VATupdate

ECJ C-358/20 (Promexor Trade) – Decision – Involuntarily de-registered taxable persons liable for VAT but no right to deduct VAT

On November 18, 2021, the ECJ issued its decision in the case C-358/20 (Promexor Trade).

Context: Reference for a preliminary ruling – Harmonization of tax legislation – Common system of value added tax (VAT) – Directive 2006/112 / EC – Right to deduct VAT – Cancellation of the VAT identification of a taxable person – Refusal of right to deduction – Formal conditions


Article in the EU VAT Directive (and other EU legislation)

An interpretation of Article 5(4) TEU

Articles 168, 213(1), 214(1) and 273 of the EU VAT Directive 2006/112/EC.

Article 168 (Right to deduct VAT)
In so far as the goods and services are used for the purposes of the taxed transactions of a taxable person, the taxable person shall be entitled, in the Member State in which he carries
out these transactions, to deduct the following from the VAT which he is liable to pay:
(a) the VAT due or paid in that Member State in respect of supplies to him of goods or services, carried out or to be carried out by another taxable person;
(b) the VAT due in respect of transactions treated as supplies of goods or services pursuant to Article 18 (a)and Article 27;
(c) the VAT due in respect of intra-Community acquisitions of goods pursuant to Article 2(1)(b)(i);
(d) the VAT due on transactions treated as intra-Community acquisitions in accordance with Articles 21 and 22;
(e) the VAT due or paid in respect of the importation of goods into that Member State.

Article 213 (Identification of Taxable Persons)
1. Every taxable person shall state when his activity as a taxable person commences, changes or ceases.
Member States shall allow, and may require, the statement to be made by electronic means, in accordance with conditions which they lay down.

Article 214 (Identification of Taxable Persons)
1. Member States shall take the measures necessary to ensure that the following persons are identified by means of an individual number:
(a) every taxable person, with the exception of those referred to in Article 9(2), who within their respective territory carries out supplies of goods or services in respect of which VAT is deductible, other than supplies of goods or services in respect of which VAT is payable solely by the customer or the person for whom the goods or services are intended, in accordance with Articles 194 to 197 and Article 199;
(b) every taxable person, or non-taxable legal person, who makes intra-Community acquisitions of goods subject to VAT pursuant to Article 2(1)(b) and every taxable person, or non-taxable legal person, who exercises the option under Article 3(3) of making their intra-Community acquisitions subject to VAT;
(c) every taxable person who, within their respective territory, makes intra-Community acquisitions of goods for the purposes of transactions which relate to the activities referred to in the second subparagraph of Article 9(1) and which are carried out outside that territory.
(d) every taxable person who within their respective territory receives services for which he is liable to pay VAT pursuant to Article 196;
(e) every taxable person, established within their respective territory, who supplies services within the territory of another Member State for which VAT is payable solely by the recipient pursuant to Article 196.

Article 273
Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers.

The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.


Facts

On 30 April 2014, the defendant (the tax authorities) ordered the ex officio withdrawal of the applicant’s VAT registration because its VAT returns did not reveal any transactions subject to VAT. Since the applicant no longer had a valid VAT number, it issued invoices without VAT from May 2014. In April 2019, the defendant informed the applicant that a tax audit would be carried out soon. In order to avoid a fine for failing to submit returns on time, the applicant has decided to submit the VAT collected return, which must be drawn up by taxable persons whose VAT number has been withdrawn, with retroactive effect. On the basis of what was included in those declarations and without further investigation, the defendant issued an enforcement order on 19-04-2019, and with the issuing of the injunction against the applicant, a levy of execution commenced. The tax audit took place on 11-06-2019. In doing so, the inspection body found that the applicant had correctly submitted the VAT returns for the period audited. After the inspection had ended, but within the limitation period, the applicant submitted zero returns for rectification. The applicant requests the referring court to annul the order for payment and the enforcement order of 19.04.2019 issued in a case of levy of execution opened against her, as well as to annul the claim and the levy of execution. In doing so, the inspection body found that the applicant had correctly submitted the VAT returns for the period audited. After the inspection had ended, but within the limitation period, the applicant submitted zero returns for rectification. The applicant requests the referring court to annul the order for payment and the enforcement order of 19.04.2019 issued in a case of levy of execution opened against her, as well as to annul the claim and the levy of execution. In doing so, the inspection body found that the applicant had correctly submitted the VAT returns for the period audited. After the inspection had ended, but within the limitation period, the applicant submitted zero returns for rectification. The applicant requests the referring court to annul the order for payment and the enforcement order of 19.04.2019 issued in a case of levy of execution opened against her, as well as to annul the claim and the levy of execution.

