Source: Curia
On July 16, 2020, the ECJ/CJEU issued a decion in the case C-424/19 (Cabinet de Avocat URs), which deals with the question whether lawyers are taxable persons.
Artcile in the EU VAT Directive
Article 9(1) of the EU VAT Directive 2006/112/EU
Decision
1. Article 9(1) 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 person practising the profession of a lawyer must be regarded as a ‘taxable person’ within the meaning of that provision.
2. EU law precludes a national court, in a dispute relating to value added tax (VAT), from applying the principle of res judicata where that dispute does not relate to a tax period identical to the one which was at issue in the dispute which gave rise to the judicial decision having the authority of res judicata, does not have the same subject matter as that dispute, and where the application of that principle would prevent that court from taking into account EU legislation on VAT.
See our earlier newsitem: Link
Facts (simplified):
The Cabinet de Avocat UR (UR law firm), based in Romania, requested the Romanian tax authorities to be removed from the VAT register and a refund of VAT for the years 2010 to 2014, as the firm believed it was wrongly entered in this VAT register. The firm requested to be removed from the VAT register, with retroactive effect to 2002, the year in which in his view, the applicant was wrongly registered in the VAT register.
According to the tax authorities, the firm was subject to the normal VAT rules from the moment it’s turnover went over the threshold, which was in 2002.
UR Law firm essentially argues that, instead of taxable activities, he is carrying out legal activities, and that he had entered into legal service contracts with its clients, which are not service contracts. He considers legal contracts not to be economic activities, and therefore the VAT rules do not apply.
Although the Romanian Court believes that the ECJ has given clear directions with regard to ‘taxable person’ in its earlier jugdments, it still wishes to have clarity with regard to the activities of a lawyer firm as such. It therefore asks the following preliminary questions:
Does the concept of ‘taxable person’ include persons who practice the profession of lawyer?
Does the principle of the primacy of EU law permit an exception to be made, in subsequent proceedings, to the authority of res judicata attaching to a final judicial decision in which it has been established, in essence, that, in accordance with national value added tax legislation, as it is interpreted and applied, lawyers do not supply goods, do not carry out an economic activity and do not conclude contracts for the supply of services, but instead conclude contracts for legal assistance?
Question
In the context of the application of Article 9(1) of Council Directive 2006/112/EC (on the common system of value added tax), does the concept of ‘taxable person’ include persons who practice the profession of lawyer?
Does the principle of the primacy of EU law permit an exception to be made, in subsequent proceedings, to the authority of res judicata attaching to a final judicial decision in which it has been established, in essence, that, in accordance with national value added tax legislation, as it is interpreted and applied, lawyers do not supply goods, do not carry out an economic activity and do not conclude contracts for the supply of services, but instead conclude contracts for legal assistance?
AG Opinion
None
Decision
Not surprisingly, the ECJ starts with the remark that based on article 9(1) of the EU VAT Directive ‘any person who independently pursues an economic activity, whatever the place, goals and results of this activity’ is regarded a taxable person.
Subsequently, it concludes that “as soon as the profession of lawyer constitutes a liberal profession, it follows from Article 9(1) of the EU VAT Directive that a person exercising that profession pursues an economic activity and must be viewed as a “taxable person” within the meaning of this provision”.
The ECJ rules as follows:
1) Article 9 (1) 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 person practicing the profession of a lawyer must be considered to be a “taxable person” within the meaning of this provision.
2) Union law precludes a national court from applying a principle of res judicata in the context of value added tax (VAT) litigation this dispute does not relate to a taxation period identical to that which was at issue in the dispute which gave rise to the court decision invested with this authority nor has the same object as this one, and that the application of this principle would prevent the taking into account, by that court, of Union rules on VAT.
Source
Newsletters
