Flashback on ECJ Cases C-499/13 (Macikowski) – Liability to pay VAT on the supply of immovable property in the context of a forced auction

On March 26, 2015, the ECJ issued its decsion in the case C-499/13 (Macikowski). This case relates Tax on the supply of immovable property in the context of a forced auction – National legislation according to which bailiff carrying out such a sale is obliged to calculate and pay VAT on such transaction,

Context: Reference for a preliminary ruling — Common system of value added tax — Principles of proportionality and fiscal neutrality — Taxation of a supply of immovable property in a procedure for compulsory sale by auction — National legislation requiring the court enforcement officer executing such a sale to calculate and pay VAT on the transaction — Payment of the purchase price to the competent court and need for the VAT to be paid to be transferred by that court to the court enforcement officer — Liability for damages and criminal liability of the court enforcement officer for non-payment of VAT — Difference between the general statutory time-limit for the payment of VAT by a taxable person and the time-limit imposed on the court enforcement officer — Impossibility of deducting the input VAT paid)

Article in the EU VAT Directive

Articles 9, 193, 199(1)(g), 206, 250, 252

Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.
2. In addition to the persons referred to in paragraph 1, any person who, on an occasional basis, supplies a new means of transport, which is dispatched or transported to the customer by the vendor or the customer, or on behalf of the vendor or the customer, to a destination outside the territory of a Member State but within the territory of the Community, shall be regarded as a taxable person.

Article 193 (Liability to pay VAT)
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202.

Article 199 (Liability to pay VAT)
1. Member States may provide that the person liable for payment of VAT is the taxable person to whom any of the following supplies are made:
(g) the supply of immovable property sold by a judgment debtor in a compulsory sale procedure.

Article 206 (Liability to pay VAT – Payment arrangements)
Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.

Article 250 (VAT returns)
1. 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.
2. Member States shall allow, and may require, the VAT return referred to in paragraph 1 to be submitted by electronic means, in accordance with conditions which they lay down.

Article 252 (VAT returns)
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 after 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.

Facts

Mr Macikowski is a court enforcement officer at the Sąd Rejonowy w Chojnicach (District Court, Chojnice).

At the request of a creditor, he took enforcement action against Royal sp. z o.o. (‘Royal’), which was a taxable person for VAT purposes.
As part of that procedure Mr Macikowski seized immovable property belonging to Royal.
The auction of the immovable property at issue was held on 16 February 2007. By order of 22 March 2007, which became final on 22 August 2007, the Sąd Rejonowy w Chojnicach awarded ownership of the immovable property to Mr and Mrs Babinski at the highest bid price of 1 424 201 Polish zlotys (PLN). The purchasers paid that price in full into the account of the Sąd Rejonowy w Chojnicach.
By order of 27 October 2008, Mr Macikowski drew up a draft plan for dividing that sum, in which, inter alia, he identified an amount of PLN 256 823.13 due in respect of VAT to be paid to the Tax Office in Chojnice.
On 26 January 2009, Mr Macikowski requested the Sąd Rejonowy w Chojnicach to transfer PLN 256 823.13 to his account to enable him, as paying agent, to pay the VAT due on the transfer of ownership by auction of Royal’s immovable property.
The Sąd Rejonowy w Chojnicach transferred that amount to Mr Macikowski’s account after the plan for division had become final. Mr Macikowski consequently issued an invoice documenting the VAT on the sale of that immovable property on 31 August 2009, and informed the tax authority of the payment of the tax on 2 September 2009.
Referring inter alia to Article 18 of the VAT Law in conjunction with Articles 8 and 30(1), (3) and (4) of the Tax Code, the Head of the Tax Office in Chojnice ruled that Mr Macikowski was liable, as the paying agent, for VAT of PLN 256 823.13 which had been collected but not paid in time in connection with the sale of Royal’s immovable property. In the view of the Tax Office in Chojnice, since Mr Macikowski was taking enforcement action, he had been required, in November 2007, to issue on behalf of the debtor, Royal, a VAT invoice documenting the sale of that company’s immovable property for a gross amount of PLN 1 424 201, including tax of PLN 256 823.13, and to pay that tax into the account of the competent tax office by 25 December 2007.
By judgment of 10 October 2011, the Wojewódzki Sąd Administracyjny w Gdańsku (Regional Administrative Court, Gdańsk) dismissed the action brought by Mr Macikowski against the decision of the Dyrektor Izby Skarbowej w Gdańsku of 23 November 2009 ruling on the tax liability of the paying agent for the failure to pay in time the VAT on the enforced sale of Royal’s immovable property. In the grounds of appeal that court pointed out that it was bound in this case by the interpretation of the Naczelny Sąd Administracyjny (Supreme Administrative Court), which had not questioned the legal basis of that decision and had accepted that it was possible in law for Mr Macikowski to fulfil his obligations under Article 18 of the VAT Law.
Mr Macikowski appealed on a point of law against that judgment to the Naczelny Sąd Administracyjny. In the grounds of appeal he claimed that the judgment had made an erroneous interpretation of Article 18 of the VAT Law by not taking account of the provisions of EU law on VAT, namely the provisions of the VAT Directive.

