ECJ C-627/21 (Administraţia Judeţeană a Finanţelor Publice Sibiu … )- Order – Right to deduct VAT if VAT registration is cancelled for a given period

On May 2, 2022, the ECJ issued its Order in the case C-627/21 (Administraţia Judeţeană a Finanţelor Publice Sibiu and Direcţia Generală Regională a Finanţelor Publice Braşov)

Context: Reference for a preliminary ruling — Article 99 of the Rules of Procedure of the Court — Harmonization of tax legislation — Common system of value added tax (VAT) — Directive 2006/112/EC — Deduction of input tax paid in relation to the acquisition, construction and transformation of immovable property – Automatic cancellation of the VAT identification of a taxable person – Regularization of the deduction initially made – Answer to the preliminary question which can be clearly deduced from the case law

Article in the EU VAT Directive

Articles 16, 184, 186, 187, 188, 192 of the EU VAT Directive 2006/112/EC.

Article 16 (Taxable transaction)
The application by a taxable person of goods forming part of his business assets for his private use or for that of his staff, or their disposal free of charge or, more generally, their application for purposes other than those of his business, shall be treated as a supply of goods for consideration, where the VAT on those goods or the component parts thereof was wholly or partly deductible.
However, the application of goods for business use as samples or as gifts of small value shall not be treated as a supply of goods for consideration.

Article 184 (Adjustment of deductions)
The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.

Article 186
Member States shall lay down the detailed rules for applying Articles 184 and 185.

Article 187
1. In the case of capital goods, adjustment shall be spread over five years including that in which the goods were acquired or manufactured.
Member States may, however, base the adjustment on a period of five full years starting from the time at which the goods are first used.
In the case of immovable property acquired as capital goods, the adjustment period may be extended up to 20 years.
2. The annual adjustment shall be made only in respect of one-fifth of the VAT charged on the capital goods, or, if the adjustment period has been extended, in respect of the corresponding fraction thereof.
The adjustment referred to in the first subparagraph shall be made on the basis of the variations in the deduction entitlement in subsequent years in relation to that for the year in which the goods were acquired, manufactured or, where applicable, used for the first time.

Article 188
1. If supplied during the adjustment period, capital goods shall be treated as if they had been applied to an economic activity of the taxable person up until expiry of the adjustment period.
The economic activity shall be presumed to be fully taxed in cases where the supply of the capital goods is taxed.
The economic activity shall be presumed to be fully exempt in cases where the supply of the capital goods is exempt.
2. The adjustment provided for in paragraph 1 shall be made only once in respect of all the time covered by the adjustment period that remains to run. However, where the supply of capital goods is exempt, Member States may waive the requirement for adjustment in so far as the purchaser is a taxable person using the capital goods in question solely for transactions in respect of which VAT is deductible.

Article 192
Where a taxable person transfers from being taxed in the normal way to a special scheme or vice versa, Member States may take all measures necessary to ensure that the taxable person does not enjoy unjustified advantage or sustain unjustified harm.


  •  The plaintiff in the main proceedings, who had benefited from the optional liability regime since 2013, purchased, manufactured, completed, built or transformed, during the years 2013 and 2014, a total of 69 buildings and exercised his right with deduction of the input VAT paid on these transactions. On February 1 ,  2017, its VAT identification was automatically canceled on the grounds that the VAT declarations submitted for two consecutive calendar quarters did not mention any transaction subject to VAT. From 29 January 2018, the plaintiff in the main proceedings was again identified as subject to VAT.
  • Following a tax audit covering the period from 1 January  2017 to 31 March 2018, the competent authority refused deduction of the input VAT paid by the applicant in the main proceedings and imposed on him an adjustment of the VAT initially deducted, on the grounds that the interested party had not made the corresponding negative adjustment for the buildings in stock on February 1 ,  2017, the date on which the tax body had automatically canceled its registration to VAT.
  • The administrative complaint lodged by the applicant in the main proceedings against that decision having been dismissed and the subsequent appeal also having been dismissed, the applicant in the main proceedings brought an appeal before the referring court. In support of this appeal, he essentially argued that, in the light of the Court’s case-law, the exercise of the right to deduct for capital goods involves analyzing the intention of the subject at the time of acquisition of this property. Furthermore, the provisions of the VAT Directive would be infringed by the issuance of an administrative act automatically canceling the VAT registration, since the possibility for the tax authorities to order such a cancellation would have a exceptional nature and would be subject to compliance with the principle of proportionality. Gold,
  • According to the competent administration, the regularization, in favor of the State, of the VAT deducted on investment goods existing on the date of the removal of VAT identification is mandatory, given that these goods do not are not assigned to an economic activity as long as the taxable person is not validly identified for VAT.
  • It is apparent from the request for a preliminary ruling that the referring court, having regard to the Court’s case-law on the matter, wonders, first of all, whether the formal requirement to be identified for VAT can have an impact decisive on the right to deduct by obliging a taxable person to carry out an adjustment when the administration has automatically canceled his VAT identification. It then wonders whether, in the light of the principle of proportionality and in the light of the discretion granted to the Member States by Articles 186 and 192 of the VAT Directive, the temporary cancellation of the VAT identification of a taxable person may entail the obligation for the latter to proceed with the regularization of the VAT deducted upstream. She wonders, finally, if the principle of neutrality is respected when, in the interpretation and concrete application of national legislation such as that at issue in the main proceedings, the tax administration considers that the inaction of the taxable person for a determined period, formally sanctioned by the cancellation of its VAT identification, must be accompanied by a negative VAT adjustment, in order to meet the objectives set out in Articles 184 and 192 of the VAT Directive, in particular that of preventing the taxable person does not unfairly benefit from advantages or suffer unjustified prejudice. In that regard, the referring court adds that the latter question arises all the more so since, during the period following the imposition of the penalty consisting in the cancellation of his VAT identification,


On the grounds that the tax authority canceled ex officio the VAT identification of the said taxpayer for a specific period due to the absence of economic activity, while the investment goods were not subject the provision of services or the supply of goods during the period between the automatic cancellation and the VAT re-identification of the taxable person?

AG Opinion



Articles 16, 184, 186 to 188 and 192 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax must be interpreted as precluding to national regulations and practice which oblige a taxable person, whose identification for value added tax (VAT) has been canceled for a given period due to the absence of mention of taxable transactions in his declarations of VAT filed for six consecutive months,to adjust the input VAT deducted in relation to the acquisition of capital goods without the said taxable person being authorized to provide proof that the substantive conditions for being able to benefit from the right to deduct are met on the grounds that there is an irrebuttable presumption that the taxable person has used these goods for purposes other than economic activities.




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