Judgment;Summary — ECLI:EU:C:2020:464
Date: 2020-06-11
Language of the case: Slovenian
Court formation: Seventh Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Slovenia

Translation C-146/19 — 1 
Case C-146/19 
Request for a preliminary ruling 
Date lodged:  
21 February 2019 
Referring court: 
Vrhovno sodišče Republike Slovenije (Slovenia) 
Date of the decision to refer: 
30 January 2019 
Appellant: 
SCT, d.d., in bankruptcy 
Respondent: 
Republic of Slovenia 
  
EN 
REQUEST FOR A PRELIMINARY RULING OF 30. 1. 2019 — CASE C-146/19 
 
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VRHOVNO SODIŠČE 
REPUBLIC OF SLOVENIA 
To the Registry of the 
Court of Justice of the European Union  
(omissis) REQUEST FOR A PRELIMINARY RULING 
An appeal on a point of law has been brought before the Vrhovno Sodišče 
Republike Slovenije (Supreme Court of the Republic of Slovenia) in an 
administrative dispute, concerning value added tax, between the company SCT, 
d.d. [SpA], Ljubljana, Slovenia — in bankruptcy, (omissis) appellant, 
represented by (omissis) and the Republic of Slovenia, respondent, represented 
by the Ministrstvo za finance (Ministry of Finance), Ljubljana. 
The Vrhovno sodišče Republike Slovenije, sitting in a Chamber consisting of 
(omissis) has, by order of 30 January 2019, stayed the proceedings in the appeal 
on a point of law, having decided, in light of the doubts which it entertains in 
relation to European Union law, to request a preliminary ruling of the Court of 
Justice of the European Union, pursuant to Article 267 TFEU. [Or. 1] 
Subject matter of the proceedings and the facts of the case in the main 
proceedings 
1 In the present case, the tax authority of first instance assessed the value added tax 
(VAT) owed by the applicant for the tax period April 2014 in the sum of 
EUR 272 431.70, that sum having been calculated by applying 20% to a taxable 
amount of EUR 1 362 158.48, and also in the sum of EUR 39.36, resulting from 
the application of 8.5% to a taxable amount of EUR 463.30 (paragraph I of the 
decision). With reference to the tax subsequently assessed, after the calculation of 
VAT for the period to April 2014, in the sum of EUR 272 471.06, the appellant 
was granted a reduction of overpaid VAT withheld after the calculation of VAT 
for the period to April 2014 in the sum of EUR 272 471.00. The excess, after the 
calculation of VAT for the period to April 2014, amounting to EUR 46 083.00, 
was returned to the appellant by payment into its account on 26 June 2014 
(paragraph II of the decision). 
2 It is apparent from the reasoning of the tax authority’s decision that the authority 
verified the appellant’s calculation of VAT for the tax period to April 2014. On 
the basis of the documentation produced, it found that the appellant had made a 
correction in the VAT register to the VAT invoiced in the sum of 
EUR 272 471.00. The appellant explained to the tax authority that the VAT 
adjustment related to claims which it had against company A., a limited liability 
company in bankruptcy, and against company B, a public limited liability 
company in bankruptcy. Those claims had not been paid by the time the 
SCT 
 
