Judgment;Summary — ECLI:EU:C:2023:639
Date: 2023-09-07
Language of the case: German
Court formation: Eighth Chamber
Subject matter: Taxation;Value added tax
Procedure: Reference for a preliminary ruling
Origin: Germany

Translation C-453/22 – 1 
Case C-453/22 
Request for a preliminary ruling 
Date lodged: 
6 July 2022 
Referring court: 
Finanzgericht Münster (Germany) 
Date of the decision to refer: 
27 June 2022 
Applicant: 
Michael Schütte 
Defendant: 
Finanzamt Brilon 
  
FINANZGERICHT MÜNSTER (Finance Court, Münster, Germany) 
O R D E R 
In the case of 
Mr Michael Schütte, […] Meschede, 
– Applicant – 
[…] […] 
v Finanzamt Brilon (Finance Court, Brilon) 
[…] 
 – Defendant – 
concerning an application for discharge on grounds of 
inequity under Paragraphs 163 and 227 of the 
Abgabenordnung (Tax Code, ‘the AO’) 
 
EN 
REQUEST FOR A PRELIMINARY RULING OF 27. 6. 2022 – CASE C-453/22 
 
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the 15th Chamber […] 
made the following order on 27 June 2022: 
I. The following question is referred to the Court of Justice of the European 
Union for a preliminary ruling pursuant to Article 267 of the Treaty on the 
Functioning of the European Union: 
In the circumstances of the main proceedings, do the provisions of Directive 
2006/112/EC – in particular the principle of fiscal neutrality and the principle 
of effectiveness – require that the applicant has a right to claim 
reimbursement of the value added tax overpaid by him or her to his or her 
upstream suppliers, including interest, directly from the tax authorities, even 
though there is still a possibility that the upstream suppliers will at a later 
point in time take action against the tax authorities on the basis of a 
correction of the invoices, and the tax authorities may then – possibly – no 
longer have a right of recourse against the applicant, with the result that 
there is a risk that those authorities will have to reimburse the same value 
added tax twice? 
II. The proceedings are stayed pending the ruling of the Court. 
[…] [statements regarding matters of procedural law] 
G r o u n d s 
I. 
It is disputed whether the defendant was right to refuse an application by the 
applicant for discharge from additional assessments to turnover tax and interest on 
turnover tax on grounds of equity. 
The applicant is a farmer and forester and engages in (inter alia) commercial trade 
in timber. In the years 2011 to 2013, the applicant purchased timber from its 
upstream suppliers – with each of whom he had concluded net agreements 
concerning the net amounts – the respective invoices stating turnover tax at the 
standard rate of 19%. The applicant sold and delivered the timber to his 
customers, stating the reduced rate of 7%, which applies to firewood. 
The upstream suppliers each declared the transactions and paid the tax to the tax 
authorities at the rate of 19%. The applicant declared output transactions at the 
rate of only 7% and in turn deducted input tax in respect of the supplies at the rate 
of 19%. The applicant paid the resulting tax debt to the tax authorities. There were 
no indications of the applicant’s imminent insolvency at any time. There is no 
suspicion of fraud. 
SCHÜTTE 
 
