Information;Order — ECLI:EU:C:2024:133
Date: 2024-02-05
Language of the case: Portuguese
Court formation: Seventh Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Portugal

Anonymised version 
Translation C-377/23 – 1 
Case C-377/23 [Sancra] i 
Request for a preliminary ruling 
Date lodged: 
14 June 2023 
Referring court: 
Supremo Tribunal Administrativo (Portugal) 
Date of the decision to refer: 
10 May 2023 
Appellant: 
DC 
Respondent: 
Autoridade Tributária e Aduaneira (Tax and Customs Authority) 
  
SUPREMO TRIBUNAL ADMINISTRATIVO 
(Supreme Administrative Court) 
STA/2nd Section 
[…] 
The Secção de Contencioso Tributário (Tax Chamber) of the Supreme 
Administrative Court has adopted the following decision: 
 
i The name of this case is fictitious. It is not the name of any of the parties to the proceedings. 
EN 
REQUEST FOR A PRELIMINARY RULING OF 10. 5. 2023 – CASE C-377/23 
 
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1. Background to the dispute 
1.1. After being served the judgment of the Tribunal Central Administrativo Sul 
(Central Administrative Court, South, Portugal) of 10 November 2022, with 
which he disagreed, DC, who was identified in the case file, brought an appeal in 
cassation under Article 285 of the Código de Procedimento e de Processo 
Tributário (Code of Administrative and Judicial Procedure in Tax Matters; ‘the 
CPPT’), in which he claimed as follows: 
1. […] In the course of a tax inspection procedure, if it is necessary to 
make additional assessments to VAT and the taxable person is unable to 
pass on the additionally assessed VAT to his or her final consumer, how is 
[the tax authority] to calculate the uncollected tax? 
2. In the present case, the [tax authority] invariably calculated the 
uncollected tax ‘externally’, by adding the VAT charge to the declared sale 
amount, a procedure which was examined and confirmed both at first 
instance and by the court whose judgment is being appealed, in the case of 
the VAT on the appellant’s sales of second-hand vehicles to final 
consumers. 
3. Nonetheless, the Court of Justice of the European Union has for some 
time been arguing and developing in its judgments case-law to the effect 
that, in such situations, the uncollected tax must be calculated ‘internally’, 
by deducting the VAT charge from the declared sale and applying VAT to 
that amount. 
4. Given that this tax is the subject of an extensive Community 
framework and is highly harmonised within the domestic laws of the 
Member States, as circumscribed by Community directives, that 
harmonisation should also be reflected in the decisions of the national 
courts, so as to encourage the application of more uniform solutions in 
keeping with the Community case-law on VAT. 
5. The legal solution adopted by the courts in the present case, however, 
shows that no such harmonisation exists at the level of judicial decision-
making, since that solution is manifestly contrary to the relevant case-law of 
the Court of Justice. 
6. The [Centro de Arbitragem Administrativa (Administrative Arbitration 
Centre); (‘the CAAD’)] has held, contrary to the judgment under appeal and 
in line with the case-law of the Court of Justice that forms the basis of its 
decisions, that any uncollected VAT which is the subject of an additional 
assessment made by the [tax authority] in the course of a tax inspection must 
be calculated ‘internally’, given that the taxable person is unable to pass it 
on to final consumers. 
SANCRA 
 
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7. The solution referred to in the earlier paragraphs above, which is 
different from that applied in the case-law of the Court of Justice and 
endorsed by the CAAD, manifestly inverts the rationale behind VAT, which 
is by nature a tax on consumption which is intended to tax only the final 
consumer and rests on the latter’s ability to pay as evidenced by the act of 
consumption itself (see the judgments of the Court of Justice of 
24 November 1996, Elida Gibbs, C-317/94, and of 22 November 2018, 
MEO – Serviços de Telecomunicações e Multimedia S.A., C-295/17). 
8. It also infringes one of the principles that inform and shape the 
common system of VAT, the principle of [fiscal] neutrality, which is 
established in Directive 2006/112/EC on VAT [as transposed into 
Portuguese law] and takes the form of the right to deduct tax. 
9. It is also important to note that, in its case-law, the Court of Justice has 
confirmed that interpretation in situations which, though linked in the 
abstract to the question set out above, are different in their particular 
characteristics, and has now extended the application of that interpretation to 
situations in which VAT is charged at a lower rate, in which no reference is 
made to VAT (judgment of the Court of Justice of 7 November 2013, 
C-249/12 and C-250/12), in which VAT is not charged on supplies of 
services (judgment of the Court of Justice of 15 April 2021, C-846/19) and 
even, more recently, in situations of fraud in which an invoice has not even 
been issued for the transaction (see the judgment of the Court of Justice of 
1 July 2021, [C-521/19]). 
10. Although the appellant is not in the last-mentioned situation, the view 
must be taken that the case-law of the CJEU — as endorsed by the CAAD in 
its decisions of 30 June 2021 in case 563/2020-T, of 17 January 2022 in case 
521/2021-T, and, more recently, of 7 October 2022 in case 87/2022-T, all 
available at www.caad.org.pt — is, a fortiori, fully applicable to the present 
case, in which the appellant declared the taxable transactions by issuing 
invoices documenting those transactions and the [tax authority] took the 
view that the price stated on those invoices, which price the taxable person 
had actually received by way of consideration, did not include VAT. 
11. The appellant is now being required to pay that VAT but is no longer 
able to pass it on to final consumers, in the absence of a VAT adjustment 
mechanism that would make this possible, without infringing the rules on 
the protection of pricing laid down in Decree-Law No 138/90 of 26 April 
1990, as amended by Decree-Law No 162/99 of 13 July 1999. 
12. [That solution] is contrary to Article 49 of the [Código do Imposto 
sobre o Valor Acrescentado (Value Added Tax Code; ‘the CIVA’)] itself, 
from which it is clear that uncollected tax must be calculated ‘internally’, 
since VAT is a component of the price and not an element to be added on to 
REQUEST FOR A PRELIMINARY RULING OF 10. 5. 2023 – CASE C-377/23 
 
