CELEX: 62020CJ0487
Reference for a preliminary ruling
Harmonisation of fiscal legislation
Common system of value added tax (VAT)
Directive 2006/112/EC
Articles 179 and 183
Right to deduct VAT
Conditions
Compensation or refund of excess VAT
Additional liabilities
Principle of fiscal neutrality
Principles of equivalence and effectiveness

This request for a preliminary ruling concerns the interpretation of the first paragraph of Article 179 and the first paragraph of Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (
OJ 2006 L 347, p. 1
; ‘the VAT Directive’) and the principles of equivalence, effectiveness and fiscal neutrality.
The request has been made in proceedings between Philips Orăştie SRL and the Direcția Generală de Administrare a Marilor Contribuabili (Directorate-General for the Administration of Large-scale Taxpayers, Romania) concerning the provisions governing the exercise of the right to deduct value added tax (VAT).
Legal context
European Union law
Article 179 of the VAT Directive states:
‘The taxable person shall make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen and is exercised in accordance with Article 178.
However, Member States may require that taxable persons who carry out occasional transactions, as defined in Article 12, exercise their right of deduction only at the time of supply.’
Article 183 of that directive provides that:
‘Where, for a given tax period, the amount of deductions exceeds the amount of VAT due, the Member States may, in accordance with conditions which they shall determine, either make a refund or carry the excess forward to the following period.
However, Member States may refuse to refund or carry forward if the amount of the excess is insignificant.’
Article 252 of that directive provides:
‘1.   The VAT return shall be submitted by a deadline to be determined by Member States. That deadline may not be more than two months after the end of each tax period.
2.   The tax period shall be set by each Member State at one month, two months or three months.
Member States may, however, set different tax periods provided that those periods do not exceed one year.’
Romanian law
In accordance with Article 157(2)(b
) of Legea nr. 207/2015 privind Codul de procedură fiscală (Law No 207/2015 establishing the Code of Tax Procedure) of 20 July 2015 (
Monitorul Oficial al României
, Part I, No 547 of 23 July 2015) (‘the Code of Tax Procedure’), ‘tax liabilities established in fiscal administrative acts that are challenged in accordance with the law and for which a guarantee in accordance with Articles 210 to 211 or Article 235 is provided’ are not to be regarded as outstanding tax liabilities.
Article 233 of the Code of Tax Procedure, entitled ‘Stay of enforcement’, provides, inter alia:
‘…
(2
) Enforcement shall be stayed or shall not be commenced in the following cases:
(a) for tax liabilities established in a decision of the competent tax authority if, after communication of the decision, the debtor informs the tax authority of the lodging of a letter of guarantee or insurance policy of guarantee in accordance with Article 235. Enforcement shall proceed or shall be commenced if the debtor fails to lodge the letter of guarantee or insurance policy of guarantee within 45 days of the date of communication of the decision in which the tax liability is established;
(b) for tax liabilities established in fiscal administrative acts that are challenged in accordance with the law and guaranteed in accordance with Articles 210 and 211. Enforcement shall proceed or shall be commenced upon the fiscal administrative acts becoming final in the system of administrative appeals or judicial proceedings.
(2
) Throughout the period of the stay of enforcement in accordance with paragraph 2
, the tax liability which is the subject of the stay shall not be extinguished, unless the debtor chooses that it should be extinguished in accordance with Article 165(8).
…’
Article 235(1) and (5) of the Code of Tax Procedure reads as follows:
‘(1)   If a challenge is brought against a fiscal administrative act establishing a tax liability, in accordance with this Code, even while the administrative proceedings are being considered, enforcement shall be stayed or shall not be commenced in relation to the disputed tax liability if the debtor presents to the competent tax authority a letter of guarantee or insurance policy of guarantee covering the tax liability which is disputed and has not been discharged at the time of presentation of the guarantee. The validity of the letter of guarantee or insurance policy of guarantee must be at least six months from the date of issue.
…
(5)   Throughout the period of a stay of enforcement in accordance with this article, the tax liability which is the subject of the stay shall not be extinguished, unless the debtor chooses that it should be extinguished in accordance with Article 165(8).’
Article 303 of Legea nr. 227/2015 privind Codul fiscal (Law No 227/2015 establishing the Tax Code) of 8 September 2015 (
Monitorul Oficial al României
, Part I, No 688 of 10 September 2015) (‘the Tax Code’) provides:
‘(1)   If the tax on purchases made by a taxable person registered for VAT purposes, in accordance with Article 316, which is deductible in a tax period exceeds the tax levied on taxable transactions, an excess shall arise in the reporting period, referred to as a
negative tax amount
.
