On June 3, 2022, the ECJ issued the Order in the case C-188/21 (Megatherm-Csillaghegy).
Context: Reference for a preliminary ruling — Common system of value added tax (VAT) — Directive 2006/112/EC — Right to deduct VAT — Methods of exercise — Withdrawal and restoration of a taxable person’s tax identification number — Loss of the right to VAT -deduction for transactions performed in the period prior to that withdrawal – Principle of proportionality”
Article in the EU VAT Directive
Articles 63, 167, 168, 178 to 180, 182 and 273 of the VAT Directive
Article 63 (Chargeable event)
The chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied.
Article 167 (Right to deduct VAT)
A right of deduction shall arise at the time the deductible tax becomes chargeable.
Article 168
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18(a) and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.
Article 178
In order to exercise the right of deduction, a taxable person must meet the following conditions:
(a) for the purposes of deductions pursuant to Article 168(a), in respect of the supply of goods or services, he must hold an invoice drawn up in accordance with Sections 3 to 6 of Chapter 3 of Title XI;
(b) for the purposes of deductions pursuant to Article 168(b), in respect of transactions treated as the supply of goods or services, he must comply with the formalities as laid down by each Member State;
(c) for the purposes of deductions pursuant to Article 168(c), in respect of the intra-Community acquisition of goods, he must set out in the VAT return provided for in Article 250 all the information needed for the amount of VAT due on his intra-Community acquisitions of goods to be calculated and he must hold an invoice drawn up in accordance with Sections 3 to 5 of Chapter 3 of Title XI;
(d) for the purposes of deductions pursuant to Article 168(d), in respect of transactions treated as intra-Community acquisitions of goods, he must complete the formalities as laid down by each Member State;
(e) for the purposes of deductions pursuant to Article 168(e), in respect of the importation of goods, he must hold an import document specifying him as consignee or importer, and stating the amount of VAT due or enabling that amount to be calculated;
(f) when required to pay VAT as a customer where Articles 194 to 197 or Article 199 apply, he must comply with the formalities as laid down by each Member State.
Article 179
The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.
However, Member States may require that taxable persons who carry out occasional transactions, as defined in Article 12, exercise their right of deduction only at the time of supply.
Article 180
Member States may authorise a taxable person to make a deduction which he has not made in accordance with Articles 178 and 179.
Article 182
Member States shall determine the conditions and detailed rules for applying Articles 180 and 181.
Article 273 (Misc. provisions0
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 8 April 2015, the Nemzeti Adó-és Vámhivatal Pest ordered Megyei Adó-és Vámigazgatósága (Tax and Customs Directorate of the Province of Pest, subject to the National Tax and Customs Authority, Hungary) (‘the Tax and Customs Directorate’ ) withdrew the tax identification number of the applicant in the main proceedings on the ground that it had failed to fulfill its obligations to file and electronically publish its annual accounts for 2013, despite having received several reminders and fined for that failure. After the applicant in the main proceedings remedied that omission on 10 June 2015, the Department of Taxation and Customs restored its tax identification number with effect from that date.
- On 20 January 2015, the applicant in the main proceedings filed its tax return for October 2014. However, this declaration was filed by the Tax and Customs Directorate on the ground that it had been submitted as a quarterly declaration and not as a monthly declaration. The quantitative data contained therein were not recorded. On 8 August 2016, the applicant in the main proceedings filed a new tax return, in accordance with the prescribed regularity. That new tax return was subsequently corrected several times, most recently on 6 December 2016. According to the Tax and Customs Department, that new tax return was incorrect because it stated a deductible tax which the applicant in the main proceedings was unable to include because its tax identification number had been revoked. The Tax and Customs Department therefore requested the applicant in the main proceedings to correct that declaration. In the absence of that correction, the Tax and Customs Directorate informed the applicant in the main proceedings that it filed the same new tax return without examining the substance of it.
- By applying to the Tax and Customs Directorate on 22 December 2016, the applicant in the main proceedings requested, inter alia, the credit or refund of an amount corresponding to the input tax paid by it in the period prior to the restoration of its tax identification number, which is 75 889 000 Hungarian forints (HUF) (approximately EUR 242 844.80). Part of this amount corresponded to the input tax paid in the period prior to the withdrawal of that number.
