Court of Justice (First Chamber) 14 September 2017, C-132/16 (Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika“ - Sofia v „Iberdrola Inmobiliaria Real Estate Investments“ EOOD.)

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In a preliminary ruling under Article 267 TFEU, the Court of Justice (First Chamber) held that Article 168(a) of Directive 2006/112/EC must be interpreted as entitling a taxable person to deduct input VAT on services consisting of the construction or improvement of a property owned by a third party, even where that third party enjoys the results of those services free of charge, provided that the services are used by both the taxable person and the third party in the context of their respective economic activities. The right to deduct is conditional upon the services not exceeding what is necessary to enable the taxable person to carry out its taxable output transactions and upon the cost of those services being included in the price of those transactions. A national provision such as Article 70(1)(2) of the Bulgarian Law on Value Added Tax (Zakon za danak varhu dobavenata stoynos), which denies the right to deduct solely on the ground that services are supplied free of charge to a third party without regard to their use in the taxable person's economic activity, is incompatible with Article 168(a) of Directive 2006/112.AI