(2)   After determining the amount of tax payable or the negative tax amount relating to the transactions carried out in the course of the reporting period, taxable persons shall make the adjustments provided for in this article using the tax return referred to in Article 323.
(3)   A cumulative negative tax amount shall be determined by adding together the negative tax amount for the reporting period, the balance of the negative tax amount carried forward from the return for the preceding tax period, where a refund has not been requested, and the negative balance of VAT as established by the tax inspection authorities in a decision communicated prior to the submission of the tax return.
(4)   A cumulative amount of tax due shall be determined in the reporting period by adding together the tax due in the reporting period and any portion not paid to the Treasury – prior to the submission of the tax return referred to in Article 323 – of the balance of tax due from the preceding tax period, and any portion not paid to the Treasury – prior to the submission of the tax return – of the balance of VAT due established by the tax inspection bodies in a decision communicated prior to the submission of the return. By way of exception:
(a) in the first tax return submitted to the tax authority after the date of approval of a payment facility, the cumulative amount of tax due in respect of which the payment facility has been approved shall not be carried forward from the return for the preceding tax period;
(b) in the first tax return submitted to the tax authority after the date of registration of the tax authority in the body of creditors referred to in Law No 85/2014, the cumulative amount of tax due in respect of which the authority is registered in the body of creditors in accordance with the provisions of Law No 85/2014 shall not be carried forward from the return for the preceding tax period.
(5)   By way of derogation from the provisions of paragraphs 3 and 4, any negative VAT balance established by the tax inspection authorities and any portion that has not been paid to the Treasury, by the date of submission of the tax return of the balance of the VAT due established by the tax inspection bodies in a decision the enforcement of which has been stayed by a court in accordance with the law, shall not be added to the negative amount or to the cumulative amount of tax due, depending on the case, relating to the period(s) for which enforcement of the decision is suspended. Such amounts shall be imputed to the return for the tax period in which the stay of enforcement of the decision is lifted, so as to determine the cumulative negative tax amount or, as the case may be, the cumulative amount of tax due.
(6)   Using the tax return referred in in Article 323, taxable persons are required to determine the difference between the amounts referred to in paragraphs 3 and 4, which represent the tax adjustments, and to determine the balance of tax due or the balance of the negative tax amount. If the cumulative amount of tax due exceeds the cumulative negative tax amount, a balance of tax due shall arise in the reporting period. If the cumulative negative tax amount exceeds the cumulative amount of tax due, a balance of the negative tax amount shall arise in the reporting period.
…’
The dispute in the main proceedings and the question referred for a preliminary ruling
In September 2016, the Directorate-General for the Administration of Large-scale Taxpayers issued a tax assessment notice (‘the tax assessment notice’) ordering Philips Orăștie to pay 31628916 Romanian lei (RON) (approximately EUR 6325783) by way of VAT and ancillary tax liabilities.
Since, with respect to the amounts established by that tax assessment notice, enforcement of the debt was not suspended, Philips Orăștie entered, in the return for September 2016, a sum of RON 21799334 (approximately EUR 4359866), representing the ‘balance of VAT due as established in the tax assessment notice and not paid prior to the submission of the VAT return’, without requesting a refund. Thus, Philips Orăștie remained liable, after set-off, for a sum of RON 12096916 (approximately EUR 2419383).
On 4 November 2016, Philips Orăștie brought a tax appeal against the tax assessment notice, disputing its lawfulness to the extent of the amount of RON 21799334 (approximately EUR 4359866). On lodging its tax appeal, Philips Orăștie lodged a letter of bank guarantee, issued on the same day, for the sum of RON 31577059 (approximately EUR 6315412). The letter of bank guarantee was extended to 4 March 2020 by subsequent documents.
Between November 2016 and March 2019, Philips Orăștie submitted VAT returns in which it did not include, in line 38 thereof, as outstanding liabilities, the balance of VAT due as established in the tax assessment notice and not paid prior to the submission of those returns, while requesting a refund of VAT. That company took the view that, in the light of the provisions of Article 233 and Article 235(1) and (5) of the Code of Tax Procedure, that balance could neither be classified as ‘outstanding liabilities’ nor form part of the ‘cumulative VAT due’, as defined in Article 303(4) of the Tax Code. The Directorate-General for the Administration of Large-scale Taxpayers issued orders for the refund of VAT without raising any objection as to the manner in which those returns had been completed or as to how Philips Orăștie interpreted the relevant provisions.
