On September 30, 2015, the ECJ issued its Order in the C-424/14 (Balogh).
Context: Articles 213 and 214 — Commencement of an activity not stated — Exemption scheme for small businesses — Penalty)
Article in the EU VAT Directive
Articles 213, 214 of the EU VAT Directive 2006/112/EC
Article 213
1. Every taxable person shall state when his activity as a taxable person commences, changes or ceases.
Member States shall allow, and may require, the statement to be made by electronic means, in accordance with conditions which they lay down.
2. Without prejudice to the first subparagraph of paragraph 1, every taxable person or nontaxable legal person who makes intra-Community acquisitions of goods which are not subject to VAT pursuant to Article 3(1) must state that he makes such acquisitions if the conditions, laid down in that provision, for not making such transactions subject to VAT cease to be fulfilled.
Article 214
1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number:
(a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199;
(b) every taxable person, or non-taxable legal person, who makes intra-Community acquisitions of goods subject to VAT pursuant to Article 2(1)(b) and every taxable person, or non-taxable legal person, who exercises the option under Article 3(3) of making their intra-Community acquisitions subject to VAT;
(c) every taxable person who, within their respective territory, makes intra-Community acquisitions of goods for the purposes of transactions which relate to the activities referred to in the second subparagraph of Article 9(1) and which are carried out outside that territory.
(d) every taxable person who within their respective territory receives services for which he is liable to pay VAT pursuant to Article 196;
(e) every taxable person, established within their respective territory, who supplies services within the territory of another Member State for which VAT is payable solely by the recipient pursuant to Article 196.
2. Member States need not identify certain taxable persons who carry out transactions on an occasional basis, as referred to in Article 12.
Facts
- Mr Balogh registered on an auction website to sell children’s clothing there. On 1 st August the same year, he sold 208 items to a number of business 504720 HUF, about 1612,50 euros, and had 576 sale.
- On 18 July 2013, as part of a tax audit, the tax inspectors bought him a new product for the sum of HUF 1,990 and asked him to deliver the product to them in person. Mr. Balogh gave them the product without issuing an invoice. Finding that the latter was carrying on a commercial activity without having fulfilled his declaration obligation, the tax authority imposed a fine of 100,000 HUF, or approximately 319.48 euros.
- Following the rejection of his complaint against that decision, Mr Balogh brought an action for annulment before the referring court. In support of his conclusions, he essentially argues that the reporting obligation, under Article 16, paragraph 2, of Law No. XCII, only applies to taxpayers “wishing to carry out a taxable activity” and that , therefore, is not required to declare its activity to the tax authorities the taxable person who, like him, opts for the “subjective tax exemption” allowed by Articles 187, paragraph 1, and 188, paragraph 2, of the TGCA law in the event of turnover below a certain ceiling. Mr Balogh adds that this conclusion is in accordance with Articles 213 and 214 of the VAT Directive.
Questions
Does the obligation to register laid down in Articles 213(1) and 214(1) of the VAT Directive 1 preclude the national practice in Hungary of mandatorily requiring the registration of individuals — under the threshold for the personal exemption from VAT — who do not wish to pursue an activity subject to VAT?
When carrying out an ex post inspection, is the tax authority permitted to penalise the failure to register where the threshold for the personal exemption has not been exceeded?
When carrying out an ex post inspection, is the tax authority permitted to be subrogated in the individual’s right of option, and is it permitted to exclude the possibility of the individual opting for the personal exemption in breach of the principle of procedural fairness?
AG Opinion
None
Decision
1) Article 213 (1) of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that it does not preclude not to national legislation requiring a taxable person to declare the start of an economic activity when the product of this activity does not exceed the ceiling of the exemption for small businesses and the taxable person does not intend to carry out a taxable activity .
2) Union law must be interpreted as meaning that it does not preclude an administrative fine from sanctioning non-compliance by a taxable person with his obligation to declare the start of an economic activity when the proceeds from this activity do not exceed the deductible limit for small businesses. It is for the referring court to assess whether, in the main proceedings, the sanction imposed complies with the principle of proportionality.
Summary
It is permissible to require a taxpayer to declare the start of an economic activity if the product of this activity does not exceed the ceiling for the application of the exemption for small businesses and the taxpayer does not intend to carry out a taxable activity.
It is permitted to impose an administrative fine on a taxpayer who fails to fulfill his obligation to declare the start of an economic activity if the product of this activity does not exceed the ceiling for the application of the exemption for small enterprises.
Source:
Similar ECJ cases
Newsletters
