Information;Order — ECLI:EU:C:2022:344
Date: 2022-05-02
Language of the case: Romanian
Court formation: Seventh Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Romania

Summary of the request for a preliminary ruling pursuant to Article 98(1) of 
the Rules of Procedure of the Court of Justice 
Date lodged: 
11 October 2021 
Referring court: 
Curtea de Apel Alba Iulia (Romania) 
Date of the decision to refer: 
5 October 2021 
Appellant: 
S.H. 
Respondents: 
Administrația Județeană a Finanțelor Publice Sibiu 
Direcția Generală Regională a Finanțelor Publice Brașov  
  
Subject matter of the main proceedings 
Appeal brought before the referring court, the Curtea de Apel Alba Iulia (Court of 
Appeal, Alba Iulia, Romania), by the appellant S.H., a natural person, in respect of 
the respondents, the Administrația Județeană a Finanțelor Publice Sibiu 
(Provincial Administration of Public Finances, Sibiu, Romania) and the Direcția 
Generală Regională a Finanțelor Publice Brașov (Regional Directorate-General of 
Public Finances, Brașov, Romania), against the decision given at first instance by 
the Tribunalul Sibiu (Regional Court, Sibiu, Romania) dismissing his application 
for annulment of a value added tax (VAT) assessment. 
Subject matter and legal basis of the request  
An interpretation of recital 30 and Articles 16, 184, 186 to 188, and 192 of 
Directive 112/2006 is sought pursuant to Article 267 TFEU. 
EN 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-627/21 
 
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Question referred for a preliminary ruling 
Can the principle of neutrality of VAT, [recital 30] and Articles 16, 184, 186, 187, 
188 and 192 of Directive 112/2006/EC be interpreted as being compatible with 
national legislation relating to adjustment of the deductible tax in respect of 
capital goods (in particular Article 305(4)(a) of Legea nr. 227/2015 privind Codul 
fiscal (Law No 227/2015 establishing the Tax Code) and point 79(14)(b) of the 
Normele metodologice de aplicare a Legii nr. 227/2015 privind Codul fiscal 
(Rules for applying Law No 227/2015 establishing the Tax Code), approved by 
Hotărârea Guvernului nr. 1/2016 (Government Decision No 1/2016), laid down 
pursuant to Article 305(4)(a) of the Tax Code, in conjunction with 
Article 316(11)(e) of Law No 227/2015 establishing the Tax Code), and with the 
practice of the tax administration affecting the initial deductibility of VAT paid in 
respect of the purchases of capital goods by requiring the taxable person to adjust 
downwards the deductible VAT on the ground that the tax authority annulled, of 
its own motion, the taxable person’s registration for VAT purposes for a certain 
period because of a failure to carry on economic activities in relation to the time 
during which the capital goods were not the subject of supplies of services or 
goods during the period between the annulment of the tax authority’s own motion 
and re-registration for the purposes of VAT? 
Provisions of EU law and case-law cited 
Recital 30 and Articles 16, 184, 186 to 188 and 192 of Council Directive 
2006/112/EC of 28 November 2006 on the common system of value added tax. 
Judgment of 9 July 2015, Salomie and Oltean, C-l83/14, EU:C:2015:454, 
paragraphs 60 and 63; judgment of 7 March 2018, Dobre, C-159/17, 
EU:C:2018:161, paragraphs 32 and 34, and judgment of 12 September 2018, 
Gamesa Wind România, C-69/17, EU:C:2018:703, paragraphs 35 and 37 
Provisions of national law cited 
Legea nr. 227/2015 privind Codul fiscal (Law No 227/2015 establishing the Tax 
Code) (‘the Tax Code’) 
Article 305, entitled ‘Adjustment of the deductible tax in respect of capital goods’, 
paragraph 4(a)(1), under which, where capital goods are used by a taxable person, 
in whole or in part, for purposes other than economic activities, the VAT 
deductible is to be adjusted downwards, and paragraph (5)(a), under which, in the 
cases referred to in paragraph 4(a), the adjustment is to be made by one fifth or, as 
the case may be, one twentieth of the tax initially deducted, in respect of each year 
in which there is a change of purpose. 
Article 316, entitled ‘Identification of taxable persons for the purposes of VAT’, 
paragraph 11(e), under which the tax authorities are to revoke the identification 
ADMINISTRAȚIA JUDEȚEANĂ A FINANȚELOR PUBLICE SIBIU AND DIRECȚIA GENERALĂ REGIONALĂ A FINANȚELOR PUBLICE 
BRAȘOV 
 
