Court of Justice of the European Union
Judgment of 12 February 2015
Reference for a preliminary ruling - VAT – Special national procedure where the existence of abusive practices is suspected in the field of taxation – Principles of effectiveness and equivalence
In this judgment, delivered within the scope of a reference for a preliminary ruling from Supremo Tribunal Administrativo (STA), the Court of Justice of the European Union (CJEU) ruled on the admissibility, under the Council Directive 2066/112/EC of 28 November 2006 (VAT Directive), of the mandatory preliminary application of a procedure provided for in the national legislation to abusive practices relating to VAT.
In the case under consideration, the TCA had concluded, after a tax inspection, that the taxpayer in question had deducted VAT abusively (through the con clusion of a transfer of operation with a company formed for that purpose by the same group of companies of which the assignor formed part, a transaction that had allegedly been concluded with the sole aim of enabling the assignor to deduct the input VAT with the construction and equipment of the building).
The taxpayer challenged the additional tax assessments arising therefrom, claiming that the same were illegal, as, among other reasons, the TCA had not used the mandatory special procedure set out in Article 63 of the Código de Procedimento e de Processo Tributário (CPPT) for situations of abusive practices in the field of taxation.
In this conneciton, the CJEU began by considering that, although the VAT Directive enables Member States to take the necessary measures to ensure the correct collection of the tax and prevent evasion, it does not lay down any provision specifying in concrete terms the contents of the measure that must be adopted by the Member States for that purpose.
Accordingly, in the absence of any EU rules in the area, the implementation of the means to combat VAT fraud falls within the internal legal system of Member States, in accordance with the principle of procedural autonomy of the latter. In particular, it is for the Member States not only to designate the authorities responsible for combating VAT fraud, as to lay down the procedural rules for safeguarding rights which individuals derive from EU law, provided that such rules are not less favourable that those governing similar domestic actions (principle of equivalence) and that they do not render impossible in practice or excessively difficult the exercise of rights conferred by the EU legal system (principle of effectiveness).
Analysing in particular the special procedure provided for in Article 63 of the CPPT in concrete, the CJEU considered that the same procedure concerns both the principle of equivalence (inasmuch as the procedure in question applies without distinction to actions based on infringement of EU law and to those base on infringement of national law having a similar purpose and cause), and the principle of effectiveness, which procedure seeks, among other things, to guarantee the observance of certain fundamental rights of the suspect of abusive practices, namely, the right to be heard.
Accordingly, the CJEU concluded that the VAT Directive must be interpreted as meaning that it does not preclude the mandatory preliminary application of a national administrative procedure, such as that laid down by Article 63 of the CPPT, in the event that the tax authorities suspect the existence of an abusive practice.