On Oct 24, 2019, the ECJ issues his Order in the case C-292/19 (PORR Epitesi Kft.) related to the Adjustment of output VAT due to non-payment.
Article in the EU VAT Directive
Article 90 of the EU VAT Directive 2006/112/EU
Facts
Not published
Questions
The Fővárosi Közigazgatási és Munkaügyi Bíróság requested the ECJ to answer the following questions:
- Should Article 90(1) and (2) of the EU VAT Directive (2006/112) be interpreted as meaning that Member States must allow the reduction of the VAT taxable amount where it can be demonstrated definitively that the taxable person has not received all or part of the consideration in respect of the transaction entered into by that person?
- Should the case-law of the Court of Justice of the European Union be interpreted, taking into account, in particular, the judgments in Almos, (C-337/13), paragraph 23, Di Maura, (C-246/16), paragraphs 20 to 29, and, by analogy, T-2, (C-396/16), paragraphs 31 to 45, as meaning that, as regards the obligation of the Member States, laid down in Article 90(1) of the EU VAT Directive (2006/112), to reduce a posteriori the taxable amount, a distinction must be made between total or partial non-payment of the consideration by the purchaser and the situation in which the sum due to the seller has become definitively unrecoverable, so that, in the first situation, the Member State may make use of the exception provided for in Article 90(2), whereas in the second situation use of that exception is precluded and the Member State must, in any event, permit the taxable amount to be reduced a posteriori?
Source: Questions – curia.europa.eu
AG Opinion
None
Order
Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a Member State must allow the taxable amount for value added tax to be reduced where the taxable person can demonstrate that the debt owed to him by the debtor is definitely irrecoverable, which is a matter for the national court to ascertain, since that situation does not amount to a case of non-payment capable of coming under the derogation from the obligation to reduce the taxable amount of the value added tax provided for in Article 90(2) of the directive.
- Article 90 (1) of the VAT Directive, which covers cases of annulment, cancellation, cancellation, total or partial non-payment or price reduction after the the time of the transaction, obliges the Member States to reduce the VAT taxable amount and, consequently, the amount of VAT payable by the taxable person whenever, following the conclusion of a transaction, some or all of the consideration is not collected by the taxable person.
- This provision is the expression of a fundamental principle of the VAT Directive according to which the taxable amount is constituted by the consideration actually received and the corollary of which is that the tax administration can not charge VAT higher than that which the taxable person had received.
- Admittedly, Article 90 (2) of that directive allows the Member States, to derogate from this rule in the event of total or partial non-payment of the transaction price, so that taxable persons can not claim a right to reduce their tax base on the VAT in this case. However, that option of derogation, is based on the idea that the non-payment of the counterparty may be difficult to verify or not to be only temporary. Accordingly, that derogation power is intended only to enable the Member States to combat the uncertainty relating to the recovery of sums due and does not resolve the question of whether a reduction of the VAT tax base may not be necessary. Admitting the possibility for the Member States to exclude, in such a case, any reduction in the VAT taxable amount would run counter to the principle of the neutrality of VAT.
- The fact that the debtor ceased to be subject to VAT in the context of insolvency proceedings is likely to corroborate the finality of the non-payment
- Article 90 of the VAT Directive precludes national legislation which provides that the taxable person may not rectify the VAT taxable amount in the event of total or partial non-payment by his debtor , of an amount due in respect of a transaction subject to that tax, if that debtor is no longer subject to VAT.
- It is clear that the claim of the applicant completely disappeared as a result of the liquidation.
- If the claim declared by the plaintiff in the main proceedings is henceforth definitely irrecoverable, the reduction of the debtor’s obligations resulting from the procedure of insolvency does not constitute a case of non-payment.
- In the light of the foregoing, the answer to the questions referred is that Article 90 of the VAT Directive must be interpreted as meaning that a Member State must allow a reduction in the taxable amount for VAT purposes if the taxable person may show that the claim he has on his debtor is definitely irrecoverable, which it is for the referring court to verify, since that situation does not constitute a case of non-payment capable of raising derogation from the obligation to reduce the VAT taxable amount provided for in paragraph 2 of this Article.
Source: Order – Curia
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