By judgment of 5 March 2019, the Curtea de Apel București (Court of Appeal, Bucharest, Romania) upheld the action brought by Philips Orăștie against the tax assessment notice and cancelled the additional VAT in the amount of RON 21799334 (approximately EUR 4359866). It is apparent from the request for a preliminary ruling that, when the request was made, that judgment was not final.
In its VAT returns for April and May 2019, Philips Orăștie did not, as it had previously, include in line 38 of those returns the balance of VAT due as established in the tax assessment notice and not paid prior to the submission of those returns.
The Directorate-General for the Administration of Large-scale Taxpayers informed Philips Orăștie that it considered that line 38 of the returns for April and May 2019, relating to an amount of VAT due in the sum of RON 12096916 (approximately EUR 2419383), had been incorrectly completed and issued two VAT adjustment notices to correct those returns, by which it altered the amount of VAT due indicated on them, including in the cumulative amount of VAT due the sum of RON 21799334 (approximately EUR 4359866), with direct effect on the amount of VAT to be refunded.
After its administrative appeal against those adjustment notices had been rejected, Philips Orăștie brought an action before the referring court for annulment of those adjustment notices, arguing, inter alia, that, since the Code of Tax Procedure recognises the suspensory effect on the enforcement of tax liabilities established by tax measures which were challenged, but in respect of which a letter of bank guarantee was lodged, the same rule must also apply where those liabilities relate to additional VAT established by the contested tax assessment notices, all the more so since that interpretation was confirmed by the tax authorities between November 2016 and March 2019. That company also claimed that, while it is true that the Member States have a margin of discretion in transposing the provisions of the VAT Directive, they must observe the general principles applicable, namely the principles of equivalence, effectiveness and VAT neutrality, as defined by the Court’s case-law on the subject, which are not, in the present case, observed by Romanian law.
The Directorate-General for the Administration of Large-scale Taxpayers, for its part, contended that the mechanism for determining the VAT due or to be refunded is a special mechanism and that the provisions of Article 303(4) and (5) of the Tax Code are special provisions unlike those of Articles 157, 233 and 235 of the Code of Tax Procedure, which apply only to other types of tax or duty. Therefore, the submission of a letter of bank guarantee is not sufficient to exclude from the calculation of the ‘cumulative VAT due’ the tax liabilities established in a contested tax assessment notice.
In those circumstances, the Curtea de Apel Alba Iulia (Court of Appeal, Alba Iulia, Romania) decided to stay the proceedings and to refer the following question to the Court of Justice for a preliminary ruling.
‘May the provisions of [the first paragraph of] Article 179 and [the first paragraph of] Article 183 of [the VAT Directive], regard being had to the principles of equivalence, effectiveness and neutrality, be interpreted as precluding national legislation or practices in accordance with which the amount of VAT to be refunded is reduced by including in the calculation of the VAT due amounts representing additional liabilities established in a notice of assessment that has been annulled by a judgment that is not yet final, where such additional liabilities are guaranteed by a bank guarantee and the national tax procedure rules recognise that such a guarantee has the effect of staying enforcement in the case of other taxes and duties?’
Consideration of the question referred
By its question, the referring court asks, in essence, whether the first paragraph of Article 179 and the first paragraph of Article 183 of the VAT Directive, as well as the principles of fiscal neutrality, equivalence and effectiveness, must be interpreted as precluding national legislation which allows the tax authorities of a Member State to refuse a refund of additional VAT that has been established and paid following a tax assessment notice challenged by the taxable person concerned and which has been the subject of a judicial decision that is not final in favour of that taxable person, while the latter has a bank guarantee for the amount of VAT in question and, in accordance with national procedural law, in the case of other taxes and duties, the provision of such a bank guarantee makes it possible to obtain such a refund.
As a preliminary point, it should be recalled that it is for the Court to answer that question on the basis of the national legislation and the factual context defined by the referring court, which alone has jurisdiction in that regard, and to provide it with all the criteria for the interpretation of EU law which may enable it to assess whether that legislation is compatible with the provisions of the VAT Directive (see, to that effect, judgment of 12 May 2011, Enel Maritsa Iztok 3,
C‑107/10
,
EU:C:2011:298
, paragraph
).
