On October 26, 2017, the ECJ issued its decision in the case C-534/16 (BB construct).
Context: Reference for a preliminary ruling — Value added tax (VAT) — Directive 2006/112/EC — Inclusion in the register of taxable persons for VAT — National law requiring provision of a guarantee — Combating fraud — Charter of Fundamental Rights of the European Union — Freedom to conduct a business — Principle of non-discrimination — Principle ne bis in idem — Principle of non-retroactivity
Article in the EU VAT Directive
Article 273 of the EU VAT Directive 2006/112/EC
Article 273 (Obligations of Taxable Persons and Certain Non-Taxable Persons – Miscellaneous Provisions)
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.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.
Facts
BB construct had submitted an application for VAT registration. The Slovak tax authorities had decided that a security had to be provided for 12 months. The amount of that security was EUR 500,000 and had to be paid within 20 days. The tax authorities considered the security to be justified because of the VAT debt of another company with which the director or shareholder of BB construct had a personal or property relationship.
Questions
Is it possible to interpret as in accordance with the objective of Article 273 of Council Directive 2006/112/EC 1 of 28 November 2006 on the common system of value added tax, that is, the prevention of VAT evasion, an approach on the part of a national body which considers the fact that the current director of a legal person was also the director of another legal person which has outstanding tax liabilities to be a ground under national law for requiring payment of a tax deposit of up to the value of EUR 500 000?
May it be held that the abovementioned tax deposit, given its amount, which may be up to the value of EUR 500 000 as in the present case, is consistent with the freedom to conduct a business under Article 16 [of the Charter of Fundamental Rights of the European Union], does not directly force the taxable person to declare bankruptcy, does not constitute discrimination under Article 21(1) [of the Charter] and does not constitute a breach, in the area of the levying of VAT, of the ne bis in idem principle or of the prohibition on retroactivity under Article 49(1) and (3) of the Charter?
AG Opinion
None
Decision
Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax and Article 16 of the Charter of Fundamental Rights of the European Union must be interpreted as not precluding, at the time of the registration for the purposes of value added tax of a taxable person, of which the director was formerly the director or associate member of another legal person which had not complied with its tax obligations, the tax authority from requiring that taxable person to provide a guarantee, the amount of which could reach EUR 500 000, provided that the guarantee required from that taxable person does not go further than is necessary in order to attain the objectives of Article 273, which it is for the referring court to determine.
The principle of equal treatment must be interpreted as not precluding a tax authority from requiring a new taxable person, at the time of his registration for the purposes of value added tax, to provide, owing to his links with another legal person that has tax debts, such a guarantee.
Summary
Entry in the register of VAT payers – National legislation requiring the provision of security – Fight against fraud
BB construct had submitted an application for VAT registration. The Slovak tax authorities had decided that a security had to be provided for 12 months. The amount of that security was EUR 500,000 and had to be paid within 20 days. The tax authorities considered the security to be justified because of the VAT debt of another company with which the director or shareholder of BB construct had a personal or property relationship.
According to the ECJ, that was allowed. Indeed, Article 273 of the VAT Directive states that, subject to equal treatment between Member States between the Member States of transactions carried out by taxable persons, Member States may prescribe other obligations which they deem necessary to ensure the correct collection of VAT and to prevention of fraud, provided that in trade between Member States these obligations do not give rise to formalities related to a border crossing.
According to the ECJ, there is also no conflict with Article 16 of the EU Charter and/or the principle of equality.
Source:
Newsletters
Join the Linkedin Group on ECJ VAT Cases, click HERE
For an overview of ECJ cases per article of the EU VAT Directive, click HERE
