ECJ C-146/21 (DGRFP Bucureşti) – Question – Application of Reverse-Charge before VAT registration


Article in the EU VAT Directive

Article 9(1), 193 and 395(1)

Article 9 (Taxable person)
1. “Taxable person” shall mean any person who, independently, carries out in any place any economic activity, whatever the purpose or results of that activity.
Any activity of producers, traders or persons supplying services, including mining and agricultural activities and activities of the professions, shall be regarded as “economic activity”. The exploitation of tangible or intangible property for the purposes of obtaining income therefrom on a continuing basis shall in particular be regarded as an economic activity.

Article 193 (Liability to pay VAT)
VAT shall be payable by any taxable person carrying out a taxable supply of goods or services, except where it is payable by another person in the cases referred to in Articles 194 to 199b and Article 202.

Article 395 (Simplification measures and measures to prevent tax evasion or avoidance)
1. The Council, acting unanimously on a proposal from the Commission, may authorise any Member State to introduce special measures for derogation from the provisions of this Directive, in order to simplify the procedure for collecting VAT or to prevent certain forms of tax evasion or avoidance.
Measures intended to simplify the procedure for collecting VAT may not, except to a negligible extent, affect the overall amount of the tax revenue of the Member State collected at the stage of final consumption.


  • The respondent and applicant at first instance, VB, is the owner of forested land which, between 2011 and 2017, was utilised on the basis of a contract for the sale of standing timber concluded with a number of companies.
  • Between 5 December 2017 and 2 February 2018, a tax inspection was carried out the purpose of which was to review the tax obligations relating to the period from 1 October 2011 to 30 September 2017.
  • The tax inspectors checked the sales of standing timber and found that, in September 2011, the turnover of the applicant at first instance had exceeded the 119 000 Romanian Lei (RON) special upper limit for exemption for small businesses laid down in Article 152(1) of the Tax Code, in accordance with which VB should have registered for VAT purposes within 10 days of the end of September 2011 and become liable to VAT with effect from 1 November 2011.
  • Since VB had failed to register for VAT purposes, the tax inspectors made a retroactive calculation of the VAT due from November 2011 onwards, applying the ‘percentage increase’ method on the basis that the sale price included VAT.The tax inspectors also required VB to register for VAT purposes and to submit declaration 70. VB complied with this on 20 November 2017, within the period of 10 days granted him.
  • In those circumstances, on the basis of the tax inspection report and by way of a tax assessment notice dated 16 February 2018, VAT was calculated on all the sales made by VB after he had exceeded the threshold of RON 119 000, without applying reverse charge measures, with the result that the VAT due was set at RON 196 634.
  • VB lodged an objection against the assessment notice, arguing, in essence, that sales of standing timber are subject to the reverse charge mechanism, the
    application of which is not conditional on the supplier having a VAT registration number, since, in that regard, it is necessary for both parties to be taxable persons, irrespective of whether they have complied with the obligation to register for VAT purposes or not.
  • That objection was rejected on 12 July 2018 on the ground that, in order for reverse charging to apply, it is a necessary condition that both the supplier and the recipient are registered for VAT purposes.
  • In those circumstances, VB brought an action before the Tribunalul București (Regional Court, Bucharest, Romania), seeking annulment of the assessment notice and of the decision on his objection. The action was upheld on 24 June 2019 and the assessment notice and the decision were annulled. VB was relieved of the obligation to pay RON 196 634 and the interest thereon, as well as the penalties applied.
  • The Tribunalul București (Regional Court, Bucharest) held that, in accordance with the case-law of the Court, registration for the purposes of VAT is a purely formal requirement that did not alter the substance of the right of the applicant at first instance and that, where there is no specific evidence of tax evasion, the right  to apply the mechanisms established by EU law cannot be denied. Consequently, in the absence of any suspicion of tax evasion, the tax authority could not oppose the application of the reverse charge mechanism.
  • It appeared from a systematic interpretation of the provisions of Article 160 of the Tax Code of 2003 and Paragraph 62(2)(a) of the procedure for the application of the Tax Code that, when it establishes that a taxable person has reached or exceeded the upper limit for exemption but has not applied for registration for VAT purposes, the tax authority is required to treat the taxable person as being registered for VAT purposes and to apply the reverse charge procedure governed by Article 160 of the Tax Code. Consequently, the tax authority had acted unlawfully in finding that the reverse charge procedure did not apply.
  • On 5 September 2019 the Direcția Generală Regională a Finanțelor Publice București ‒ Administrația Sector 1 a Finanțelor Publice brought an appeal against that judgment before the referring court.


In circumstances such as those in the main proceedings, do Directive 2006/112/EC and the principle of neutrality preclude national legislation or a tax practice in accordance with which the reverse charge mechanism (simplification measures), which is mandatory for the sale of standing timber, is not applicable to a person who has been the subject of an inspection and who has been registered for VAT purposes following that inspection, on the grounds that the person subject to the inspection had neither applied for nor obtained registration for VAT purposes either before the transactions were carried out or by the date on which the upper limit [for exemption] was exceeded?

AG Opinion


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