On November 9, 2017, the ECJ issued its decision in the case C-552/16 (Wind Inovation 1).
Context: Reference for a preliminary ruling — Taxation — Common system of value added tax — Directive 2006/112/EC — Dissolution of a company resulting in its removal from the value added tax (VAT) register — Obligation to calculate VAT on available assets and to pay the VAT calculated to the State — Maintenance or amendment of the law existing on the date of accession to the European Union — Second paragraph of Article 176 — Effect on the right to deduct — Article 168
Article in the EU VAT Directive
Article 168 and 176 of the EU VAT Directive 2006/112/EC
Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
Facts
- Wind Inovation is a company governed by Bulgarian law in liquidation, whose object is the production of electricity and investment in energy projects. Gräss Solartechnik GmbH & Co. KG, a company governed by German law, owns the entire capital of Wind Inovation, of which it is therefore the sole shareholder.
- Kühling Stahl-und Metallbau GmbH, a company governed by German law, had a claim against Gräss Solartechnik. Since the latter had not settled its debt, Kühling Stahl-und Metallbau GmbH sought the dissolution of Wind Inovation, in accordance with Bulgarian law.
- The referring court specifies that the assets of the dissolved company were to be applied to satisfying the claim by the creditor and that should the debt owed to Gräss Solartechnik be settled, the proceedings to liquidate Wind Inovation would be terminated.
- In accordance with the provisions of the ZDDS, Wind Inovation applied to be removed from the VAT register.
- The tax authorities found that an entry had been made in the companies register on 7 August 2015 to the effect that Wind Inovation had ceased trading and been placed under liquidation. On 25 August 2015, those authorities issued a notice removing Wind Inovation from the VAT register, which was retroactively dated 7 August 2015.
- The notice of removal having been notified to it, on 27 August 2015 Wind Inovation submitted a new application for registration in the VAT register, specifying that it had not ceased trading and that, even at the time of the registration of its liquidation in the companies register, its turnover exceeded by a multiple factor the threshold value for compulsory VAT registration, namely 50 000 Bulgarian leva (BGN) (approximately EUR 25 000). The company was once again entered in that register on 12 September 2015.
- Wind Inovation calculated the VAT on its available assets on 7 August 2015 and included it, as VAT payable, in its statement relating to that month.
- Wind Inovation subsequently submitted an objection against the notice of removal from the VAT register with the Direktor. That objection having been dismissed, Wind Inovation brought an action before the Administrativen sad Sofia-grad (Administrative Court of the City of Sofia).
- That court is uncertain as to whether the amendment made in the national legislation on 1 January 2007, relating to the removal of the option of the court-appointed liquidator to decide whether the dissolved legal person continues to be registered in the VAT register until the date of its removal from the companies register, constitutes a breach of the second paragraph of Article 176 of the VAT Directive.
- That court states that the removal of that option gives rise to an obligation for the dissolved company to calculate VAT on the available assets and actually to pay that VAT to the tax authorities. It adds that the company concerned must immediately re-register owing to its continued economic activity and is unsure whether the compulsory removal from the VAT register, which gives rise to the calculation of the VAT on the available assets and to the actual payment of the amount calculated to the State, constitutes an additional condition governing exercise of the right to deduct input VAT and therefore, a restriction of the right to deduct which is not provided for in the VAT Directive.
Questions
1. Is the second paragraph of Article 176 of Directive 2006/112/ЕC 1 to be interpreted as precluding an amendment to the ZDDS (Law on VAT) as at 1 January 2007, which provides for the compulsory removal of a person from the VAT register, and the loss of the court-appointed liquidator’s right to decide that the legal person whose dissolution has been ordered by a court decision is to continue to be registered under the ZDDS until its deletion from the companies register, and which instead makes dissolution of a commercially active legal person, by reason of liquidation or otherwise, a ground for compulsory removal from the VAT register ?
2. Is the second paragraph of Article 176 of Directive 2006/112/ЕC to be interpreted as precluding compulsory removal from the VAT register under an amendment to the ZDDS (Law on VAT) as at 1 January 2007 where, at the time of compulsory removal from the VAT register, the taxable person meets the conditions for compulsory re-registration for VAT, the taxable person is party to current contracts and states that it has not ceased business and continues to carry on an economic activity, and where the taxable person must actually pay the tax calculated and payable upon the compulsory removal in order to retain entitlement to deduct VAT input tax on assets taxed upon removal from the register and available on subsequent registration? If compulsory removal from the register under the circumstances set out is permissible, may entitlement to deduct input tax on assets taxed upon removal from the register, which are available on the subsequent registration for VAT and with which the person effects or will effect taxable transactions, be made dependent on the actual payment of the tax to the exchequer or may the tax calculated upon removal from the register be set off against the amount of tax credit determined on subsequent registration for VAT, in particular where the tax is payable by a person in respect of whom entitlement to deduct input tax arises …?
AG Opinion
None
Decision
1. Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding national legislation pursuant to which the compulsory removal from the value added tax (VAT) register of a company whose dissolution has been ordered by court decision results in the obligation to calculate the input VAT due or paid on the available assets on the date of the dissolution of that company and to pay it to the State, on condition that that company no longer carries out economic transactions as from its dissolution.
2. Directive 2006/112, in particular Article 168 thereof, must be interpreted as precluding national legislation, such as that at issue in the main proceedings, pursuant to which the compulsory removal from the VAT register of a company whose dissolution has been ordered by court decision results, even where that company continues to carry out economic transactions whilst being placed under liquidation, in the obligation to calculate the input VAT due or paid on the available assets on the date of that dissolution and to pay it to the State and which, therefore, makes the right to deduct subject to compliance with that obligation.
Summary
Dissolution of company leading to cancellation of VAT registration – Obligation to calculate and pay VAT on available assets – Consequences for the right to deduct
Wind Inovation is a Bulgarian company in liquidation whose activities consist of generating electricity and investing in energy projects. In accordance with the Bulgarian provisions, Wind Inovation has submitted a request for deletion from the VAT register. The tax authorities have established that the termination of Wind Inovation’s activities and its liquidation have been registered in the trade register. The tax authorities have therefore removed the company from the VAT register. After the cancellation decision was notified to it, Wind Inovation submitted a new application for registration in the VAT register stating that it had not terminated its commercial activity and that its turnover exceeded the threshold for the mandatory VAT registration many times over even at the time of the registration of the liquidation in the commercial register transcended. The company was subsequently registered again in the aforementioned register.
Wind Inovation has calculated VAT on the assets present at the time of deletion from the VAT register and included them as VAT due in the declaration for this month in accordance with Bulgarian law.
In the present case, the referring court emphasizes that the case in the main proceedings concerns a dissolved company in liquidation which, however, continues to carry out certain economic activities and achieves a significant turnover, requiring it again under national law to register request.
In this context, according to the CJEU, the aim of avoiding untaxed end-use does not justify that, in order to benefit from the right to deduct VAT, the VAT due on the liquidation date on the assets of the said company must be calculated and paid to the State getting paid.
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