VAT: Kreissparkasse Wiedenbrück (C-186/15) CJEU Judgment

VAT: Kreissparkasse Wiedenbrück (C-186/15)

The CJEU has released its Judgment in this case concerning rounding and partial exemption.


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The Court of Justice of the European Union (CJEU) has released its Judgment in this case concerning rounding. This referral from Germany essentially seeks to re-run the technical arguments put forward in Royal Bank of Scotland (C-488/07) (RBS) under the provisions of the later VAT Directive. For background, the taxpayer calculated its deductible proportion, which for the years 2009 and 2010 was 13.55 percent and 13.18 percent respectively. The taxpayer rounded these up to 14 percent. The taxpayer also made adjustments to its initial deductions of input tax, which it again rounded up. The taxpayer was assessed for using a rate that was too high. The CJEU has concluded that it would be contrary to the purpose of the Directive to require mandatory rounding in such derogating methods, although a Member State is free to do so.

The first question is the re-run of the arguments put forward unsuccessfully by the taxpayer in RBS and asks whether Member States are required to apply the ‘rounding-up rule’ in Article 175(1) of the VAT Directive where the deductible proportion is calculated in accordance with one of the derogating methods set out in Article 173(2).

Given the structure of the provisions in the Directive, the CJEU agreed that it could read that the rounding-up rule in Article 175(1) is capable of being applied whenever there is mixed (taxable and exempt) use of goods and services. However, the CJEU noted that the derogating measures in Article 173(2) are aimed at allowing Member States to achieve greater accuracy in determining deductible VAT by taking into account the specific characteristics of the taxable person’s activities. It would therefore be contrary to the purpose of the Directive to require mandatory rounding in such derogating methods, although a Member State is free to do so.

The CJEU noted that this issue had been considered in RBS under the Sixth Directive. The CJEU concluded that this remains good law. The Judgment refers to recital 3 of the VAT Directive, which confirms that the adoption of that Directive has not brought about material changes in the existing legislation on the common system of VAT. There were a few exceptions but these are not applicable to Articles 173 to 175.

The second question concerns the adjustment to deduction under Article 184. Article 184 provides for adjustments where the initial deduction is higher or lower than that to which the taxable person was entitled. Here the CJEU has stated that Member States are only required to apply the rounding up rule in Article 175(1) where the rule was used in calculating the initial deduction. To access the judgment click here.


For further information please contact :

Karen Killington 

Steve Powell 

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