On February 28, 2018, the ECJ issued its decision in the case C-387/16 (Nidera).
Context: Reference for a preliminary ruling — Taxation — Value added tax (VAT) — Directive 2006/112/EC — Deduction of input tax — Article 183 — Refund of overpaid VAT — Late refund — Amount of default interest due under national law — Reduction of that amount for reasons not attributable to the taxable person — Whether permissible — Fiscal neutrality — Legal certainty)
Article in the EU VAT Directive
Article 183 of 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
- Between February and May 2008, Nidera, a company established in the Netherlands, purchased wheat in Lithuania from suppliers of agricultural produce. The total amount of VAT paid, in accordance with the invoices of those suppliers, amounted to 11 743 259 Lithuanian litai (LTL) (approximately EUR 3 400 000). During the same period, Nidera exported that grain to third countries, applying the 0% VAT rate provided for under Lithuanian law.
- On 12 August 2008, Nidera was registered as a taxable person for the purposes of VAT in Lithuania. In its VAT declaration for the period from 12 to 31 August 2008, it declared that the above amount of VAT had been paid and requested a refund.
- By decision of 19 March 2009 approving the inspection report, the Vilniaus apskrities valstybinė mokesčių inspekcija (Vilnius District State Tax Inspectorate, Lithuania) refused that refund on the ground that, at the time when the wheat in question was delivered, Nidera was not registered as a taxable person for the purposes of VAT, with the result that, under Lithuanian law, it was not entitled to deduct the VAT paid.
- However, following the judgment of 21 October 2010, Nidera Handelscompagnie (C‑385/09, EU:C:2010:627), the Mokestinių ginčų komisija prie Lietuvos Respublikos Vyriausybės (Tax Disputes Commission attached to the Government of the Republic of Lithuania) held, by decision of 24 November 2010, that Nidera was entitled to deduct the input VAT paid and ordered the tax authority to refund the amount in question. On 22 December 2010, the State Tax Inspectorate refunded Nidera overpaid VAT in the amount of LTL 11 743 259 (approximately EUR 3 400 000).
- Nidera subsequently requested payment of interest due by reason of the initial refusal to refund it the overpaid VAT. On 11 August 2011, the Vilnius District State Tax Inspectorate paid to it LTL 214 902.27 (approximately EUR 60 000) by way of interest on the overpaid VAT relating to the period between the delivery of that judgment and the date on which the overpaid VAT was refunded. By contrast, the Inspectorate refused to pay default interest for the period prior to the delivery of that judgment. By decision of 2 October 2013, the State Tax Inspectorate rejected the complaint lodged by Nidera against that decision.
- Nidera brought an action before the Vilniaus apygardos administracinis teismas (Regional Administrative Court, Vilnius, Lithuania) seeking annulment of the decision of the State Tax Inspectorate and an amendment to the decision of the Vilnius District State Tax Inspectorate, ordering the Inspectorate to refund to it the amount of LTL 3 864 706.66 (approximately EUR 1 100 000) in interest. It claimed that interest had to be calculated from the date of commencement of the tax inspection, that is to say, 21 November 2008, until the date on which the overpaid VAT was refunded. That court upheld Nidera’s action in part and ordered the Vilnius District State Tax Inspectorate to pay to Nidera interest in respect of the period from 17 February 2009 to the date of the refund. The State Tax Inspectorate appealed against that decision before the referring court.
- That court states that it follows, in particular, from the judgment of 12 May 2011, Enel Maritsa Iztok 3 (C‑107/10, EU:C:2011:298), that Article 183 of the VAT Directive, read in the light of the principle of fiscal neutrality, precludes national legislation under which the normal period for refunding overpaid VAT, at the expiry of which default interest is payable on the sum to be refunded, is extended in the case where a tax investigation is instigated. The referring court considers that this therefore suggests that the interest due to Nidera should be calculated from the expiry of the period referred to in Article 87(7)(1) of that law, namely within 30 days from the date of receipt of the request for a refund, rather than from the expiry of the period referred to in Article 87(7)(2) of the Law on Tax Administration.
