Court of Justice of the European Union Judgment of 11 December 2014

Case C-678/11

In the judgment in question, delivered in the scope of an action for Member State’s failure to comply with EU legislation brought on 22 December 2011 by the European Commission against the Kingdom of Spain, the Court of Justice of the European Union rules that the adoption of legislation which compels pension funds established in other EU Member States, offering professional pension plans in the Kingdom of Spain, and insurance companies, operating in the same country under the freedom to  render services principle, to name a resident tax representative is contrary to Article 56.º of the Treaty on the Functioning of the European Union (“TFEU”) – which forbids restrictions to the free rendering of services by nationals of EU Member States which are established in a different Member State.

According to the Court of Justice of the European Union, the cooperation mechanisms in place between EU Member States are enough to guarantee the collection of tax in a different State. As such the provision complying pension funds and insurance companies  to name a resident tax representative, and therefore to incur in additional costs, is considered excessive and contrary to the principle of freedom in the render services.

Court of Justice of the European Union Judgment of 11 December 2014

Case C-590/13

In the Judgment in question, delivered in the scope of a reference for a preliminary ruling, the Court of Justice of the European Union clarifies that Articles 18(1)(d) and Article 22 of the Sixth Directive, 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, as amended by  Council Directive 91/680/EEC of 16 December 1991, must be interpreted as containing formal requirements relating to the right to deduct and that failure to comply with  formal requirements cannot result in the loss of the deduction right.

According to the Court of Justice of the European Union the fundamental principle of VAT neutrality, in the context of the reverse charge procedure, requires that the deduction of input tax to be allowed if the substantive requirements are satisfied, even if the taxpayer has failed to comply with some of the formal requirements . This may not be the case if non-compliance with such formal requirements has the purpose of preventing the control of the fulfilment of said substantive requirements.