Context: Calculation of interest on value added tax (‘VAT’) which was not refunded as a result of a national condition contrary to European Union law.
Right to compensation for losses incurred through monetary erosion suffered on account of inflation until the actual payment of the interest due on the amount of VAT which was refunded late.
Article in the EU VAT Directive
Article 183 of the EU VAT Directive 2006/112/EC.
Article 183 (Rules governing exercise of the right of deduction)
Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period.
However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.
Facts
- On 30 December 2016, the applicant, relying on the order of 17 July 2014, Delphi Hungary Autóalkatrész Gyártó (C-654/13, not published, EU:C:2014:2127), filed with the tax authority claims for the calculation and payment of interest on the deductible VAT which had not been refunded in a reasonable period as a result of the application of the paid consideration condition (see the judgment of 28 July 2011, Commission v Hungary, C-274/10, EU:C:2011:530), calculated at a rate equivalent to twice the Hungarian central bank’s base rate and corresponding to different reporting periods falling between December 2005 and June 2011, and for compound interest for the late payment of that interest. The defendant, by decisions adopted in its capacity as the second-tier authority in the administrative appeal proceedings commenced as a result of those claims, ordered the payment of interest calculated at the central bank’s base rate, in the amount of HUF 104 165 000 (‘interest on the VAT’) and compound interest in the amount of HUF 34 660 000 (‘default interest’).
- In the administrative appeal lodged against those decisions, the Szegedi Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Szeged, Hungary) (predecessor of the referring court) asked the Court of Justice to give a preliminary ruling. Those preliminary-ruling proceedings gave rise to the judgment in Sole-Mizo and Dalmandi Mezőgazdasági.
- In the light of that judgment, the applicant amended the forms of order sought as follows:
– in the case concerning the interest on the VAT, it claimed that interest should be calculated on two different grounds: (1) interest on the VAT, calculated on the basis of the short-term money market credit interest rate, in respect of each reporting period in which the paid consideration condition was applied, and (2) interest in respect of the monetary erosion, calculated on the basis of an interest rate equivalent to the inflation rate for the period between the end of the periods referred to above and 6 December 2011 (‘the monetary erosion period’);
– in the case concerning default interest, the applicant claimed default interest calculated by applying a rate equivalent to twice the central bank’s base rate to a principal amount consisting of the interest on the VAT referred to, in respect of the period between 6 December 2011 and the date of payment. - The referring court granted those forms of order by its judgments of 23 June 2020.
- In the meantime, the legislature amended the new Law on General Tax Procedure. First, it decided that the interest rate equivalent to the central bank’s base rate, which was previously applicable, would be increased by two percentage points and, second, by the insertion of Paragraph 274/G, it stipulated that that amendment would also apply to pending cases and cases concluded by final judgment.
- The Kúria (Supreme Court), ruling on the appeals in cassation lodged by the defendant, set aside the judgments of the referring court of 23 June 2020 in the proceedings relating to interest on the VAT and in the proceedings relating to default interest and also set aside the first and second-tier decisions given by the defendant in those cases. In addition, the Kúria (Supreme Court) ordered the firsttier tax authority to conduct new proceedings in which it was required to give a decision, taking into consideration the new legislative provisions and the terms of the judgment in Sole-Mizo and Dalmandi Mezőgazdasági, on the forms of order which the applicant had amended in the judicial proceedings.
- The decision adopted by the first-tier tax authority, following the judgment of the Kúria (Supreme Court) referred to in paragraph 6, in the case concerning the default interest became final as no appeal was lodged against it.
- In its decision of 23 August 2021, the first-tier tax authority took into consideration paragraph 47 of the judgment in Sole-Mizo and Dalmandi Mezőgazdasági and calculated the interest on the VAT by applying a rate equivalent to the central bank’s base rate increased by two percentage points, in accordance with the provisions of the new Law on General Tax Procedure. It did not grant the right to receive interest to compensate for the monetary erosion suffered by reason of the passage of time in respect of the monetary erosion period.
- In its administrative appeal to the defendant against that decision, the applicant contested the first-tier decision only as regards its final part, which was confirmed by the defendant.
- The applicant has brought an administrative appeal before the referring court against that decision of the defendant. In the appeal, the applicant seeks, primarily,
the amendment of the defendant’s decision so that the referring court upholds the SOLE-MIZO claim that it should be granted the right to receive interest in respect of the monetary erosion period and, in the alternative, the annulment of the defendant’s decision and an order that the defendant conduct new proceedings. The applicant claims that the interest for the monetary erosion period should be calculated by applying, primarily, the central bank’s base rate increased by two percentage points; or, in the alternative, by applying twice the central bank’s base rate; or, in the further alternative, by applying a rate equivalent to the inflation rate.
Questions
1. In circumstances in which, in accordance with national law, interest on the amount of excess deductible VAT which could not be recovered because of the paid consideration condition (‘interest on the VAT’) is calculated by the application of an interest rate which undisputedly covers the short-term money market credit interest rate and which corresponds to the central bank’s base rate increased by two percentage points, in relation to the VAT reporting period, so that that the interest runs from the day following the lodging of the VAT return form on which the taxable person indicated an excess of VAT that had to be carried forward to the following reporting period because of the paid consideration condition until the last day for lodging the next VAT return form, must European Union law, in particular Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’); the principles of effectiveness and equivalence, direct effect and proportionality; and the judgment of the Court of Justice of 23 April 2020 in joined Cases Sole-Mizo and Dalmandi Mezőgazdasági (C-13/18 and C-126/18) (‘judgment in SoleMizo and Dalmandi Mezőgazdasági’), be interpreted as precluding a practice of a Member State, such as that at issue in the present case, which does not permit, in addition to interest on the VAT, the payment of interest to compensate the taxable person for the monetary erosion of the amount in question caused by the passage of time following that reporting period up until the actual payment of that interest?
2. If the answer to the previous question is in the affirmative, must the European Union law mentioned in that question and the judgment in SoleMizo and Dalmandi Mezőgazdasági be interpreted as meaning that it is compatible with that law and that judgment for a national court to set the interest rate applicable to the monetary erosion by making that rate the same as the inflation rate?
3. Must the European Union law mentioned in question 1 and the judgment in Sole-Mizo and Dalmandi Mezőgazdasági be interpreted as precluding a practice of a Member State which, in calculating the amount of the monetary erosion, also takes into account the fact that, until compliance with the paid consideration condition, in other words until payment of the consideration for the goods or the service, the taxable person concerned had at its disposal the consideration paid for the purchases and the applicable tax, and which also assesses, in addition to the inflation rate recorded during the period of monetary erosion, how long the taxable person had to forgo (could not reclaim) the VAT?
Source