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it, which is to say that it is part of the consideration actually received by the 
transferor of the goods or the provider of services. 
13. It follows from the foregoing that the infringement in particular of 
Article 49 of the CIVA and the breach of the principle of fiscal neutrality 
established in the Community directives, which have been transposed into 
Portuguese law and are applicable pursuant to Article 8(4) of the 
Constitution of the Portuguese Republic, justify the annulment not only of 
the additional assessments to VAT challenged by the appellant, but also, 
given that those assessments necessarily affect the determination of the 
taxable amount of the Imposto sobre o Rendimento das Pessoas Singulares 
(personal income tax) (IRS), of the additional assessments to the latter tax, 
in accordance with the constitutional principle of taxation of actual profit, 
provided for in Article 104(2) of the [Portuguese] Constitution. 
The foregoing supports the inference that the judgment under appeal 
infringed, inter alia, the following legal provisions: 
– Article 49 of the CIVA; 
– Article l of Decree-Law No 138/90 of 26 April 1990, as amended by 
Decree-Law No 162/99 of 13 July 1999; 
– Article 104(2) of the Constitution of the Portuguese Republic; 
– Council Directive 2006/112/EC of 28 November 2006; 
– Article 8(4) of the Constitution of the Portuguese Republic. 
[…] The appellant claims that the present appeal should be upheld and, in 
consequence, that the […] judgment under appeal be set aside and replaced 
[…] with a judgment declaring that the additional assessments to VAT and 
IRS, challenged at law by the appellant, must be annulled in the manner and 
on the grounds set out above. 
1.2. The respondent has not submitted a response. 
1.3. The appeal in cassation was allowed to proceed by decision of this court of 
22 March 2023. 
2. Factual grounds 
In accordance with Articles 663(6) and 679 of the Código de Processo Civil (Code 
of Civil Procedure; ‘the CPC’), applicable pursuant to Article 281 of the Code of 
Administrative and Judicial Procedure in Tax Matters, reference is made to the 
facts set out in the judgment under appeal. 
SANCRA 
 
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3. Legal grounds 
3.1. The question raised by the appellant, which appears in the decision allowing 
the present appeal in cassation to proceed, asks how, in the course of a tax 
inspection procedure, if it is necessary to make additional assessments to 
VAT and the taxable person is unable to pass on the additionally assessed 
VAT to final consumers, the tax authority must calculate the uncollected tax: 
by regarding the value of the invoices as already including VAT or by adding 
the VAT charge to the value of the invoices?’. 
3.2. [Factual background] 
[…] 
(i) The appellant considered that sales of second-hand cars were subject to the 
VAT scheme applicable to used goods and included on the invoices the reference 
‘Article 16(6) of the CIVA’ or ‘Profit margin scheme – Used goods’ and, in 
relation to VAT, ‘0%’. 
(ii) The [tax authority] took the view that, since they originated from intra-
Community acquisitions, car sales should come under the general scheme and 
corrected the uncollected VAT by adding the VAT charge, at a rate of 23%, to the 
value appearing on the sales invoices issued by the appellant to the final 
consumer. 
(iii) It has not been shown that the invoices do not include VAT on the sale price 
charged to the final consumer. 
3.3. The question raised in the present appeal is concerned only with the way in 
which the uncollected VAT was calculated (the existence of uncollected VAT is 
not in issue). The appellant submits that the tax must be calculated ‘internally’ 
(meaning that the price given on the invoice is to be regarded as already including 
VAT), and not, as was the case, ‘externally’ (meaning that the VAT was 
calculated by adding the VAT charge to the value of the invoice), and relies in 
support of its argument on the case-law of the Court of Justice of the European 
Union. 
3.4. So it is that, in the various judgments cited by the appellant, the Court of 
Justice has already ruled on the method of calculating VAT in different situations. 
Thus, in the judgment of 22 November 2018 in Case C-295/17, the Court of 
Justice held as follows: 
‘55. Furthermore, given that VAT is intended to tax only the final 
consumer, the taxable amount of VAT to be collected by the tax authorities 
cannot exceed the consideration actually paid by the final consumer which is 
the basis for calculating the VAT ultimately borne by him (see, to that 
REQUEST FOR A PRELIMINARY RULING OF 10. 5. 2023 – CASE C-377/23 
 