3 
bankruptcy proceedings had concluded, on 12 June 2013. The appellant also 
explained that it had not lodged its claims against those companies in the relevant 
bankruptcy proceedings. The tax authority found that the appellant had indeed not 
lodged its unsatisfied claims in the bankruptcy proceedings commenced against 
the two companies and that, in accordance with Article 296 of the Zakon o 
finančnem poslovanju, postopkih zaradi insolventnosti in prisilnem prenehanju 
(Law on financial operations, insolvency procedures and compulsory company 
dissolution) (‘the ZFPPIPP’), those claims against the bankrupt debtors had been 
extinguished. On the basis of those findings, the tax authority concluded that the 
conditions for reducing the VAT declared, laid down in Article 39 of the Zakon o 
davku na dodano vrednost (Law on value added tax) (‘the ZDDV-1’), had not 
been fulfilled. In the procedure for the verification of the VAT return for the tax 
period to April 2014 it was found that the appellant, after making the VAT 
adjustment, had claimed a surplus of VAT in the sum of EUR 46 083.00, which 
had been returned to it on 26 June 2014. 
3 The appellant brought an administrative appeal before the Ministrstvo za finance, 
which was dismissed. The tax authority of second instance upheld the decision of 
the tax authority of first instance, emphasising that it was clear from the 
provisions of Article 39(3) of the ZDDV-1 that a taxable person is entitled, on the 
basis of a final decision concluding bankruptcy proceedings, to make a VAT 
adjustment only if it has lodged its claim against the bankrupt debtor. By lodging 
its claim in the bankruptcy proceedings, the taxable person also demonstrates that 
its claim still exists. That is all the more important where claims are made against 
legally related parties, as in the present case. Any different interpretation would 
create the conditions for tax fraud or evasion or for reducing VAT owed in 
relation to claims that have already been settled or which never existed. [Or. 2] 
4 The appellant brought an appeal against the decision of the tax authorities before 
the Upravno sodišče (Administrative court), in which it clarified that the facts of 
the dispute were common ground. The appellant claimed that it was entitled to 
adjust the VAT owed in relation to the claims it had against the two companies in 
respect of which the bankruptcy proceedings had been definitively concluded, 
even though it had not lodged its claims against the two debtor companies in the 
relevant bankruptcy proceedings. It took issue with the position adopted by the tax 
authorities, for the following reasons: 1. the law did not provide for any obligation 
for taxable persons wishing to make an adjustment to lodge a claim; 2. the tax 
authorities’ position conflicted with Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax (‘the VAT 
Directive’) and with the case-law of the Court of Justice of the European Union; 
3. the position adopted unreasonably interfered with the constitutional right to 
private property. 
5 In the grounds of its judgment, the Upravno sodišče confirmed that the 
interpretation adopted by the tax authorities was correct. It referred to 
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Article 90(2) of the VAT Directive and to the case-law of the Court of Justice, 1 in 
accordance with which the Member States may derogate from Article 90(1) in the 
case of non-payment. Paragraph 1 of Article 90 provides that, ‘in the case of … 
non-payment … after the supply takes place, the taxable amount shall be reduced 
accordingly under conditions which shall be determined by the Member States’. In 
the view of the Upravno sodišče, the Republic of Slovenia had transposed the 
provisions of the VAT Directive into national law, namely the ZDDV-1. 
However, the Republic of Slovenia had not provided in the ZDDV-1 that taxable 
persons are entitled to make an adjustment immediately following a failure to pay 
for services received, as the appellant company asserted. In addition, that court 
also considered that it may be inferred from the ratio and purpose of Article 39(3) 
of the ZDDV-1 that taxable persons must lodge their claims in the bankruptcy 
proceedings. That followed also from paragraph 4 of Article 39(4) of the ZDDV-
1. 
6 In its appeal against the judgment of the Upravno sodišče, currently before the 
Vrhovno sodišče, the appellant maintains that Article 39(3) of the ZDDV-1 does 
not depart from the obligation laid down in Article 90(1) of the VAT Directive; it 
merely defines the conditions that must be fulfilled in order for the taxable amount 
or the VAT charged to be reduced. In the appellant’s opinion, what is at issue is 
the implementation of Article 90(1) of the VAT Directive, not the application of 
Article 90(2). That is clear from paragraph 24 of the judgment in Almos 
Agrárkülkereskedelmi, Case C-337/13. The appellant explains that, in the 
Republic of Slovenia, it is possible to adjust the taxable amount or the VAT 
calculated, but only under certain conditions, the common characteristic of which 
is that the creditor will (probably) not be able (entirely) to recover his claim (for 
example, because the bankruptcy proceedings involving the debtor have been 
concluded, because the creditor has been unsuccessful in enforcing its claim, 
because the debtor has been removed from the court register, or because an 
arrangement with creditors has been approved). The appellant also refers to 
paragraph 39 of the judgment in Almos Agrárkülkereskedelmi, Case C-337/13, and 
points to Article 273 of the VAT Directive, which allows the Member States the 
option of adopting measures to prevent tax evasion, albeit that has not been 
proven in the present case. The appellant asserts that it is not apparent from the 
provision in question, or the ratio and purpose of that provision, that it is 
necessary to lodge a claim in the bankruptcy proceedings. Such an interpretation 
would be unlawful and also [Or. 3] unconstitutional, inasmuch as it would 
interfere disproportionately with the fundamental right to private property. The 
requirements of preventing tax evasion and ensuring that taxable persons that 
could have recovered their claims may not make an adjustment can be satisfied by 
more lenient measures, in particular, by ensuring, in the proceedings, that there is 
no tax evasion and that it is certain that the creditor will not be paid. In this 
 
