ECJ C-519/22 (MAX7 Design) – AG Opinion – Tax guarantee imposed on a company of which one of its executive officers was a member or executive of another legal person with an outstanding tax debt

On December 14, 2023, the ECJ issued the AG Opinion in the case C-519/22 (MAX7 Design).

Context:

Article in the EU VAT Directive

Article 273 of the EU VAT Directive 2006/112/EC.

Article 273 (Misc. provisions)
Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.
The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.

Facts

By decision of 19 December 2019, the Nemzeti Adó- és Vámhivatal Északbudapesti Adó- és Vámigazgatósága (Budapest-North Tax and Customs Office, which is part of the National Tax and Customs Administration, Hungary; ‘the first-tier tax authority’) imposed on the company MAX7 Design Kft., the applicant in the main proceedings (‘the applicant’), an obligation to lodge a tax guarantee in the amount of HUF 1930979 (approximately EUR 4 900). The reason for the requirement to lodge that guarantee was that, between 14 February and 2 June 2017, one of the applicant’s executive officers had been an executive officer of another company in liquidation which, at the time of its dissolution, had had a tax debt of the same amount as the guarantee required.
The first-tier tax authority sent the applicant and the executive officer in question the decision imposing the requirement to lodge the forementioned guarantee. In both cases, it was the executive officer in question who took receipt of that decision. The date of receipt was 21 December 2019. The tax guarantee should have been lodged within thirty days of receipt, that is to say by 20 January 2020 at the latest. Any appeal against that decision should have been brought within eight days of its notification. Neither the applicant nor the executive officer in question having brought such an appeal, the decision became final on 31 December 2019.
On 7 January 2020, the members of the applicant dismissed the executive officer in question and appointed another in his place. As the reason for imposing the requirement to lodge a tax guarantee had thereby been removed, the applicant did not lodge that guarantee.
The first-tier tax authority ordered the cancellation of the applicant’s tax identification number and VAT identification number, on the ground that the applicant had not lodged the tax guarantee within the period indicated. The applicant brought an administrative appeal against that decision. The defendant in the main proceedings, the Nemzeti Adó- és Vámhivatal Fellebbviteli Igazgatósága (Appeals Division of the National Tax and Customs Authority; ‘the defendant’), upheld that decision.
The applicant brought an action against the second-tier decision before the Fővárosi Törvényszék (Budapest High Court), the referring court. In the course of examining the application, the referring court has submitted a request for a preliminary ruling to the Court of Justice.

Questions

1) In the light of Article 273 [of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax] and the principle of proportionality under Article 52(1) [of the Charter of Fundamental Rights of the European Union], is legislation of a Member State under which a company’s tax identification number or VAT identification number may be cancelled for failure to comply with the requirement to lodge a tax guarantee imposed on that company compatible with the freedom to conduct a business enshrined in Article 16 of the Charter, even in the case where the members of the company are not directly aware that the requirement to lodge that guarantee has been imposed on the company or that the reason why the requirement to lodge a tax guarantee was imposed on the company is that one of its executive officers is or was a member or executive of another legal person with an outstanding tax debt?
2) In the light of principle of necessity under Article 273 of Directive [2006/112] and the principle of proportionality under Article 52(1) of the charter, is legislation of a Member State under which a company’s tax identification number or VAT identification number may be cancelled for failure to comply with the requirement to lodge a tax guarantee imposed on that company compatible with the freedom to conduct a business enshrined in Article 16 of the Charter and the right to an effective remedy under Article 47 of the Charter, even in the case where the minimum notice period for properly convening a meeting of that company’s decision-making body, in accordance with the general provisions of the legislation of that Member State, does not allow that body to dismiss the executive officer affected by the impediment giving rise to the requirement to lodge that guarantee, and thus to remove that impediment within a timeframe such as to cause the obligation to lodge the guarantee to be extinguished, thereby obviating the need to cancel the tax identification number, before the tax authority’s decision imposing the requirement to lodge that guarantee becomes final?
3) Is legislation of a Member State which provides in mandatory terms, and without leaving any discretion to law-enforcement bodies, that:

a) the removal by the company, as a taxable person, of the impediment giving rise to the imposition of the requirement to lodge a tax guarantee once the decision imposing that requirement has become final has no effect on the obligation to lodge a tax guarantee or, therefore, on the cancellability of the tax identification number, even if that impediment was removed after the decision imposing the requirement to lodge a guarantee became final but within the prescribed time limit for lodging that guarantee; and that,
b) if the tax guarantee has not been lodged, the company, as a taxable person, cannot remedy the legal consequences of the cancellation of its tax identification number once the prescribed time limit for lodging that guarantee has expired, even if it removed the impediment giving rise to the imposition of the requirement to lodge a guarantee after the decision imposing that requirement became final but within the prescribed time limit for lodging that guarantee, compatible with the freedom to conduct a business enshrined in Article 16 of the Charter, subject to the necessary limitation thereof provided for in Article 273 of […] Directive [2006/112], and proportionate in accordance with Article 52(1) of the Charter and with the right to effective judicial protection under Article 47 of the Charter?

AG Opinion

(1) Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with Articles 16 and 17 of the Charter of Fundamental Rights of the European Union,

must be interpreted as precluding the imposition of a guarantee in the amount of the unpaid tax debts of another taxable person, such as that at issue in the present case.

(2) Article 47 of the Charter

must be interpreted as precluding legislation under which the imposition of a requirement to lodge a guarantee in the amount of the unpaid tax debts of another taxable person cannot itself be challenged as to its substance. It also precludes legislation under which all conceivable appeals against the imposition of a requirement to lodge a guarantee have no suspensory effect, such that the payment deadline will expire before a decision on the appeal has been made by the authorities and before there was even the possibility of obtaining judicial protection against it.

Decision

Summary

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