Opinion of the Advocate General — ECLI:EU:C:2021:176
Date: 2021-03-04
Language of the case: Spanish
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Spain

Anonymised version 
Translation C-521/19 — 1 
Case C-521/19 
Request for a preliminary ruling 
Date lodged: 
8 July 2019 
Referring court: 
Tribunal Superior de Justicia de Galicia (Spain) 
Date of the decision to refer: 
19 June 2019 
Appellant: 
CB 
Respondent: 
Tribunal Económico-Administrativo Regional de Galicia 
  
[…] 
[Wording of certification, references of the decision, parties and representatives] 
ORDER 
CHAMBER FOR CONTENTIOUS ADMINISTRATIVE PROCEEDINGS [...] 
[…] [Composition of the Chamber] 
CORUNNA, 19 June 2019.  
FACTS 
FIRST.- DISPUTE. 
The proceedings have been brought against the decision of the Tribunal 
Económico-Administrativo Regional de Galicia (Regional Tax Tribunal, Galicia, 
EN 
REQUEST FOR A PRELIMINARY RULING OF 19. 6.2019 — CASE C-521/19 
 
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Spain) of 10 May 2018, which dismissed the contentious administrative action 
brought by CB against the assessments and penalties relating to personal income 
tax for the years 2010, 2011 and 2012. [Or. 2] 
The assessments and penalties were the result of investigations by the Tax 
Inspectorate which commenced on 14 July 2014 to verify CB’s activity (subject to 
and not exempt from VAT) under the heading IAE 853-performing artists’ 
engagements agent. 
CB provided services to Grupo Lito: an informal group of undertakings […] 
[identity of the owner of the group] which managed infrastructure (marquees, 
musical equipment, transport, etc.) and orchestras (70) which performed at patron 
saint (and other) festivals in towns around Galicia. 
The relationship was as follows: Mr CB would contact the Festivals Committee 
(informal group of residents who organised festivals) in his area (which covered a 
number of municipalities) and negotiate performances by orchestras on behalf of 
Grupo Lito. On almost every occasion, payments from the Festivals Committee to 
Grupo Lito were made in cash, without an invoice and were not entered in the 
accounts and, therefore, were not declared for the purposes of corporation tax or 
VAT. 
Mr CB would receive 10% of the amount paid to Grupo Lito: cash payments 
which were not declared and for which no invoices were issued either. 
In 2012, Mr CB acted as an intermediary in respect of 150 performances which 
generated EUR 608 427 for Grupo Lito and an income of EUR 60 692.50 for 
Mr CB. In 2011, Grupo Lito received EUR 675 654 and Mr CB’s income was 
EUR 67 565.40, while in 2010, Grupo Lito received EUR 644 149 and Mr CB’s 
income was EUR 64 414.90. 
Mr CB did not keep accounts or official records of any kind, nor did he issue or 
receive invoices and nor, consequently, did he complete VAT returns. 
The tax authority took the view that the amounts of EUR 60 692.50, 
EUR 67 565.40 and EUR 64 414.90 received by Mr CB did not include VAT and 
that, therefore, income tax should be assessed on the total amount received. 
SECOND.– Among other matters, CB maintains that the [Agencia Estatal de 
Administración Tributaria (AEAT)] (State Tax Administration Agency) 
subsequently applies the corresponding amount of VAT to amounts treated as 
income, contrary to the case-law of the Tribunal Supremo (Supreme Court, Spain) 
[…] [references to judgments of the Tribunal Supremo (Supreme Court)] pursuant 
to which, ‘Article 78(1) of Law 37/1992 on Valued Added Tax (Ley 37/1992 del 
Impuesto sobre el Valor Añadido) of 28 December 1992 (‘LIVA’) (BOE No 312 
of 29 December 1992), in conjunction with Articles 73 and 78 of Council 
Directive 2006/112/EC [Or. 3] of 28 November 2006 on the common system of 
value added tax (OJ 2006 L 347, p. 1) and the interpretation of those provisions in 
CB 
 
