Facts
- The applicant filed claims for interest on deductible VAT which had not been refunded in a reasonable period, based on a previous order.
- The tax authority ordered payment of interest at the central bank’s base rate and compound interest.
- The case went to the Szegedi Közigazgatási és Munkaügyi Bíróság, which asked for a preliminary ruling from the Court of Justice.
- After a judgment in another case, the applicant amended their claims.
- The referring court granted the amended claims, but the legislature later amended the law.
- The Kúria set aside the referring court’s judgments and ordered new proceedings.
- The first-tier tax authority’s decision on default interest became final. In its latest decision, the first-tier tax authority applied the new law and did not grant interest for monetary erosion.
- The applicant appealed to the defendant, who confirmed the decision. The applicant has now brought an administrative appeal before the referring court seeking to amend the decision.
Questions
- Can a Member State practice that does not allow payment of interest in addition to interest on VAT, to compensate for monetary erosion caused by the passage of time, be considered compatible with EU law?
- If not, can the interest rate applicable to monetary erosion be set as the inflation rate? Can a Member State practice that takes into account the period of time the taxable person had to forgo VAT and the inflation rate during that period, be considered compatible with EU law?
- These questions arise in relation to the interpretation of Article 183 of the VAT Directive, the principles of effectiveness and equivalence, direct effect and proportionality, and the judgment in Sole-Mizo and Dalmandi Mezőgazdasági.
Decision
The principles of tax effectiveness and neutrality, along with Article 183 of Council Directive 2006/112/EC, prohibit a Member State from calculating interest on excess deductible VAT withheld in breach of EU law using a rate that does not compensate for monetary depreciation caused by the passage of time. This practice deprives taxable persons of adequate compensation for the loss caused by unavailability of funds and does not offset the economic burden of the unduly withheld tax.
See also