1  Judgments of 2 July 2015, NLB Leasing, Case C-209/14, and of 15 May 2014, Almos 
Agrárkülkereskedelmi, Case C-337/13. 
SCT 
 
5 
context, the appellant also refers to Article 52 of the Charter of Fundamental 
Rights of the European Union. 
Applicable law 
7 Article 39(2) of the ZDDV-1 provides that, ‘in the case of cancellation, return of 
the goods or reduction of the price after the supply, the taxable amount shall be 
reduced accordingly. The taxable person may adjust (reduce) the amount of VAT 
calculated, provided he informs the purchaser in writing of the amount of VAT in 
respect of which the purchaser has no right to deduct.’ 
8 In accordance with Article 39(3) of the ZDDV-1, ‘a taxable person may also 
adjust (reduce) the amount of VAT calculated where, on the basis of a final 
decision of a court concluding bankruptcy proceedings or approving an 
arrangement with creditors, the taxable person has not been paid or has not been 
paid in full. A taxable person may also adjust (reduce) the amount of VAT 
calculated where he obtains a final court decision on the cessation of enforcement 
proceedings or some other document which clearly shows that, in the enforcement 
proceedings that have been concluded, he has not been paid or has not been paid 
in full, as may a taxable person who has not been paid or has not been paid in full 
because the debtor has been removed from the court register or from another 
relevant register or prescribed register of public record. Where a taxable person 
subsequently receives payment or partial payment for the supply of goods or 
provision of services in relation to which he has claimed the right to adjust the 
taxable amount in accordance with this paragraph, he shall calculate the VAT on 
the amount received.’ 
9 Paragraph 4 [of Article 39] of the ZDDV-1 provides that ‘without prejudice to the 
previous paragraph, a taxable person may adjust (reduce) the amount of VAT 
calculated and not paid on all acknowledged claims which he has lodged in 
proceedings for concluding an arrangement with creditors or in bankruptcy 
proceedings.’ 
10 The provisions cited above transpose into Slovenian law Article 90 of the VAT 
Directive, which provides, in paragraph 1 thereof, that, ‘in the case of 
cancellation, refusal or total or partial non-payment, or where the price is reduced 
after the supply takes place, the taxable amount shall be reduced accordingly 
under conditions which shall be determined by the Member States’ and, in 
paragraph 2 thereof, that, ‘in the case of total or partial non-payment, Member 
States may derogate from paragraph 1.’ 
11 The VAT Directive also provides, in Article 273 thereof, that ‘Member States may 
impose other obligations which they deem necessary to ensure the correct 
collection of VAT and [Or. 4] to prevent evasion, subject to the requirement of 
equal treatment as between domestic transactions and transactions carried out 
between Member States by taxable persons and provided that such obligations do 
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not, in trade between Member States, give rise to formalities connected with the 
crossing of frontiers.’ 
12 Article 296 of the ZFPPIPP indicates what claims must be lodged in bankruptcy 
proceedings and the consequences of failure to lodge such claims. It provides, in 
paragraph 1 thereof, that ‘creditors in bankruptcy proceedings must lodge all 
claims which they have against the debtor in bankruptcy which arose before the 
commencement of the bankruptcy proceedings, with the exception of claims 
which, by law, do not need to be lodged.’ Paragraph 5 of Article 296 provides 
that, ‘in the event that the creditor does not comply with the time-limit for lodging 
his claim, laid down in paragraph 1 … of this article, his claim against the debtor 
in bankruptcy shall be extinguished and the court shall dismiss any late 
application to lodge the claim in the bankruptcy proceedings.’ 
Questions relating to European Union law 
I 
13 Article 39(2) of the ZDDV-1 lists the situations in which the taxable amount for 
VAT purposes may be reduced on a commensurate basis by the taxable person, 
but excludes the case of total or partial non-payment. It is clear from that that the 
Slovenian legislature made use of the derogation laid down in Article 90(2) of the 
VAT Directive and thus excluded the right to reduce the taxable amount in the 
event of (total or partial) non-payment. It applied the derogation which permits 
Member States to establish that the supplier of the goods or services (the issuer of 
the invoice) is not entitled to reduce his own VAT liability arising from the 
supply, not even where he does not receive payment from the purchaser in respect 
of the goods or services supplied. The provision in question has been interpreted 
in this way in the consistent administrative practice of the tax authorities and in 
the case-law of the administrative courts of the Republic of Slovenia. 2 
14 However, it can be seen from the third paragraph of Article 39 of the ZDDV-1 
that the Slovenian legislature nevertheless established four cases, listed 
exhaustively, in which the taxable person (the seller) is entitled to reduce the 
taxable amount in the event of non-payment (omissis) These therefore amount to 
an exception to the derogation: although entitlement to reduce the taxable amount 
in the event of non-payment is normally excluded, there are certain exceptional 
cases, prescribed by law, where that entitlement remains. These exceptional cases, 
in fact, arise where it is impossible for the taxable person to obtain payment of his 
claim (for example, because of the bankruptcy of the purchaser/debtor or where it 
is impossible to recover the claim). However, in order for that right to reduce the 
taxable amount for VAT purposes to be recognised, the seller, as a taxable person, 
 
