ECJ C-235/21 (RAIFFEISEN LEASING) – Judgment – A written contract may exceptionally be regarded as an invoice

On September 29, 2022, the ECJ issued the judgment in the case C-235/21 (RAIFFEISEN LEASING).

Context: Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Article 203 — Sale-and-leaseback agreement — Article 226 — Compulsory information on an invoice — Possibility of to equate a written agreement with an invoice”

Article in the EU VAT Directive

In particular Article 203, and Articles 63, 178, 218 and 226 to 230 thereof Council Directive 2006/112/EC

Article 203 (Liability to pay VAT)
VAT shall be payable by any person who enters the VAT on an invoice.

Article 63 (Chargeable event)
The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.

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.

Article 218 (Concept of an invoice)
For the purposes of this Directive, Member States shall accept documents or messages on paper or in electronic form as invoices if they meet the conditions laid down in this Chapter.

Article 226 (Content of invoices)
Without prejudice to the particular provisions laid down in this Directive, only the following details are required for VAT purposes on invoices issued pursuant to Articles 220 and 221:
(1) the date of issue;
(2) a sequential number, based on one or more series, which uniquely identifies the invoice;
(3) the VAT identification number referred to in Article 214 under which the taxable person supplied the goods or services;
(4) the customer’s VAT identification number, as referred to in Article 214, under which the customer received a supply of goods or services in respect of which he is liable for payment of VAT, or received a supply of goods as referred to in Article 138;
(5) the full name and address of the taxable person and of the customer;
(6) the quantity and nature of the goods supplied or the extent and nature of the services rendered;
(7) the date on which the supply of goods or services was made or completed or the date on which the payment on account referred to in points (4) and (5) of Article 220 was made, in so far as that date can be determined and differs from the date of issue of the invoice;
(7a) where the VAT becomes chargeable at the time when the payment is received in accordance with Article 66(b) and the right of deduction arises at the time the deductible tax becomes chargeable, the mention ‘Cash accounting’;
(8) the taxable amount per rate or exemption, the unit price exclusive of VAT and any discounts or rebates if they are not included in the unit price;
(9) the VAT rate applied;
(10) the VAT amount payable, except where a special arrangement is applied under which, in accordance with this Directive, such a detail is excluded;
(10a) where the customer receiving a supply issues the invoice instead of the supplier, the mention ‘Self-billing’;
(11) in the case of an exemption, reference to the applicable provision of this Directive, or to the corresponding national provision, or any other reference indicating that the supply of goods or services is exempt;
(11a) where the customer is liable for the payment of the VAT, the mention ‘Reverse charge’;
(12) in the case of the supply of a new means of transport made in accordance with the conditions specified in Article 138(1) and (2)(a), the characteristics as identified in point (b) of Article 2(2);
(13) where the margin scheme for travel agents is applied, the mention ‘Margin scheme — Travel agents’;
(14) where one of the special arrangements applicable to second-hand goods, works of art, collectors’ items and antiques is applied, the mention ‘Margin scheme — Second-hand goods’; ‘Margin scheme — Works of art’ or ‘Margin scheme — Collector’s items and antiques’ respectively;
(15) where the person liable for payment of VAT is a tax representative for the purposes of Article 204, the VAT identification number, referred to in Article 214, of that tax representative, together with his full name and address.

Article 226a
Where the invoice is issued by a taxable person, who is not established in the Member State where the tax is due or whose establishment in that Member State does not intervene in the supply within the meaning of Article 192a, and who is making a supply of goods or services to a customer who is liable for payment of VAT, the taxable person may omit the details referred to in points (8), (9) and (10) of Article 226 and instead indicate, by reference to the quantity or extent of the goods or services supplied and their nature, the taxable amount of those goods or services.

Article 226b
As regards simplified invoices issued pursuant to Article 220a and Article 221(1) and (2), Member States shall require at least the following details:
(a) the date of issue;
(b) identification of the taxable person supplying the goods or services;
(c) identification of the type of goods or services supplied;
(d) the VAT amount payable or the information needed to calculate it;
(e) where the invoice issued is a document or message treated as an invoice pursuant to Article 219, specific and unambiguous reference to that initial invoice and the specific details which are being amended.
They may not require details on invoices other than those referred to in Articles 226, 227 and 230.

Article 227
Member States may require taxable persons established in their territory and supplying goods or services there to indicate the VAT identification number, referred to in Article 214, of the customer in cases other than those referred to in point (4) of Article 226.

Article 229
Member States shall not require invoices to be signed.

Article 230
The amounts which appear on the invoice may be expressed in any currency, provided that the amount of VAT payable or to be adjusted is expressed in the national currency of the Member State, using the conversion rate mechanism provided for in Article 91.

