VAT taxable base of deemed supply of goods. Judgment of the Court of Justice of the EU of April 28th, 2016


The self-consumption of goods for the purposes of VAT, regarded as a deemed supply of goods, is defined as the application by a taxable person to the needs of his business of goods produced, constructed, built, processed, purchased or imported in the activity of the company. However, this deemed supply of goods is not subject to VAT when the taxable person could not deduct the tax borne in the acquisition of the goods.

To determine the taxable base corresponding to the deemed supply of goods is necessary to use the purchase price or cost thereof, in the moment in which the transactions are carried out.

It is precisely how the taxable base should be formed as from the cost price the case under judgment by the European Court of Justice, of an entity that was recipient of a right of use over a plot and some offices under construction, which agreed an annual rent for 20 years, payable in advance.

After the construction of the offices the entity leased most of them, without applying the exemption from the tax, while another part thereof was given to his own use. For the use of its own offices they paid VAT, which taxable base was determined by the cost related to the completion of the construction beside the annual rent already accrued at the date of the transaction. However, the tax administration considered that the tax base had to be set, in addition to the costs of construction, adding the capitalized value of the totality of the rent.

Meanwhile the Court of Justice, by virtue of the provisions of the VAT Directive, firstly, considers that only when input VAT related to the acquisition of the goods could not deducted by the taxable person, the price or costs of goods must be omitted from the tax base of the deemed supply of goods, so that if the taxpayer paid the tax but deduced it these elements must be considered for the tax base.

With regard to the value of the tax base, considers the Court that the cost or purchase price has to be assessed at the time that the supply is carried out. For this purpose, it is necessary to determine whether to take into account the full value of the right of use or only a portion of that value. The Court refers to an example in the case which a third party concluded at such time a contract for a similar right, which would do it for a residual value of the right. So that, taking the full value would lead to ignore that the value of the right of use decreases with time and ignore the rule by which the cost price has to be determined at the time that the delivery is carried out. Therefore, the tax base must be constituted by the value of the rents that must be paid annually as consideration during the remaining term of the right, capitalized in the same way as done in order to determine the value of constituting the right of use.

Attached is a copy of the judgment with case number C-128/14.

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ECJ C 128_14

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