2  The Court of Justice of the European Union has also emphasised that a national provision 
which, in setting out the situations in which the taxable amount may be reduced, does not refer 
to the situation of non-payment of the transaction price must be regarded as the result of the 
exercise by the Member State concerned of the power of derogation granted to it by 
Article 90(2) of the VAT Directive: judgment in Almos Agrárkülkereskedelmi, paragraph 24. 
SCT 
 
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must take certain steps [Or. 5] with a view to obtaining payment of his claim 
(lodging the claim in bankruptcy proceedings, seeking to enforce his claim, and so 
on). Consequently, the taxable person must demonstrate the impossibility of 
obtaining payment by means of official documents, issued in relevant legal 
proceedings (a court order or other document, such as a document attesting to the 
conclusion of bankruptcy proceedings, or the cessation of enforcement 
proceedings, or the removal of the debtor from the register). 
II 
15 Having regard to the consistent case-law of the Court of Justice of the European 
Union (‘the CJEU’), it is in principle necessary, in the context of the VAT system, 
to follow the rule that the seller, as a taxable person, is not required to pay VAT if 
he has not received payment for the goods or service supplied. In Article 90(2) of 
the VAT Directive, the EU legislature authorised the Member States to establish 
possible derogations from the right to reduce the taxable amount for VAT 
purposes in the event of total or partial non-payment only for those situations in 
which it remains uncertain whether the taxable person will obtain payment, or in 
which it has not been definitively established that the seller, as a taxable person, 
will not be paid (see, to that effect, the judgments of 23 November 2017, Di 
Maura, C-246/16, paragraph 22, and of 12 October 2017, Lombard Ingatlan 
Lízing, C-404/16, paragraph 30) 3. 
16 In accordance with the foregoing, the restriction of the entitlement to reduce the 
taxable amount under Article 39(3) of the ZDDV-1 may be regarded as 
inconsistent with Article 90(2) of the VAT Directive for the reason that it does not 
permit reduction of the taxable amount in all situations in which it has been 
definitely established that the debt will not be paid, and instead makes it 
conditional on fulfilment by the taxable person of additional requirements. Under 
Article 39(3) of the ZDDV-1, the situations in which the taxable amount for VAT 
purposes may be reduced do not therefore include all situations in which the 
taxable person (the seller) could find himself definitively unable to recover the 
sum owed and is able to adduce sufficient proof of that fact. This therefore raises 
the issue of a substantive exclusion of the entitlement to reduce the taxable 
amount for VAT purposes even for situations in which there is (definitive) non-
payment of the sum owed, rather than merely an issue regarding the requirements 
for proving the fulfilment of the formal conditions for reducing the taxable 
amount (within the meaning of Article 90(1) of the VAT Directive). 
III 
 