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the judgment of the Court of Justice of the European Union of 7 November 2013, 
Tulică and Plavoşin, Joined Cases C-249/12 and C-250/12, EU:C:2013:722, must 
be construed as meaning that, where the Tax Inspectorate discovers concealed 
transactions liable to value added tax for which no invoices were issued, the price 
agreed by the parties for those transactions must be regarded as already including 
that tax.’ 
CB submits, therefore, that since it is impossible for him to reclaim the VAT not 
passed on because his conduct constitutes a tax offence (Article 89(3)(2) of the 
Spanish Law on VAT (Ley del IVA)), the VAT should be treated as included in 
the price of the services provided, which has a bearing on the determination of the 
taxable amount for personal income tax, meaning that the administrative acts 
relating to the assessment of that tax should be amended to reduce the income 
from his business activity and, therefore, the taxable amount in the amount 
corresponding to the VAT payments which should have been passed on but were 
not. 
THIRD.– By procedural decision of 30 May 2019, the parties were asked for their 
views on a possible reference for a preliminary ruling to the Court of Justice of the 
European Union concerning the compatibility of the AEAT’s interpretation 
(which is contrary to the case-law of the Tribunal Supremo (Supreme Court)) with 
Article 78(1) of Law 37/1992 of 28 December 1992 on Value Added Tax, in 
conjunction with Articles 73 and 78 of Council Directive 2006/112/EC of 
28 November 2006 on the common system of value added tax, read together with 
the judgments of 28 July 2016 (Case C-332/15, Astone) and of 5 October 2016 
(Case C-576/15, Marinova) and with the general findings of the judgment of 
3 December 1974, Van Binsbergen, C-33/74 (EU law may not be relied on 
fraudulently) and the judgment in Emsland-Stärke, C-110/99 (which held that the 
prohibition of abuse of rights is an inherent principle of European Union law), in 
cases like this one in which the parties involved in the relationship carried out 
hidden transactions voluntarily and in a concerted fashion, without issuing 
invoices, using cash and without declaring the VAT, and once they had been 
discovered by the Tax Inspectorate, they argued, for their own benefit, that the 
payments should be treated as having been made inclusive of VAT. 
FOURTH.– The appellant objected to the reference for a preliminary ruling on the 
ground that the judgment of the Tribunal Supremo (Supreme Court) of 
27 September 2017 correctly interpreted the EU legislation […]. [Or. 4] 
The State legal advisor, representing the tax authority, submitted that a reference 
for a preliminary ruling is necessary because the judgment of the Court of Justice 
of 7 November 2013, Tulică and Plavoşin, on which the Tribunal Supremo 
(Supreme Court) relied, is not applicable to situations in which there is fraudulent 
conduct, citing in support of that argument the judgments of the Court of Justice 
of 5 October 2016, Maya Marinova, C-576/15, EU:C:2016:740, paragraph 49; of 
28 July 2016, Astone, C-332/15, EU:C:2016:614, paragraph 58; and of 
18 December 2014, Schoenimport ‘Italmoda’ Mariano Previti and Others, Joined 
REQUEST FOR A PRELIMINARY RULING OF 19. 6.2019 — CASE C-521/19 
 
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Cases C-131/13, C-163/13 and C-164/13, EU:C:2014:2455, paragraph 48. 
Recently, and, therefore, after the majority of the judgments of the Tribunal 
Supremo (Supreme Court) which reiterate the interpretation of the VAT Directive 
which this court is now calling into question, the Court of Justice again stated that 
the tax authorities are entitled to refuse to allow a taxable person to deduct VAT 
when it is established that that person acted fraudulently in order to be able to 
benefit from that right (see judgment of 7 March 2018, Dobre, C-159/17, 
EU:C:2018:161) . 
LAW 
FIRST.– The articles of Law 37/1992 at issue are: 
Article 78. Taxable amount. General rule. 1. The taxable amount shall be 
composed of the total amount of the consideration for taxable transactions 
received from the customer or third parties. 
Article 88. Passing on the tax. 1. Taxable persons must pass on in full the 
amount of the tax to the person for whom the taxable transaction is carried out, 
and the latter must pay that tax provided that the tax is passed on in accordance 
with the provisions of this Law, regardless of the terms which the parties have 
agreed between themselves. In the case of the taxable and non-exempt supply of 
goods or services to a customer which is a public body, the taxable person, when 
drawing up his financial proposals, even if these are verbal, shall be deemed in all 
cases to have included in those proposals the value added tax which, nevertheless, 
must be passed on as a separate item, where appropriate, in the documents 
submitted for the purposes of collecting payment, while the overall amount agreed 
must not be increased as a result of showing the tax passed on. 2. The tax must be 
passed on in an invoice, under the conditions and in accordance with the criteria 
established by law. For that purpose, the amount passed on shall be shown 
separately from the taxable amount, including in the case of prices which are set 
officially, stating the rate of tax applied. Transactions which are determined by 
law shall be exempt from the above. [Or. 5] 3. The tax must be passed on at the 
time when the relevant invoice is issued and delivered. 4. The right to pass on the 
tax shall be lost after one year has passed from the due date. 5. The person for 
whom the taxable transaction is carried out shall not be required to pay the VAT 
passed on to him before that tax becomes due. 6. Any disputes which may arise in 
connection with the passing on of the tax, relating to the lawfulness of passing on 
the tax and to the amount of tax, shall be treated as tax disputes for the purposes 
of the relevant complaint before a tax tribunal. 
Article 89. Correction of the amounts of tax passed on. 1. Taxable persons 
must correct the amounts of tax passed on where those amounts have been 
calculated incorrectly or where circumstances arise which, in accordance with 
Article 80 hereof, lead to the adjustment of the taxable amount. The correction 
must be made at the time when the reasons for the incorrect calculation of the tax 
are identified or when the other circumstances referred to in the previous 
CB 
 