Facts

The appellant in cassation, the company Raiffeisen Leasing, d.o.o. (‘Raiffeisen Leasing’), entered into a financial leasing agreement and a sale and purchase agreement relating to immovable property (a sale and lease back transaction) with the company RED, d.o.o. (‘RED’).
RED was the owner of land on which stood an old residential building, in Rožna Dolina. It wished to erect a new building there. For financing purposes, the parties agreed, in an immovable property financial leasing agreement concluded on 19 November 2007 (‘the agreement’), that Raiffeisen Leasing would purchase the property from RED and that RED would then pay leasing instalments up to the value of the existing land and the new buildings (EUR 1 294 786.56). That agreement also stated an amount of value added tax (‘VAT’), namely EUR 110 056.86.
Raiffeisen Leasing did not issue to RED any (specific) invoice on the basis of the agreement. Nor did it declare or pay VAT. RED exercised its right to deduct VAT on the basis of the agreement, as if the agreement itself had been an invoice, and reported the deduction in its VAT return.
In November 2007, Raiffeisen Leasing, the appellant in cassation, exercised the right to deduct VAT on the basis of the sale agreement.
RED, however, failed to fulfil its obligations within the stipulated period and the agreement was terminated by mutual consent almost four years later, on 21 February 2011. Raiffeisen Leasing subsequently sold the property on to another purchaser, at a price inclusive of VAT.
On 25 July 2014, RED was served with a final decision refusing it the right to deduct VAT on the basis of the agreement.
In the course of a tax inspection procedure, it was established (in a first- and second-instance tax assessment) that Raiffeisen Leasing (1) ought to have accounted for VAT on the agreement and (2) should not have exercised the right of deduction on the basis of the sale agreement.
As regards (1): the Finančna uprava Republike Slovenije (tax authority of the Republic of Slovenia; ‘the tax authority’) based the liability to VAT on Article 76(1)(9) of the Zakon o davku na dodano vrednost (Law on value added tax; ‘the ZDDV-1’), which provides that ‘VAT is payable by any person who mentions VAT on an invoice’. In its opinion, the agreement, which set out a price inclusive of VAT, had substantially the content of an invoice and RED had become entitled, on the basis thereof, to exercise its right to deduct VAT. Consequently, an obligation to pay VAT also arose at that time.
The tax authority subsequently adopted a decision refusing RED the right to deduct VAT on the basis of the agreement. At that point, Raiffeisen Leasing accordingly acquired the right to reduce (correct) the VAT declaration, since the effect of the tax authority’s decision was that there was no longer a risk of loss of tax revenue. Prior to that, however, (from 3 January 2008 to 25 July 2014) there had been a period during which Raiffeisen Leasing was under an obligation, in the tax authority’s opinion, to declare the VAT, which it had failed to do. With reference to that intervening period, the tax authority applied interest on the tax debt amounting to EUR 50 571.88.
As regards (2): in the tax authority’s opinion, the transaction under the sale agreement was legally exempt from VAT pursuant to Article 44(7) of the ZDDV-1, which provides that ‘the supply of buildings or parts thereof, and of the land on which they stand, shall be exempt from VAT, unless the supply takes place before the buildings or parts thereof are occupied or otherwise used for the first time, or the supply takes place within two years of the date of first occupation or first use.’ The tax declaration under which a person may choose to render a transaction subject to VAT, in accordance with Article 45 of the ZDDV-1, was not submitted by the contracting parties to the tax authorities. Consequently, no right to deduct could be claimed, even though an invoice had been issued which (wrongly) stated an amount of VAT. The tax authority therefore assessed
additional VAT of EUR 44 200.00, together with interest of EUR 11 841.97. In the tax authority’s opinion, it was irrelevant that (once the agreement had been terminated) the property was sold on to another purchaser under a transaction subject to VAT. The transaction under the sale agreement was exempt from VAT, and subsequent events had no bearing on that.
In the course of administrative proceedings, the Ministry of Finance rejected the appellant’s claim as unfounded and upheld the decision of the tax authority, as the authority of first instance.
Raiffeisen Leasing brought an action which was dismissed by the Upravno sodišče (Administrative Court) on grounds substantially identical to those set out in the decision of the tax authority and the decision of the Ministry of Finance, as the authority of second instance.
Raiffeisen Leasing then applied for leave to bring an appeal in cassation against the judgment of the Upravno sodišče (Administrative Court), which was partially granted by the Vrhovno sodišče (Supreme Court), which granted leave for the appeal in cassation by order of 20 May 2020, inter alia, for the purpose of resolving the following important legal issue: ‘When may a bilateral arrangement (an agreement) be regarded as an invoice for the purposes of the [ZDDV-1] and the [VAT] Directive?’ On that basis, Raiffeisen Leasing brought its appeal in cassation, on which the Vrhovno sodišče (Supreme Court) is now required to give its ruling.

Questions

May a written agreement be regarded as an invoice, for the purposes of Article 203 of the VAT Directive, ¹ only if it contains all of the information that is required to be set out in an invoice in accordance with Chapter 3 (‘Invoicing’) [of Title XI] of the VAT Directive?

In the event that that question is answered in the negative:

On the basis of what information and circumstances may a written agreement in any event be regarded (also) as an invoice giving rise to an obligation to pay VAT within the meaning of Article 203 of the VAT Directive?

More specifically:

May a written agreement, concluded by two taxable persons subject to VAT and concerning the supply of goods or services, be regarded as an invoice within the meaning of Article 203 of the VAT Directive if it evidences an express and objectively identifiable intention on the part of the seller or the provider of services, as a contracting party, to issue an invoice for a specific transaction, such that the purchaser could reasonably assume that it had, on the basis thereof, a right to deduct the input VAT paid?

AG Opinion (unofficial translation)

Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as meaning that a written contract may exceptionally be regarded as an invoice within the meaning of that directive even if that agreement does not contain all the information required under Chapter 3 (‘Invoicing’) of Title XI of that Directive, if that document contains sufficient information to enable the tax authorities to verify that the tax due has been paid and , where applicable, whether there is any right to deduct the value added tax.

Decision

Article 203 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax,

should be interpreted as:

a sale-leaseback contract, the conclusion of which has not been followed by the establishment of an invoice by the parties, may be considered to be an invoice, within the meaning of this provision, in the event that this contract contains all the information necessary for the tax authorities of a Member State to be able to establish whether the material conditions for the right to deduct value added tax have been satisfied in the present case, which it is for the referring court to verify .

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