ECJ C-159/17 (Întreprinderea Individuală Dobre M. Marius) – Judgment – Right to deduct if taxpayer’s VAT registration is revoked

Om March 7, 2018, the ECJ issued its decision in the case C-159/17 (Întreprinderea Individuală Dobre M. Marius). This case deals with the Right to deduct if taxpayer’s VAT registration is revoked.

Article in the EU VAT Directive

Articles 167, 168, 169, 179, 213(1), 214(1)(a) and 273 of Directive 2006/112/EC

Article 167 of Directive

‘A right of deduction shall arise at the time the deductible tax becomes chargeable.’

Article 168 of that directive, set out in Title X thereof, entitled ‘Deductions’, is worded as follows:

‘In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:

(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;

…’

In accordance with Article 178(a) of that directive, in order to exercise the right of deduction, in respect of the supply of goods or services, a taxable person must meet, inter alia, the following condition:

‘… he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI’.

The first paragraph of Article 179 of that directive provides as follows:

‘The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.’

Article 213(1) of Directive 2006/112 states:

‘Every taxable person shall state when his activity as a taxable person commences, changes or ceases.

…’

Article 214 of that directive states that:

‘1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number:

(a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199;

…’

Under Article 250(1) of that directive:

‘Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.’

Article 252 of that directive provides as follows:

‘1. The VAT return shall be submitted by a deadline to be determined by Member States. That deadline may not be more than two months later than the end of each tax period.

2. The tax period shall be set by each Member State at one month, two months or three months.

Member States may, however, set different tax periods provided that those periods do not exceed one year.’

Article 273 of Directive 2006/112 is worded as follows:

‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

…’

Facts

Dobre was registered for VAT in Romania for the period July 2011 and July 2012. However, having failed to submit VAT returns for the fourth quarter of 2011 and the first quarter of 2012 the tax authority revoked its VAT number from August 2012. From August 2012 to July 2013, Dobre continued to issue invoices charging VAT but did not submit VAT returns.

The tax authority, following a tax inspection carried out in 2015, issued a tax demand requiring Dobre to pay approximately €40,000 for the VAT charged and collected during the period after the VAT number was revoked. Dobre then filed a counter refund claim for approximately €27,000 in respect of the input VAT it had incurred on goods and services used for the purpose of supplying the taxable transactions in the same period. The refund claim was rejected in the Romanian courts.

The Romanian Court of Appeal referred the case to the CJEU seeking confirmation as to whether the VAT Directive precludes national legislation which requires a taxpayer, whose VAT registration has been revoked, to pay VAT collected during the period in which the VAT registration was revoked, without recognising the right to deduct VAT on purchases made during the same period.

Questions

Must Articles 167, 168, 169, 179, 213(1), 214(1)(a) and 273 of Directive 2006/112/EC ¹ be interpreted as precluding national legislation which, in circumstances such as those of the main proceedings, requires a taxpayer, whose registration for VAT purposes has been revoked, to pay to the State the VAT collected during the period in which the VAT identification code was revoked, without, however, recognising his right to deduct the VAT relating to purchases made during that period?

AG Opinion

None

Decision

Articles 167 to 169 and 179, Articles 213(1) and 214(1), and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding national legislation, such as that at issue in the main proceedings, which allows tax authorities to refuse a taxable person the right to deduct value added tax when it is established that, on account of the alleged infringements committed by that person, the tax authorities could not have access to the information necessary to establish that the substantive requirements giving rise to the right to deduct input value added tax paid by that taxable person have been satisfied or that that person acted fraudulently in order to enjoy that right, a matter which it is for the referring court to ascertain.

Summary

The CJEU held that the right to deduct VAT, in the circumstances of the case, could be refused on the basis of the infringements committed by the taxpayer. The infringement being the failure by the taxpayer to file VAT returns prevented the correct collection of VAT and denied the tax authority from having access to the information needed to establish that the substantive requirements giving rise to the right to deduct were met.

Source