Appeal against a tax assessment notice by which the Agenzia delle Entrate (the Revenue Authority) classified the appellant as a società di comodo (shell company or brass plate company) for the 2008 tax year and initiated the recovery of unpaid higher direct taxes. The contested tax assessment notice also ruled that the appellant could not use its VAT credit, amounting to EUR 42 108, in the following financial year because it had not carried out, over the course of three successive tax periods, relevant transactions for VAT purposes of such an amount as would enable it to pass the so-called operational test provided for by the Italian legislation governing such companies.
Article in the EU VAT Directive 2006/112/EC
Article 2(1)(a), 9(1), 167, 168 and 178 of the EU VAT Directive 2006/112/EC.
Article 2 (Scope of VAT)
1. The following transaactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such
Article 9 (Taxable person)
1. ‘Taxable person’ shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as ‘economic activity’. The exploitation of tangible or intangible property for the purposes of obtaining income there from on a continuing basis shall in particular be regarded as an economic activity.
Article 167 (Right to deduct VAT)
A right of deduction shall arise at the time the deductible tax becomes chargeable.
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.
Article 178 (Rules governing exercise of the right of deduction)
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Facts
- .The Revenue Authority served on the company Vigna Ottieri S.r.l., which was subsequently taken over by Feudi di San Gregorio Aziende Agricole S.p.A., a notice of assessment by which, for the 2008 tax year, it classified the company as a shell company, on the ground that the value of the transactions which the company had recorded in its accounts was less than the revenue threshold below which companies are deemed, under national legislation, to be non-operating companies.
- By the same notice of assessment, the Revenue Authority initiated the recovery of unpaid taxes and rejected the company’s claim for a VAT credit of EUR 42 108 which the company had proposed to apply in the following financial year. As justification for its rejection of that claim, the Revenue Authority stated that the company had not carried out, over the course of three successive tax periods, relevant transactions for VAT purposes of such an amount as would satisfy the criteria of the so-called operational test.
- The Revenue Authority also stated that, for the purposes of the operational test, the company’s sale of fixed assets and of the right to use a trade mark could not be taken into consideration, since they amounted to the sale of part of the business and, as such, fell outside the scope of VAT.
- The company appealed against that notice of assessment. In particular, it argued that there had been no transfer of part of its business, in that there was no proof that the transferee was carrying on an activity which had previously been carried on by the transferor.
- La Commissione tributaria provinciale di Avellino (Provincial Tax Court, Avellino) dismissed that appeal by judgment of 18 April 2012.
- The company appealed against that judgment to the Commissione tributaria regionale della Campania (Regional Tax Court for Campania), which rejected that appeal by judgment of 15 October 2013. That court ruled that, as the Revenue Authority had asserted, the sale of fixed assets and of the right to use the trade mark constituted the sale by the company of part of its business, and for that reason those transactions had to be regarded as falling outside the scope of VAT.
- The company brought an appeal on a point of law against that judgment before the referring court.
Questions
- Is Article 9(1) of Directive 2006/112 to be interpreted as meaning that the status of taxable person, and consequently the right to deduct input VAT paid or to be reimbursed input VAT paid, may be refused where, in three consecutive years, the relevant transactions for VAT purposes carried out are of a value which is not deemed commensurate ‒ in that it is too low ‒ with what may, according to criteria pre-determined by law, reasonably be expected from the available assets and the person or entity concerned is unable to demonstrate, as justification for that fact, the existence of objective circumstances which have caused that result?
- In the event that the first question is answered in the negative, do Article 167 of Directive 2006/112, the general principle of VAT neutrality and the general principle that any restriction of the right to deduct VAT must be proportional preclude a provision of national law such as Article 30(4) of Law No 724 of 1994, under which the right to deduct input VAT paid on purchases or to be reimbursed such VAT or to use such VAT in a subsequent tax period may be refused where, in three consecutive tax periods, the relevant transactions for VAT purposes carried out are of a value which is not deemed commensurate ‒ in that it is too low ‒ with what may, according to criteria pre-determined by law, reasonably be expected from the available assets for three consecutive years and the taxable person concerned is unable to demonstrate, as justification for that fact, the existence of objective circumstances which have caused that result?
- In the event that the second question is answered in the negative, do the EUlaw principles of legal certainty and of the protection of legitimate expectations preclude a provision of national law such as Article 30(4) of Law No 724 of 1994, under which the right the deduct input VAT paid on purchases or to be reimbursed such VAT or to use such VAT in a subsequent tax period may be refused where, in three consecutive tax periods, the relevant transactions for VAT purposes carried out are of a value which is not deemed commensurate ‒ in that it is too low ‒ with what may, according to criteria pre-determined by law, reasonably be expected from the available assets for three consecutive years and the taxable person concerned is unable to demonstrate, as justification for that fact, the existence of objective circumstances which have caused that result?
Source
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