3 
Following an audit, the defendant concluded that the applicant’s output 
transactions were not subject to the reduced rate of tax, but rather to the standard 
rate of tax. In an action brought against that audit, the referring Chamber 
confirmed, by judgment, that the applicant’s output transactions were subject to 
the reduced rate of tax. However, the Chamber also took the view that the 
applicant’s input transactions were already subject to the reduced rate of tax of 7% 
and that the applicant could deduct input tax only to that extent because it was 
only to that extent that tax was lawfully payable. Therefore, the applicant’s 
deduction of input tax was reduced. The judgment became final (Finanzgericht 
Münster (Finance Court, Münster), judgment of 2 July 2019, 15 K 2794/17 U, not 
published). 
In implementation of the judgment, the defendant sought to recover the additional 
turnover tax for the years 2011 to 2013 (2011: EUR; 2012: EUR; 2013: EUR) and 
fixed the interest on turnover tax for the years 2011 to 2013 (2011: EUR; 2012: 
EUR; 2013: EUR) by notices of 30 September 2019. 
The applicant subsequently contacted his upstream suppliers, requesting that they 
correct the invoices issued to him and pay him the difference. In respect of all the 
upstream suppliers, tax assessment was already time-barred with regard to the 
2011-2013 assessment periods. All the upstream suppliers invoked the civil-law 
defence of limitation with regard to the claim asserted by the applicant for 
correction of the invoices and repayment of the difference. Accordingly, the 
invoices were not corrected and the applicant also did not receive back from his 
upstream suppliers the difference in respect of the turnover tax owed. Under 
national civil law, the applicant has no possibility to enforce his claim against the 
upstream suppliers due to the limitation defence raised. 
Subsequently, the applicant, by letter of 24 October 2019, applied to the defendant 
for discharge, on grounds of equity in accordance with Paragraphs 163 and 227 of 
the AO, from the additional turnover tax which it had sought to recover and the 
interest which it had fixed in respect of the turnover tax (total amounts for 2011: 
EUR; for 2012: EUR; EUR). In that respect, he made express reference to the 
case-law of the Court (judgments of 15 March 2007, C-35/05, Reemtsma 
Cigarettenfabriken, EU:C:2007:167, paragraph 41; of 26 April 2017, C-564/15, 
Farkas, EU:C:2017:302, paragraph 53; of 11 April 2019, C-691/17, PORR Építési 
Kft., EU:C:2019:327, paragraph 42; of 10 July 2019, C-273/18, Kuršu zeme, 
EU:C:2019:588, paragraph 41). 
The defendant refused the applications for discharge in accordance with 
Paragraphs 163 and 227 of the AO by administrative decisions of 3 December 
2019 and 16 December 2019. In the grounds for those decisions, the defendant 
stated, in essence, that the applicant himself was responsible for the situation. Had 
he acted in accordance with the law, he would not have been permitted to resell 
the unchanged goods at a different rate of tax. 
REQUEST FOR A PRELIMINARY RULING OF 27. 6. 2022 – CASE C-453/22 
 
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The defendant rejected the objections directed against those decisions as 
unfounded in the objection decision of 24 July 2020, whereupon the applicant 
brought an action. 
II. 
The relevant provisions read: 
a) EU law 
Recitals of Council Directive 2006/112/EC of 28 November 2006 on the common 
system of value added tax (‘the VAT Directive’): 
(4) The attainment of the objective of establishing an internal market 
presupposes the application in Member States of legislation on turnover 
taxes that does not distort conditions of competition or hinder the free 
movement of goods and services. It is therefore necessary to achieve such 
harmonisation of legislation on turnover taxes by means of a system of value 
added tax (VAT), such as will eliminate, as far as possible, factors which 
may distort conditions of competition, whether at national or Community 
level. 
(5) A VAT system achieves the highest degree of simplicity and of 
neutrality when the tax is levied in as general a manner as possible and 
when its scope covers all stages of production and distribution, as well as 
the supply of services. It is therefore in the interests of the internal market 
and of Member States to adopt a common system which also applies to the 
retail trade. 
(7) The common system of VAT should, even if rates and exemptions are 
not fully harmonised, result in neutrality in competition, such that within the 
territory of each Member State similar goods and services bear the same tax 
burden, whatever the length of the production and distribution chain. 
Article 167 of the VAT Directive: 
A right of deduction shall arise at the time the deductible tax becomes 
chargeable. 
Article 168 of the VAT Directive: 
In so far as the goods and services are used for the purposes of the taxed 
transactions of a taxable person, the taxable person shall be entitled, in the 
Member State in which he carries out these transactions, to deduct the 
following from the VAT which he is liable to pay: 
SCHÜTTE 
 
