ECJ C-180/22 (Mensing) – AG Opinion – VAT paid on intra-EU acquisition to be included in taxable amount under profit margin scheme

On March 23, 2023, the ECJ issued the AG Opinion in the case C-180/22 (Mensing).

Context: Reference for a preliminary ruling — Taxation — Value added tax — Directive 2006/112/EC — Article 311 et seq. — Special schemes for works of art — Profit margin scheme — Taxable resellers — Supply of works of art by the maker or his successors in title — Intra-Community transactions — Taxable amount – Tax on the intra-Community acquisition”

Articles in the EU VAT Directive

Article 315 of the EU VAT Directive 2006/112/EC

Article 315
The taxable amount in respect of the supply of goods as referred to in Article 314 shall be the profit margin made by the taxable dealer, less the amount of VAT relating to the profit margin.
The profit margin of the taxable dealer shall be equal to the difference between the selling price charged by the taxable dealer for the goods and the purchase price.

Facts

The parties disagree as to whether the tax on the intra-Community acquisition reduces the taxable profit margin when the profit margin scheme is applied to the supply of works of art that were previously supplied in the context of an intra-Community acquisition to the applicant and the defendant in Revision (applicant) are delivered. The applicant is an art dealer. He operates art galleries in several German cities. In the course of 2014 (the year at issue), he was also supplied with works of art from artists established in other Member States. These supplies are always declared as exempt intra-Community supplies in the Member State of establishment of the artists. The applicant paid the reduced tax rate in accordance with Paragraph 12(2)(13)(a) of the Turnover Tax Act (UStG) on intra-Community acquisitions. In his objection to a provisional assessment, the applicant argued that Paragraph 25a(7)(1)(a) of the UStG, according to which the profit margin scheme does not apply to the supply of an item sold by the reseller in the context of an intra-Community acquisition has acquired,

Consideration:

In the context of the assessment under national law, the Senate takes the view that, in determining the taxable amount for the profit margin scheme, it is possible to take into account an interpretation of the third sentence of Paragraph 25a(3) of the UStG in conformity with EU law. accounted for by the disputed sales tax. However, it is questionable whether national law can be interpreted in accordance with EU law if the profit margin scheme is itself governed by EU law. Furthermore, the Senate considers it necessary to submit a second question to the Court. According to the referring Senate, the correct solution under EU law could be found in Article 315 of the VAT Directive, to which the first paragraph of Article 317 of the VAT Directive refers in this regard. The first paragraph of Article 315 of the VAT Directive provides that the taxable amount is the profit margin, ‘less the amount of VAT applicable to the profit margin itself’. According to the referring Senate, the wording in the specific case to be decided here can be interpreted as meaning that the ‘VAT applicable to the profit margin itself’ also includes the turnover tax paid by the applicant for the intra-Community acquisition. The interpretation of the first paragraph of Article 315 of the VAT Directive, which the Senate considers possible, in a systematic interpretation also corresponds to the rationale of Article 78(a) of the VAT Directive, which states that the VAT itself is not should be included in the taxable amount. However, with that interpretation, the referring Senate would diverge from the view expressed by Advocate General Szpunar in point 54 of his Opinion (C-264/17). The Advocate General has assumed that this legal lacuna cannot be filled by interpretation, but must be filled by the legislature.

Questions (Unofficial translation)

1. In circumstances such as those of the main proceedings, in which a taxable person relies on the basis of the judgment of the Court of 29 November 2018 (Mensing, C-264/17, EU:C:2018:968), must the taxable amount be determined that the supply of works of art, which were supplied to him at an earlier stage by the maker (or his rightful claimants) in the context of an exempt intra-Community supply, is also subject to the profit margin scheme within the meaning of Articles 311 et seq. of Directive 2006/112/ EC of the Council of 28 November 2006 on the common system of value added tax,pursuant to paragraph 49 of this judgment must be determined solely in accordance with EU law, so that the interpretation by the national court of last instance of a rule of national law (in this case: Paragraph 25a(3), third sentence, of the Umsatzsteuergesetz, Law on turnover tax) according to which the tax on intra-Community acquisitions does not form part of the taxable amount, is not permissible?Turnover Tax Act) according to which the tax on intra-Community acquisitions does not form part of the taxable amount, is not permissible?Turnover Tax Act) according to which the tax on intra-Community acquisitions does not form part of the taxable amount, is not permissible?

2. If the first question is answered in the affirmative, are Articles 311 et seq. of Directive 2006/112/EC on the common system of value added tax to be interpreted as meaning that, when the profit margin scheme is applied to supplies of works of art which have been delivered to him at an earlier stage by the maker (or his rightful claimants) in the context of an intra-Community acquisition, the tax on the intra-Community acquisition reduces the profit margin,or is there an unintended lacuna in EU law in this regard which, in the context of further development of the law, cannot be filled by case-law but only by the EU legislature?

AG Opinion

Articles 312, 315 and 317, first paragraph, of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax

should be interpreted thus that

the value added tax paid by a taxable reseller in respect of the intra-Community acquisition of a work of art which is subsequently supplied by that reseller under the profit margin scheme provided for in Article 316(1)(b) of this Directive, in the taxable amount of this later supply must be included

Source

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