On April 1, 2004, the ECJ issued its decision in the case C-90/02 (Gerhard Bockemühl).
Context: Reference for a preliminary ruling – Interpretation of Article 18(1) of the Sixth VAT Directive – Conditions for exercise of the right to deduct input VAT – Recipient of a service referred to in Article 9(2)(e) of the Sixth VAT Directive – Supply of staff by a taxable person established abroad – Recipient liable for VAT as the person to whom the supply was made – Requirement to hold an invoice – Content of the invoice
Article in the EU VAT Directive
Article 18(1) of the Sixth VAT Directive (Article 178 of the EU VAT Directive 2006/112/EC).
Article 178 (Rules governing exercise of the right of deduction)
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Facts
- Mr Bockemühl runs a construction company in Germany. During the financial year in question, he had engaged English workers who had been placed at his disposal by a company calling itself ‘Jaylink Bau Ltd Building Contractors’. That company had a contact address in the Netherlands.
- The work carried out by those English workers was invoiced to Mr Bockemühl under the name of the company in question, the invoices bearing an English VAT identification number. A first London address was given on the invoices covering the period from 14 December 1994 to 22 March 1995, whereas another London address was indicated on those covering the period from 29 March 1995 to 19 July 1995. Those invoices described the service invoiced as work, whereas in reality it was the supply of staff.
- According to investigations carried out by the Bundesamt für Finanzen (Federal Finance Ministry), there was a company called ‘Jaylink Building Contractors Ltd’, on the English Register of Companies as at 21 May 1992, whose registered office was at the address mentioned on the first invoices. The company did not appear in local telephone directories.
- The invoices did not show any VAT, but contained the words ‘Nullregelung Par. 52 UStDV vereinbart’ (zero rate Para. 52 UStDV as agreed). However, after an audit, the Finanzamt took the view that the services invoiced had not been carried out by the company whose name appeared on the invoices but by another, unknown, undertaking. Accordingly, by a tax assessment notice of 23 August 1996, it held that, as the recipient of the services, Mr Bockemühl was liable to pay VAT of DEM 17 219.17 on the taxable transactions in question.
- Following an action brought by Mr Bockemühl, the Finanzgericht Köln (Germany) annulled that assessment and the subsequent decision on Mr Bockemühl’s administrative complaint, dated 27 March 1997, holding that there was ‘no reasonable doubt that the person issuing the invoice and the undertaking supplying the service were one and the same person’.
- It is against that judgment that the Finanzamt appealed on a point of law to the Bundesfinanzhof, arguing that the conditions for applying the ‘zero rule’ in Article 52(2), point 2, of the UStDV 1993 were not fulfilled inasmuch as the identity of the person supplying the services was, in its submission, doubtful. Mr Bockemühl was therefore liable for the tax.
- According to the order for reference, the procedure for deduction at source laid down by Paragraph 51 et seq. of the UStDV 1993 was replaced, from 1 January 2002, by a procedure implying that the recipient of the services is liable to tax on the ground that that procedure for deduction at source was not in accordance with Community rules. However, the referring court considers that those paragraphs of the UStDV 1993 remain applicable for the financial year in question in so far as they can be interpreted in accordance with the rules of Community law.
- In that context, and with a view to seeing the relevant national provisions applied in a manner consistent with the Sixth Directive, the national court considers that the services in question were supplied by a taxable person established abroad, and that the place where the services were supplied was Germany, either by virtue of Article 9(2)(a) of the Sixth Directive concerning supplies of services relating to immovable property or by virtue of Article 9(2)(e) of that directive concerning the supply of staff. For the purposes of that latter provision, the referring court is of the view that the Federal Republic of Germany is required, in accordance with Article 21(1)(b) of the Sixth Directive, to regard Mr Bockemühl, as the person to whom the services were supplied, as liable for VAT.
Questions
- (1) Is it necessary under Article 18(1)(a) of Directive 77/388/EEC for a person to whom services are supplied, who is liable to pay tax under Article 21(1) of Directive 77/388 and who has been charged to tax as such, to be in possession of an invoice issued in accordance with Article 22(3) of Directive 77/388 in order to exercise his right to deduct input tax?
(2) If the first question is answered in the affirmative, what details must the invoice contain? Is it detrimental if, instead of the supply of staff, the work carried out using that staff is given as the service supplied?
(3) What would be the consequences in law of inextinguishable doubts that the person issuing the invoice supplied the service invoiced?
- AG Opinion
- (1) A recipient of services who is also the person liable to pay the VAT on those services and to whom that tax has been charged may exercise his right of deduction under Article 18(1)(a) of the Sixth Council Directive 77/388 only if he is in possession of an invoice issued in accordance with Article 22(3).
(2) In the version of that Directive applicable before 1 January 2004, Article 22(3)(b) requires the supplier to state, for each item on the invoice, the price exclusive of tax and, as the case may be, either the amount of tax to be charged or the exemption or reverse-charge mechanism applicable; if either of those statements is omitted, the invoice may be refused as justification of the customer’s right to deduct. Article 22(8) allows Member States to require suppliers to indicate their name and address and to identify accurately the nature of the supply, on any invoice used for VAT purposes, and thus to refuse the recipient a right to deduct if those particulars are absent or materially incorrect.
(3) It is for the Member States to determine the consequences in law of difficulties in establishing that the person who issued the invoice is the same as the supplier of the taxable service, provided that the exercise of the right to deduction is not rendered in practice impossible or excessively difficult.
Decision
A taxable person who is liable, as the recipient of services, for the value added tax relating thereto, in accordance with Article 21(1) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment, as amended by Council Directive 91/680/EEC of 16 December 1991 supplementing the common system of value added tax and amending Directive 77/388 with a view to the abolition of fiscal frontiers and by Council Directive 92/111/EEC of 14 December 1992 amending Directive 77/388 and introducing simplificationmeasures with regard to value added tax, is not obliged to be in possession of an invoice drawn up in accordance with Article 22(3) of that directive in order to be able to exercise his right to deduct.
Source
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