European Union
European Court of Justice, Case C-293/21, “Vittamed technologijos”: Requirement for Input VAT Deduction on Unused Goods to Be Reviewed at the Time of Liquidation
The European Court of Justice (ECJ) has ruled that Articles 184 to 187 of Council Directive 2006/112/EC of 28 November 2006, on the common system of VAT, must be interpreted as meaning that a taxable person is under an obligation to adjust deductions of input VAT relating to the acquisition of goods or services intended to produce capital goods in the case where, as a result of the decision of the owner or sole shareholder of that taxable person to place it in liquidation and of the taxable person’s request to be removed, and it being removed, from the register of VAT payers, the capital goods produced have not been used—and will never be used—in the course of taxable economic activities. The reasons for the decision to place that taxable person in liquidation and, consequently, for the abandonment of the intended taxable economic activity, such as constantly growing losses, the absence of orders, and the doubts of the taxable person’s shareholder as to the profitability of the intended economic activity, have no bearing on the taxable person’s obligation to adjust the deductions of VAT concerned, in so far as that taxable person no longer has—and will never have—any intention of using the capital goods for the purposes of taxable transactions.
European Court of Justice, Case C-250/21, “O. Fundusz lnwestycyjny Zamknięty reprezentowany przez O”: VAT Exemption of Services Provided Under a Sub-Participation Agreement
The ECJ has ruled that Article 135(1)(b) of Council Directive 2006/112/EC of 28 November 2006, on the common system of VAT, must be interpreted as meaning that the services provided by a sub-participant under a sub-participation agreement, consisting of making available to the originator a financial contribution in exchange for payment of the proceeds from the receivables specified in that agreement, those receivables remaining in the assets of the originator, fall within the concept of “granting of credit” within the meaning of that provision.
European Court of Justice, Case C-1/21, “Direktor na Direktsia „Obzhalvane i danachno-osiguritelna praktika”:Manager’s Joint and Several Liability for the Company’s VAT Debts
The ECJ has ruled that Article 273 of Council Directive 2006/112/EC of 28 November 2006, on the common system of VAT and the principle of proportionality, must be interpreted as not precluding national legislation providing for a system of joint and several liability for a legal person’s VAT debts in the following circumstances:
- The person held jointly and severally liable is a manager or member of an executive body of the legal person
- The person held jointly and severally liable made, in bad faith, payments from the legal person’s assets that could be characterised as a hidden distribution of profits or dividends, or transferred those assets free of charge or at a price significantly lower than the market price
- The acts carried out in bad faith had the effect of rendering the legal person unable to pay all or part of the VAT for which it is liable
- The joint and several liability is limited to the amount by which the legal person’s assets were depleted as a result of the acts carried out in bad faith
- That joint and several liability is incurred only in the alternative, where it proves impossible to recover from the legal person the amounts of VAT payable
Additionally, the ECJ has ruled that Article 273 of Directive 2006/112 and the principle of proportionality must be interpreted as not precluding national legislation providing for a system of joint and several liability, such as that described above, which extends to default interest payable by the legal person for failure to pay VAT within the mandatory time limits laid down by that directive on account of acts committed in bad faith by the person designated as jointly and severally liable.
European Court of Justice, Case C-397/21, “HUMDA”: Tax Authorities Are Required to Refund VAT Incorrectly Charged and Paid on VAT-Exempt Supplies of Services
The ECJ has ruled that the Council Directive 2006/112/EC of 28 November 2006, on the common system of VAT, read in the light of the principles of effectiveness and neutrality of VAT, must be interpreted as precluding legislation of a member state under which a taxable person to whom another taxable person has provided a service cannot claim, directly from the tax authority, a refund of the amount corresponding to the VAT in respect of which that service provider has unduly invoiced that taxable person and that service provider has paid to the Treasury, where it is impossible or excessively difficult to claim that amount from that service provider on account of that service provider having gone into liquidation and even though no fraud or abuse can be attributed to those two taxable persons, with the result that there is no risk of loss of tax revenue for that member state.
Additionally, the ECJ has ruled that Article 183 of Directive 2006/112, read in the light of the principle of neutrality of VAT, must be interpreted as meaning that, where a taxable person to whom another taxable person has provided a service can claim directly from the tax authority a refund of the amount corresponding to the VAT in respect of which that service provider has unduly invoiced that taxable person and that service provider has paid to the Treasury, that authority is obliged to pay interest on that amount where it has not made that refund within a reasonable period of time after having been requested to do so. The rules for applying interest on that amount fall within the procedural autonomy of the member states, circumscribed by the principles of equivalence and effectiveness, it being understood that the national rules relating in particular to the calculation of any interest due must not result in the taxable person being deprived of adequate compensation in respect of the loss caused by the late refund of that amount. It is for the referring court to do whatever lies within its jurisdiction to give full effect to that Article 183 by interpreting national law in conformity with EU law.