On March 16, 2017, the ECJ issued its decision in the case C-493/15 (Identi).
Context: Reference for a preliminary ruling — Taxation — Value added tax — Article 4(3) TEU — Sixth Directive — State aid — Procedure discharging bankrupt natural persons from debts (esdebitazione) — Ineligibility of VAT debts
Article in the EU VAT Directive
Articles 2 and 22 of the Sixth VAT Directive. Articles 2(1), 206, 250, 252 and 273 of the EU VAT Directive 2006/112/EC.
Article 2 (Scope of VAT)
1. The following transactions shall be subject to VAT:
(a) the supply of goods for consideration within the territory of a Member State by a taxable person acting as such;
(b) the intra-Community acquisition of goods for consideration within the territory of a Member State by:
(i) a taxable person acting as such, or a non-taxable legal person, where the vendor is a taxable person acting as such who is not eligible for the exemption for small enterprises provided for in Articles 282 to 292 and who is not covered by Articles 33 or 36;
(ii) in the case of new means of transport, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1), or any other non-taxable person;
(iii) in the case of products subject to excise duty, where the excise duty on the intra-Community acquisition is chargeable, pursuant to Directive 92/12/EEC, within the territory of the Member State, a taxable person, or a non-taxable legal person, whose other acquisitions are not subject to VAT pursuant to Article 3(1);
(c) the supply of services for consideration within the territory of a Member State by a taxable person acting as such;
(d) the importation of goods.
Article 206
Any taxable person liable for payment of VAT must pay the net amount of the VAT when submitting the VAT return provided for in Article 250. Member States may, however, set a different date for payment of that amount or may require interim payments to be made.
Article 250
1. Every taxable person shall submit a VAT return setting out all the information needed to calculate the tax that has become chargeable and the deductions to be made including, in so far as is necessary for the establishment of the basis of assessment, the total value of the transactions relating to such tax and deductions and the value of any exempt transactions.
2. Member States shall allow, and may require, the VAT return referred to in paragraph 1 to be submitted by electronic means, in accordance with conditions which they lay down.
Article 252
1. The VAT return shall be submitted by a deadline to be determined by Member States. That deadline may not be more than two months after the end of each tax period.
2. The tax period shall be set by each Member State at one month, two months or three months.
Member States may, however, set different tax periods provided that those periods do not exceed one year.
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
- By an order of 14 April 2008, the Tribunale di Mondovì (Mondovì District court, Italy) granted Mr Identi, general partner of the insolvent company PVA di Identi Marco e C. Sas (and himself bankrupt), discharge from bankruptcy. Subsequent to that order, the tax authorities issued a tax assessment to Mr Identi for VAT and the regional tax on productive activities in respect of the tax year 2003.
- The tax authorities have sought, before the Corte suprema di cassazione (Supreme Court of Cassation, Italy), to have set aside on a point of law the judgment of the Commissione tributaria regionale del Piemonte (Regional tax court, Piedmont, Italy), of 26 March 2012, which confirmed a decision at first instance finding that tax assessment to be unlawful and dismissed the appeal brought by the tax authorities against that decision.
- The referring court states that the bankruptcy discharge procedure applicable to the debtor — a natural person who is a commercial trader who has been declared bankrupt — is intended to allow the person benefiting from it to ‘make a fresh start’ after being discharged from all his previous debts owed to creditors with a declared interest in the bankruptcy proceedings and which have not been settled at the close of those proceedings, so that the debtor concerned may become an active economic entity again without having to bear limitations on initiative or his potential to generate wealth as a result of the burden of past debts. The court dealing with insolvency and bankruptcy matters, sitting as a collegiate body, takes the decision to allow the debtor to benefit from that procedure after receiving the non-binding opinions of the bankruptcy administrator and the creditors’ committee and checking, inter alia, whether the conditions laid down in Article 142, first paragraph, of the Law on insolvency and bankruptcy are met.
- The referring court raises the issue of whether the bankruptcy discharge procedure complies with EU law. According to that court, the question arises as to whether, as in the case of the arrangement with creditors at issue in the case which gave rise to the judgment of 7 April 2016, Degano Trasporti (C‑546/14, EU:C:2016:206), practical considerations established by a court, such as the bankruptcy or insolvency or a meritorious debtor or the possibility of collecting only part of the VAT claim, can justify the waiver, in full or in part, of that claim.
- The referring court takes the view that by listing exhaustively in the third paragraph of Article 142 of the Law on insolvency and bankruptcy the debts from which the debtor may not be discharged, without referring to tax debts, the national legislature considered that a person eligible for the bankruptcy discharge procedure must be discharged also from tax debts. However, in the referring court’s view it is also necessary to ascertain that the application of that procedure to VAT debts does not infringe EU law.
- It adds that the issue is also raised of whether the national legislation concerned in the main proceedings is compatible with the EU rules on competition, since that legislation promotes the return to economic activity of persons benefiting from that procedure over other persons declared bankrupt who are ineligible ex lege.
Questions
Must Article 4(3) TEU and Articles 2 and 22 of [the Sixth Directive] be interpreted as precluding the application, in relation to [VAT], of a provision of national law which provides for the extinguishment of debts arising from VAT in favour of taxable persons admitted to the bankruptcy discharge procedure governed by Articles 142 and 143 of [the Law on insolvency and bankruptcy]?
AG Opinion
None
Decision
EU law, in particular Article 4(3) TEU and Articles 2 and 22 of the 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, and the rules on State aid, must be interpreted to the effect that it does not preclude value added tax debts from being declared irrecoverable under national legislation, such as that at issue in the main proceedings, providing for a bankruptcy discharge procedure by means of which a court may, under certain conditions, declare irrecoverable the debts of a natural person which have not been settled by the close of the bankruptcy proceedings initiated against that person.
Summary
The exemption from turnover tax under Italian residual debt relief (= no tax scheme) is not state aid (not selective) because other persons are not in a comparable situation in fact or in law. The objective is to enable a (bona fide) insolvent natural person to resume a business activity while being released from the debts that were not the resumption of an entrepreneurial activity with relief from debts not settled at the end of the insolvency proceedings.
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