Flashback on ECJ Cases – C-427/10 (Banca Antoniana Popolare Veneta) – Different terms for refunds in fiscal vs civial law

On December 15, 2011, the ECJ issued its decision in the case C-427/10 (Banca Antoniana Popolare Veneta).

Context: VAT – Recovery of VAT paid but not due – National legislation under which actions may be brought for the recovery of sums paid but not due, before different courts and subject to different time-limits, depending on whether the claimant is the recipient of the services or their supplier – Possibility for the recipient to claim a VAT refund from the supplier after the expiry of the time-limits within which the supplier is able to bring an action against the tax authority – Principle of effectiveness

Article in the EU VAT Directive

Artivle 21(1)(b) of the Sixth VAT Directive (Article 196 of the EU VAT Directive 2006/112/EC).

Article 196 (Liability to pay VAT)
VAT shall be payable by any taxable person, or non-taxable legal person identified for VAT purposes, to whom the services referred to in Article 44 are supplied, if the services are supplied by a taxable person not established within the territory of the Member State.

Facts

From 1984 to 1994, BAPV supplied a service consisting in the collection of consortium contributions, due from members, on behalf of three Consorzi di Bonifica (land reclamation consortia), that is to say, public bodies governed by national and regional laws and tasked with carrying out public infrastructure works. As the payments received in return for those services were subject to VAT, BAPV charged VAT on those supplies to the consortia. BAPV regularly paid the VAT to the tax authority in accordance with the statutory procedure since, at the time, the collection of consortium contributions was not regarded by the tax authority as falling within the exemption provided for under Article 10(5) of DPR No 633/72.
By administrative circular dated 26 February 1999, the tax authority announced that it had changed its original interpretation of that provision, taking the view that the contributions to the consortia were fiscal in nature and, in consequence, that the payments due from the consortia in return for the collection of contributions were to be regarded as exempt from VAT for the purposes of Article 10(5) of DPR No 633/72.
Accordingly, the land reclamation consortia asked SIFER SpA, the company which had succeeded BAPV, for the refund – by way of sums paid but not due, for the purposes of Article 2033 of the Civil Code – of the VAT paid on the payments for the collection of contributions. Following the action brought before the Tribunale civile di Ferrara (Ferrara Civil Court) by one of the consortia, BAPV was ordered to repay those sums.
BAPV brought a claim against the tax authority for a VAT refund equivalent in amount to the sums claimed back by the recipients of the services. When faced with an implied decision rejecting that claim, BAPV brought before the Commissione tributaria provinciale di Roma (Provincial Tax Court of Rome) three separate actions, all of which were upheld.
However, the tax authority appealed against those three decisions and, after joining the appeals, the Commissione tributaria regionale del Lazio (Provincial Tax Court of Lazio) found that BAPV’s right to a refund had lapsed since its claim for a refund had been entered after the expiry of the specific two-year time‑limit, with effect from payment of the VAT, laid down in Article 21(2) of Legislative Decree No 546 of 31 December 1992. In that connection, the Commissione tributaria regionale del Lazio stated that the administrative circular of 26 February 1999 could not constitute a chargeable event from which time for the purposes of that time-limit started to run.
BAPV brought an appeal in cassation against that judgment before the Corte suprema di cassazione.
The Corte suprema di cassazione has doubts as to whether the national procedural rules are compatible with the guiding principles relating to VAT, given the fact that those rules can give rise to situations like that at issue before it, which result in a substantive denial of the right to a refund of VAT paid but not due . The Corte suprema di cassazione notes that BAPV, which paid the VAT to the tax authority, is compelled, pursuant to a judgment by a civil court, to refund the VAT to the person who paid the charge, but cannot then obtain reimbursement from the tax authority. Ultimately, therefore, the provisions of national law governing procedure and the rules of substantive law governing the reimbursement of VAT paid but not due make it virtually impossible to exercise the right to a refund.

Questions

1. Do the principles of effectiveness, non-discrimination and tax neutrality in relation to VAT preclude national rules or practice in accordance with which the right of the purchaser/client to reimbursement of VAT paid in error is construed, in contrast to the right exercised by the principal debtor (supplier/provider of the service), as a right under the ordinary law to the recovery of sums paid but not due, and time-limits are applied in the case of the purchaser/client which are significantly more generous than those applied to the principal debtor, with the result that the claim of the purchaser/client, brought after the time-limits for the principal debtor have expired, can give rise to an order directing the principal debtor to provide reimbursement, while it is no longer possible for the latter to claim a refund from the tax authority and there is no provision for any bridging instrument, designed to prevent conflicts or disputes, to coordinate the proceedings brought or to be brought before the various courts?

2. Quite apart from that situation, are the above principles compatible with national practice or case-law under which it is possible for a judgment to direct that the purchaser/client be reimbursed by the supplier/provider of the service, where the latter has not brought a reimbursement claim before another court within the time allowed for that purpose – in reliance on an interpretation, handed down by case-law and subsequently implemented through administrative practice, to the effect that the transaction was subject to VAT?

AG Opinion

The principles of neutrality, effectiveness and non-discrimination do not preclude national legislation, such as that at issue in the case before the referring court, which, with regard to VAT which was not due but which has been paid to the public Treasury, in the first place, confers different rights, subject to different time-limits or limitation periods, on the service provider as a taxable person for VAT purposes, as compared with the recipient of the services as the individual charged with the VAT, and, in the second place, confers jurisdiction on different courts for any related disputes – provided that that legislation is applied consistently with the principles of legal certainty and the protection of legitimate expectations, and with due respect for the right to property.

Decision

The principle of effectiveness does not preclude national rules governing the recovery of sums paid but not due, under which the time-limits for a civil law action for recovery of sums paid but not due, brought by the recipient of services against the supplier, a taxable person for the purposes of VAT, are more generous than the specific time-limits for a fiscal law action for a tax refund, brought by the supplier against the tax authority, provided that it is possible for that taxable person effectively to claim reimbursement of the VAT from the tax authority. That condition is not satisfied where the application of such rules has the effect of totally depriving the taxable person of the right to obtain from the tax authority a refund of the VAT paid but not due, which the taxable person has himself had to pay back to the recipient of his services.

Summary

The principle of effectiveness does not preclude national legislation on the recovery of undue payments which provides for a longer limitation period for civil law claims for repayment of undue payments brought by the recipient of services against the supplier of those services subject to VAT. is then the specific limitation period for the tax-law claim for refund that the provider of the services brings against the tax administration, insofar as this taxpayer can successfully claim a refund of that tax from that administration.The latter condition is not met if the application of such a scheme results in the taxable person being completely deprived of his right to recover from the tax authorities the unduly paid VAT which he himself had to reimburse to the recipient of his services.

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