On May 17, 2018, the ECJ issued its decision in the case C-566/16 (Vámos).
Context: Reference for a preliminary ruling — Common system of value added tax — Directive 2006/112/EC — Articles 282 to 292 — Special scheme for small enterprises — Exemption scheme — Obligation to opt for the application of the special scheme in the reference calendar year
Article in the EU VAT Directive
Article 282 to 292 of the EU VAT Directive 2006/112/EC (Special Scheme for small enterprises)
Article 282
The exemptions and graduated tax relief provided for in this Section shall apply to the supply of goods and services by small enterprises.
Article 283
1. The arrangements provided for in this Section shall not apply to the following transactions:
(a) transactions carried out on an occasional basis, as referred to in Article 12;
(b) supplies of new means of transport carried out in accordance with the conditions specified in Article 138(1) and (2)(a);
(c) supplies of goods or services carried out by a taxable person who is not established in the Member State in which the VAT is due.
2. Member States may exclude transactions other than those referred to in paragraph 1 from the arrangements provided for in this Section.
Article 284
1. Member States which have exercised the option under Article 14 of Council Directive 67/228/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes — Structure and procedures for application of the common system of value added tax14 of introducing exemptions or graduated tax relief may retain them, and the arrangements for applying them, if they comply with the VAT rules.
2. Member States which, at 17 May 1977, exempted taxable persons whose annual turnover was less than the equivalent in national currency of 5000 European units of account at the conversion rate on that date, may raise that ceiling up to EUR 5000.
Member States which applied graduated tax relief may neither raise the ceiling for graduated tax relief nor render the conditions for the granting of it more favourable.
Article 285
Member States which have not exercised the option under Article 14 of Directive 67/228/EEC may exempt taxable persons whose annual turnover is no higher than EUR 5000 or the equivalent in national currency.
The Member States referred to in the first paragraph may grant graduated tax relief to taxable persons whose annual turnover exceeds the ceiling fixed by them for its application.
Article 286
Member States which, at 17 May 1977, exempted taxable persons whose annual turnover was equal to or higher than the equivalent in national currency of 5000 European units of account at the conversion rate on that date, may raise that ceiling in order to maintain the value of the exemption in real terms.
Article 287
Member States which acceded after 1 January 1978 may exempt taxable persons whose annual turnover is no higher than the equivalent in national currency of the following amounts at the conversion rate on the day of their accession:
(1) Greece: 10000 European units of account;
(2) Spain: ECU 10000;
(3) Portugal: ECU 10000;
(4) Austria: ECU 35000;
(5) Finland: ECU 10000;
(6) Sweden: ECU 10000;
(7) Czech Republic: EUR 35000;
(8) Estonia: EUR 16000;
(9) Cyprus: EUR 15600;
(10) Latvia: EUR 17200;
(11) Lithuania: EUR 29000;
(12) Hungary: EUR 35000;
(13) Malta: EUR 37000 if the economic activity consists principally in the supply of goods, EUR 24300 if the economic activity consists principally in the supply of services with a low value added (high inputs), and EUR 14600 in other cases, namely supplies of services with a high value added (low inputs);
(14) Poland: EUR 10000;
(15) Slovenia: EUR 25000;
(16) Slovakia: EUR 35000.
(17) Bulgaria: EUR 25 600;
(18) Romania: EUR 35 000.
(19) Croatia: EUR 35000.
Article 288
The turnover serving as a reference for the purposes of applying the arrangements provided for in this Section shall consist of the following amounts, exclusive of VAT:
(1) the value of supplies of goods and services, in so far as they are taxed;
(2) the value of transactions which are exempt, with deductibility of the VAT paid at the preceding stage, pursuant to Articles 110 or 111, Article 125(1), Article 127 or Article 128(1);
(3) the value of transactions which are exempt pursuant to Articles 146 to 149 and Articles 151, 152 or 153;
(4) the value of real estate transactions, financial transactions as referred to in points (b) to (g) of Article 135(1), and insurance services, unless those transactions are ancillary transactions.
However, disposals of the tangible or intangible capital assets of an enterprise shall not be taken into account for the purposes of calculating turnover.
Article 289
Taxable persons exempt from VAT shall not be entitled to deduct VAT in accordance with Articles 167 to 171 and Articles 173 to 177, and may not show the VAT on their invoices.
Article 290
Taxable persons who are entitled to exemption from VAT may opt either for the normal VAT arrangements or for the simplified procedures provided for in Article 281. In this case, they shall be entitled to any graduated tax relief provided for under national legislation.
