ECJ C-323/12 (E. ON Global Commodities SE) – Judgment: A tax representative did not constitute a Fixed Establishment

On February 6, 2014, the ECJ issued his decision in the case C-323/12 (E. ON Global Commodities SE). This case dealt with the right to deduct VAT if a company has designated a tax representative.

Context: Directive 79/1072/EEC — Common system of value added tax — Taxable persons residing in another Member State — Rules for refund of VAT — Taxable persons designating a tax representative in accordance with provisions of national law preceding accession to the European Union — Precluded — Meaning of ‘taxable person not established in the territory of the country’ — Condition of not being established — Condition of no supply of goods or services — Supplies of electricity to taxable dealers — Directive 2006/112/EC — Article 171’

Article in the EU VAT Directive

Article 1, 3, 4 and 6 of Eighth Council Directive 79/1072/EEC

Articles 38, 171 and 195 of Council Directive 2006/112/EC

Article 38 of the VAT Directive provides:

1. In the case of the supply of gas through the natural gas distribution system, or of electricity, to a taxable dealer, the place of supply shall be deemed to be the place where that taxable dealer has established his business or has a fixed establishment for which the goods are supplied, or, in the absence of such a place of business or fixed establishment, the place where he has his permanent address or usually resides.

2. For the purposes of paragraph 1, “taxable dealer” shall mean a taxable person whose principal activity in respect of purchases of gas or electricity is reselling those products and whose own consumption of those products is negligible.

Article 171(1) of the VAT Directive is worded as follows:

‘VAT shall be refunded to taxable persons who are not established in the Member State in which they purchase goods and services or import goods subject to VAT but who are established in another Member State, in accordance with the detailed implementing rules laid down in [the Eighth Directive].

The taxable persons referred to in Article 1 of [the Eighth Directive] shall also, for the purposes of applying that Directive, be regarded as taxable persons who are not established in the Member State concerned where, in the Member State in which they purchase goods and services or import goods subject to VAT, they have only carried out the supply of goods or services to a person designated in accordance with Articles 194 to 197 or Article 199 as liable for payment of VAT

Article 195 of the VAT Directive provides:

‘VAT shall be payable by any person who is identified for VAT purposes in the Member State in which the tax is due and to whom goods are supplied in the circumstances specified in Articles 38 or 39, if the supplies are carried out by a taxable person not established within that Member State.

Facts

E.ON has been active in the Romanian energy sector since October 2005 and designated Haarmann Hemmelrath & Partner Management Consulting SRL as its tax representative in Romania to meet tax obligations.
Haarmann acted as E.ON’s tax representative by issuing tax invoices for electricity supply and transport services between October 2005 and December 2006.
After Romania joined the European Union, the obligation to have a tax representative was abolished, but Haarmann continued to represent E.ON before the tax authorities.
E.ON sought to deduct VAT paid on invoices from Romanian suppliers for services such as coal conversion, coal transport, customs services, and electricity transmission between January and August 2007.
The tax authorities refused to accept the deduction, stating that E.ON ceased to be a taxable person for VAT purposes in Romania after January 2007, and its tax representative could not deduct VAT for supplies made after that date. Please note that this summary is based on the information provided and should not be considered as legal advice.

Questions

May a taxable person having its principal place of business in a Member State of the European Union other than Romania, and that has identified for VAT purposes a tax representative in Romania, on the basis of the provisions of domestic law in force before Romania acceded to the European Union, be regarded as a ‘taxable person not established in the territory of the country’, within the meaning of Article 1 of Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonisation of the laws of the Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable persons not established in the territory of the country?

Does the requirement, laid down in Article 1472(1)(a) of Law No 571/2003 on the Tax Code and transposing the provisions of the Directive, that the legal person should not be identified for VAT purposes, represent a further condition in addition to those expressly provided for in Articles 3 and 4 [of the Eighth Directive] and, if so, is a further condition of this kind permitted, having regard to Article 6 of the Directive?

Can Articles 3 and 4 [of the Eighth Directive] have direct effect, or does satisfaction of the conditions explicitly regulated by those provisions rather confer on the legal person not established in the territory of Romania, in accordance with Article 1, the right to refund of VAT, regardless of the form they are given in the national legislation?

AG Opinion

None

Decision

The provisions of the Eighth Council Directive 79/1072/EEC of 6 December 1979 on the harmonization of the laws of the Member States relating to turnover taxes – Arrangements for the refund of value added tax to taxable persons not established in the territory of the country, read together with Articles 38, 171 and 195 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2007/75/EC of 20 December 2007, must be interpreted as meaning that a taxable person established in one Member State and who has made supplies of electricity to taxable dealers established in another Member State has the right to rely on the Eighth Directive 79/1072 in the latter State in order to obtain a refund of input value added tax. That right is not precluded merely by the designation of a tax representative who is identified for value added tax purposes in the latter State.

Personal comments/VATupdate

This was another case concerning the right to VAT refund. The CJEU ruled that a tax representative did not constitute an FE for the purposes of Eighth Council Directive (79/1072/EEC). Therefore, E.ON’s right to VAT refund could not be excluded based on the fact that it designated a tax representative in Romania.

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