Munich, Germany

ECJ Case C-528/19: Deduction of full input VAT without taxation of a benefit free of charge

By Brigitte Jakoby, Jakoby Dr Baumhof - Wirtschaftsprüfer Steuerberater Rechtsanwälte

In this case, Mitteldeutsche Hartstein-Industrie AG deals with the deduction of input VAT for construction work of public roads.


The plaintiff company was granted permission to operate a quarry under the condition that it expanded a public road belonging to the municipality in which that quarry was located. The plaintiff agreed with the municipality to develop the public road and to transfer it to the municipality, free of charge. The company deducted the full input VAT for the construction costs.

The tax authority refunded the input VAT but also, intended to assess a taxable supply of goods free of charge. In contrast, the German Federal Fiscal Court wanted to rule that the input VAT was not deductible in circumstances of transferring the road free of charge, but appealed to the ECJ before making a decision.

ECJ decision

The ECJ decided that the company is entitled to deduct input VAT paid for the works of the extension of the public road. The road is used both by the taxable person in connection with its economic activity and by the public. But the public use is irrelevant because the works for the extension of the road were carried out not for the purposes of the municipality, but in order to adapt the road to the heavy goods traffc generated by operating the quarry. Therefore, the costs of those works are considered to be a cost component of the company’ sprice charged for its supplies.

The ECJ also rejected the idea that there could be a final untaxed consumption, because the taxable person did not pursue any purposes other than those of his own business. The development of the road benefited the plaintiff himself and was directly linked to his entire economic activities.

This decision is important and helpful for any taxable person building infrastructure facilities and handing them over free of charge to municipalities.

Brigitte Jakoby

Brigitte Jakoby

GGI member firm
Jakoby Dr Baumhof - Wirtschaftsprüfer Steuerberater Rechtsanwälte
Advisory, Auditing & Accounting, Corporate Finance, Law Firm Services, Tax
Rothenburg o.d.T., Ebersberg, Germany
T: +49 9861 9405 0
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Jakoby Dr Baumhof - Wirtschaftsprüfer Steuerberater Rechtsanwälte is a mediumsized interdisciplinary company located in the south of Germany, with offices in Rothenburg o.d. Tauber, located in Northern Bavaria, and Ebersberg, near Munich.

In 1987, Brigitte Jakoby started collaborating with her husband Eugen Jakoby, also a German Chartered Accountant and German Certified Tax Advisor. Since 1996, she has been one of the Senior Partners at Jakoby Dr. Baumhof.

Published: Indirect Taxes Newsletter, No. 12 Autumn 2021 l Photo: Marcel -


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