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subparagraph arise, provided that four years have not passed from the due date of 
the tax to which the transaction is liable or, as the case may be, the circumstances 
referred to in Article 80 arose. 2. The provisions of the previous paragraph shall 
also apply where no tax has been passed on and the invoice for the transaction 
has been issued. 3. Notwithstanding the provisions of the previous paragraphs, 
the amounts of tax passed on shall not be corrected in the following situations: 1) 
Where the correction is not based on the grounds provided for in Article 80 
hereof, involves an increase in the amounts passed on and the persons for whom 
the transactions were carried out do not act as businesses or professional 
persons, except where the rates of tax are raised by statute in which case the 
correction may be made in the month in which the new tax rates enter into force 
and in the following month. 2) Where the tax authorities demonstrate, through the 
relevant assessments, amounts of tax due and not passed on which are higher than 
those declared by the taxable person and it is established, by means of objective 
information, that that taxable person was involved in a fraud or that he knew or 
should have known, through the exercise of reasonable care in that regard, that 
he was carrying out a transaction which was part of a fraud. 
SECOND.– RELEVANT PROVISIONS OF EUROPEAN UNION 
LAW. Articles 73 and 78 of Council Directive 2006/112/EC of 28 November 
2006 on the common system of value added tax. [Or. 6] 
Article 73 
In respect of the supply of goods or services, other than as referred to in 
Articles 74 to 77, the taxable amount shall include everything which constitutes 
consideration obtained or to be obtained by the supplier, in return for the supply, 
from the customer or a third party, including subsidies directly linked to the price 
of the supply. 
Article 78 
The taxable amount shall include the following factors: 
a) taxes, duties, levies and charges, excluding the VAT itself; 
b) incidental expenses, such as commission, packing, transport and insurance 
costs, charged by the supplier to the customer. 
For the purposes of point (b) of the first paragraph, Member States may regard 
expenses covered by a separate agreement as incidental expenses. 
THIRD.– Accordingly, the question is whether the express stipulation in 
Article 89(3)(2) and the application of that article by the AEAT to assess and 
impose penalties in situations where, during a tax inspection, a transaction is 
discovered which has been concealed by all the participants, voluntarily and in a 
concerted fashion (cash payments with no invoices and no declaration or payment 
of VAT), is compatible with the principle of the neutrality of VAT (judgments of 
REQUEST FOR A PRELIMINARY RULING OF 19. 6.2019 — CASE C-521/19 
 
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28 July 2016 (Case C-332/15, Astone), of 5 October 2016 (Case C-576/15, 
Marinova), and of 7 March 2018, Dobre, C-159/17, EU:C:2018:161) and with the 
general findings of the judgment of 3 December 1974, Van Binsbergen, C-33/74 
(EU law may not be relied on fraudulently) and the judgment in Emsland-Stärke, 
C-110/99 (which held that the prohibition of abuse of rights is an inherent 
principle of EU law), such that, then, those [Or. 7] deliberately concealed 
transactions are deemed to include the applicable VAT in the same way as 
transactions between businesses which are not concealed and in which the 
payments are formally recorded, in accordance with the interpretation provided by 
the Tribunal Supremo (Supreme Court) in the judgments cited […] [references to 
the judgments of the Tribunal Supremo (Supreme Court) cited above] (applying 
the case-law laid down in the judgment of the Court of Justice of 7 November 
2013, Tulică and Plavoşin). The alternative is that the neutrality of the tax, the 
legislation and the case-law of the Court of Justice cited cannot provide protection 
and VAT is also deemed to be due in these situations, where a transaction has 
been concealed and there is no formal record of payment, and these two matters 
come to light only as a result of an investigation by the tax authorities. That is an 
expression of the fact that the neutrality of the tax can protect only those who 
comply with the legislation and not those who deliberately infringe that 
legislation. 
On those grounds 
THE CHAMBER DECIDES 
FIRST.– To stay the proceedings pending the outcome of this reference for a 
preliminary ruling. 
SECOND.– To refer the following questions to the Court of Justice of the 
European Union for a preliminary ruling: 
‘Must Articles 73 and 78 of the VAT Directive, in the light of the principles of 
neutrality, prohibition of tax evasion and abuse of rights, and prohibition of the 
illegal distortion of competition, be interpreted as precluding national legislation 
and the case-law interpreting it, pursuant to which, where the tax authorities 
discover concealed transactions subject to value added tax for which no invoice 
was issued, the price agreed by the parties for those transactions must be regarded 
as already including value added tax? 
Is it therefore possible, in cases of fraud in which the transaction was concealed 
from the tax authorities, to consider, as may be deduced from the judgments of the 
Court of Justice of the European Union of 28 July 2016 (Case C-332/15 Astone), 
of 5 October 2016 (Case C-576/15 Marinova) and of 7 March 2018, Dobre, 
C-159/17, EU:C:2018:161, that the amounts paid and received do not include 
value added tax in order to conduct the proper assessment and impose the 
appropriate penalty?’ 
CB 
 
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[…] [Or. 8] […] [Wording directing that the decision and the case-file be sent to 
the Court of Justice of the European Union]  
[…] [Signatures, certification wording, date, etc.]