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for VAT purposes of a person where the tax returns filed for two consecutive 
calendar quarters do not show transactions, and paragraph 12(d), under which the 
person whose identification has been revoked under paragraph 11(e) will be re-
identified on the basis of a self-attestation stating that he will carry on economic 
activity. 
Hotărârea Guvernului nr. 1/2016 pentru aprobarea Normelor metodologice de 
aplicare a Legii nr. 227/2015 privind Codul fiscal (Government Decision 
No 1/2016 approving the rules for the application of Law No 227/2015 
establishing the Tax Code) (the ‘rules for applying the Tax Code’) – 
point 79(14)(b), under which, in the case of taxable persons whose identification 
for VAT purposes has been revoked, inter alia, under Article 316(11)(e) of the 
Tax Code, capital goods are to be deemed not intended for an economic activity in 
the period during which [those persons] did not have a valid VAT number since 
an adjustment of the tax is obligatory under Article 305(4)(a)(1) of the Tax Code 
in the sense that the taxable person concerned must make an adjustment 
downwards, in respect of the capital goods existing at the time of the revocation of 
the VAT number, which is reflected, in relation to the year in which the VAT 
number was revoked, in the final tax return filed for the tax period during which 
the identification for the purposes of VAT of the taxable person was annulled, by 
one fifth or one twentieth of the tax initially deducted. Under that provision, if the 
taxable person is re-identified for the purposes of VAT in the year during which 
his VAT number was revoked, he will have the right to make an adjustment 
upwards by one fifth or one twentieth of the tax initially deducted on capital goods 
existing on the date of the revocation of the VAT number in the first tax return 
filed after the date of re-identification or, as the case may be, in a subsequent 
return. 
Succinct presentation of the facts and procedure in the main proceedings 
1 On 1 March 2013, S.H. was identified, at his request, as a taxable person for the 
purposes of VAT. In this capacity, he purchased, produced, completed, 
constructed or altered, on 31 August 2013, 8 December 2014 and 7 May 2014, 69 
properties (flats and parking spaces) in respect of which he exercised the right to 
deduct VAT. 
2 Since the VAT returns filed for two consecutive calendar quarters did not show 
transactions, the tax authorities revoked, of their own motion, on 1 February 2017, 
the identification for the purposes of VAT of S.H., pursuant to Article 316(11)(e) 
of the Tax Code. S.H. was re-identified for the purposes of VAT on 28 January 
2019, by decision of the tax authorities adopted pursuant to Article 316(12)(d) of 
the Tax Code. 
3 Following a tax audit covering the period from 1 January 2017 to 31 March 2018, 
the tax authorities issued the tax assessment of 17 July 2018 ordering the removal 
of the VAT deduction and the imposition of additional VAT in the amount of 
SUMMARY OF THE REQUEST FOR A PRELIMINARY RULING – CASE C-627/21 
 
