Court of Justice (Fifth Chamber) 29 April 2004, C-137/02 (Finanzamt Offenbach am Main-Land v Faxworld Vorgründungsgesellschaft Peter Hünninghausen und Wolfgang Klein GbR.)

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In Case C-137/02, the Court of Justice (Fifth Chamber) addressed whether a pre-incorporation civil-law partnership (Vorgründungsgesellschaft) established solely to found a capital company is entitled to deduct input VAT where its only output transaction was the transfer of all its assets to the newly formed company, and where the Member State had exercised the option under Articles 5(8) and 6(5) of the Sixth VAT Directive (77/388/EEC) to treat such a transfer as a non-taxable event. The Court held that the partnership qualifies as a taxable person under Article 4 of the Sixth Directive and that, by operation of the successor clause in Articles 5(8) and 6(5)—whereby 'the recipient shall be treated as the successor to the transferor'—the transferor partnership may rely on the recipient company's taxable transactions to establish its right to deduct. Accordingly, a partnership established for the sole purpose of founding a capital company is entitled to deduct input tax paid on supplies of goods and services where its only output transaction was the formal transfer for consideration of those supplies to the founded company.AI