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Flashback on ECJ Cases – C-500/10 (Belvedere Costruzioni) – Lengthy Italian VAT procedures may be settled without a decision on the merits

On March 29, 2012, the ECJ issued its decision in the case C-500/10 (Belvedere Costruzioni).

Context: Taxation — VAT — Article 4(3) TEU — Sixth Directive — Articles 2 and 22 — Automatic conclusion of proceedings pending before the tax court of third instance


Article in the EU VAT Directive

Articles 2, 22 of the Sixth VAT Directive. (Article 2, 250 of the EU VAT Directive 2006/112/EC).

Article 250 (VAT Returns)

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.


Facts

  • In its annual VAT return for 1982 Belvedere Costruzioni deducted a tax credit of ITL 22 264 000 described as a credit from the 1981 return. On 12 August 1985 the Ufficio IVA di Piacenza, taking the view that the VAT return for 1981 had been submitted out of time and it was not therefore possible to deduct that tax credit in connection with the VAT return for 1982, sent the company an adjustment notice.
  • Belvedere Costruzioni brought proceedings against that notice before the Commissione tributaria di primo grado di Piacenza (Tax Court of First Instance, Piacenza), submitting that the disputed tax credit did not derive from the difference between the tax shown as ‘debited’ on sales and the tax shown as ‘credited’ on purchases in relation to taxable transactions effected in 1981, but represented part of the tax credit mentioned in its tax return for 1980. It argued that, having regard to the relevant national legislation, its right to deduct that tax credit had not been extinguished, while the Ufficio IVA di Piacenza argued the contrary.
  • The Commissione tributaria di primo grado di Piacenza allowed the application by decision of 10 October 1986, confirmed by decision of the Commissione tributaria di secondo grado (Tax Court of Second Instance) of 28 May 1990 following the appeal by the Ufficio IVA. The Ufficio IVA thereupon appealed against that decision to the referring court.
  • In the order for reference the Commissione tributaria centrale, sezione di Bologna, states that, since the tax authorities were unsuccessful before the courts of first and second instance, it should apply Article 3(2bis)(a) of Decree‑Law No 40/2010, which would have the consequence that the decision of the court of second instance would become final and binding and the debt claimed by the tax authorities at the three levels of jurisdiction would be extinguished.
  • It considers, however, that the application of that provision may lead to a breach of Article 4(3) TEU and of Articles 2 and 22 of the Sixth Directive, as interpreted in Case C‑132/06 Commission v Italy [2008] ECR I‑5457, since it definitively bars recovery of the VAT debt the existence of which the tax authorities are expressly seeking to have declared by the court. That in its opinion constitutes a breach of the Italian State’s obligation to ensure effective collection of the European Union’s own resources.

Questions

Do Article 10 [EC], now Article 4 [TEU], and Articles 2 and 22 of [the Sixth Directive] preclude legislation of the Italian State laid down in Article 3(2bis) of Decree‑Law [No 40/2010], under which the court with jurisdiction in tax matters may not rule on the existence of an alleged tax debt which the tax authorities have sought, in due time, to recover by appealing against an unfavourable decision and which thus in effect provides for the VAT debt at issue to be wholly waived in cases where the courts have ruled at both first and second instance that such a debt does not exist, without the taxable person in favour of whom the waiver has operated having to pay even a fraction of the debt at issue?


AG Opinion

A national provision under which, in value added tax disputes between a taxable person and the tax authority, when 10 years have elapsed since proceedings were brought at first instance, a second appeal by the tax authority following judgments against it both at first instance and on a first appeal is automatically concluded without a decision on the substance by the second appeal court, is not precluded either by Article 4(3) TEU (Article 10 EC) or by Articles 2 and 22 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.


Decision

Article 4(3) TEU and Articles 2 and 22 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 precluding the application in value added tax matters of an exceptional provision of national law, such as that at issue in the main proceedings, which provides for the automatic conclusion of proceedings pending before the tax court of third instance where those proceedings originate in an application brought at first instance more than 10 years, and in practice more than 14 years, before the date of the entry into force of that provision and the tax authorities have been unsuccessful at first and second instance, the consequence of that automatic conclusion being that the decision of the court of second instance becomes final and binding and the debt claimed by the tax authorities is extinguished.


Summary

Automatic termination of proceedings pending before tax court at third instance

Allows a national exception to be applied under which proceedings pending before a third instance tax court are automatically terminated when those proceedings have been commenced with an appeal that has lasted more than 10 years at first instance — and in practice more than 14 years — before the entry into force of that provision and the tax authorities have been unsuccessful at first and second instance, whereby this automatic termination has the effect that the court decision at second instance becomes final and the claim of the tax authorities lapses.


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