On March 29, 2012, the ECJ issued its decision in the case C-414/10 (Véleclair).
Context: VAT — Sixth Directive — Article 17(2)(b) — Taxation of a product imported from a third country — National legislation — Right to deduct VAT on importation — Condition — Actual payment of VAT by the taxable person
Article in the EU VAT Directive
Article 17(2)(b) of the Sixth VAT Directive (Art. 168 of the EU VAT Directive 2006/112/EC)
Article 17(2((b)
2. In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled to deduct from the tax which he is liable to pay:
(b) value added tax due or paid in respect of imported goods within the territory of the country;
Facts
- Between 1992 and 1995, Véleclair imported bicycles, declaring that those bicycles came from Vietnam. By contrast, the French customs authorities considered that those bicycles had in fact originated in China and, consequently, drew up a statement to the effect that a false declaration of origin had been made. As a result, Véleclair was subject to customs duties and anti-dumping duties in the amount of almost EUR 4 million, those duties being themselves liable to VAT in the amount of EUR 735 437.
- Véleclair did not pay that VAT and the customs authorities communicated that information to the tax authorities, who then held a claim against that company. By order of 12 February 1999, the official receiver held that that claim had lapsed on the ground that it had not been definitively declared within 12 months of the publication of Véleclair’s compulsory administration. That decision was upheld at final instance by the Cour de cassation (Court of Cassation) on 8 July 2003.
- Véleclair filed an application for a refund, in the amount of EUR 723 503.37, corresponding to the deductible VAT credit to which it believed itself to be entitled on 31 December 1997 by virtue of the increase in VAT on importation on non-recovered duties.
- That application was rejected by the tax authorities on the ground that, according to the CGI, the deductibility of VAT on importation is conditional upon its actual prior payment. The position defended by the tax authorities was upheld at first instance by the tribunal administratif d’Orléans (Administrative Court, Orléans). After the appeal brought against that decision before the cour administrative d’appel de Nantes (Administrative Court of Appeal, Nantes) was also dismissed, Véleclair brought an appeal in cassation before the Conseil d’État (Council of State).
- Before that court, Véleclair submitted that the exercise of its right to deduction could not be made conditional upon the actual prior payment of the tax for which it was liable on the ground that Article 271(II)(1)(b) of the CGI, providing that the right to deduct VAT is conditional upon its actual receipt by the tax authorities and not merely on the fact that it is chargeable, is incompatible with Article 17(2)(b) of the Sixth Directive.
Questions
Does Article 17(2)(b) of the Sixth Directive permit a Member State to make the right to deduct value added tax on importation conditional, regard being had in particular to the risk of tax evasion, upon the actual payment of that tax by the taxable person, where the taxable person for the purposes of value added tax on importation and the holder of the corresponding right to deduction are, as in France, the same person?
AG Opinion
1) Article 17(2)( b) of the Sixth Directive does not permit a Member State to make the right to deduct VAT on importation conditional upon the actual payment of that tax by the taxable person, even where the taxable person and the holder of the corresponding right to deduction are the same person. However, subject to the conditions in Article 28(3)(d) of the Sixth Directive, a Member State may retain such a provision for a transitional period.
2) VAT is only “due” within the meaning of Article 17(2)(b) of the Sixth Directive if the taxable person has a legally enforceable obligation to pay the amount of VAT which he seeks to deduct as input VAT. If there is no such obligation, then he cannot be entitled to a right to deduct in respect of VAT on importation which has not yet been paid.
Decision
Article 17(2)(b) of Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover taxes — Common system of value added tax: uniform basis of assessment must be interpreted as not allowing a Member State to make the right to deduct value added tax on importation conditional upon the actual prior payment of that tax by the taxable person where that taxable person is also the holder of the right to deduction.
Summary
In 1992-1995, the French Société Véléclair imports bicycles from outside the EU to resell them. The French customs administration imposes an additional charge for customs duties and anti-dumping duties of € 4 million on Véléclair. Véléclair again owes € 735,437 in import VAT on this. The French court found in 1999 that the amount of tax had not yet been paid when the judicial administration of Véléclair was announced, and that the claim had been extinguished. Véléclair then requests a refund of the VAT, since the import VAT subsequently determined entitles it to deduct the amount in question as input tax. The French court has referred a question for a preliminary ruling in these proceedings.
The European Court of Justice (CJEU) has ruled that France may not make the right to deduct the VAT on imports dependent on the actual prior payment of that tax by the taxable person when he is also the one who is authorized to deduct. The CJEU points out that in the text of art. 17 Sixth VAT Directive provides that VAT that is “due or paid” is deductible. According to the CJEU, the term “due” indicates that the deduction does not require that the VAT has also been paid.
Source:
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