Exclusion from the Right to Deduct VAT: Relationship Between EU and National Law

Does the exclusion from VAT deduction provided for by the law of an EU Member State fall within the standstill clause contained in EU law?

Under this provision, can Member States maintain all the exclusions from deduction provided for by their national legislation at the date of their accession until the Council establishes the provisions of Article 176, first paragraph, of the VAT Directive?

To answer these questions, it is first necessary to review the content of Article 176, first paragraph, of the VAT Directive, which establishes, in the first paragraph, a limitation of the right to deduct by the Council and, in the second paragraph, a standstill clause: "The Council, acting unanimously on a proposal from the Commission, shall determine the expenditure in respect of which VAT shall not be deductible. In any case, expenditure not of a strictly business nature, such as expenses for luxury, entertainment, or entertainment, shall be excluded from the right to deduct." Until the entry into force of the provisions referred to in the first subparagraph, Member States may maintain all the exclusions provided for by their national legislation on 1 January 1979 or, for Member States which acceded to the Community after that date, on the date of their accession.