Advocate General

In Grundstucksgemeinschaft Kollaustrabe 136 (C-9/20), the taxpayer (GK) was both the lessee and lessor of various commercial properties. Both its lessor and GK had opted to tax the leases and both the lessor and GK had been authorised by the tax authority to use ‘cash accounting’, that is to calculate their tax on the basis of remuneration received rather than supplies when made and received. Some of GK’s rental payments to its lessor were deferred and paid in later years. A portion of rent was released and never paid. GK claimed its input tax on the deferred rental payments in the year in which the rent was paid but the tax authority argued that the input tax deductions should be made in the year to which the rent related; notwithstanding that GK used ‘cash accounting’, GK’s right of deduction arose at the time of supply (ie when the real estate was made available to GK under the lease). The earlier tax years to which the input tax related were time-barred by the time the tax authority issued its notice and consequently, GK was prevented from reclaiming its input tax.

The German court was satisfied that under German law the right to an input tax deduction arose in the earlier years to which the rental payments related but asked the CJEU whether this national rule was precluded by the VAT Directive.

The Advocate General analysed the detail of the provisions Directive and the background to them and concluded that they clearly precluded the German rule which required GK to claim its input tax deduction in the earlier years in circumstances where GK’s lessor was authorised to use ‘cash accounting’ and therefore only obliged to account for output tax when the rent was paid. The Advocate General observed that GK was not trying to secure any benefit by claiming its input tax deduction in the later year. On the contrary, reclaiming its input tax in the earlier years would have given GK a substantial cash-flow benefit to the detriment of the tax authority.

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