3  The detailed rules laid down by Article 39(4) of the ZDDV-1, which relates to claims the non-
payment of which is not yet certain, establish that the taxable person may, even during the 
course of bankruptcy proceedings, reduce the VAT calculated and unpaid (only) on claims 
which he has lodged in the bankruptcy proceedings, provided that they are recognised as 
existing. 
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17 The present case concerns a specific aspect of the application of Article 39 of the 
ZDDV-1, namely whether it is permissible, in accordance with the VAT 
Directive, to impose a restriction on the right to reduce the taxable amount for 
VAT purposes in such a way that it may be reduced (and the VAT owed adjusted 
accordingly) solely if the taxable person has lodged his claim, and been 
unsuccessful in recovering it, in bankruptcy proceedings which have been 
concluded, and where that is apparent from the [Or. 6] final order of a court 
concluding the bankruptcy proceedings. More specifically, the central question is 
whether, in accordance with Article 90 of the VAT Directive, the fact that the 
taxable person has not pursued payment of his claim in bankruptcy proceedings 
that have been concluded is sufficient reason to deny the right to reduce the 
taxable amount for VAT purposes on the ground of non-payment of the sum 
owed, as it is under the legislation enacted by the Republic of Slovenia. 
18 It could be inferred from the case-law of the CJEU cited that that question has 
already been decided (acte claire) and that the taxable person is entitled to reduce 
the taxable amount, and that this right cannot, therefore, be restricted in the case 
of definitive non-payment (see, for example, the judgment in Di Maura, 
paragraph 22). Similarly, it could be concluded that the question has already been 
resolved in response to the question whether such a restriction is permissible 
where its purpose is to prevent abuse of the VAT system, which the CJEU has 
already answered, holding that, in principle, measures to prevent tax evasion or 
avoidance may derogate from the basis for charging VAT only within the limits 
strictly necessary for achieving that specific aim, must have as little effect as 
possible on the objectives and principles of the VAT Directive and may not 
therefore be used in such a way that they would have the effect of undermining 
VAT neutrality (judgments of 26 January 2012, Kraft Foods Polska, C-588/10, 
paragraph 28, and of 8 May 2013, Petroma Transports, C-271/12, paragraph 28). 
19 However, on the basis of the opinions expressed by the CJEU, and in light of the 
circumstances of the present case, the Vrhovno sodišče also has another question 
on the interpretation of the VAT Directive, which is whether, having regard to the 
common principles of the VAT system, it is permissible, when applying the 
derogation provided for by Article 90(2) of the VAT Directive, to exclude the 
possibility of exercising the right to reduce the taxable amount for VAT purposes 
in the event of non-payment also in situations in which the taxable person has 
failed to demonstrate due diligence in obtaining satisfaction of his claim and thus 
also of the State’s claim to payment of the VAT, even where there is no question 
of cooperation aimed at avoiding or evading the payment of VAT. 4 
 
