On September 30, 2021, the ECJ issued its decision in the case C-186/20 (HYDINA SK).
Context: Reference for a preliminary ruling – Administrative cooperation and fight against fraud in the field of value added tax (VAT) – Regulation (EU) No 904/2010 – Articles 10 to 12 – Exchange of information – Tax audit – Deadlines – Suspension of the tax audit in the event of an exchange of information – Exceeding the time limit imposed for communicating information – Impact on the legality of the suspension of the tax audit
Article in the EU VAT Legislation
Recital 25 of Council Regulation (EU) No 904/2010
Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of VAT
‘the time limits laid down in this Regulation for the provision of information are to be understood as maximum periods not to be exceeded’
If these time limits are exceeded, does this mean that the tax audit is unlawful?
Are there any sanctions against authorities?
Is international exchange of information that exceeded the time limits unlawful?
In December 2013, the applicant made use of the VAT deduction on the purchase of meat (total € 174,699.33). On 21-03-2014, the tax authorities initiated a tax audit with regard to the December 2013 tax period. The tax authorities temporarily suspended the tax audit twice, both times to exchange information internationally. Ultimately, the tax audit ended with a report on 07-12-2015. The tax authorities found that the applicant did not meet the conditions for deduction of VAT. The applicant’s objection to this decision was rejected. The applicant thereupon appealed to the court of first instance, which was also dismissed. Subsequently, the applicant lodged an appeal in cassation with the referring court. The applicant submits that the principle of proportionality has been infringed because the tax authorities exceeded the maximum time limits for a tax audit. The tax audit took a total of 626 days, including the suspension of 202 days. The tax authorities ended the tax audit after the expiry of the legal period of 1 year after its commencement, including the maximum period of 3 months for its suspension in accordance with Regulation No 904/2010, according to the applicant.
Under Slovak law, the tax authorities have one year to carry out a tax audit. One exception is the suspension of a tax audit following a request for international exchange of information. It cannot be ruled out that the legal term will be circumvented by an unnecessary and inappropriate suspension thereof. Since the expiry of the legal deadline for carrying out a tax audit renders the report drawn up unlawful, in the case of direct application of Regulation 904/2010, the nature of the resulting deadlines should be determined and also determined how the administrative judge should test the legality of the duration of a tax audit.
Must recital 25 of Council Regulation (EU) No 904/2010 1 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax, which states that ‘the time limits laid down in this Regulation for the provision of information are to be understood as maximum periods not to be exceeded’, be interpreted as meaning that those time limits cannot be exceeded and that exceeding them results in the suspension of a tax audit being unlawful?
Does failure to comply with the time limits for implementing the international exchange of information provided for in Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax result in consequences for (sanctions against) the requested authority and the requesting authority?
Can international exchange of information that does not comply with the time limits laid down in Council Regulation (EU) No 904/2010 of 7 October 2010 on administrative cooperation and combating fraud in the field of value added tax be regarded as unlawful interference in the rights of a taxable person?
Article 10 of Regulation (EU) No o 904/2010 of 7 October 2010 on administrative cooperation and the fight against fraud in the field of value added tax, read in the light of recital 25 of the latter, must be interpreted as meaning that it does not provide for deadlines the exceeding of which is liable to affect the legality of the suspension of a tax audit provided for by the law of the requesting Member State in the awaiting communication by the requested Member State of the information requested under the administrative cooperation mechanism established by this regulation.
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