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(a) the VAT due or paid in that Member State in respect of supplies to him 
of goods or services, carried out or to be carried out by another taxable 
person; 
(…) 
Article 178 of the VAT Directive: 
In order to exercise the right of deduction, a taxable person must meet the 
following conditions: 
(a) for the purposes of deductions pursuant to Article 168(a), in respect of 
the supply of goods or services, he must hold an invoice drawn up in 
accordance with Sections 3 to 6 of Chapter 3 of Title XI; 
(…) 
Article 203 of the VAT Directive: 
VAT shall be payable by any person who enters the VAT on an invoice. 
(b) National law/administrative provisions 
Paragraph 14 of the Umsatzsteuergesetz (Law on turnover tax; ‘the UStG’) 
(…) 
(4) An invoice must contain the following details: 
(…) 
8. the applicable rate of tax and the amount of tax due on the consideration 
or, in the case of an exemption, an indication that the supply of goods or 
services is subject to an exemption; 
(…). 
Paragraph 14c of the UStG 
(1) If a trader has, in an invoice for a supply of goods or services, stated 
separately a higher amount of tax than is payable under this Law in respect 
of the transaction concerned (incorrectly stated tax), he or she shall also be 
liable to pay the additional amount. If he or she adjusts the amount of tax 
vis-à-vis the recipient of the supply, Paragraph 17(1) shall apply by 
analogy. 
(…). 
Paragraph 15 of the UStG 
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(1) A trader may deduct the following as input tax: 
1. the tax lawfully payable on goods and services provided to his or her 
business by another trader. Deduction of the input tax is subject to the 
condition that the trader holds an invoice drawn up in accordance with 
Paragraphs 14 and 14a. 
(…). 
Paragraph 163 of the AO 
(1) Taxes may be set at a lower amount and individual bases of taxation 
which increase the tax may be ignored in assessing the tax where the levy of 
the tax would be inequitable in the circumstances of the individual case. 
(…). 
Paragraph 227 of the AO 
The tax authorities may waive, in whole or in part, claims arising from a 
liability to tax where it would be unfair to pursue them in the circumstances 
of the particular case; on the same conditions, amounts which have already 
been paid may be reimbursed or set off. 
Paragraph 233a of the AO: 
(1) If the assessment of the (…) turnover tax (…) results in a difference 
within the meaning of subparagraph 3, that difference shall be subject to 
interest (…). 
(2) The accrual of interest shall commence 15 months after the end of the 
calendar year during which the tax liability arose. (…) It shall cease at the 
end of the day on which the tax assessment becomes effective. 
(…) 
(3) The calculation of the interest shall be based on the tax assessed, 
reduced by the deductible amounts to be offset, (…) and by the advance 
payments assessed up to the point at which interest began to accrue 
(differential amount). 
(…) 
The tax authorities take the following administrative view (see the following 
excerpts from the letter of the Bundesministerium der Finanzen (Federal Ministry 
of Finance; ‘the BMF’) of 12 April 2022, III C 2 – S 7358/20/10001:004, with 
emphasis added by the referring Chamber): 
SCHÜTTE 
 
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[10] Equitable relief always takes the form of a decision that takes into 
account and weighs up the special circumstances of the individual case, 
whereby, with regard to the direct claim, the following particularities must 
be observed in addition to the tax legislation (see Anwendungserlass zur 
Abgabenordnung (Decree on the application of the AO; ‘the AEAO’) 
concerning Paragraph 163). Any contributory negligence on the part of the 
recipient of the supply in the drawing up of the incorrect invoice must be 
taken into account in the decision on equitable relief. 
[11] As a general rule, the recipient of a supply must first assert his or her 
claim for reimbursement of incorrectly invoiced and unduly paid turnover 
tax against the supplier under civil law. The direct claim can therefore be 
brought only in the alternative to the tax adjustment procedure under 
Paragraph 14c(1) of the UStG. As a general rule, it can be assumed that 
reimbursement by the supplier is impossible or excessively difficult from 
the outset only where an application for insolvency proceedings in respect 
of the supplier’s assets has already been refused by reason of insufficiency 
of assets. The mere insolvency of the supplier within the meaning of the 
Insolvenzordnung (Insolvency Code; ‘the InsO’) is not sufficient in that 
regard. (…) 
[12] No decision can be taken on a direct claim which has been asserted 
as long as it is still legally possible for the supplier to take action against 
the tax authorities on the basis of an adjustment of the amount of tax in 
accordance with the second and third sentences of Paragraph 14c(1) of 
the UStG. Therefore, in insolvency proceedings, for example, a decision on 
the direct claim can generally be taken only after the insolvency proceedings 
have been concluded. This is because, by virtue of the insolvency 
proceedings, the debtor (in this case the supplier) remains liable to pay the 
tax. He or she merely loses the right to dispose of and administer his or her 
assets, but retains legal ownership and is legally entitled to reimbursement 
in the event of an adjustment. 
[13] The direct claim against the tax authorities is accessory to the claim 
of the recipient of the supply against his contracting partner (the supplier) 
in such a way that a direct claim against the tax authorities is excluded if 
the claim of the recipient of the supply against the supplier can no longer 
be enforced because it is time-barred under civil law (for example under 
Paragraph 195 of the Bürgerliches Gesetzbuch (Civil Code; ‘the BGB’)). 
III. 
The present Chamber stays the action […] and refers the question set out in the 
operative part of the present order to the Court for a preliminary ruling pursuant to 
the second paragraph of Article 267 TFEU. 
REQUEST FOR A PRELIMINARY RULING OF 27. 6. 2022 – CASE C-453/22 
 
