On November 9, 2017, the ECJ issued its decision in the case C-298/16 (Ispas).
Context: Reference for a preliminary ruling — General principles of EU law — Right to good administration and rights of the defence — National tax rules providing for the right to be heard and the right to be informed during an administrative tax procedure — Decision to levy value added tax issued by the national tax authorities without giving the taxpayer access to the information and the documents upon which that decision was based
Article in the EU VAT Directive
Point 23 of the Judgment:
”even though the order for reference does not identify a specific provision of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), the general obligations ensuing from that directive are easily identifiable and the Court is in a position to give a useful answer to the national court.”
Facts
- Mr and Mrs Ispas, who are property developers, were the object of a tax inspection covering the period from 1 January 2007 to 31 December 2011. The purpose of that inspection was to verify their tax files and the accounting treatment of their activities with regard to property transactions, and also the way in which their tax obligations had been determined, declared and paid.
- Following that inspection, it was established that Mr and Mrs Ispas had obtained five building permits from the Consiliul Local Florești (local council of Florești, Romania) and that the apartments constructed on the basis of those permits had been sold from December 2007.
- Considering that, by concluding 73 contracts of sale, Mr and Mrs Ispas had engaged in commercial activity, and given that those transactions had a permanent character, the Directorate-General of Public Finances (Cluj) held that they had become taxable persons for VAT purposes and that the transactions in question were subject to that tax. That economic activity commenced on the date on which expenditure was first incurred in respect of the construction of the buildings concerned and not on the date of the sale of those buildings.
- The Directorate-General of Public Finances (Cluj) therefore issued, on 25 April 2012, two tax assessment notices imposing on each spouse additional VAT in the amount of 513 489 Romanian lei (RON) (approximately EUR 114 000) and RON 451 546 (approximately EUR 100 000) by way of default interest, and the amount of RON 7 860 (approximately EUR 1 700) by way of late-payment penalty.
- Mr and Mrs Ispas challenged those tax assessment notices before the national court, the Curtea de Apel Cluj (Court of Appeal, Cluj, Romania). In their applications, joined by that court, they submit that those notices were null and void on the grounds that their rights of defence had not been respected.
- According to Mr and Mrs Ispas, the Directorate-General of Public Finances (Cluj), rather than merely inviting them to a final discussion, ought to have given them access of its own motion to all the relevant information on the basis of which it adopted the tax inspection report and issued the two tax assessment notices, so that they would subsequently be in a position to challenge them.
- The applicants therefore asked the national court to refer a question for a preliminary ruling to the Court in that regard.
- In its observations relating to that request, the Directorate-General of Public Finances (Cluj) asked Mr and Mrs Ispas to identify the documents which, according to them, should have been communicated to them.
- Mr and Mrs Ispas state, however, that they are not asking, at this stage of the main proceedings, for the information gathered during the course of the tax inspection procedure to be communicated to them.
- However, they are unsure as to the consequences arising from information and evidence being gathered outwith the tax inspection procedure and access not being permitted during the course of the preliminary administrative procedure. They seek to establish whether such a situation can be remedied by granting access to those documents during the judicial proceedings.
Questions
Is an administrative practice consisting in the taking of a decision imposing obligations on an individual without allowing that individual to have access to all of the information and documents considered by the public authority when it adopted that decision, being information and documents contained in the administrative file (not a public file) drawn up by the public authority, compatible with the principle of respect for the rights of the defence?
AG Opinion
The general principle of respect for the rights of the defence requires that, in a national value added tax collection procedure, an individual should have access, upon request, to the information and documents forming the basis of the administrative decision setting out his VAT obligations.
Decision
The general principle of EU law of respect for the rights of the defence must be interpreted as a requirement that, in national administrative procedures of inspection and establishment of the basis for the assessment of value added tax, an individual is to have the opportunity to have communicated to him, at his request, the information and documents in the administrative file and considered by the public authority when it adopted its decision, unless objectives of public interest warrant restricting access to that information and those documents.
Summary
The Romanian couple Ispas (real estate developers) received a tax audit. It was established that the apartments built on the basis of obtained building permits had been sold from December 2007. The Romanian tax authorities considered that the Ispas couple was engaged in an economic activity by concluding 73 sales contracts and issued 2 tax assessments, requesting each spouse to pay an additional amount of VAT of approximately €114,000, approximately €100,000 in default interest and a fine for late payment of VAT amounting to approximately €1,700.
The couple Ispas appealed against this, arguing that the attacks were null and void because of violation of the defense principle. The Ispas couple believed that the Romanian tax authorities, instead of just inviting them to a final discussion, should have given them ex officio access to all the relevant information on the basis of which they drew up the audit report and issued the 2 tax assessments, so that they could later dispute that information. The Ispas couple therefore requested the court to refer a question to the ECJ in this regard. Thus it happened.
The ECJ ruled that, in administrative proceedings for the control and determination of the VAT taxable amount, individuals should, on the basis of the defense principle, have the possibility to receive, at their request, the information and documents contained in the administrative file and which taken into account by the public authority when making its decision, unless a restriction of access to such information and documents is justified by public interest objectives.
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