4  In the opinion of the Vrhovno sodišče, it cannot be entirely ruled out that the failure on the part 
of the seller (as a taxable person) to pursue payment of a given sum due could also indicate 
abuse detrimental to the VAT system. (omissis) However, this would simply entail a different 
derogation from the right to adjust, one not based on Article 90(2) of the VAT Directive, but on 
Article 273 of the directive. In any event, this aspect is not the subject, either in fact or in law, of 
the present administrative proceedings, or a factor on the basis of which a decision may be 
adopted. 
SCT 
 
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20 Indeed, the taxable person liable for VAT is in any event one of the cornerstones 
of the system for the collection of that tax, and in this sense is an agent of the 
State entrusted with the collection of VAT and its payment over. If the taxable 
person were allowed to reduce the taxable amount for VAT purposes in each and 
every case in which the sum owed him has not been paid (following a narrow 
interpretation of the circumstances in which the derogation referred to in 
Article 90(2) of the VAT Directive is permissible), and thus also whenever he 
fails to carry out his duties under the VAT system, for example, by making no 
attempt to recover unsatisfied claims in the context of specific bankruptcy 
proceedings, then the State’s budget would suffer a potential loss of revenue from 
the VAT owed. 5 Indeed, the CJEU has emphasised in its case-law that [Or. 7] the 
undertaking, as tax collector for the State, must be entirely relieved of the burden 
of the VAT payable or paid in the course of all its economic activities subject to 
VAT (see, to that effect, the judgments of 13 March 2008, Securenta, C-437/06, 
EU:C:2008:166, paragraph 25, and of 13 March 2014, Malburg, C-204/13, 
EU:C:2014:147, paragraph 41). However, in that same context it is clear that such 
an undertaking is required, under the VAT system, also to ensure that other 
entities which collect the tax conduct themselves properly (invoices and payment 
receipts, and so on). 
21 However, the situation of non-payment of a claim (the purchase price) following a 
supply of goods or the provision of services is different from the other situations 
listed in Article 90(1) of the VAT Directive (and Article 39(2) of the ZDDV-1), in 
that it is not normally recoverable. The cancellation of an order or the refusal of 
goods, by contrast, means that the goods in question may be the subject of a new 
transaction on which VAT will be charged, and the reduction of the price means 
that the value of the transaction has been reduced by agreement and, with it, the 
taxable amount for VAT purposes. There is therefore no definitive unacceptable 
loss to the State budget in these situations. In the case of non-payment, however, 
the only way in which the State is able to obtain its share of the sum owed by the 
purchaser (corresponding to the VAT chargeable) is through the actions which the 
seller (as a taxable person) properly takes to recover the entire sum owed. 
22 Thus, the taxable person (also the seller) has a special role to play in the VAT 
system, one that he must perform properly. That could also extend to recovering 
claims in the context of bankruptcy proceedings involving his debtors 
(purchasers). The State, on the other hand, is not a creditor for the purposes of 
recovering such claims in bankruptcy proceedings and, in this case, it is not even 
in a position independently to make such claims in the stead of the seller, as 
taxable person and VAT payer. 6 
 