Therefore, in the present case, there is no need to examine the Romanian Government’s argument that Philips Orăștie had options other than those which it chose in order to assert its rights and which would have been without any additional financial burden for it. The existence of such options in Romanian law has not been mentioned by the referring court and it is not for the Court to call into question the interpretation of national law provided by the referring court.
Next, it should be recalled that, under the first paragraph of Article 179 of the VAT Directive, the taxable person is to make the deduction by subtracting from the total amount of VAT due for a given tax period the total amount of VAT in respect of which, during the same period, the right of deduction has arisen. The first paragraph of Article 183 of that directive clarifies that, where, for a given tax period, the amount of deductions exceeds the amount of VAT due, there is to be an excess that may either be carried forward to the following period or refunded.
Furthermore, the Court has repeatedly held that, while the implementation of the right to a refund of excess VAT provided for in Article 183 of the VAT Directive falls, as a general rule, under the procedural autonomy of the Member States, the fact remains that that autonomy is circumscribed by the principles of equivalence and effectiveness (judgment of 12 May 2011, Enel Maritsa Iztok 3,
C‑107/10
,
EU:C:2011:298
, paragraph
and the case-law cited).
As regards the possibility, under Article 183 of the VAT Directive, of providing that excess VAT is to be carried forward to the following tax period or refunded, the Court has made it clear that, while the Member States have a certain freedom in determining the conditions for the refund of excess VAT, those conditions cannot undermine the principle of fiscal neutrality by making the taxable person bear the burden of the VAT in whole or in part. In particular, such conditions must enable the taxable person, in appropriate circumstances, to recover the entirety of the credit arising from that excess VAT. This implies that the refund is made within a reasonable period of time by a payment in liquid funds or equivalent means, and that, in any event, the method of refund adopted must not entail any financial risk for the taxable person (judgment of 12 May 2011, Enel Maritsa Iztok 3,
C‑107/10
,
EU:C:2011:298
, paragraph
and the case-law cited).
In addition, it is apparent from the Court’s case-law that Article 183 of the VAT Directive cannot be interpreted as necessarily precluding national legislation which lays down detailed rules for the refund of excess VAT combining the two methods of refunding excess VAT provided for in Article 183, namely carrying forward to the following period and refund of that excess, or which provides for it to be carried forward not to the following tax period but over several tax periods, provided that they comply with the limits laid down in Article 252(2) of the VAT Directive (see, to that effect, judgment of 12 May 2011, Enel Maritsa Iztok 3,
C‑107/10
,
EU:C:2011:298
, paragraphs
to
).
On the other hand, national legislation under which the taxable person has to bear part of the financial burden of the excess VAT during a period regarded as unreasonable is inconsistent with the principle of fiscal neutrality (see, to that effect, judgment of 18 October 2012, Mednis,
C‑525/11
,
EU:C:2012:652
, paragraph
).
In the present case, as regards the principle of fiscal neutrality, it must be held that, in the absence of any indication, in the request for a preliminary ruling, of the exact period during which a taxable person cannot, under Romanian law, obtain a refund of the excess VAT on which that person may rely in respect of a given tax period, it is for the referring court, which alone has jurisdiction to rule on the facts, to decide whether that legislation actually imposes on the taxable person, for a period regarded as unreasonable, within the meaning of the Court’s case-law, the financial burden of the excess VAT or a part thereof.
As regards the principles of equivalence and effectiveness, to which reference has already been made in paragraph 24 of this judgment, it must be recalled that the detailed procedural rules governing actions for safeguarding the rights which taxpayers derive from EU law must not be any less favourable than those governing similar domestic actions (principle of equivalence) and must not be framed in such a way as to render impossible in practice or excessively difficult the exercise of rights conferred by the legal order of the European Union (principle of effectiveness) (see, inter alia, judgment of 30 June 2016, Câmpean,
C‑200/14
,
EU:C:2016:494
, paragraph
and the case-law cited).
It is for the national court, which alone has direct knowledge of the procedural rules governing restitution actions against the State, to determine whether the procedural rules intended to ensure that the rights derived by individuals from EU law are safeguarded under domestic law comply with the principle of equivalence and to consider both the purpose and the essential characteristics of allegedly similar domestic actions. For that purpose, the national courts must consider whether the actions concerned are similar as regards their purpose, cause of action and essential characteristics (judgment of 19 July 2012, Littlewoods Retail and Others,
C‑591/10
,
EU:C:2012:478
, paragraph
and the case-law cited).
