The right of a partnership to deduct input VAT paid in respect of preparatory activities conducted by future partners: a commentary on Case C-280/10 Polski Trawertyn

Abstract

On 1 March 2012 the Court of Justice delivered a judgment in Case C-280/10 Polski Trawertyn.1 The Court was asked questions relating to the right to deduct input VAT by a partnership, where it had been incurred in relation to the purchase of immovable property effected by the persons who subsequently founded the partnership. The Court held that under the provisions of the VAT Directive2 the partnership was entitled to recover the tax and this right was not affected by the fact that the invoice was issued in the names of the partners rather than the name of the partnership. The judgment fits into the consistent line of jurisprudence of the Court of Justice, which highlights the importance of the principle of neutrality of the European VAT system for taxable persons according to which the trader shall be entirely relieved of the burden of VAT payable or paid in the course of all his economic activities. It is not the first ruling in which the Court of Justice has adopted a non-formalistic approach giving priority to the fundamental principles underlying and constituting an integral part of the VAT system before the formal obligations established by legislation of national laws of Member States.3 Nevertheless, the ruling in Polski Trawertyn must not be listed, without any further commentary, together with other cases whose subject matter centres on the deductibility of input VAT related to acts preparatory to the carrying on of an economic activity. Due to the specific circumstances of the case that differ from the scenarios involved in cases heard by the Court of Justice previously, the judgment goes further than earlier rulings. Not only did the Court, for the first time, interpret the VAT