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RON 64 498 (Romanian lei) as an adjustment of the VAT initially deducted, on 
the ground that S.H. had failed to make such a downward adjustment in respect of 
the flats and parking spaces which were at his disposal [still unsold] on 1 February 
2017, the date on which the tax authorities revoked, of their own motion, his 
identification for the purposes of VAT. 
4 The amount of RON 64 498 constitutes one twentieth of the VAT initially 
deducted in respect of all the properties purchased, from which the VAT deducted 
in respect of the three properties sold in 2015 and 2016 was subtracted, and which 
was calculated in accordance with Article 305(4)(a)(1) of the Tax Code, in 
conjunction with point 79(14)(b) of the rules for applying the Tax Code. 
5 Following the dismissal of the complaint raised with the tax authorities and the 
administrative action brought before the Tribunalul Sibiu (Regional Court, Sibiu) 
against that dismissal, S.H. brought an appeal before the Curtea de Apel Alba Iulia 
(Court of Appeal, Alba Iulia), which adjudicates as the court of final instance. 
S.H. requests that the referring court submit a request to the Court of Justice for a 
preliminary ruling. 
The essential arguments of the parties in the main proceedings  
6 The appellant claims, first, that, according to the case-law of the Court of Justice, 
exercise of the right to deduct in respect of capital goods necessitates an analysis 
of the taxable person’s intention at the time of their purchase since it is for the 
national court to determine whether the taxable person purchased the goods 
concerned for his business purposes or whether, on the contrary, there is a 
fraudulent practice given that the right to deduct can be limited only in the event 
of avoidance or abuse. 
7 Second, the appellant claims that Directive 2006/112 is infringed since revocation 
of identification for VAT purposes constitutes an exceptional situation which must 
comply with the principle of proportionality. 
8 Third, both the principle of neutrality and the principle of proportionality are 
infringed in the present case since, throughout the period during which the 
revocation decision produces its effects, the taxable person will be unable to 
exercise the right to deduct, collect a tax which is not deductible for the recipient 
thereof, and be required to make a downward adjustment of the VAT paid on the 
purchase of the capital goods. 
9 The appellant considers that the tax authorities acted unlawfully when they 
revoked the tax number for a short period and then reactivated it, thus removing 
the VAT deduction for that period. 
10 In the view of the appellant, the reasoning followed by the Court of Justice in its 
judgment of 12 September 2018, Gamesa Wind România (C-69/17, 
EU:C:2018:703) is also relevant in the present case. 
ADMINISTRAȚIA JUDEȚEANĂ A FINANȚELOR PUBLICE SIBIU AND DIRECȚIA GENERALĂ REGIONALĂ A FINANȚELOR PUBLICE 
BRAȘOV 
 
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11 The respondents contend that, as the national legislation considers that, because 
during the period in which the taxable person did not have a valid VAT number 
the capital goods were not intended for an economic activity, the VAT adjustment 
is obligatory. 
Succinct presentation of the reasoning in the request for a preliminary ruling 
12 The referring court states that it is called upon to examine the lawfulness of the 
downward adjustment, made as a result of the taxable person’s fiscal inactivity, of 
the VAT already deemed to be deductible, in relation to the purchase, building 
and alteration of the properties classified as capital goods. 
13 The referring court goes on to recall the case-law of the Court of Justice, 
according to which identification for VAT purposes, provided for in Article 214 
of Directive 2006/112, and the obligation of the taxable person to state when his 
activity as a taxable person commences, changes or ceases, provided for in 
Article 213 of that directive, are only formal requirements for the purposes of 
control, and they cannot undermine, inter alia, the right to deduct VAT in the case 
where the substantive conditions which give rise to that right are satisfied. 
14 In addition, given that, according to the case-law of the Court of Justice, the 
penalty for the taxable person’s failure to comply with accounting obligations and 
those relating to the returns by refusing the right to deduct clearly goes beyond 
what is necessary to attain the objective of ensuring proper fulfilment of those 
obligations, the referring court considers that, in order to resolve the dispute 
before it, it is necessary to establish whether, in the light of the principle of 
proportionality and the discretion afforded to the Member States by Articles 186 
and 192 of Directive 2006/112/EC, the temporary revocation of identification for 
the purposes of VAT can give rise to an obligation to make a downward 
adjustment of VAT. 
15 Finally, the referring court considers it necessary to ascertain the extent to which 
the way in which the national legislation at issue is interpreted and applied in 
practice complies with the principle of neutrality, given that the tax authorities 
take the view the appellant’s inactivity over a specific period, formally penalised 
by the revocation of his status as a taxable person, must be accompanied by a 
downward adjustment of the VAT. In this context, the Curtea de Apel Alba Iulia 
points out that, although, during the period in which the penalty of revocation of 
the taxable person’s status applied, the appellant carried out no transactions 
(supplies of goods/services) relating to the capital goods in question, the tax 
authorities assume absolutely that those goods are used by the taxable person for 
purposes other than economic activities.