On July 13, 2023, the ECJ issued its decision in the case C-615/21 (Napfeny Toll).
Context: Reference for a preliminary ruling – Value added tax (VAT) – National legislation providing for the possibility of suspending, without any temporal limit, the limitation period for action by the tax authorities in the event of court proceedings – Repeated tax procedures – Regulation No 2988/95 – Scope – Principles of legal certainty and effectiveness of EU law
Article in the EU VAT Directive
Recital 8 to Directive 2006/112 provides:
Pursuant to Council Decision 2000/597/EC, Euratom, of 29 September 2000 on the system of the European Communities’ own resources [(OJ 2000 L 253, p. 42)], the budget of the European Communities is to be financed, without prejudice to other revenue, wholly from the Communities’ own resources. Those resources are to include those accruing from VAT and obtained through the application of a uniform rate of tax to bases of assessment determined in a uniform manner and in accordance with Community rules’.
Facts
During the period in question, namely in June 2010 and between November 2010 and September 2011 (period concerned), the applicant deducted the VAT on the goods it had acquired from the tax payable by it. The South Budapest tax authorities carried out an audit of the period concerned by authorization dated 09-12-2011. It was found that some of the goods acquired by the applicant did not in fact come from the undertakings which issued the invoices to it. By decision of 08.10.2015, the South Budapest Tax Office established a tax difference of HUF 144,785,000 borne by the applicant, which had been classified in its entirety as a tax debt, and imposed a tax penalty on the applicant, plus default interest. According to the statement of reasons for the decision, some of the invoices in question were not based on actual economic transactions; for another part economic transactions had taken place but tax fraud had been committed with the applicant’s knowledge. Defendant’s predecessor (objection division of the national tax) According to the statement of reasons for the decision, some of the invoices in question were not based on actual economic transactions; for another part economic transactions had taken place but tax fraud had been committed with the applicant’s knowledge. Defendant’s predecessor (objection division of the national tax) According to the statement of reasons for the decision, some of the invoices in question were not based on actual economic transactions; for another part economic transactions had taken place but tax fraud had been committed with the applicant’s knowledge. Defendant’s predecessor (objection division of the national tax) ‐ and customs office of Hungary) amended this decision by decision of 11-12-2015 with regard to the default interest and confirmed it for the rest. Deciding on the action brought by the applicant, the Board of Directors ‐ and the labor court annulled the decision on the objection by decision of 02-03-2018, which became irrevocable on the same day, and referred the case back for a new procedure. By its decision of 06/04/2020, which is being contested in the context of the present proceedings, the defendant amended the primary decision as regards the default interest and confirmed the remainder. In its application, the applicant seeks annulment of the contested decision, including the primary decision. In that regard, it submits, inter alia, that the right of the tax authorities to determine the tax under Paragraph 164(1) and (5)
Consideration:
§164(5) of the old Code of Tax Procedural Law and § 203(3) of the new Code of Tax Procedural Law regulate in essentially the same way the suspension of the limitation period during the judicial review of an administrative decision. None of these provisions provides for any limitation with regard to the duration of the suspension or makes an exception for decisions of the tax authorities that, in the opinion of the court, do not qualify for substantive review. Therefore, according to Hungarian law and the relevant case-law of the Kúria, the suspension of the limitation period in the event of judicial review is not limited in time and judicial proceedings initiated in respect of annulled decisions of the tax authorities are no exception to this rule. The principle of effectiveness, which has also been regularly examined by the Court in VAT-related cases, requires that national procedural rules do not make it impossible in practice or excessively difficult to assert claims based on EU law. The referring court considers that the unreasonably long duration of the tax procedure for assessing the substantive conditions of the right to tax deduction makes the exercise of the right to deduct tax extremely difficult. On the basis of all of the foregoing, the referring court has doubts as to whether the above scheme and the legal practice based on it are compatible with the EU law principles of legal certainty and effectiveness.
Questions
Should the principles of legal certainty and effectiveness, which are part of European Union law, be interpreted as not precluding national legislation, such as Paragraph 164(5) of az adózás rendjéről szóló 2003. évi XCII. törvény (Law No. XCII of 2003 establishing the Fiscal Procedure Code; hereinafter ‘Old Code’), which does not allow the court to exercise any discretion, and the practice based on that law according to which the prescription of actions is not subject to any limitation period? XCII of 2003 enacting the Tax Procedure Code; hereinafter: “Old Tax Procedure Code”), which leaves no discretion to the court, and the practice based on it according to which the limitation of the tax authorities’ right to determine value added tax (hereinafter: “VAT)” is suspended during the entire duration of the administrative appeal procedures, regardless of the number of new procedures after referral back by the judge, and the duration of the periods of suspension during the administrative appeal procedures are added together without time limitation, even if the judge found, with respect to the decision of the tax authority made in a new procedure after referral back, that the tax authority had not complied with the directions given by the judge in an earlier procedure, i.e. that the tax authority is to blame for the fact that an administrative appeal procedure was again instituted?
AG Opinion
The principles of legal certainty and of effectiveness of EU law must be interpreted as not precluding legislation of a Member State under which, in matters of value added tax, the limitation period in respect of the right of the tax authorities to make a tax assessment is to be suspended for the whole duration of the judicial review concerned, even where the review concerns consecutive decisions made by a tax authority and concerning the same tax.
However, it is for the competent national court, taking into account all the circumstances of the case, such as its complexity, to assess whether the repetition of the tax procedure and the judicial reviews concerned were mainly due to failures by the tax authority or whether the delay may be ascribed to the national courts, and to draw the requisite conclusions, including whether the taxable person concerned is entitled to any compensation.
Decision
The principles of legal certainty and effectiveness of EU law must be interpreted as not precluding legislation of a Member State or the related administrative practice, under which, in relation to value added tax, the limitation period in respect of the right of the tax authorities to assess that tax is suspended for the whole duration of judicial review, regardless of the number of times the administrative tax procedure has had to be repeated following those reviews and with no ceiling on the cumulative duration of the suspensions of that period, including in cases where the court ruling on a decision of the tax authority concerned taken as part of a repeat procedure, following on from an earlier court decision, finds that that tax authority failed to comply with the guidance contained in that court decision.
Summary
Source
Similar ECJ cases
Cited (recent) case law: (C-14/83), (C-106/89), (C-334/92), (C-91/92), (C-397/01 to C-403 /01), Plantanol Gmbh (C-201/08), Belgocodex (C-381/97), Goed Wonen (C-376/02), Netto Supermarket (C-271/06), technoRent International ea (C-844 /19), Volkswagen (C-533/16), LVK (C-643/11), Ecotrade SpA (C-95/07 and C-96/07)
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