Article 291
Subject to the application of Article 281, taxable persons enjoying graduated relief shall be regarded as taxable persons subject to the normal VAT arrangements.
Article 292
The arrangements provided for in this Section shall apply until a date to be fixed by the Council in accordance with Article 93 of the Treaty, which may not be later than that on which the definitive arrangements referred to in Article 402 enter into force.
Facts
- At the end of an inspection, the Hungarian tax authority found that, from 2007 until 22 January 2014, Mr Vámos had made 778 sales of electronic items on two online platforms, without registering as a taxable person for VAT purposes or declaring the income from those sales and, consequently, imposed a financial penalty on him.
- That tax authority also determined that, in the period between 1 January 2012 and 31 December 2013, Mr Vámos had been engaged in sales activity for which he obtained income which did not exceed the maximum threshold giving entitlement to the personal exemption laid down in Paragraph 188(2) of the VAT Law, and that between 1 and 22 January 2014, Mr Vámos was also engaged in sales activity, which brought him negligible income.
- On 22 January 2014, Mr Vámos registered as a person liable to VAT, and opted for the personal exemption, a VAT tax exemption scheme for small enterprises set out in Paragraph 187 et seq. of the VAT Law.
- In proceedings different from those which had led to a financial penalty being imposed on Mr Vámos, the Hungarian tax authority carried out an ex post inspection of the tax returns corresponding to all of Mr Vámos’s taxes and public subsidies for the tax years 2012 to 2014. At the end of that inspection, the tax authority found a VAT debt owed by Mr Vámos for the period between the first quarter of 2012 and the first quarter of 2014, and imposed on him a further financial penalty plus interest for late payment on the basis of the tax arrears thereby made apparent.
- Mr Vámos filed an administrative appeal against that decision, although the Appeals Directorate upheld that decision. The Appeals Directorate referred, first, to Paragraph 187(1) of the VAT Law, on the basis of which Mr Vámos was permitted to opt for the personal exemption, and stated, secondly, that Paragraph 22(1)(c) of the code of fiscal procedure only allowed the personal exemption to be opted for at the time of stating when the taxable activity commences and that that option could no longer be exercised thereafter. According to the Appeals Directorate, since Mr Vámos had registered with the tax authority and opted for the personal exemption only on 22 January 2014, he was entitled to benefit from that personal exemption only as from that date.
- Mr Vámos challenged the Appeal Directorate’s decision before the referring court, arguing that the pursuit of an economic activity within the meaning of Paragraph 6 of the VAT Law only entails being subject to VAT and implies, therefore, an obligation to make the statement in accordance with Article 213(1) of the VAT Directive and Paragraph 16 of the Code of fiscal procedure, but not an obligation to pay VAT. Since Mr Vámos’s income, as established by the Hungarian tax authority, did not exceed, either for 2012 or 2013, the maximum threshold giving entitlement to the personal exemption, the Hungarian tax authority should not have required him to pay VAT for the tax years 2012 and 2013, but should by contrast have been required to ask him, in the context of the ex post inspection, whether he wished to opt for the personal exemption.
Questions
Is national legislation pursuant to with the tax authority may, when carrying out an ex post tax inspection, preclude the possibility of opting for the personal exemption, on the basis that the taxable person only has that possibility at the time of stating when his taxable activity commences, contrary to EU law?
AG Opinion
European Union law does not preclude national legislation prohibiting the retroactive application of a special tax scheme granting an exemption to small enterprises — adopted pursuant to the provisions of Title XII, Chapter 1, Section 2, of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax — to a taxable person who fulfilled all the material conditions but did not declare the commencement of his activities to the tax authorities in due course, and did not opt for the application of that scheme.
See also Taxlive.nl
Decision
EU law must be interpreted as not precluding national legislation which excludes a special value added tax taxation scheme providing for an exemption for small enterprises — that scheme having been adopted in accordance with the provisions of Section 2 of Chapter I of Title XII of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax — from being applied to a taxable person who fulfils all the material conditions but did not exercise the right to opt for the application of that scheme at the same time as he declared the commencement of his economic activities to the tax authority.
Summary
Small entrepreneurs scheme – Obligation to opt for application of the special scheme in reference calendar year
Vámos wanted to make retroactive use of the Hungarian small business exemption (Small Entrepreneurs Scheme). The tax authorities refused, because it had not been chosen. The ECJ ruled that a taxpayer can be denied the exemption if he meets all substantive conditions but has not made use of the option to opt for the application of this scheme.
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