- The Department of Taxation and Customs informed the applicant in the main proceedings that its request could not be granted and that it could no longer exercise its right to deduct VAT in respect of the period prior to the withdrawal of its tax identification number. The applicant in the main proceedings requested the supervisory body to rule on this matter. Since that request was unsuccessful, it brought an action in court, requesting that the authority of the first instance, namely the Tax and Customs Directorate, take a decision at its request of 22 December 2016. After the Fővárosi Törvényszék (Judge for the Budapest Metropolitan Area, Hungary) ordered it to do so,
- In particular, by decision, the Tax and Customs Directorate accepted the applicant in the main proceedings’ request for an entry in its tax account and a refund of the deductible VAT included in its corrected return for the period from 1 to 31 October 2014 of April 3, 2019. On administrative appeal, the Objection Division of the National Tax and Customs Authority confirmed this decision by decision of 3 June 2019.
- It is apparent from the latter decision that it was only after the withdrawal and reinstatement of its tax identification number that the applicant in the main proceedings submitted a pending VAT return for October 2014 and that its right to deduct under Paragraph 137(3) of the VAT -law, in the version valid for the period from January 1, 2015 to December 31, 2017, had ceased to exist for the period prior to the withdrawal of its tax identification number.
- The applicant in the main proceedings brought an action of 3 June 2019 against the decision of the Objections Division of the National Tax and Customs Authority, which was dismissed at first instance by a judgment which had the force of res judicata.
- The applicant in the main proceedings brought an appeal in cassation against that judgment before the referring court, the Kúria (Supreme Court, Hungary). In this appeal in cassation, it argues in particular that that judgment is contrary to Articles 167, 168, 176 and 177 of the VAT Directive and infringes the principle of VAT neutrality by stating that the right to deduct VAT is not existed before the period preceding the withdrawal of its tax identification number. The applicant in the main proceedings further argues that Articles 176 and 177 of the VAT Directive do not confer on Member States the right to link the loss of the right to deduct input tax to the withdrawal of a taxable person’s tax identification number.
- The referring court notes that, in October 2014, the applicant in the main proceedings engaged in a genuine economic activity and that it intended to fulfill its notification obligation in respect of that period, although it did not do so with the required regularity and submitted her return only after her previously withdrawn tax identification number was restored. Moreover, according to that court’s findings, it is not apparent from the file in its possession that the applicant in the main proceedings attempted to exercise its right to deduct fraudulently.
- However, the referring court infers from the case-law of the Court that failure to comply with the formalities of the right to deduct VAT may lead to refusal of that right only if it prevents the tax authorities concerned from determining the amount of the tax or hinders an effective fight against VAT fraud. For example, he takes the view that the withdrawal of a taxable person’s tax identification number does not in itself justify the loss of his right to deduct input tax, since the right to deduct VAT can only be lost if it is established that facts result in fraud.
Questions
Must the principle of the neutrality of value added tax, as well as recital 30 and Articles 63, 167, 168, 178 to 180, 182 and 273 of the VAT Directive, be interpreted as meaning that they preclude the last sentence of Article 137(3) of az általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law CXXVII of 2007 on Value Added Tax), in the version in force between 1 January 2015 and 31 December 2017, whereby, ‘even in the case where the tax authority revokes the taxable person’s tax identification number without having suspended it, the taxable person shall lose his or her right to deduct tax on the date on which the decision revoking that number becomes final’, and Article 137 thereof, in the version in force between 1 January 2018 and 26 November 2020, whereby, ‘if the national tax and customs authority revokes the taxable person’s tax identification number, the taxable person shall lose the right to deduct tax on the date on which the decision revoking that number becomes final’?
Must Article 273 of the VAT Directive be interpreted as meaning that loss of the right to deduct tax as a mandatory legal consequence goes (disproportionately) beyond what is necessary in order to attain the objective of collecting tax and combating tax evasion?
AG Opinion
None
Order
Articles 63, 167, 168, 178 to 180, 182 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010, and the principles of the neutrality of value added tax (VAT) and of proportionality must be interpreted as precluding a national measure under which a taxable person for VAT purposes whose tax identification number was withdrawn because of a failure to submit and publish annual accounts and whose number was subsequently restored after that omission had been corrected, loses his right to deduct input VAT paid during the period preceding that withdrawal, even though the substantive conditions for the exercise of that right are met and that taxable person did not act fraudulently or unlawfully in order to benefit from that right.
Source
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