On May 12, 2011, the ECJ issued its decision in the case C-107/10 (Enel Maritsa Iztok 3).
Context: Reference for a preliminary ruling – VAT – Directives 77/388/EEC and 2006/112/EC – Refund – Time-limit – Interest – Set-off – Principles of fiscal neutrality and proportionality – Protection of legitimate expectations
Article in the EU VAT Directive
Article 183 in the EU VAT Directive 2006/112/EC
Article 183 (Right to deduct VAT – Rules Governing Exercise of the Right of Deduction)
Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period. However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.
Facts
- On 11 October 2007, Enel submitted a tax return which showed tax to be refunded by the Bulgarian tax authorities in the sum of BGN 2 273 514.85. That sum was arrived at as the total deductions exceeded the total VAT due for the tax period in question and Enel had not been in a position to make those deductions during earlier tax periods. In accordance with Article 92(1)(4) of the Law on VAT, in the version in force until 18 December 2007, the period for refunding that tax, namely 45 days, would normally have expired on 26 November 2007, triggering an obligation on the part of the tax authorities, in accordance with Article 92(8) of that law, to pay default interest from that date.
- On 8 November 2007, a decision ordering a tax investigation was served on Enel with a view to establishing VAT liabilities for the period from 1 January 2005 to 30 September 2007 and liabilities in relation to other taxes in respect of 2005 and 2006.
- By notice of deduction and refund of 19 December 2007, VAT in the sum of BGN 1 364 108.91 was refunded on the basis of the tax return of 11 October 2007 and that sum was transferred to the company’s account on 21 December 2007.
- The tax investigation gave rise to a report of 13 March 2008, to which Enel lodged an objection, claiming that it was entitled to default interest on the sum of BGN 1 364 108.91 that had already been refunded for the period from 27 November 2007 to 21 December 2007 and on the outstanding balance to be repaid for the period from 27 November 2007 to the date of actual reimbursement.
- An amended notice of assessment was issued on 29 April 2008. That notice did not contain any reference to payment of default interest.
- The amount of tax to be refunded to Enel on the basis of that amended notice of assessment was set off against the tax liabilities and default interest for 2005 and 2006 set out in the amended notice. On 13 May 2008, the balance of BGN 179 092.25 was transferred to Enel’s account without any decision having been made concerning default interest accrued.
- On 20 May 2008, Enel lodged an application for administrative review of the amended notice of assessment of 29 April 2008, disputing the tax liabilities and default interest, the set-off of those liabilities against the amount to be refunded to it and the implied refusal to pay to it the default interest claimed in its objection of 13 March 2008.
- That application gave rise to Decision No 1518 of 20 October 2008 of the Direktor. In that decision, default interest was awarded on the sum of BGN 179 092.25 for the period from the date on which the amended notice of assessment was issued, namely 29 April 2008, to the date of actual repayment of that sum on 13 May 2008. As to the remainder, the application was regarded as unfounded.
- On 31 October 2008, Enel brought an action before the Administrativen sad Sofia-grad (Administrative Court, Sofia), claiming, inter alia, that default interest on the total VAT to be refunded should be paid from 27 November 2007 to the date of actual repayment of that amount in full.
- The Administrativen sad Sofia-grad considers that an interpretation of the relevant provisions of the Sixth Directive or the VAT Directive is necessary to enable it to rule on that claim. In its view, the Sixth Directive is applicable ratione temporis in the light of Article 2 of the Act concerning the conditions of accession of the Republic of Bulgaria and Romania and the adjustments to the treaties on which the European Union is founded (OJ 2005 L 157, p. 203) and Annex VI, Chapter 6, paragraph 1, of that act.
Questions
AG Opinion
None
Decision
1. Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2006/138/EC of 19 December 2006, in conjunction with the principle of the protection of legitimate expectations, is to be interpreted as precluding national legislation which provides, with retrospective effect, for the extension of the period within which excess value added tax is to be refunded, in so far as that legislation deprives the taxable person of the right enjoyed before the entry into force of the legislation to obtain default interest on the sum to be refunded.
2. Article 183 of Directive 2006/112, as amended by Directive 2006/138, in the light of the principle of fiscal neutrality, is to be interpreted as precluding national legislation under which the normal period for refunding excess valued added tax, at the expiry of which default interest is payable on the sum to be refunded, is extended where a tax investigation is instigated, the effect of the extension being that such interest is payable only from the date on which the investigation is completed, the excess having already been carried forward during the three tax periods following that in which it arose. On the other hand, the fact that the normal period is 45 days is not contrary to that provision.
3. Article 183 of the Directive 2006/112, as amended by Directive 2006/138, is to be interpreted as not precluding the refund of excess valued added tax by way of set-off.
Summary
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