On September 28, 2006, the ECJ issued its decision in the case C-128/05 (Commission v Austria).
Context: Failure of a Member State to fulfil obligations – Sixth VAT Directive – International transport undertakings established in another Member State – Annual turnover in Austria of EUR 22 000 or less – Simplified procedures for charging and collecting the VAT
Article in the EU VAT Directive
Artciles 18(1)(a), 18(2), 22(3), 22(4), 22(5) of the Sixth VAT Directive
- Article 18(1)(a) provides, inter alia, that to exercise his right to deduct the taxable person must, ‘in respect of deductions under Article 17(2)(a), hold an invoice, drawn up in accordance with Article 22(3)’.
- Under the first subparagraph of Article 18(2), ‘the taxable person shall effect the deduction by subtracting from the total amount of value added tax due for a given tax period the total amount of the tax in respect of which, during the same period, the right to deduct has arisen and can be exercised under the provisions of paragraph 1’.
- Article 22(3), (4) and (5) of the Sixth Directive lays down, respectively, the conditions for issuing invoices, the procedures for submitting periodic returns and the obligation on taxpayers to pay the net amount of the VAT owed when submitting the return.
Facts
- For international passenger transport by taxable persons established in another Member State or in a third country, simplified rules have been in force in Austria since 1 April 2002. Such taxable persons are permitted not to submit tax return forms and not to pay the net amount of VAT, when their annual turnover in Austria is below 22 000 euros. The rules assume that, in this case, the amount of VAT owed is equal to the amount of deductible VAT. At the same time taxable persons who take advantage of these simplified rules do not have to state the Austrian VAT in their invoices or in other documents serving as invoices.
- These rules are neither in accordance with the provisions of Council Directive 77/388/EEC of 17 May 1977 (‘Sixth VAT Directive’) nor with Council Decision 2001/242/EC of 19 May 2001.
- The Commission submits that the abovementioned directive does in fact provide for the possibility of a flat-rate scheme for small enterprises, but the definition of ‘small enterprise’ used under Austrian rules – turnover in Austria of less than EUR 22 000 – does not correspond to the Community law concept of ‘small enterprise’, which must be given a uniform interpretation. It remains furthermore unproven that the Austrian flat-rate scheme does not lead to a tax reduction which exceeds the simplification measure which Article 24(1) of the abovementioned directive aims to permit. The release from the other invoicing and tax return obligations and the duty to keep records further constitutes the formal aspect of the oversimplification.
- The Commission claims that the Austrian rules at issue cannot be accepted on the basis of the abovementioned Council decision either. This decision does admittedly authorise the Republic of Austria to tax, from 1 January 2001 to 31 December 2005, the international transportation of passengers carried out by taxable persons not established in Austria by means of motor vehicles not registered in Austria in derogation from Article 11 of the abovementioned directive. This exception is, however, expressly based on the condition that the distance covered in Austria be taxed on the basis of an average taxable amount per person and per kilometre.
Questions
AG Opinion
I am consequently of the opinion that the Court should
– dismiss the application in so far as it refers to Articles 2, 6, 9(2)(b) and 17 of Sixth Council Directive 77/388/EEC;
– declare that, by allowing taxable persons not established in Austria who transport passengers there not to submit tax returns and not to pay the net amount of VAT when their annual turnover in Austria is below EUR 22 000, in that case deeming the amount of VAT due to be equal to the amount of deductible VAT and making the application of the simplified rules contingent on Austrian VAT not appearing on invoices or in other documents serving as invoices, the Republic of Austria has failed to fulfil its obligations under Articles 18(1)(a) and (2) and 22(3) to (5) of the same directive; and
– order the Republic of Austria to pay the costs.
Decision
1. By allowing taxable persons not established in Austria who transport passengers there not to submit tax return forms and not to pay the net amount of VAT when their annual turnover in Austria is below EUR 22 000, in that case deeming the amount of VAT due to be equal to the amount of deductible VAT and making application of the simplified rules contingent on Austrian VAT not appearing on invoices or in other documents serving as invoices, the Republic of Austria has failed to fulfil its obligations under Articles 18(1)(a) and (2) and 22(3) to (5) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common arrangement of value added tax: uniform basis of assessment;
2. Dismisses the action as to the remainder;
3. Orders the Republic of Austria to pay the costs.
Summary
Austria has failed to fulfill its obligations under Articles 18(1)(a) and (2) and 22(3) to (5) of the Sixth Directive by non-established taxable persons carrying out passenger transport services in that Member State not to submit tax returns and not to pay the net amount of VAT if the annual turnover achieved in Austria is less than EUR 22 000, in which case the amount of VAT due is to be assumed to be equal to that of the deductible VAT, and to make the application of the simplified scheme subject to the condition that this VAT is not indicated on the invoices or the documents serving as such.
Source:
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