On 26 March 2020, Advocat General BOBEK gave its opinion in case C‑835/18 (SC Terracult SRL). The case deals with the question if a tax payer can still make corrections after he received an assessment.
Summary:
A taxable person was the subject of an inspection by the tax authorities. Having identified errors with regard to a given transaction in which that taxable person acted as supplier, the tax authorities issued a tax assessment requesting the taxable person to pay additional value added tax (VAT). The taxable person complied with the tax assessment and paid the additional VAT requested.
Subsequently, however, new facts came to light which triggered a different tax regime (the reverse charge mechanism) with regard to the transaction at issue. In those circumstances, can the national tax authorities refuse to allow the taxable person to correct the relevant invoices, and thus, in effect, deny the taxable person the right to a tax adjustment, because the invoices relate to transactions carried out during a period which was the subject of a tax inspection, and the resulting tax assessment was not challenged by the taxable person at that time?
Facts (simplified):
Donauland SRL (later: Terracult SRL), was the subject of a tax inspection by the Romanian tax authorities. The inspection found that Donauland had supplied rapeseed to Almos Alfons Mosel Handels GmbH (Germany) (‘Almos’). As Donauland was unable to provide the supporting documents verifying that the goods had left the territory of Romania, the tax authorities considered that the VAT exemption for intra-Community supplies of goods was not applicable to those supplies.
Therefore, the authorities issued a tax assessment (‘the first tax assessment’) and a tax inspection report, which set out certain additional liabilities of Donauland, including VAT for the supplies of rapeseed made to Almos, which were regarded as national supplies, subject to the standard VAT rate of 24%. [note: this seems logical]
Donauland did not contest the first tax assessment.
After this, Almos informed Donauland that it had noted that the invoices issued by Donauland contained Almos’ tax identification code (‘TIC’) for Germany. Almos informed Donauland that the goods had not left the territory of Romania and requested corrected invoices bearing the identification details of Almos’ tax representative in Romania.
On the basis of the documents produced by Almos, Donauland recorded 180 corrected invoices in its accounts. The corrected invoices were issued to Almos (addressed to both Almos in Germany and its tax representative in Romania), showing the following transactions: (1) the cancellation of the intra-Community supplies made and the reclassification of them as national supplies, applying the standard VAT rate of 24%, and (2) the cancellation of those national supplies to which the standard VAT rate had been applied and the inclusion of those supplies in the category of supplies of goods to which the reverse charge mechanism applied, on the basis that incorrect purchaser identification had been detected as a result of the communication by Almos. [note: Romania has a special reverse charge mechanism for doestic supplies of certain goods, inclduing rape seed.]
The corrected invoices issued by Donauland were included in the VAT return of March 2014. Donauland deducted the VAT relating to those invoices from the VAT owed for that period.
As a result of an application for a refund of VAT, a new tax inspection was carried out, at the end of which the tax assessment of 10 February 2017 (‘the second tax assessment’) was issued. That tax assessment established an obligation for Terracult to pay additional VAT in the amount.
Terracult lodged an administrative complaint against the second tax assessment, which was rejected by the Direcția Generală Regională a Finanțelor Publice Timișoara (Regional Directorate-General for Public Finance, Timișoara, Romania).
Terracult brought judicial proceedings before the Tribunalul Arad (Regional Court, Arad, Romania) requesting, inter alia, the partial annulment of the second tax assessment and a refund of the amount paid by that company on the basis of the first tax assessment. That court dismissed the action.
The Curtea de Apel Timișoara (Court of Appeal, Timișoara, Romania) decided to refer the following question to the Court for a preliminary ruling:
‘Do the VAT Directive and the principles of fiscal neutrality, effectiveness and proportionality preclude, in circumstances such as those in the main proceedings, an administrative practice and/or an interpretation of provisions of national legislation which prevents the correction of certain invoices and, consequently, the entry of the corrected invoices in the VAT return for the period in which the correction was made, in respect of transactions carried out during a period which was the subject of a tax inspection, following which the tax authorities issued a tax assessment which has become final, when, after the issue of the tax assessment, additional data and information have been discovered which would entail the application of a different tax regime?’
Analysis:
By its question, the referring court asks whether the provisions of the VAT Directive, and the principles of fiscal neutrality, effectiveness and proportionality, preclude a provision or practice of a Member State that does not allow the correction of invoices in respect of transactions carried out during a period which was the subject of a tax inspection, following which those authorities issued a tax assessment that has become final, where, after the issue of the tax assessment, additional information came to light which would give rise to the application of the reverse charge mechanism.
According to the AG, such a practice is incompatible with EU law. In order to explain that conclusion, it is necessary, first, to identify the taxable person liable for the payment of the VAT on the transaction at issue (A). Next, I will emphasise the importance of the right to make a tax adjustment and to obtain a refund of taxes unduly paid (B). Finally, I shall turn to the assessment of the grounds which the Romanian authorities have invoked to oppose the tax adjustment and refund of the tax unduly paid in the present case (C).
Opinion:
The AG is of the opinion that:
- The VAT Directive and the principles of fiscal neutrality, effectiveness and proportionality, preclude a provision or practice of a Member State which does not allow the correction of invoices in respect of transactions carried out during a period which was the subject of a tax inspection, following which the tax authorities issued a tax assessment that has become final, where, after the issue of the tax assessment, additional information came to light which would give rise to the application of the reverse charge mechanism.
- A Member State can refuse the tax adjustment and the refund of the tax unduly paid by the supplier only where the tax authorities can, based on objective factors, establish to the requisite legal standard that the correction of the invoices triggering the application of the reverse charge mechanism was made in bad faith, constituted an abuse of rights, or was connected with a tax fraud of which the supplier was aware or should have been aware. It is for the referring court to ascertain whether that is the case in the main proceedings.
Sources: Curia