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The decision in the present case depends on the answer to the question referred. If 
the Court were to rule that, even in the circumstances of the main proceedings, the 
applicant may bring a direct claim against the tax authorities for reimbursement of 
the tax retrospectively demanded and the interest, the action would have to be 
upheld. If the Court were to hold that such a direct claim is not possible, the action 
would have to be dismissed. 
The question referred is based on the following considerations of the present 
Chamber. 
According to the case-law of the Court, the principle of the fiscal neutrality of 
VAT constitutes a fundamental principle of the harmonised VAT system. The 
principle of fiscal neutrality manifests itself in the systematic determination that 
VAT ultimately seeks only to tax private consumption and that the supplier, as a 
taxable person, simply acts as a tax collector for the State (see judgment of the 
Court of 21 February 2008, C-271/06, Netto Supermarkt, EU:C:2008:105, 
paragraph 21). The principle of fiscal neutrality implies that the burden of value 
added tax must fundamentally remain neutral for the supplier, that is to say it must 
not become a factor which influences competition (see judgment of the Court of 
21 March 2000, C-110/98, Gabalfrisa and Others, EU:C:2000:145, paragraphs 44 
and 45). 
The principle of effectiveness, which must also be observed, implies that national 
procedural rules must not be framed so as to render virtually impossible or 
excessively difficult the exercise of rights guaranteed under EU law (judgment of 
the Court of 26 April 2018, C-81/17, Zabrus Siret, EU:C:2018:283, 
paragraph 38).  
The Court takes the view that, since the VAT Directive does not contain any 
provisions relating to the adjustment of value added tax which has been 
improperly invoiced, it is for the Member States to lay down the conditions in 
which the improperly invoiced tax may be adjusted. In that respect, the Court has 
already expressly approved a mechanism under which – as in Germany – the 
supplier is granted a right to seek reimbursement from the tax authorities and the 
recipient of the supply is referred to the civil courts for the purpose of asserting 
his or her right to repayment of the VAT unduly paid (judgment of the Court of 
15 March 2007, C-35/05, Reemtsma Cigarettenfabriken, EU:C:2007:167, 
paragraphs 38 and 39). 
However, in accordance with the case-law of the Court, in exceptional cases – 
having due regard to the principle of effectiveness – the recipient of the supply has 
a direct right of reimbursement against the tax authorities if reimbursement of the 
VAT becomes impossible or excessively difficult (judgment of the Court of 
15 March 2007, C-35/05, Reemtsma Cigarettenfabriken, EU:C:2007:167, 
paragraph 41). To that end, Member States must provide for the instruments and 
the detailed procedural rules necessary to enable the recipient of the supply to 
SCHÜTTE 
 
