On October 3, 2006, the ECJ issued its decision in the case C-475/03 (Banca popolare di Cremona).
Context: Sixth VAT Directive – Article 33(1) – Prohibition on the levying of other domestic taxes which can be characterised as turnover taxes – Definition of ‘turnover taxes’ – Italian regional tax on productive activities.
Article in the EU VAT Directive
Artcile 33(1) of the Sixth VAT Directive (Article 401 of the EU VAT Directive 2006/112/EC).
Article 401 (Other taxes, duties and charges)
Without prejudice to other provisions of Community law, this Directive shall not prevent a Member State from maintaining or introducing taxes on insurance contracts, taxes on betting and gambling, excise duties, stamp duties or, more generally, any taxes, duties or charges which cannot be characterised as turnover taxes, provided that the collecting of those taxes, duties or charges does not give rise, in trade between Member States, to formalities connected with the crossing of frontiers.
Facts
- Banca popolare brought an action before the referring court against the decision of Agenzia Entrate Ufficio Cremona refusing to reimburse the IRAP paid in 1998 and 1999.
- According to the applicant in the main proceedings, the legislative decree is not consistent with Article 33 of the Sixth Directive.
- The referring court makes the following points :
- first, IRAP applies, in general, to all commercial transactions involving production or trade, relating to goods and services and arising from the regular exercise of an activity intended for that purpose, that is, through undertakings, trades and professions;
- second, although IRAP operates according to a different procedure from that for value added tax (‘VAT’), it is levied on the net value deriving from production, or, more specifically, the net value ‘added’ to the product by the producer, with the result that IRAP is a value added tax;
- third, IRAP is levied at every stage of the production or distribution process;
- fourth, the total amount of IRAP collected in the various stages of the cycle, from production up to the final consumer, is equal to the rate of IRAP applied to the selling price of goods and services charged to the final consumer.
- However, the referring court raises the question whether the differences between VAT and IRAP concern the essential characteristics which determine whether or not the taxes belong to the same category.
Questions
Must Article 33 of [the Sixth Directive] be interpreted as meaning that it prohibits a charge to IRAP of the net value of production deriving from the regular exercise of an independently run activity whose object is the production of or trade in goods or the provision of services?
AG Opinion
(1) a tax having the features of IRAP as described in the order for reference, that is to say which
- is levied on all natural and legal persons who regularly carry on an activity with the object of producing or trading in goods or providing services,
- is imposed on the difference between the proceeds and costs of the taxable activity,
- is charged in respect of each stage in the production and distribution process corresponding to a supply or set of supplies of goods or services made by a taxable person, and
- imposes a burden at each of those stages which is globally proportional to the price at which the goods or services are supplied,
falls within the scope of the prohibition, in Article 33(1) of the Sixth Council Directive 77/388/EEC, of other national taxes which can be characterised as turnover taxes, provided that, for a representative sample of businesses subject to both taxes, the ratio between the amounts paid in VAT and the amounts paid in the disputed tax is substantially constant.
That condition must be assessed by the national court, having regard to the detailed characteristics of the tax in issue.
(2) The prohibition in that article may not be relied upon in order to claim reimbursement of IRAP levied in respect of any period of assessment prior to the Court’s judgment, or in respect of the period during which that judgment is delivered, except by persons who initiated legal proceedings or raised an equivalent administrative claim before 17 March 2005, the date on which Advocate General Jacobs delivered his Opinion in the present case. Such claimants may rely on it to the extent that their claims are not otherwise barred by national procedural rules which observe the principles of equivalence and effectiveness.
Decision
Article 33 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 system of value added tax: uniform basis of assessment, as amended by Council Directive 91/680/CEE of 16 December 1991, must be interpreted as meaning that it does not preclude the maintenance of a charge to tax with the characteristics of the tax at issue in the main proceedings.
Summary
Art 401 VAT Directive does not preclude the maintenance of a tax levy with characteristics like those of the Italian regional tax on productive activities.
Source
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