Court of Justice of the European Union
Judgment of 6 February 2014 (Case C-424/12)
Reference for a preliminary ruling – VAT – Directive 2006/112/EC – Reverse charge procedure – Payment of the tax to the service supplier – Omission of mandatory particulars – Payment of VAT not due – Loss of right to deduct – Principle of fiscal neutrality – Principle of legal certainty
The Judgment in question ruled on a reference for a preliminary ruling on the interpretation of Council Directive 2006/112/EC of 28 November, relating to the common system of Value Added Tax (“VAT”), in particular, the interpretation of the provisions relating to the right to deduct where the reverse charge procedure is applied .
This question was referred in the context of a dispute between a Ro manian company and the Directorate-General of Public Finance of Bihor, in the same country, concerning the refusal to grant the company the right to deduct VAT borne, since it was considered that the simplification measures governing the reverse charge system had not been observed.
In the concrete case, the Romanian company entered into a framework agreement for works for the building and fitting out of a pig-rearing farm; the supplier issued an invoice for the total value of the works carried out, plus VAT. The Romanian company paid the relevant VAT to the supplier and applied for the reimbursement from the competent authorities, which was authorised.
However, following a second tax investigation, the Directorate-General of Public Finance of Bihor decided that the VAT should be collected in the case in question and that the company had lost the right to deduct the tax, considering that the supplier had incorrectly drawn up the invoice in question, on the one hand, and that, by failing to include the words “reverse charge procedure” in the invoice and by paying the tax to the supplier, the Romanian company had failed to comply with the obligations provided for in the national law, on the other.
The Romanian company claimed that the case law of the Court of Justice arising from the Judgment of 01.04.2004 (Bockemühl), which holds that, where the reverse charge mechanism is applicable, the fact that the conditions relating to the invoices have not been satisfied does not affect the right to deduct, should be applied . The company also claimed that the irregularities committed by the supplier in drawing up the invoice would not affect the right to deduct VAT to which that invoice related, particularly if the invoice could not be corrected, because of the insolvency of the supplier .
However, the court considered that, contrary to what the Romanian company claimed , the circumstances of the case in the main proceeding differed from those that gave rise to the Bockemühl judgment. On the one hand, it demonstrated that the invoice under consideration did not contain the words “reverse charge procedure”, contrary to the requirements established for that purpose, further sustaining that the Romanian company had failed to adopt the measures necessary to correct that omission . On the other hand, it emphasised that the Romanian company paid to the supplier the VAT incorrectly mentioned in the invoice, whereas, under this scheme, it should, as the recipient of the services, had reversed charges and paid the VAT to the tax authorities, in accordance with Article 199 of the VAT Directive.
Thus, the court decided that, since the VAT paid by the Romanian company to the supplier was not due and that the payment failed to fulfil a substantive requirement of the reverse charge scheme, the company could not claim the right to deduct that VAT.
However, the court considered that such fact did not prevent the Romanian company from requesting the reimbursement of the VAT unduly paid from the supplier, in accordance with the national civil law.
The court also considered that the fact that the national tax authorities had first recognised the Romanian company’s right to deduct the VAT, and following a fresh investigation, demanded the payment of the VAT together with a penalty for the late payment, did not amount to a breach of the principle of legal certainty , since such principle does not preclude the tax authorities to revoke, within a limitation period , a decision by which they granted the taxable person the right to deduct VAT.