Jern-Fei Ng successfully represented RBS Deutschland Holdings GmbH in his first solo appearance before the European Court of Justice in Luxembourg, the decision of the Court having been handed down shortly before Christmas last year: Case C-277/09 The Commissioners for Her Majesty’s Revenue and Customs v RBS Deutschland Holdings GmbH (22 December 2010).
The reference to the ECJ was made in relation to the issue as to whether RBS Deutschland was entitled to recover input VAT in circumstances where leasing transactions which it had entered into did not result in the payment of output VAT due to a mismatch in the national legislation of the United Kingdom and Germany purporting to transpose a relevant provision of the Sixth Directive. The UK government took the view that RBS Deutschland was not entitled to recover the tax on the grounds that it would be contrary to the principle of fiscal neutrality and/or an abuse of rights to allow it to do so. The UK was supported in its position by the governments of Denmark, Germany, Ireland and Italy.
Four questions were ultimately posed to the ECJ and the Court found in favour of RBS Deutschland in relation to all four, holding as follows:
- In circumstances such as those of the main proceedings, Article 17(3)(a) of 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 must be interpreted as meaning that a Member State cannot refuse to allow a taxable person to deduct input value added tax paid on the acquisition of goods in that Member State, where those goods have been used for the purposes of leasing transactions carried out in another Member State, solely on the ground that the output transactions have not given rise to the payment of value added tax in the second Member State.
- The principle of prohibiting abusive practices does not preclude the right to deduct value added tax, recognised in Article 17(3)(a) of Directive 77/388, in circumstances such as those of the main proceedings, in which a company established in one Member State elects to have its subsidiary, established in another Member State, carry out transactions for the leasing of goods to a third company established in the first Member State, in order to avoid a situation in which value added tax is payable on the sums paid as consideration for those transactions, the transactions having being categorised in the first Member State as supplies of rental services carried out in the second Member State, and in that second Member State as supplies of goods carried out in the first Member State.