5  The reasons for not lodging a claim in bankruptcy proceedings could lie in a commercial 
decision resulting from a variety of business situations, rather than being aimed at abuse of the 
VAT system. 
6  From the point of view of the constitutional rules of the Republic of Slovenia, it would be 
impermissible for the State, by means of a fiscal procedure, to attack the assets of the debtor of 
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23 One argument against the possibility of refusing the right to reduce the taxable 
amount for VAT purposes on the ground of non-payment even in the situation in 
which the taxable person has not intervened in bankruptcy proceedings could be 
the fact that the State also has the ability to make good the loss so occasioned to 
public funds by refusing the right to deduct (or by adjusting the VAT return) of 
the debtor of the taxable person, that is, of the debtor in bankruptcy, who should 
pay the VAT. The State could make good the loss by increasing the tax liability of 
the debtor for that (proportional) part of the adjustment to the return on the ground 
that it is necessary to reduce the deduction of VAT on the tax calculated that has 
not been paid by the debtor because of the bankruptcy proceedings (see, for 
example, the judgment of 22 February 2018, T-2, C-396/16, EU:C:2018:109). 
That argument would be relevant only if the State had the ability to put forward in 
bankruptcy proceedings its resulting tax claim arising from the corresponding 
refusal of the right to deduct the VAT. [Or. 8] 
24 However, in such a context, in bankruptcy proceedings against recipients of goods 
or services subject to VAT, it cannot reasonably be expected, given the factual 
and legal circumstances, that the State’s participation in such proceedings would 
be such that the tax consequences for the public finances resulting from the 
reduction of the taxable amount for taxable persons liable to pay VAT (sellers) on 
the ground of non-payment would be attenuated or eliminated proportionately. 7 In 
such a case, instead of taxable persons liable to pay VAT as the building blocks of 
the VAT system, it would be the State that had to intervene, for the purposes of 
collecting the tax, in all bankruptcy proceedings against debtors of those taxable 
persons (required to pay VAT) and create in each case a specific legal basis for 
enforcing the payment of VAT (via the reduction of the right to deduct). 8 The 
State’s ability to obtain such payment by itself could in any event be frustrated by 
many other relevant circumstances, such as the gathering of information to 
establish that it is the debtor of the taxable person that is liable to pay the VAT, or 
difficulties in commencing bankruptcy proceedings against the debtor, or the 
expiry of time-limits for lodging claims, and so on. 
IV 
25 Even if it is possible to interpret the power conferred by the EU legislature in 
Article 90(2) of the VAT Directive as permitting national legislatures to restrict 
      
the taxable person without the taxable person having the right to a preliminary legal procedure 
in which the existence of his claim could be established by the competent court on the basis of 
an action brought by the taxable person (its debtor). ...  
7  This would be especially true in the case of the sale of goods or services to final consumers or 
other parties that do not have the right to deduct VAT and where the failure to pay the seller’s 
claim would therefore entail, in the event of a reduction in the taxable amount, a definitive loss 
for the public finances equal to the VAT owed. 
8 The State is not entitled to pursue claims arising from legal transactions between undertakings 
that are required to pay VAT. It may merely require payment of the VAT in the event that that 
obligation arises from such a transaction. 
SCT 
 
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the entitlement to reduce the taxable basis on the ground of non-payment even in 
situations in which is it established that the debt arising from the transaction will 
not be paid, where the taxable person has not intervened in the bankruptcy 
proceedings to pursue that claim, 9 and thus, even if a restriction such as that 
established in Article 39(3) of the ZDDV-1, is permissible and consistent with the 
VAT Directive, then the question still arises of possible exceptions to that 
restriction resulting from the correct interpretation of Article 90(2) of the 
directive, and thus the question of whether there are cases in which, despite the 
fact that the taxable person has not made a claim in the bankruptcy proceedings 
against his debtor, the taxable person should be allowed to reduce the taxable 
basis for VAT purposes. 
26 Thus, the Vrhovno sodišče poses the question whether, in accordance with the 
VAT Directive, the taxable person must be allowed the opportunity of 
demonstrating that, despite not having lodged a claim in bankruptcy proceedings, 
he may reduce the taxable basis, provided that the following conditions are met: 
(a) his claim would not have been satisfied even if he had lodged it in the 
bankruptcy proceedings; [Or. 9] 
(b) there are other reasonable grounds for not lodging the claim in the 
bankruptcy proceedings (such as the limited value of the debt in comparison 
with the costs which the taxable person would incur as a creditor in the 
bankruptcy proceedings), which justify his conduct. 
27 As regards such exceptions, which, from a substantive point of view, would 
logically come into play, the Vrhovno sodišče is aware of the fact that they could 
create a disproportionate burden for the tax procedure itself, inasmuch as proving 
the relevant facts could be extremely complex. Therefore, the further question 
arises of whether it would not be appropriate to confine such exceptions to facts 
that can be clearly demonstrated (for example, the fact that the claim would not 
have been paid even if it had been lodged in the bankruptcy proceedings). Indeed, 
the current system — which is that, under Article 39(3) of the ZDDV-1, there is 
no entitlement to reduce the taxable amount on the ground of non-payment if the 
claim has not been lodged in the bankruptcy proceedings — offers simplicity, 
inasmuch as, in the opposite case, where the claim is lodged in the bankruptcy 
proceedings, both the existence of the claim and its non-recovery will, on 
conclusion of the bankruptcy proceedings, have been proven by a court decision, 
prior to the subsequent tax procedure. A narrow interpretation of Article 90(2) of 
the VAT Directive (such as is apparent from the current case-law of the CJEU) 
would offer the same simplicity, if it were necessary merely to prove that the debt 
had not been paid, and nothing more. The legal situation which would result from 
the existence of the two exceptions mentioned — which would appear to be 
possible on some interpretations of Article 90 of the VAT Directive — would, 
 
