Title X: Deductions

Chapter 2: Proportional deduction

Article 173

1. In the case of goods or services used by a taxable person both for transactions in respect of which VAT is deductible pursuant to Articles 168, 169 and 170, and for transactions in respect of which VAT is not deductible, only such proportion of the VAT as is attributable to the former transactions shall be deductible.

The deductible proportion shall be determined, in accordance with Articles 174 and 175, for all the transactions carried out by the taxable person.

2. Member States may take the following measures:

1. authorise the taxable person to determine a proportion for each sector of his business, provided that separate accounts are kept for each sector;

2. require the taxable person to determine a proportion for each sector of his business and to keep separate accounts for each sector;

3. authorise or require the taxable person to make the deduction on the basis of the use made of all or part of the goods and services;

4. authorise or require the taxable person to make the deduction in accordance with the rule laid down in the first subparagraph of paragraph 1, in respect of all goods and services used for all transactions referred to therein;

5. provide that, where the VAT which is not deductible by the taxable person is insignificant, it is to be treated as nil.