Opinion of the Advocate General — ECLI:EU:C:2008:39
Date: 2008-01-24
Language of the case: Dutch
Based on: Treaty establishing the European Economic Community (1957)
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Netherlands

summary: (i) where amounts have to be totalled, arithmetic rounding will lead to less distortion than systematic rounding up or down (and rounding to even will reduce the distortion still further); (ii) distortion can be more effectively minimised by calculating amounts due only after totalling individual VAT-inclusive amounts for each tax period; (iii) at that stage, in order to avoid any excess payment to the tax authority, it is acceptable to round the amount due down to the nearest minimum unit of payment in all cases. 54. I would stress that the approaches I have outlined should not be viewed as necessarily the only possibilities open to Member States. Any solution which respects the relevant rules and principles – and in particular which does not involve the retailer either keeping or paying any difference between the exact proportion of VAT in the retail price and the amount accounted for to the tax authority – is acceptable. VAT-exclusive prices and supplies to taxable persons 55. The case before the Hoge Raad concerns retail sales at VAT-inclusive prices. The considerations set out above relate to that specific context, and assume that sales are made to final consumers. Such consumers, as I have indicated, are entitled to know the proportion of VAT included in the price they have paid, and may be informed how much it amounts to, to the nearest cent. That information is commonly given on retailers’ receipts, but need not be binding as between the trader and the tax authority. 56. However, where sales are made to taxable persons who will use the goods in question for the purposes of their taxable outputs, it is necessary to issue a VAT invoice in accordance with Article 22(3) of the Sixth Directive. That invoice must state both the price exclusive of tax and the amount of tax, each of which must thus be expressed as an amount capable of payment. 57. Such situations normally concern not retailers but traders whose business is essentially to supply other taxable persons. Unlike retail traders, they typically fix a price – in whole cents – exclusive of tax, then apply VAT at the appropriate rate to that price. In order to indicate the amount of VAT as a whole number of cents, it will again often be necessary to round the amount up or down. 58. However, in such a situation, the distortions I have outlined above either do not arise or have greatly mitigated effects. 59. As regards individual transactions, where the output tax charged by the supplier represents input tax which will subsequently be deducted by the customer, the amount neither burdens nor benefits either party and, because the output tax and the input tax cancel each other out by the operation of the deduction system, the amount collected on the supply to the final consumer at the end of the VAT chain is unaffected. 60. In the rarer cases where the supply is to a final consumer, rounding, although it has a slight effect on the amount paid by the customer and collected by the tax authority, does not affect the neutrality of the tax from the supplier’s point of view. The amount invoiced is the amount which must be accounted for to the tax authority, and the fraction by which it is rounded does not affect the supplier’s margin either way. (32) 61. It is true that the cumulative effect of rounding on such transactions may affect the overall amount of VAT revenue collected by the Member State, but that effect will be limited. Final consumers obtain their supplies overwhelmingly from retailers who are required to sell at VAT-inclusive prices. On the occasions when they do not, their purchases are likely to be of more substantial value, so that rounding by less than one cent will represent an appreciably smaller proportional difference. If rounding is arithmetic, the effect, both on overall VAT receipts and on individual customers, will be limited. 62. Where, in exceptional individual transactions, a taxable person purchases from a retailer items which he will use for his taxable outputs and the VAT on which he will wish to deduct, he will request an invoice stating the net price together with the amount of tax. In that event, the retailer must make a slight adjustment to his price in order to be able to show those amounts in whole cents. However, for the reasons I have explained, that adjustment will have no effect on either party or on the amount of VAT ultimately collected. Conclusion 63. In the light of all the above considerations, I propose that the Court should answer the questions raised by the Hoge Raad as follows: (1) The Community VAT directives do not regulate in detail the rounding of amounts of VAT. Such regulation is therefore a matter for national law, which must, however, comply in that regard with all the relevant rules and principles which flow from the directives. (2) Those rules and principles do not permit retailers to round down the amount of VAT in the VAT-inclusive price of each item sold, in order to determine the amount of output tax which they must declare in their regular returns. 1 – Original language: English. 2 – In the present case, which concerns amounts in euros, that smallest unit is the cent, to which I shall refer, but the name of the unit is irrelevant. 3 – Similar questions are raised in Case C-302/07 Wetherspoon, pending before the Court, in which it is asked also (c) whether the common arithmetic method of rounding up or down can be imposed, (d) at what stage rounding must take place and (e) what consequences flow from the principles of equal treatment and VAT neutrality when tax authorities allow some but not all traders to round down systematically. 4 – First Council Directive 67/227/EEC of 11 April 1967 on the harmonisation of legislation of Member States concerning turnover taxes (OJ, English Special Edition 1967 I, p. 14). With effect from 1 January 2007, the First Directive was repealed and replaced by Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (OJ 2006 L 347, p. 1), Article 1(2) of which contains the same provisions, with minor linguistic changes. The aim of Directive 2006/112 is to present all the applicable Community VAT provisions clearly and rationally in a recast structure and wording without, in principle, bringing about material changes in the existing legislation (see recital 3 in the preamble). References below to provisions of Directive 2006/112 do not therefore imply identity of wording with the equivalent provisions of the repealed directives. 