennartz [1991] ECR I-3795; C-110/94 INZO [1996] ECR I-857; C-37/95 Ghent Coal Terminal [1998] ECR I-1; C-110/98 to C-147/98 Galbafrisa [2000] ECR I-1577; C-396/98 Grundstückgemeinschaft Schloßstraße [2000] ECR I-4279; C-400/98 Brigitte Breitsohl [2000] ECR I-4321; C-385/09 Nidera Handelscompagnie [2010] ECR 0000. In Case C-32/03 I/S Fini H [2005] ECR I-1599 the Court of Justice ruled on the deductibility of VAT on expenditure incurred in order to terminate the economic activities of a taxable person.
  • In Case 165/86 Intiem [1988] ECR 1471, the Court of Justice ruled that an employer was entitled to deduct VAT on fuel delivered by the supplier direct to employees. The fuel was used for the purposes and in the course of the undertaking's business. The deduction was allowed as the employer and employees were not separate taxable persons. In Polski Trawertyn, irrespective of the continuity of the business in question, which was recognised by the Court of Justice, in the light of reasoning of the Court the future partners and the partnership were separate taxable persons.
  • Hereinafter referred to as ‘Polski Trawertyn’.
  • Rompelman (n 3).
  • INZO (n 3).
  • Art 9(1) of the VAT Directive.
  • Case 137/02 Faxworld [2004] ECR I-5547.
  • Inter alia, Rompelman (n 3); INZO (n 3); Brigitte Breitsohl (n 3).
  • Nidera Handelscompagnie (n 3).
  • Opinion of Advocate General Cruz Villalón delivered on 15 September 2011 in Polski Trawertyn (n 1), para 2.
  • Faxworld (n 9).
  • Dennis Ramsdahl Jensen and Henrik Stensgaard, ‘The Distinction between Direct and General Costs with Regard to the Deduction of Input VAT—The Case of Acquisition, Holding and Sale of Shares' (2012) 1 World Tax Journal 3, 28.
  • Case C-408/98 Abbey National [2001] ECR I-1361.
  • Provisions of German law corresponding to Arts 19 and 29 of the VAT Directive.
  • AG Cruz Villalón discussed the issue in detail in his Opinion in Polski Trawertyn (n 1) at paras 39 ff.
  • Art 168 of the Directive and case law (Case C-29/08 AB SKF [2009] ECR I-10413 para 56 and the case law referred to therein).
  • Art 14 of the VAT Directive.
  • Except for so called ‘self-supply’ (Articles 16, 17 and 26 of the VAT Directive).
  • In the analysis of the second question referred by the national court.
  • para 45 of the ruling.
  • para 40 of the AG's Opinion (n 12).
  • The issue has been analysed by Ad van Doesum, ‘Contributions to Partnerships from a European VAT Law Perspective' [2010] 6 EC Tax Review 259. The author concludes in that respect that equation between a partner and his partnership on the basis of Art 10 of the VAT Directive is not justified from the EU VAT perspective in the light of the case law of the Court of Justice (eg Case C-260/95 JA van der Steen [1997] ECR I-1005) unless the partner and the partnership form a VAT group. The author notes, however, that the outcome can be different if the partner acts in the capacity of an employee or if a situation of abuse of law exists.
  • Case C-23/98 J Heerma [2000] ECR I-419.
  • The issue of what determines the separability of an entity as a taxable person has been also discussed in the context of companies and their branches (Case C-210/04 FCE Bank [2006] ECR I-2803).
  • Pursuant to Art 19 of the VAT Directive, 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 that the person to whom the goods are transferred is to be treated as the successor to the transferor.
  • Case C-497/01 Zita Modes [2003] ECR I-14393, para 40.
  • ibid, para 44.
  • In Abbey National (n 15), the sale of title to real estate which constituted assets of a business of leasing office premises for professional and commercial use was regarded as a transfer of a going concern.
  • The legal basis for the exemption constituted point 6 of Art 8(1) of the Decree of the Polish Minister for Finance of 27 April 2004 on the implementation of certain provisions of the Law on the tax on goods and services (Dziennik Ustaw No 97, item 970, as amended).
  • Inter alia: Malgorzata Militz, ‘Aport a korekta odliczeń. Aspekty wspólnotowe problemu’ [2008] 11 Przegląd Podatkowy 34; Krzysztof Wilk and Rafal Zajączkowski, ‘Opodatkowanie VAT aportów do spółek osobowych’ [2009] 12 Przegląd Podatkowy 18; Adam Bartosiewicz and Ryszard Kubacki, VAT Komentarz, System Informacji Prawnej ‘Lex’ (Legal Information System ‘Lex’) (Wolters Kluwer, 2012).
  • Inter alia: the judgment of the Polish Supreme Administrative Court I FSK 505/07; the judgment of the Regional Administrative Court in Warsaw, III SA/Wa 364/08; the judgment of the Regional Administrative Court in Poznań, I SA/Po 464/09; the judgment of the Regional Administrative Court in Olsztyn I SA/OI 221/08.
  • Decree of the Polish Minister for Finance of 28 November 2008 on the implementation of certain provisions of the Law on the tax on goods and services (Dziennik Ustaw No 212, item 1336).
  • Case 348/87 Stichting Uitvoering Financiële Acties [1989] ECR 1737, para 13.
  • Militz (n 32) 35.
  • Case C-442/01 KapHag [2003] ECR I-6851.
  • Case C-60/90 Polysar [1991] ECR I-3111; Case C-333/91 Sofitam [1993] ECR I-3513; Case C-142/99 Floridienne and Berginvest [2000] ECR I-9567.
  • KapHag (n 37) concerns the admission of a partner to a partnership. Similar conclusions with regard to a company selling shares were reached by the Court of Justice in Case C-465/03 Kretztechnik [2005] I-4357.
  • KapHag (n 37) para 41.
  • ibid, paras 37 and 38.
  • Van Doesum (n 24) 266.
  • Opinion of AG Ruiz-Jarabo Colomer delivered on 6 February 2003 in KapHag (n 37).

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