Questions

In the light of the system of value added tax resulting from Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the directive’), ¹ in particular Articles 9 and 193, in conjunction with Article 199(1)(g) thereof, is a provision of national law permissible, such as that established in Article 18 of the Ustawa o podatku od towarów i usług (Law on the tax on goods and services) of 11 March 2004 (Dziennik Ustaw of 2011, No 177, item 1054, as amended; ‘the VAT Law’), which introduces derogations from the general rules on that tax, in particular with regard to the persons required to calculate and collect the tax, by establishing the concept of paying agent, that is to say, a person who is required, on behalf of the taxable person, to calculate the amount of tax, collect it from the taxable person, and pay it to the tax authority in good time?

If the answer to the first question is in the affirmative:

(a) In the light of the principle of proportionality, which is a general principle of European Union law, is a provision of national law permissible, such as that established in Article 18 of the VAT Law, under which, inter alia, tax on the supply of immovable property effected through enforcement in respect of goods owned by the debtor or in his possession in breach of existing law is calculated, collected and paid by a court enforcement officer carrying out an enforcement action who, as paying agent, bears liability in the event of failure to fulfil that obligation?

(b) In the light of Articles 206, 250 and 252 of the directive and of the principle of neutrality arising therefrom, is a provision of national law permissible, such as that established in Article 18 of the VAT Law, under which a paying agent as referred to in that provision is required to calculate, collect and pay, within the tax period of the taxable person, an amount of value added tax on a supply, effected through enforcement, of goods owned by that taxable person or in his possession in breach of the law in force, in an amount comprising the product of the proceeds from the sale of the goods, minus value added tax and the applicable rate of that tax, with no reduction of that amount by the amount of input tax from the beginning of the tax period to the date of the collection of that tax from the taxable person?

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AG Opinion

Council Directive 2006/112/EC of 28 November 2006 on the harmonised system of value added tax does not preclude a national provision under which, in the case of a supply of immovable property by means of a compulsory sale by auction, an obligation is imposed on the court enforcement officer involved in the sale to calculate, collect and pay the VAT due, without taking into account the input tax incurred by the person liable for payment of the tax from the beginning of the tax period, and, in the event of failure in this duty, he is liable with his entire assets, to the extent that the court enforcement officer is not prevented from fulfilling these obligations by the act of a third party over which he has no influence.

Decision

1. Articles 9, 193 and 199(1)(g) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding a provision of national law, such as that at issue in the main proceedings, which, within the context of a sale of immovable property effected through enforcement, imposes on a person — namely the court enforcement officer who made the sale — obligations to calculate, collect and pay the value added tax on the proceeds of that transaction within the prescribed time-limits.

2. The principle of proportionality must be interpreted as not precluding a provision of national law, such as that at issue in the main proceedings, under which a court enforcement officer must be liable with his entire assets for the amount of value added tax due on the proceeds of the sale of immovable property effected through enforcement where he does not discharge his obligation to collect and pay that tax, provided that the court enforcement officer concerned actually has all legal means to discharge that obligation, which it is for the referring court to determine.

3. Articles 206, 250 and 252 of Directive 2006/112 and the principle of fiscal neutrality must be interpreted as not precluding a provision of national law, such as that at issue in the main proceedings, under which the paying agent as referred to in that provision is required to calculate, collect and pay an amount of value added tax on a sale of goods effected through enforcement without being able to deduct the amount of value added tax paid as input tax from the beginning of the tax period to the date of the collection of that tax from the taxable person.

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