There are various types of European Court of Justice (CJEU or ECJ) proceedings. Among them (and most common) are the references for preliminary rulings (also in VAT area).
The recent years show an ever increasing number of the CJEU cases on VAT (much more than on direct taxes) on various topics. The CJEU VAT cases show a very diverse palette, e.g. VAT deduction right, VAT exemptions, substance over form/ neutrality principles vs strict formal interpretation, fixed establishment, chain transactions etc. All hot topics in VAT arena.
Therefore, let’s remember a few things about the references to CJEU for preliminary rulings:
- National courts may, and sometimes must, refer to the Court of Justice and ask it to clarify a point concerning the interpretation of EU law, (e.g., to ascertain whether their national legislation complies with that law);
- A reference for a preliminary ruling may also seek the review of the validity of an act of EU law;
- A reference can be made only by a national court;
- The Court of Justice’s reply is not merely an opinion, but takes the form of a judgment or reasoned order;
- The national court to which it is addressed, is, in deciding the dispute before it, bound by the interpretation given;
- The Court’s judgment likewise binds other national courts before which the same problem is raised.
In this context, also to think of the direct effect of European law, which enables individuals to immediately invoke a European provision before a national or European court. This principle only relates to certain European acts. Furthermore, it is subject to several conditions.
The CJEU first articulated the doctrine of direct effect in the case of Van Gend en Loos (Case C-26/62). The Court laid down the criteria (“Van Gend criteria”) for establishing direct effect. In this judgement, the Court states that European law not only engenders obligations for EU countries, but also rights for individuals. Individuals may therefore take advantage of these rights and directly invoke European acts before national and European courts.
The same principle (direct effect) applies in the VAT area as well: in Grad v Finanzamt Traunstein (Case 9/70), the CJEU ruled that a directive could be directly effective, as they imposed an obligation to achieve a required result. Also, in the Becker case (C-8/81), the Court held that, “wherever the provisions of a directive appear … to be unconditional and sufficiently precise, those provisions may, in the absence of implementing measures adopted within the prescribed period, be relied upon as against any national provision which is incompatible with the directive or insofar as the provisions define rights which individuals are able to assert against the State.”
Thus, also in the VAT system, a company may, in proceedings against a Member Sates, rely on sufficiently precise, clear and unconditional directive provision to override incompatible domestic provisions. This is the precedence of EU law over domestic law.
Contribution by Maria Cambien