However, the Court may, for the purposes of the verification which the national court must carry out, provide it with certain information relating to the interpretation of EU law.
In the present case, in its request for a preliminary ruling, the referring court states that the general system of tax liabilities relating to national taxes and duties, as provided for in Articles 157, 233 and 235 of the Code of Tax Procedure, lays down the rule that, where a tax assessment notice is challenged, but a letter of bank guarantee is lodged in respect of all the relevant tax liabilities, the enforceability of that notice is suspended and those liabilities may be extinguished, in advance, only in so far as the debtor so requests. On the other hand, in relation to VAT, those provisions do not apply and Article 303(4) and (5) of the Tax Code do not provide for such a rule, with the result that the lodging of a letter of bank guarantee would not have the effect of suspending VAT liabilities.
In order to demonstrate that the principle of equivalence has been observed, the Romanian Government submits, first, that, although Philips Orăștie sought to suspend the effects of the contested tax assessment notice, it had the option to request that suspension before the administrative court in accordance with the conditions laid down in Articles 14 and 15 of the Legea contenciosului administrativ nr. 554/2004 (Law on Administrative Proceedings No 554/2004) (
Monitorul Oficial al României
, Part I, No 1154 of 7 December 2004), in the version thereof applicable to the main proceedings. Second, the non-recognition of such a suspensory effect in respect of VAT, although that effect is recognised in respect of other tax liabilities, is not such as to call into question the observance of the principle of equivalence, given that that suspension has no effect on the deductibility of VAT and on the extinguishment of the tax liabilities as such. The detailed procedural rules applied in relation to VAT are thus no less favourable than those applicable to tax liabilities under national law, given that, in any event, the liability is not extinguished but only suspended.
Thus, in order to determine whether the principle of equivalence is observed in the main proceedings, the referring court must establish, in the first place, whether the actions which are subject to the procedural rules which the Romanian Government considers to be similar to those provided for by Articles 157, 233 and 235 of the Code of Tax Procedure are, from the point of view of their cause of action, their purpose and their essential characteristics, similar to an action based on rights derived from EU law, such as that at issue in the main proceedings.
That does not appear to be the case, as the referring court itself has pointed out, with regard to actions relating to VAT liabilities arising from contested tax assessment notices and the possibility of obtaining a suspension of the enforceability of those liabilities, which it is, however, for that court to ascertain.
In the second place, it will be for that court to establish whether or not the procedural rules applicable to national actions which it has identified as similar to the action at issue in the main proceedings are, in fact, more favourable than those applicable in the dispute before it, pursuant to Article 303(4) and (5) of the Tax Code. It is clear from the description of the national law given by the referring court in its request for a preliminary ruling that, in the present case, taxable persons have, in relation to VAT, less favourable procedural means than those available to them regarding rights which they derive from national law, as regards duties and taxes other than VAT. It is for the referring court to make the necessary checks to ensure that the principle of equivalence is observed so far as concerns the legislation applicable to the dispute before it.
As regards the principle of effectiveness, it is sufficient to note that, in the present case, that principle does not appear to be at issue since, subject to verification by the referring court, it is not apparent from the documents before the Court and it has not, moreover, been argued that the national legislation at issue in the main proceedings makes the exercise of rights conferred by the legal order of the European Union excessively difficult or impossible in practice. Accordingly, there is no need to rule in that regard.
In the light of the foregoing considerations, the answer is that the first paragraph of Article 179 and the first paragraph of Article 183 of the VAT Directive, as well as the principle of equivalence, must be interpreted as precluding national legislation which lays down detailed procedural rules governing actions for the refund of VAT, based on an infringement of the common system of VAT, less favourable than those applicable to similar actions based on an infringement of domestic law relating to duties and taxes other than VAT.
Costs
Since these proceedings are, for the parties to the main proceedings, a step in the actions pending before the referring court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Eighth Chamber) hereby rules:

The first paragraph of Article 179 and the first paragraph of Article 183 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax, as well as the principle of equivalence, must be interpreted as precluding national legislation which lays down detailed procedural rules governing actions for the refund of value added tax (VAT), based on an infringement of the common system of VAT, less favourable than those applicable to similar actions based on an infringement of domestic law relating to duties and taxes other than VAT.

[Signatures]
(
*1
)	Language of the case: Romanian.