9 In bankruptcy proceedings under the ZFPPIPP, claims which are not lodged are extinguished. 
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however, impose on courts and tax authorities significant demands in so far as 
concerns establishing the facts relevant to taxation. 
V 
28 The CJEU has already pointed out that Article 90(1) of the VAT Directive has 
direct effect (judgment in Almos Agrárkülkereskedelmi, paragraph 34 and point 2 
of the operative part). However, the Vrhovno sodišče also wonders whether it is 
possible in this context to regard Article 90(1) of the VAT Directive as having 
direct effect even where the legislature of a Member State has exceeded the scope 
of the possibilities for derogation established by Article 90(2) of the directive. In 
short, the question is whether the right to reduce the taxable amount referred to in 
the VAT Directive may be regarded as having direct effect on which taxable 
persons may rely in the event that it is found that the Member State has erred in 
transposing into national law the restrictions on that right (in the case of total or 
partial non-payment) and has consequently impeded the exercise of that right 
conferred by EU law on taxable persons. Indeed, in such a situation, the 
legislature of a Member State will itself have created inequality among taxable 
persons in different Member States, by transposing the directive incorrectly, and 
will thus have undermined the freedom to conduct a business, both of which are 
protected by the Charter of Fundamental Rights of the European Union. However, 
in such a context, the issue is not the discretion which the legislature enjoys in 
enforcing the right itself, but the limited discretion it has in determining what 
restrictions are permissible. [Or. 10] 
Questions referred for a preliminary ruling  
29 In light of the foregoing, the Vrhovno sodišče refers the following questions to the 
CJEU for a preliminary ruling: 
1. Is Article 90(2) of the VAT Directive to be interpreted as permitting 
derogation from the right to reduce the taxable amount for VAT 
purposes even with respect to cases of definitive non-payment, where 
such definitive non-payment is a consequence of a failure on the part of 
the taxable person liable for the VAT to take proper steps, such as 
lodging a claim in bankruptcy proceedings commenced against his 
debtor, as in the present case? 
2. If such derogation from the right to reduce the taxable amount for VAT 
purposes is permissible, must there nevertheless be a right to reduce the 
taxable amount for VAT purposes on the ground of non-payment where 
the taxable person is able to demonstrate that, even if he had lodged a 
claim in the bankruptcy proceedings, it would not have been satisfied, 
or is able to demonstrate that there were reasonable grounds for not 
lodging a claim? 
SCT 
 
13 
3. Does Article 90(1) of the VAT Directive have direct effect even if the 
legislature of a Member State has exceeded the scope of the possibilities 
for derogation established by Article 90(2)? [Or. 11] 
…