Flashback on ECJ Cases – C-472/08 (Alstom Power Hydro) – A Member State may provide for a limitation period of three years for refund of unduly paid VAT

On January 21, 2010, the ECJ issued its decision in the case C-472/08 (Alstom Power Hydro).

Context: Reference for a preliminary ruling – Sixth VAT Directive – Article 18(4) – National legislation laying down a limitation period of three years for the refund of excess VAT

Article in the EU VAT Directive

Article 18(4) of the Sixth VAT Directive (Article 183 of the EU VAT Directive 2006/112/EC).

Article 183 (Rules governing exercise of the right of deduction)
Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period.
However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.

Facts

On 7 October 2004, Alstom requested, pursuant to Article 12(10) and (11) of the Law on value added tax, a refund of the sums which it considered that it had overpaid for the period from 1998 to 1 October 2004.
The VID decided not to refund excess VAT in the sum of LVL 288 184 and decided to conduct an inquiry in respect of the balance, amounting to LVL 31 265. In its decision, it noted that the applicant had exceeded the period of three years allowed for applying for the refund of overpaid tax laid down by Article 16(10) of the Law on direct and indirect taxes.
Alstom brought an action against that decision claiming, in particular, that the VID was required to apply Article 18(4) of the Sixth Directive, which does not lay down a temporal limit on the exercise of the right to apply for a refund and that, accordingly, it was not entitled to raise in its defence the limitation period laid down in Article 16(10) of the Law on direct and indirect taxes.
Its action having been dismissed both at first instance and on appeal, Alstom brought an appeal on a point of law before the national court, claiming, in particular, that the Republic of Latvia, as a Member State of the European Union, is obliged to transpose Article 18(4) of the Sixth Directive into its domestic law and that it follows from the case‑law of the Court that Member States cannot, as in the present case, extinguish the right to a refund of overpaid VAT.
In the order for reference, the Augstākās tiesas Senāts states that, where the VID examines applications for refunds of overpaid VAT, it is entitled to undertake inquiries. However, in such a situation, it must comply with the period of three years laid down in Article 23(1) of the Law on direct and indirect taxes. In the absence of a limitation period for the right for taxable persons to apply for a refund of excess VAT corresponding to the period during which the VID is entitled to adopt an amended assessment to tax following its inspection, it would have to consider the applications in every case. In those circumstances, the national legislation could be abused by a person liable to pay tax, where that person applies for a refund of overpaid VAT relating to a period in respect of which the VID can no longer undertake an inquiry.

Questions

On a proper construction of Article 18(4) of Council Directive 77/388/EEC ¹ of 17 May 1977, is it contrary to that provision for domestic legislation to lay down a limitation period of three years for the exercise of the right to recover sums of VAT overpaid (the difference between output tax and deductible input tax)?

AG Opinion

None

Decision

Article 18(4) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes – Common system of value added tax: uniform basis of assessment is to be interpreted as not precluding legislation of a Member State, such as that at issue in the main proceedings, which lays down a limitation period of three years in which to make an application for the refund of excess value added tax collected by, though not due to, the tax authority.

Summary

Article 18(4 ) of the Sixth Directive does not preclude the regulation of a Member State which provides for a limitation period of three years for the submission of an application for a refund of the surplus of VAT that the tax authorities of that State have unduly collected.

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