- However, the referring court harbours doubts as to the competence of the national authorities, including the courts, to reduce the interest due on the ground of the particular circumstances of the case in the main proceedings. In particular, the referring court is uncertain whether it has any discretion regarding the substantiation and correctness of the interest due, taking into account, inter alia, the relationship between that amount and that of the non-refunded overpayment, the period during which the overpayment was not refunded and the underlying reasons — in this case the national-law prohibition on persons not registered as taxable persons for the purposes of VAT from deducting input VAT —, as well as the loss actually incurred by the taxable person.
- According to the referring court, the judgment of 24 October 2013, Rafinăria Steaua Română (C‑431/12, EU:C:2013:686, paragraph 25) may indicate that the amount of interest due cannot be reduced in the light of circumstances unrelated to the actions of the taxable person himself. However, in so far as the purpose of such interest is to compensate the taxable person for the loss that he incurred owing to the unavailability of the corresponding funds, the referring court considers that a long period of unavailability of funds may give rise to a disproportionate amount of interest when compared with the loss actually incurred and that the criteria of reasonableness and fairness, which guide both the tax administration, in accordance with Article 8(3) of the Law on Tax Administration, and the national court, may lead to a reduction in that amount.
- Nevertheless, given the purposes of the VAT refund, inter alia that of not exposing the taxable person to any financial risk, the referring court observes that the adverse financial consequences resulting from the unavailability of funds may occur after their refund. Consequently, the fact of linking the amount of interest due to the loss actually incurred by the taxable person, so as to reduce the amount of that interest, does not eliminate all financial risk and places the taxable person at a disadvantage, since the onus of proving the loss incurred would lie with him.
Questions
Must Article 183 of Council Directive 2006/112/EC 1 of 28 November 2006 on the common system of value added tax, read in conjunction with the principle of fiscal neutrality, be interpreted as precluding a reduction in the interest that is normally payable under national law on a VAT overpayment (excess) which was not refunded (set off) in due time, which reduction takes into account circumstances other than those resulting from the actions of the taxable person himself, such as the relationship between the interest and the amount of the overpayment not refunded in due time, the period of time during which the overpayment was not refunded and the underlying reasons for this, as well as the losses actually incurred by the taxable person?
AG Opinion
Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in conjunction with the principle of fiscal neutrality, must be interpreted as not permitting a reduction in the amount of interest due to a taxable person by way of default interest for the late refunding of overpaid VAT in relation to the amount of interest to which he would have been entitled under the normal rules, for reasons unconnected with the actions of that taxable person.
Decision
Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, read in the light of the principle of fiscal neutrality, must be interpreted as precluding a reduction in the amount of interest normally payable under national law on overpaid value added tax which was not refunded in due time for reasons connected to circumstances not attributable to the taxable person, such as the high amount of that interest when compared with the amount of the overpaid value added tax, the period of time during which the overpayment was not refunded and the underlying reasons for this, as well as the losses actually incurred by the taxable person.
Summary
In 2008, Nidera, a Dutch company, purchased wheat from agricultural suppliers in Lithuania, paying approximately €3.4 million in VAT. Nidera exported that wheat to third countries, applying the 0% VAT rate. On August 12, 2008, Nidera was registered as a VAT payer in Lithuania. In her VAT return, she declared the above amount and requested its refund. The Lithuanian tax authorities refused that refund because Nidera was not registered for VAT purposes at the time of the wheat supplies in question.
Following the Nidera Handelscompagnie judgment , the Lithuanian tax authorities refunded the VAT to Nidera on 22 December 2010. Nidera then requested payment of the interest owed on the basis of the initial refusal to refund. On 11 August 2011, the Lithuanian tax authorities paid Nidera an amount of approximately €60,000 for the period from the date of the judgment of that judgment until the date of refund. That tax authorities, on the other hand, refused to pay default interest for the period prior to the delivery of that judgment.
According to the ECJ, the amount of interest normally due on a surplus of VAT not returned within the prescribed period may not be reduced for reasons related to circumstances that cannot be attributed to the taxable person, such as:
– the amount of the amount of that interest in proportion to the amount of the VAT surplus,
– the duration of the non-refund period and the reasons for the non-refund, and
– the losses actually incurred by the taxable person.
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