European Court T-284/26 (Cerealcom Dolj) – Questions – VAT Interest Proportionality When Counterparty Already Paid VAT

Articles of Directive 2006/112/EC Discussed

Article 183 — VAT Directive (core provision under interpretation): Governs the procedural arrangements for VAT refunds/carry-forwards where deductions exceed the VAT due. The referring court asks whether this provision, combined with the principle of proportionality, allows Member States to impose compensatory interest where the counterparty has already paid the VAT to the State budget.
General principles invoked alongside Article 183:
- Principle of proportionality — used as the benchmark to test national interest/penalty measures.
- Principle of fiscal neutrality — invoked by Cerealcom to argue that simultaneous collection of VAT from producers and denial of deduction to the buyer constitutes double taxation.
Indirectly referenced through national provisions: While the request explicitly cites only Article 183, the underlying dispute also touches on the EU concepts embodied in:
- Articles 63 & 65 (chargeable event and chargeability — including chargeability on receipt of advance payments), reflected in Article 134(2)(b) of the Romanian Tax Code.
- Articles 167–168 (origin and scope of the right of deduction), reflected in Article 145(1) of the Romanian Tax Code applied by the tax inspectors.

Summary

Facts: T-284 26 concerns SC Cerealcom Dolj SA, a Romanian cereal wholesaler that concluded financing and sale-purchase agreements with three related producer companies (Oltyre, Cervina Segarcea, Redias Redea) between 2005–2010. Cerealcom deducted VAT on advance invoices issued by the producers. Following a tax inspection (2015–2016), the Romanian tax authorities reclassified the advance payments as loans (not supplies of goods), denied Cerealcom’s right to deduct VAT, and imposed additional tax obligations totalling RON 7,928,001 in charges, interest, and penalty fees for late payment. Cerealcom had already paid RON 1,623,894.
Issues: The core issue is a contradiction in tax treatment: the tax authorities collected VAT from the producers (who invoiced and paid VAT to the State budget on the same transactions), while simultaneously denying Cerealcom’s right to deduct that same VAT and imposing interest and penalties — resulting in double taxation and no actual revenue loss to the State budget. The referring court questions whether imposing compensatory interest is justified when the State suffered no financial damage.
Question to the tax authorities / National proceedings: Cerealcom challenged Assessment Notice No F-MC 83 and Tax Inspection Report No F-MC 59 (both of 23 March 2016), as well as Decision No 64 settling the complaint. The tax bodies argued that (i) the advance invoices did not record taxable transactions, (ii) the amounts were subsequently repaid via negative invoices, (iii) the goods were not recorded as purchased under the relevant payment orders — therefore no chargeable event occurred and no right to deduct existed under Article 145(1) of the Romanian Tax Code.
Argumentation by the referring court: The Curtea de Apel București reasons that while Member States have discretion to introduce measures ensuring correct VAT collection, this discretion must respect the principle of proportionality and the objectives of the VAT Directive. The court distinguishes two situations: (1) unlawful VAT deduction with no counterparty payment (genuine State budget loss), and (2) unlawful VAT deduction where the counterparty has already collected and paid the VAT (no State budget loss). National law treats both identically — which may breach proportionality. The court also questions whether such interest, if allowed, should be reclassified as a tax penalty subject to a proportionality test per Salomie and Oltean.
Applicant’s position: Cerealcom argues, referencing Halifax (C-255/02), that the transactions gave it no tax advantage. The contradictory treatment — collecting VAT from producers while denying deduction to Cerealcom — breaches the principle of VAT neutrality and amounts to double taxation of the same transaction.

Questions

Does the principle of proportionality, in conjunction with Article 183 of Directive 2006/112/EC, preclude provisions of law and/or practices of the national authorities whereby compensation (referred to in national law as ‘interest’) is collected in order to cover possible damage caused to the State budget through the failure by a taxpayer to pay VAT on the due date, as a result of the deduction of VAT as part of a transaction which the tax bodies have established as falling outside the scope of VAT, even where the other party to the contract collects and pays on the due date the VAT which that taxpayer has deducted?

In so far as the provisions of Article 183 of Directive 2006/112 permit the collection of interest also in circumstances such as those highlighted in Question 1 above (that is to say, in the event that the VAT deducted by a taxpayer has been collected by the other party to the contract in respect of the same transaction), does the collection of interest retain its compensatory function or, on the contrary, must it be classified, within the meaning of the case-law of the Court of Justice derived from the judgment in Salomie and Oltean, as a tax penalty, and is it therefore necessary to take into account the principle of proportionality when applying it?

Source

Curia

Reference to other ECJ Cases

C-712/17 — EN.SA. (judgment of 8 May 2019): Concerned fictitious circular electricity sales between related Italian companies with no tax revenue loss. The ECJ held that imposing penalties equal to the full amount of disallowed VAT deduction breached the principle of proportionality where no risk of revenue loss to the State budget existed.
C-183/14 — Salomie and Oltean (judgment of 9 July 2015): Romanian tax authorities reclassified individuals’ property sales as economic activity subject to VAT and imposed surcharges. The ECJ ruled that surcharges must respect proportionality, and VAT deduction cannot be denied solely because the taxable person was not VAT-registered at the time.
C-101/16 — Paper Consult (judgment of 19 October 2017): Romanian authorities denied VAT deduction because the supplier had been declared “inactive” in the national register. The ECJ held that a systematic and definitive refusal of deduction — without allowing the taxpayer to prove the absence of fraud or tax loss — is disproportionate and incompatible with the VAT Directive.
C-255/02 — Halifax and Others (judgment of 21 February 2006): A UK bank used interposed companies to recover input VAT on call centre construction otherwise non-deductible due to exempt activities. The ECJ established the abuse of rights doctrine: transactions whose essential aim is to obtain a tax advantage contrary to the VAT Directive’s purpose may be redefined for VAT purposes.