5 – Sixth 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 (OJ 1977 L 145, p. 1, amended on numerous occasions). The Sixth Directive was also repealed and replaced by Directive 2006/112 but, for the sake of readability, I shall refer to its provisions in the present tense. The substance – and to a large extent the wording – of those provisions remains in force in the equivalent provisions of Directive 2006/112. 6 – Article 175 of Directive 2006/112. 7 – Articles 295 to 305 of Directive 2006/112, at Article 298. 8 – Article 2(1)(a) of Directive 2006/112. 9 – Article 14(1) of Directive 2006/112. 10 – Articles 62, 63 and 66 of Directive 2006/112. 11 – Article 73 of Directive 2006/112. 12 – Articles 96 to 99 of Directive 2006/112. 13 – Articles 167 and 168 of Directive 2006/112. 14 – The applicable text of Article 22 was to be found, at the material time, in Article 28h of the Sixth Directive, as one of the ‘transitional provisions’; the equivalent of Article 22(3)(a) is now in Article 220 of Directive 2006/112. 15 – At least in domestic trade – the requirement extends to all distance sales taxed in the Member State of arrival and intra-Community supplies of goods, regardless of the type of customer. 16 – That version of Article 22(3)(b) had in fact been superseded at the material time by virtue of Council Directive 2001/115/EC of 20 December 2001 amending Directive 77/388/EEC with a view to simplifying, modernising and harmonising the conditions laid down for invoicing in respect of value added tax (OJ 2002 L 15, p. 24), which set out a more detailed list of requirements. Directive 2001/115 entered into force on 6 February 2002, but the deadline for its implementation by the Member States was 1 January 2004. It appears that the Netherlands transposition took effect on that date (Law of 18 December 2003, Staatsblad n° 530, 29 December 2003, p. 1). The Hoge Raad refers to ‘the 10th indent of Article 22(3)(b) of the Sixth Directive (in the version applicable until 1 January 2004)’ – but it is in fact only the version amended by Directive 2001/115 which contains a 10th indent, requiring the invoice to state the VAT amount payable. However, since the relevant point is that a VAT invoice must indicate the amount of VAT on the transaction, the confusion is immaterial. The equivalent provisions are now in Article 226 of Directive 2006/112. 17 – Article 206 of Directive 2006/112. 18 – Under Article 22(4)(a), the tax period is to be fixed by each Member State at one, two or three months, or any other period not exceeding one year, and the regular return is to be submitted by a deadline, again to be fixed by the Member State, of not more than two months from the end of the tax period (see now Article 252 of Directive 2006/112). 19 – Of the European Parliament and of the Council of 16 February 1998 on consumer protection in the indication of the prices of products offered to consumers (OJ 1998 L 80, p. 27). 20 – A forum set up under Article 29 of the Sixth Directive (Article 398 of Directive 2006/112) in which representatives of the Member States and the Commission discuss issues relating to the implementation of VAT. 21 – It is important to bear in mind that, in the case of retail prices, VAT must be calculated backwards from a determined VAT-inclusive price and not forwards from a notional VAT-exclusive price. A retail selling price including VAT at 19% comes to 119% of the net price excluding tax. The amount of VAT will thus be not 19/100 (19%) but 19/119 of the retail price. The same calculation applies, mutatis mutandis, for any other rate of VAT. 22 – For an analogous example, see Case C-35/05 Reemtsma [2007] ECR I-2425, paragraph 38, and the case-law cited. 23 – A point which has been made many times by the Court in the field of taxation: see, most recently, Case C-443/06 Hollmann [2007] ECR I-0000, paragraph 33, and the case-law cited there. 24 – For a consideration of the latter situations, see point 55 et seq. below. 25 – See, for example, Case C-435/05 Investrand [2007] ECR I-1315, paragraph 22, and the case-law cited there. 26 – Or, if input tax exceptionally exceeds output tax during the tax period in question, a decrease or increase, respectively, in the net amount to be reimbursed by the authority. 27 – At the hearing, counsel for the United Kingdom spoke of even greater figures, between GBP 200 million and 800 million. 28 – Systematic rounding at the till receipt or ‘shopping basket’ level must also have a significant, albeit lesser, effect, given the vast number of such receipts issued daily in any Member State. 29 – At the hearing, the United Kingdom cited a case in which arithmetic rounding per article would have led to a tax discrepancy of over GBP 17 000 in six months for a single trader. It is also true that the arithmetic method contains a slight but systematic upwards bias in that 0.5 of a cent is always rounded up, even though it is exactly half way between two whole cents. That problem could be mitigated by ‘banker’s rounding’ or ‘rounding to even’, in which, for example, when rounding to whole numbers, any figure ending in exactly .5, followed by nothing else, is rounded to the nearest whole even number. Thus, 3.5 becomes 4, as before, but 2.5 becomes 2. 30 – It may be indicated for the customer’s information in a rounded form, as I have suggested at point 34 above. Problems could arise, however, if the rounded amount were taken as the actual amount of VAT included in the price. For example, an item sold at EUR 0.28 with VAT at 19% contains EUR 0.0447 in VAT (19/119 of EUR 0.28). If that is rounded to EUR 0.04, the price exclusive of VAT is EUR 0.24. But 19% of EUR 0.24 is EUR 0.0456, which should be rounded to EUR 0.05, so that the VAT-inclusive price should have been EUR 0.29. 31 – Case C-317/94 [1996] ECR I-5339, paragraphs 18 to 24, especially at paragraph 24. Although English was the language of the case, it seems to me that the formulation in the English version – ‘the tax authorities may not in any circumstances charge an amount exceeding the tax paid by the final consumer’ – does not accurately reflect the French in which the judgment was originally drafted – ‘l’administration fiscale ne saurait en définitive percevoir un montant supérieur à celui payé par le consommateur final’ (my emphasis). 32 – It should be noted that this is not an option for true retail traders, who are obliged to set VAT-inclusive prices (see Directive 98/6, cited in point 12 above.)