Court of Justice 25 November 2015, C-332/14 (Wolfgang und Dr. Wilfried Rey Grundstücksgemeinschaft GbR v Finanzamt Krefeld.)

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In this Opinion delivered on 25 November 2015 in Case C-332/14, Advocate General Mengozzi opines that the first subparagraph of Article 17(5) and Article 19(1) of the Sixth VAT Directive preclude a Member State from systematically and indiscriminately giving precedence, for all mixed-use goods and services, to any allocation key other than the turnover-based key, as the German Tax Amendment Law of 2003 (third sentence of Paragraph 15(4) of the Law on Turnover Tax) purports to do by relegating the turnover-based key to a purely subsidiary role. The Advocate General further opines that, while Article 20 of the Sixth Directive does not in principle preclude a Member State from requiring adjustment of initial VAT deductions following a legislative change in the calculation method, such adjustment must be clearly and expressly prescribed by national law and comply with the principles of legal certainty and protection of legitimate expectations, conditions not met in the present case given the absence of express adjustment provisions or transitional arrangements. Accordingly, the Advocate General proposes that, having failed to clearly identify the specific transactions to which an alternative allocation method applies, the Federal Republic of Germany cannot enforce that alternative method against taxable persons such as the applicant partnership.AI