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effect, judgment of 24 October 1996, Elida Gibbs, C-317/94, 
EU:C:1996:400, paragraph 19). 
56. Accordingly, it must be added, for the sake of completeness and as the 
Advocate General observed in point 55 of her Opinion, that, where 
necessary, it will be for the competent national authorities to carry out, under 
the conditions determined by national law, an adjustment of the 
corresponding VAT, as provided for in Article 90 of the VAT Directive, so 
that the VAT is deducted from the amount actually received by the service 
provider from his customer’. 
In the judgment of 15 April 2021 in Case C-846/19, the Court of Justice stated: 
‘93. As regards, moreover, the situation, referred to by the referring court, 
in which the person supplying services supplied services without collecting 
the VAT for which that person is liable, and in which that person would not 
be in a position to recover from those who have paid those supplies the VAT 
subsequently required by the tax authority, it is necessary, if that is the case, 
to take the view that the remuneration received in that regard by the person 
supplying services already includes the VAT due, so that the collection of 
VAT is compatible with the basic principle of the VAT Directive that the 
VAT system is aimed at taxing only the end consumer (see, to that effect, 
judgment of 7 November 2013, Tulică and Plavoşin, C-249/12 and 
C-250/12, EU:C:2013:722, paragraphs 34, 42 and 43)’. 
In the judgment of 1 July 2021 in Case C-521/19 (the authority had identified 
covert transactions which were subject to VAT but had not been invoiced), the 
Court of Justice decided to take that approach even in cases of fraud, and held: 
‘Council Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax, in particular Articles 73 and 78 thereof, read in 
the light of the principle of neutrality of value added tax (VAT), must be 
interpreted as meaning that, where taxable persons for VAT purposes, by 
fraud, have not indicated the existence of the transaction to the tax authority, 
issued invoices or shown the income generated during that transaction in a 
direct tax declaration, the reconstitution, as part of an inspection of that 
declaration, of the amounts paid and received during the transaction at issue 
by the tax authority concerned must be regarded as a price already including 
VAT, unless, under national law, the taxable persons have the possibility of 
subsequently passing on and deducting the VAT at issue, notwithstanding 
the fraud’. 
The judgments cited readily support the inference that the Court of Justice is of 
the view, as the appellant notes, that the system of VAT is intended to tax only the 
final consumer and that the taxable amount of VAT to be collected by the tax 
authorities cannot exceed the consideration actually paid by the final consumer. 
This equates to calculating VAT ‘internally’, as the appellant argues. 
SANCRA 
 
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The particular feature of the present case is that the taxable person included on the 
invoices the reference ‘Article 16(6) of the CIVA’ or ‘Profit margin scheme – 
Used goods’ and, in relation to VAT, ‘0%’, and that it has not been shown that 
‘the invoices do not include VAT on the sale price charged to the final consumer’, 
in which regard the present situation is different from those in which VAT is not 
mentioned or no invoice is issued. 
3.5. In that context, it is appropriate to make a reference to the Court of Justice of 
the European Union for a preliminary ruling on the following question: 
‘In the light of the specific characteristics of the present case, and account being 
taken of the provisions of Articles 73 and 78 of Directive 2006/112/EC and of the 
principle of fiscal neutrality, it is compatible with EU law to take the view that the 
price/amount appearing on invoices already includes VAT or must the view be 
taken rather that VAT has to be added to that amount?’ 
4. Decision 
In the light of the foregoing, the judges of the Tax Chamber of the Supreme 
Administrative Court hereby decide to: 
1. Make a reference to the Court of Justice of the European Union for a 
preliminary ruling on the question set out above. 
2. Stay the present appeal proceedings in accordance with Article 267 of the 
Treaty on the Functioning of the European Union (TFEU). 
[…] [procedural matters] 
[…] [procedural matters] 
Lisbon, 10 May 2023 
[names of the judges]