Self-supply of goods in the light of the principle of fiscal neutrality

Sammanfattning: Article 16 of the VAT Directive, which regulates the self-supply of goods, is a good example of how it is complicated to achieve fraud resistance and full compliance with the principle of fiscal neutrality in the current system of VAT. This provision concerns taxation on business goods used for private purposes, which has shown to be a complex area of VAT. Although the application of this rule has been made conditional upon strict requirements, leeway for fraudulent behavior of a taxable person still remains. The Court supplemented the current complex VAT system with the doctrine of ‘Asset labelling’ which aimed at simplifying the procedure for a taxable person to deduct input and account for output VAT on his capital goods when they are used for mixed purposes. This doctrine intended to bring the self-supply rules in VAT to perfection in the light of the principle of fiscal neutrality. However, the Commission was of a different opinion. Granting a full right of deduction to a taxable person who acquired capital goods for mixed use was too difficult for it to digest. This led to adoption of the new Article 168a of the VAT Directive, which limits the initial deduction of input VAT to the actual use, and is applicable just to immovable property. Although the Commission tends to believe that the new provision solved problems caused by allocation of assets, the article is considered to not be in compliance with the principle of fiscal neutrality.