ECJ C-355/22 (Osteopathie Van Hauwermeiren) – Judgment – A national court cannot use a national provision to maintain certain effects of a provision of national law that it has deemed incompatible with the Directive

On October 5, 2023, the ECJ issued its judgment in the case C-355/22 (Osteopathie Van Hauwermeiren)

Context: Reference for a preliminary ruling – Taxation – Common system of value added tax (VAT) – Directive 2006/112/EC – Maintenance of the effects of national regulations incompatible with Union law

Article in the EU VAT Directive 2006/112/EC

Article 132(1)(c) of the EU VAT Directive 2006/112/EC.

Article 132
1. Member States shall exempt the following transactions:
(c) the provision of medical care in the exercise of the medical and paramedical professions as defined by the Member State concerned;

Facts

Initially, there was uncertainty as to whether or not osteopathic services were eligible for the VAT exemption. Consequently, the applicant paid VAT on those services and proposed to the tax authorities that the time-barring of its right to a refund of that VAT should be interrupted by means of inclusion in an amended VAT return, an approach which the tax authorities rejected.
By judgment No 194/2019 of 5 December 2019, the Grondwettelijk Hof (Constitutional Court) partially annulled certain provisions of Article 44 of the btw-wetboek as being contrary to EU law, with the result that the services of osteopaths fall within the scope of the VAT exemption in so far as the service providers concerned possess the necessary qualifications to provide medical care of a sufficiently high level of quality as to be comparable to the care provided by members of a regulated medical or paramedical profession.
However, the Grondwettelijk Hof has maintained the effects of the annulled provisions as regards taxable events that occurred before 1 October 2019. The Grondwettelijk Hof based the limitation of the retroactivity of its ruling on important considerations of legal certainty affecting all the interests involved, both public and private, in particular the practical impossibility of refunding unduly collected VAT to the recipients of the supplies or services provided by the taxable person or of claiming payment from them in the event of an erroneous failure to charge them, particularly where a large number of unidentified persons is involved, or where the taxable persons do not have an accounting system that enables them subsequently to identify the supplies or services in question and their value. In that regard, the Grondwettelijk Hof refers to the judgment of the Court of 8 April 1976, Case 43/75, Defrenne v SABENA, paragraph 74.
On the basis of the above-mentioned judgment of the Grondwettelijk Hof, the tax authorities took the view that the applicant was not entitled to a VAT refund in respect of the period prior to 1 October 2019.
However, the applicant continues to contest that tax and to claim a refund of the VAT paid before 1 October 2019. Thus, in its periodic VAT return for the second quarter of 2020, it included a VAT adjustment in its favour in the amount of EUR 45 355.81.
Subsequently, the tax authorities imposed a fine on the applicant of 10% of that amount, rounded to EUR 4 530, which they regard as tax due.
Following the rejection by the tax authorities of its request for the remission or reduction of that fine, the applicant brought an action before the referring court seeking a declaration that the abovementioned amount and fine, including the interest thereon, are not due.

Questions

Should the judgment of the Court of Justice of 8 April 1976 in Case 43/75 Defrenne v SABENA be interpreted as granting the national court autonomous power – sua sponte and without submitting a request for a preliminary ruling under Article 267 TFEU – to maintain, on the basis of a purely internal legal provision, the effects, as regards the past, of national legislation concerning the VAT exemption for medical and paramedical services in respect of which the same court (having previously, in the same dispute, submitted three requests for a preliminary ruling under Article 267 TFEU to the Court of Justice, which the Court answered by judgment of 27 June 2019 in Case C-597/17) subsequently found that the contested provision is contrary to European Union law and partially annulled that contested provision of national law, while maintaining the effects, as regards the past, of that provision of national law found to be contrary to EU law, thereby completely denying taxable persons liable for VAT the right to a refund of VAT levied in breach of EU law?
II Is the national court entitled to maintain – autonomously and without submitting a request for a preliminary ruling under Article 267 TFEU – the effects, as regards the past, of a national provision held to be contrary to the VAT Directive, on the basis of a general reference to ‘important considerations of legal certainty affecting all the interests involved, both public and private’ and an alleged ‘practical impossibility of refunding unduly collected VAT to the recipients of the supplies or services provided by the taxable person or of claiming payment from them in the event of an erroneous failure to charge them, particularly where a large number of unidentified persons is involved, or where the taxable persons do not have an accounting system that enables them subsequently to identify the supplies or services in question and their value’ when the taxable persons have not even been given the possibility of demonstrating that such a ‘practical impossibility’ does not exist?’

AG opinion

None

Decision

A national court cannot make use of a national provision enabling it to maintain certain effects of a provision of national law which it has judged to be incompatible with Council Directive 2006/112/EC of 28 November 2006 relating to the common system of value added tax, based on an alleged impossibility of retroceding the value added tax (VAT) collected unduly to customers of services provided by a taxable person, in particular due to the large number of people concerned or when these people do not have an accounting system allowing them to identify these services and their value.

Summary

National courts cannot use a national provision to maintain effects of a law that conflicts with Council Directive 2006/112/EC on value added tax. This cannot be justified by claiming it is impossible to retrocede unduly collected VAT to customers, especially if there are many people involved or they lack an accounting system to identify the services and their value.

Source