Commentary

V3.467 Adjustment by reference to a change in intended use

Part V3 Supplies, acquisitions and imports

V3.467 Adjustment by reference to a change in intended use

V3.467 Adjustment by reference to a change in intended use

EU legislation

Directive 2006/112/EC art 185(1) provides that “Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained.” In Stichting Schoonzicht1. the taxpayer (S) owned a plot of land on which an apartment complex was built. S's original intention was that the apartment complex was going to be used solely for taxable purposes and therefore input tax was recovered in full. However, prior to making any taxable supplies of the apartments, S changed its intention and rented out (on an exempt basis) four of the seven apartments in the block (the other three remained unoccupied). In accordance with the law in the Netherlands, S was obliged to pay back all of the VAT reclaimed in respect of the four apartments. It lodged an objection to the Dutch provisions which required this. S argued that for capital goods, provisions requiring an adjustment in full of the initial VAT recovery when those goods were first used were contrary to EU law (Directive 2006/112/EC, arts 184 to 187). Instead, it contended, the adjustment ought to be spread over a number of years. This would leave S required only to pay back a portion of the VAT initially recovered each year. The CJEU was clear that an adjustment of the input tax recovery was necessary. The

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