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recover unduly invoiced VAT (judgment of the Court of 15 March 2007, C-35/05, 
Reemtsma Cigarettenfabriken, EU:C:2007:167, paragraph 41). 
The Court confirmed those principles on several occasions in its subsequent case-
law (see, to that effect, judgments of 26 April 2017, C-564/15, Farkas, 
EU:C:2017:302, paragraph 53; of 11 April 2019, C-691/17, PORR Építési Kft., 
EU:C:2019:327, paragraph 42; of 10 July 2019, C-273/18, Kuršu zeme, 
EU:C:2019:588, paragraph 41). 
The case-law of the German finance courts has followed the case-law of the 
Court. The Bundesfinanzhof (Federal Finance Court) considers that the right 
granted to the Member States to determine the procedure is guaranteed by the 
possibility afforded under German law of a decision by the tax authorities in the 
equity procedure as provided for in Paragraphs 163 and 227 of the AO. In so far 
as the tax authorities enjoy a margin of discretion under those provisions, which 
can in principle be reviewed by the courts only to a limited extent, that margin of 
discretion is reduced to zero if the requirements for a direct claim against the tax 
authority under the case-law of the Court (‘Reemtsma claim’) are met (BFH, 
judgment of 30 June 2015, VII R 30/14, paragraph 27). 
In view of the circumstances in the main proceedings, the referring Chamber has 
doubts concerning the conditions and legal consequences of the direct claim of the 
recipient of the supply against the tax authorities as developed by the Court. 
As far as can be seen, there was always an inability to pay (for example 
insolvency or economic incapacity) on the part of the issuer of the invoice in the 
cases ruled on by the Court (see judgments of the Court of 15 March 2007, 
C-35/05, Reemtsma Cigarettenfabriken, EU:C:2007:167, paragraph 41; of 
26 April 2017, C-564/15, Farkas, EU:C:2017:302, paragraph 54; of 11 April 
2019, C-691/17, PORR Építési Kft., EU:C:2019:327, paragraph 43; of 10 July 
2019, C-273/18, Kuršu zeme, EU:C:2019:588, paragraph 41), whereby the Court 
has only ever cited an inability to pay on the part of the issuer of the invoice as an 
example of impossibility or excessive difficulty, but has not made the latter 
conditional on the former. 
In the main proceedings, however, the upstream suppliers are not unable to pay. 
They invoke the defence of limitation under civil law against the applicant and are 
not prepared to correct the invoices and repay the applicant the amount of VAT 
which he overpaid. Due to the legal effects of the defence of limitation raised, the 
applicant has no possibility under civil law to enforce his claims against the 
upstream suppliers either presently or in the future. 
If the Court were to conclude that, in those circumstances, it must be assumed that 
it would be impossible or excessively difficult, within the meaning of its case-law, 
for the applicant to obtain reimbursement of the VAT from the upstream suppliers 
and that the conditions for a direct claim against the tax authority are met, the 
applicant would obtain the reimbursement directly from the tax authorities. 
REQUEST FOR A PRELIMINARY RULING OF 27. 6. 2022 – CASE C-453/22 
 
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Nevertheless, the upstream suppliers continue to have, for an unlimited period of 
time, the possibility to adjust invoices in accordance with the first and second 
sentences of Paragraph 14c(1) of the UStG. In other words, the upstream suppliers 
could still correct the invoices at a later point in time and then claim back the 
overpaid amount from their tax authorities, as invoice corrections under national 
law (second sentence of Paragraph 14c(1) of the UStG, in conjunction with 
Paragraph 17 thereof) trigger the reimbursement of VAT vis-à-vis the tax 
authorities in the tax period of the correction. The tax authorities, for their part, 
would then have to approach the applicant again and demand repayment from him 
of the amount reimbursed. If the applicant is then – for example as a result of 
insolvency that has occurred in the meantime or for other reasons – unable to 
repay it, the tax authorities would have reimbursed the VAT twice. 
The referring Chamber takes the view that the applicant can have a direct claim 
against the tax authorities only if it is established that the latter cannot be obliged 
vis-à-vis the upstream suppliers to reimburse the same VAT a second time. The 
referring Chamber takes the view that the applicant should have taken precautions 
to secure its claims against its upstream suppliers under civil law, for example by 
obtaining a waiver of the defence of limitation from the upstream suppliers in due 
time. In its more recent case-law, the Court also appears to proceed on the 
assumption that the recipient of a supply must seek an accurate invoice with VAT 
stated separately within the limitation period under civil law and, without such an 
invoice, cannot assert a claim for input tax deduction against the tax authorities 
(judgment of the Court of 13 January 2022, C-156/20, Zipvit, EU:C:2022:2, 
paragraph 41; see also in that respect the Opinion of Advocate General Kokott of 
8 July 2021, C-156/20, Zipvit, EU:C:2021:558, point 110). 
To date, that restrictive interpretation cannot be inferred from the case-law of the 
Court with regard to the direct claim. 
Should the Court’s answer to the question referred be that the applicant is entitled 
to a direct claim against the tax authorities, the referring Chamber takes the view 
that such a claim covers only the VAT paid to the upstream suppliers, but not also 
the interest accruing from the amendment of the original tax assessment on an 
independent legal basis (Paragraph 233a of the AO). This is because the interest 
was accrued in respect of a period prior to the first assertion of the direct claim 
against the tax authorities. 
[…]