VATupdate

ECJ Case C-69/17 (Siemens Gamesa) – Judgment – Acquisition by inactive taxpayer; VAT deduction

Judgment of 12 September 2018 in Case C‑69/17 (Siemens Gamesa Renewable Energy România SRL, formerly Gamesa Wind România SRL) regarding the right of deduction for acquisitions made by a taxpayer declared ‘inactive’ by the tax authorities.

Facts (simplified):

  • Gamesa is a Romanian company engaged in the business of the assembly, installation and maintenance of wind farms. It acquired various goods and services from suppliers established and registered for VAT purposes in Romania and in other EU countries. Gamesa deducted all input VAT charged to it.
  • As Gamesa had not filed a VAT Return for 6 months, it was declared an ‘inactive taxpayer’.
  • After a tax inspection, Gamesa received an assessment notice refusing it the right to deduct VAT and imposing on it an obligation to pay penalties, on the ground, inter alia, that it was not entitled to a right of deduction in respect of the acquisitions made in the period during which it had been declared inactive.
  • Gamesa did not agree with this and appealed. In its application, Gamesa primarily alleges that the tax authorities infringed the principle of proportionality and the principle of the neutrality of VAT, in circumstances in which it had met all the necessary obligations for the purposes of the reactivation of its VAT identification number. Those authorities rely, in their defence, on the need to accurately collect VAT and to prevent tax evasion.

The Romanian Court asks the following questions to the ECJ:

(1) Does the VAT Directive preclude, in circumstances such as those of the main proceedings, national legislation or a tax practice under which a taxpayer does not have the right to deduct VAT claimed in several returns after the reactivation of the taxpayer’s VAT identification number, on the basis that the VAT in question relates to purchases made during a period in which the taxpayer’s VAT identification number was inoperative?

(2) Does the VAT Directive preclude, in circumstances such as those of the main proceedings, national legislation or a tax practice under which a taxpayer does not have the right to deduct VAT claimed in several returns after the reactivation of the taxpayer’s VAT identification number, on the basis that, although the VAT in question relates to invoices issued after the reactivation of the taxpayer’s VAT identification number, it concerns purchases made during a period in which the VAT identification number was inoperative?’

Judgment:

Consideration of the questions referred

The ECJ rules that:

The VAT Directive must be interpreted as precluding national legislation, such as that at issue in the main proceedings, under which it is permissible for the tax authorities to refuse, on account of a failure to submit tax returns, a taxable person which has made acquisitions in the period during which its value added tax identification number was revoked the right to deduct value added tax on those acquisitions using value added tax returns filed — or invoices issued — after the reactivation of its identification number, on the sole ground that those acquisitions took place in the period during which its value added tax identification number was de-activated and where the substantive requirements have been satisfied and the right of deduction is not being invoked fraudulently or abusively.

Source: Curia