Consideration:

The referring court wonders whether the national legislation applicable in the present case is compatible with the principles deriving from the VAT Directive and the case-law of the Court, in the event that the taxable person, after withdrawal of his VAT number, is no longer entitled to deduction of VAT on acquisitions, but remains obliged to pay the VAT received, without limiting the collection obligation in time. Although the right to deduct could be exercised retroactively after a new registration for VAT purposes, the applicant does not specifically have this option, since it does not fulfill a formal condition because its director is a partner of another company which is located in a insolvency proceedings.

Source Minbuza.nl


Questions

Can Romania withdraw a taxable person’s VAT identification number (because no VAT due was declared for some time) and then charge VAT to that taxable person in the following period while no deduction is granted?

1. Do the provisions of Directive 2006/112/EC and the principle of fiscal neutrality preclude national legislation by which a Member State requires a citizen
to collect and pay VAT to the State for an indefinite period without, however, at the same time granting him the right to deduct VAT on the ground that the VAT code had been revoked since no transactions subject to VAT had been indicated in the VAT returns filed for six consecutive months/two consecutive calendar quarters?

2. With regard to the circumstances of the main proceedings, are the principle of legal certainty, the principle of legitimate expectations, the principle of
proportionality and [the principle] of sincere cooperation, as set out in Directive 2006/112/EC, compatible with national legislation or with a practice of the tax authority according to which, although the Member State normally allows a legal person, on request, to re-register for VAT purposes following automatic
revocation of the VAT code, in certain specific circumstances a taxpayer may not request re-registration for VAT purposes, for purely formal reasons, whilst being obliged to collect and pay VAT to the State, for an indeterminate period, without, however, at the same time being granted the right to deduct VAT?

3. With regard to the circumstances of the main proceedings, are the principle of legal certainty, the principle of legitimate expectations, the principle of
proportionality and [the principle] of sincere cooperation, as set out in Directive 2006/112/EC, to be interpreted as prohibiting the imposition on a taxpayer of a requirement to collect and pay VAT for an indefinite period and without granting the right to deduct VAT, without, in the particular case, the tax authority in question verifying the substantive requirements relating to the right to deduct VAT and without there being any fraud on the part of the taxpayer?


AG Opinion

None


Decision 

Article 168, Article 213(1), Article 214(1) and Article 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as amended by Council Directive 2010/45/EU of 13 July 2010 and the principle of value added tax (VAT) neutrality, read in the light of the principles of legal certainty, the protection of legitimate expectations and proportionality, must be interpreted as not precluding, where the identification of a taxable person for VAT purposes has been revoked because no taxable transactions have been indicated in the VAT returns filed for six consecutive months but where that taxable person continues his or her activities notwithstanding that revocation, national legislation under which the competent tax authority may require that taxable person to pay the VAT due on his or her taxed transactions, provided that he or she can re-register for VAT purposes and deduct the input VAT paid. The fact that the director of the taxable person is a partner in another company which is the subject to insolvency proceedings cannot, in itself, be put forward to systematically refuse the re-registration of that taxable person for VAT purposes.


Personal comments/VATupdate 


Source


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