Tax cases

No deduction

The claimant had a sewage treatment plant built at a time when it was a body governed by public law and therefore not a taxable person for VAT purposes. Five years later it sold the plant to an environmental foundation established by itself and immediately took a lease back. The sale was regarded as a supply within Article 5(1) of the Sixth Directive. Although the sale and leaseback were transactions concerning immovable property that were exempt the claimant and the foundation each exercised the option for tax so that VAT was payable on both transactions. The claimant applied for deduction of the VAT charged on the initial construction of the plant.
The Dutch tax authority refused the claim so the claimant appealed. The question was referred to the European Court of Justice i.e. whether a body which purchased a capital item as...