VATupdate

Flashback on ECJ/CJEU cases: GMAC UK (C589/12) – Interaction between Sixth VAT Directive and national law

CJEU GMAC UK judgment

Cars sold, repossessed and resold publicly under a hire purchase agreement – Reduction of taxable amount – Direct effect

Business case

  • To what extent is a taxable person, in relation to two transactions concerning the same goods, entitled both
  • (i) to invoke the direct effect of one provision of EC Council Directive 77/388 (“the Sixth VAT Directive”) in respect of one transaction and
  • (ii) to rely on the provisions of national law in relation to the other transaction,
  • when to do so would produce an overall fiscal result in relation to the two transactions which neither national law nor the Sixth VAT Directive applied separately to those two transactions produces or is intended to produce?
  • The Court recalled that it is settled case law whenever the provisions of a directive appear, so far as their subject-matter is concerned, to be unconditional and sufficiently precise, they may be relied upon before the national courts by individuals against the State where the latter has failed to implement the directive in domestic law by the end of the period prescribed or where it has failed to implement the directive correctly
  • …. a Member State may not prevent a taxable person from invoking the direct effect of that provision (as per the Directive) in respect of one transaction
  • by arguing that that person may rely on the provisions of national law in relation to another transaction
  • concerning the same goods
  • and that the cumulative application of those provisions would produce an overall fiscal result which neither national law nor Sixth Directive 77/388, applied separately to those transactions, produces or is intended to produce.

Decision

The first subparagraph of Article 11C(1) 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 must be interpreted as meaning that, in circumstances such as those of the case in the main proceedings, a Member State may not prevent a taxable person from invoking the direct effect of that provision in respect of one transaction by arguing that that person may rely on the provisions of national law in relation to another transaction concerning the same goods and that the cumulative application of those provisions would produce an overall fiscal result which neither national law nor Sixth Directive 77/388, applied separately to those transactions, produces or is intended to produce.

Comments

  • A taxpayer can rely on the “shall” provisions of the Directive even if not yet implemented by national legislation
  • If national legislation is more flexible than the Directive, the taxpayer can rely on national legislation

A Member State cannot prohibit a taxable person from relying on the direct effect of the Directive for an act on the ground that he can rely on provisions of national law for another act relating to the same goods and, where these provisions are applied together, an overall tax result is achived that neither by application of national law nor by application of the Sixth Directive, when applied separately to those acts, produces or intends to produce them.

In cases of non-payment by customers, taxpayers have the right to reduce the VAT taxable base. e. This system cannot be replaced by another system that leads to a similar result, but not equivalent. This alternative route cannot deny the direct effect of the EU Law.

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