On May 15, 2014, the ECJ issued its decision in the case C-337/13 (Almos Agrárkülkereskedelmi). This case relates to the taxable amount in case of the absence of a possibility to lower the taxable amount for doubtful debtors.
Context: Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Article 90 — Reduction of the taxable amount — Extent of obligations of Member States — Direct effect
Article in the EU VAT Directive
Article 90 of the EU VAT Directive 2006/112/EU
Article 90 (Taxable amount)
1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States.
2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.
- In August and September 2008 Almos sold rapeseed to another Hungarian undertaking, Bio-Ma Magyarország Energiaszolgáltató Zrt (‘Bio-Ma’). The rapeseed was delivered and placed in a warehouse but the purchaser did not pay the purchase price.
- For that reason, it was decided between the parties, in an agreement concluded on 1 October 2008, that the rapeseed was the property of Almos, that it alone was authorised to dispose of it and that Bio-Ma could not claim any charge over it, sell it or place it at the disposal of a third party. The deadline for the return of the rapeseed was fixed at 10 October 2008, until when Bio-Ma was required to observe the rules applicable to deposited goods.
- However, the goods were not returned on 10 October 2008, because in the meantime they had been seized.
- Almos brought a civil action for the return of the rapeseed. The Szegedi Ítélőtábla (Szeged Regional Court of Appeal) ordered the buyer, by a final judgment, to return 2 263.796 tonnes of rapeseed, or, failing that, to pay a sum of EUR 1 022 783. The judgment pointed out that the parties had cancelled the purchase agreement between them and the rapeseed was now the property of Almos.
- Accordingly, Almos corrected the invoices relating to the sale to Bio-Ma and, in its tax return for the month of December 2009, entered the figure of 116 705 000 Hungarian forints (HUF) as recoverable VAT.
- However, the tax authority considered that that figure was unjustified in respect of an amount of HUF 48 043 000, and a tax penalty of 10%. It pointed out that, despite the failure to pay the consideration, there had been a supply of goods within the meaning of Paragraph 9(1) of the Law on VAT. According to the authority, the correction of the invoices was not justified and the agreement between the parties after delivery had to be regarded as a new transaction. In addition, it took the view that the original situation had not been restored as there had been no return of the rapeseed and the agreed price had not been paid. The provisions of Paragraph 77(1) and (2) of the Law on VAT provide for a subsequent reduction of the taxable amount if the transaction is not valid, a situation which is different from cancellation of the contract, such as occurred in this case. The Law on VAT does not contain any provision which allows the subsequent reduction of the taxable amount solely by reason of total or partial non-payment for the goods at issue.
- The first-instance court rejected Almos’s action against the decision of the tax authority.
- In its appeal on a point of law to the referring court, Almos states that, as a consequence of the cancellation of the contract, it once again became the owner of the goods sold. According to Almos, what took place was not, therefore, an independent transaction from the point of view of tax law, but a transaction closely and intrinsically connected with the original contract of sale, since the purchaser would have become the owner of the rapeseed only if it had paid the sale price. It claims that, in the light of Article 90(1) of the VAT Directive, no unlawful conduct can be attributed to it so far as concerns the situation granting it a right to reduction.
- The referring court notes that, at the time of the introduction of the application for reimbursement, the Law on VAT did not cover all the situations listed in Article 90(1) of the VAT Directive and did not provide, inter alia, for the possibility of a reduction of the taxable amount in the case of cancellation, refusal or total or partial non-payment of the consideration. It questions whether that law deprived taxable persons of rights to which they should have been entitled in that regard.
Is Paragraph 77(1) and (2) of the általános forgalmi adóról szóló 2007. évi CXXVII. törvény (Law CXXVII of 2007 on value added tax), in force until 31 December 2010 consistent with the provisions of Article 90(1) of Council Directive 2006/112/EC 1 of 28 November 2006 on the common system of value added tax (‘VAT Directive’); does the national VAT law cover all the cases of possible reduction of the taxable amount provided for in the VAT Directive?
If the answer to the first question is no, is the taxable person entitled, in the absence of national legislation, to reduce the taxable amount, on the basis of the principles of tax neutrality and proportionality, and in the light of Article 90(1) of the VAT Directive, where it receives no consideration on completion of a transaction?
If Article 90(1) has direct effect, under what circumstances can [the taxable person] reduce the taxable amount? Is it sufficient to issue an amending invoice and send it to the purchaser or is it necessary, in addition, to demonstrate that, in fact, property in or possession of the goods has been recovered?
If the answer to the third question is no, is it obligatory under Community law to compensate the taxable person for the damage arising from the fact that the Member State did not fulfil its obligations as to harmonisation and, as a result, it was not possible for the taxable person to reduce its taxable amount.
May Article 90(2) be interpreted as meaning that, in the case of total or partial non-payment, the Member States have the possibility of not applying a reduction in the taxable amount. If so, is an express prohibition in the Member State’s legislation necessary or does the absence of any rule have the same legal effect.
1. The provisions of Article 90 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as not precluding a national provision which does not provide for the reduction of the taxable amount for value added tax in the case of non-payment of the price if the derogation provided for in Article 90(2) is applied. However, that provision must then mention all the other situations in which, under Article 90(1), after a transaction has been concluded, part or all of the consideration has not been received by the taxable person, which is a matter for the national court to ascertain.
2. Taxable persons may rely on Article 90(1) of Directive 2006/112 before national courts against the Member State to obtain a reduction of their taxable amount for value added tax. While Member States may provide that the exercise of the right to a reduction of that taxable amount is conditional on compliance with certain formalities which serve to prove in particular that, after the transaction was concluded, part or all of the consideration was definitely not received by the taxable person and that the taxable person was able to rely on one of the situations referred to in Article 90(1) of Directive 2006/112, the measures thus adopted cannot exceed what is necessary for that proof, which is for the national court to ascertain.