News article

VAT deduction for adjustment works to a public road necessary for the exploitation of a quarry

Following a discussion with the German VAT authorities, the CJEU has ruled that a taxable person is allowed to deduct VAT incurred on all expenses for adjustment works to a public road, property of the municipality. Without these works the exploitation by that taxable person of the limestone quarry would not be possible. The main use of this road is for accessibility of the quarry. Despite the works being transferred for free to the municipality and the road remaining open for the public, these adjustment works are still directly linked to the VAT activities of the company. Therefore, it is allowed VAT deduction for the works that are limited to what is necessary to ensure the operation of the limestone quarry.

The transfer of these works free of charge to the municipality does not constitute a transaction which must be treated as a supply of goods made for consideration (deemed supply). The actual end-use of this road should be taken into consideration. And that is mainly the VAT activity of the company, so the transfer free of charge does not give rise to a situation of untaxed final consumption.

CJEU, C-528/19, Mitteldeutsche Hartstein-Industrie AG, 16 September 2020