62018CJ0482_RES
Case C‑482/18
Google Ireland Limited
v
Nemzeti Adó- és Vámhivatal Kiemelt Adó- és Vámigazgatósága
(Request for a preliminary ruling from the Fővárosi Közigazgatási és Munkaügyi Bíróság)
Judgment of the Court (Grand Chamber), 3 March 2020
(Reference for a preliminary ruling — Freedom to provide services — Article 56 TFEU — Restrictions — Tax provisions — Tax on advertising activities based on turnover — Obligations relating to registration with a tax authority — Principle of non-discrimination — Fines — Principle of proportionality)
Freedom to provide services — Restrictions — National rules making the provision of services between Member States more difficult than the provision of services purely within a Member State — Not permissible — Concept of restriction — Measure which creates additional costs in respect of the service in question — Not included — Condition — Measure which affects in the same way the provision of services between Member States and the provision of services within a Member State
(Art. 56 TFEU)
(see paragraphs 25, 26)
Freedom to provide services — Restrictions — Tax legislation — National legislation concerning tax on advertising activities based on turnover — Obligation to submit a tax declaration for the purposes of liability to that tax — Exemption for resident suppliers on the ground of their obligations to register in respect of other taxes — Whether permissible
(Art. 56 TFEU)
(see paragraph 36, operative part 1)
Freedom to provide services — Restrictions — Tax legislation — National legislation concerning tax on advertising activities based on turnover — Obligation to submit a tax declaration for the purposes of liability to that tax — Possibility of imposing penalties on non-resident suppliers who fail to comply with that obligation — Penalty terms which are clearly more favourable to resident suppliers — Not permissible — Justification by reasons in the public interest — Effectiveness of fiscal supervision and the effective collection of tax — Included — No justification in the present case — Breach of the principle of proportionality
(Art. 56 TFEU)
(see paragraphs 45, 47, 54, operative part 2)
Résumé
The system of penalties relating to the Hungarian tax on advertising is not compatible with EU law. However, EU law does not preclude foreign suppliers of advertising services from being subject to an obligation to submit a tax declaration in relation to that tax
In its judgment of 3 March 2020, Google Ireland (C‑482/18), the Grand Chamber of the Court held that the freedom to provide services guaranteed by Article 56 TFEU does not preclude Hungarian legislation which imposes an obligation to submit a tax declaration on suppliers of advertising services established in a Member State other than Hungary for the purposes of their liability to Hungarian tax on advertising. That is the case despite the fact that suppliers of such services established in Hungary are exempt from that obligation since they are subject to obligations to submit a tax declaration or to register on the basis of liability to all other taxes applicable in Hungary.
However, the Court held that that principle precludes the part of the Hungarian legislation which fines suppliers of advertising services established in a Member State other than Hungary for non-compliance with the obligation to submit a tax declaration in a series of fines issued within several days capable of amounting to several million euro, without the competent authority giving the suppliers concerned the time necessary to comply with their obligations or the opportunity to submit their observations, or having itself examined the seriousness of the infringement, before adopting the final decision fixing the total amount of those fines. In that regard, the Court notes that the amount of the fine that would be imposed on a supplier of advertising services established in Hungary who has failed to comply with a similar obligation to submit a tax declaration or to register contrary to the general provisions of national tax legislation is significantly less and is not increased, in the event of continued failure to comply with such an obligation, in the same proportions, nor necessarily within such a short period of time.
In the present case, Google Ireland, a company incorporated under Irish law which carries on an activity subject to the Hungarian tax on advertising, failed to comply with its obligation to submit a declaration in respect of that tax. On that ground, Google Ireland was initially fined 10000000 Hungarian forint (HUF) (approximately EUR 31000) and then, within a few days, received additional fines, which in total amounted to HUF 1000000000 (approximately EUR 3100000). That sum corresponded to the maximum fine which could be imposed under the Hungarian legislation for non-compliance with the obligation to submit a tax declaration. Google Ireland brought an action before the Fővárosi Közigazgatási és Munkaügyi Bíróság (Budapest Administrative and Labour Court, Hungary), contesting the compatibility with EU law of, first, the obligation for foreign suppliers of advertising services to submit a tax declaration and, second, the system of penalties connected with the failure to submit such a declaration. Those arguments led the referring court to make a reference to the Court of Justice for a preliminary ruling.
The Court pointed out that the principle of freedom to provide services precludes any national rules which may make the provision of services between Member States more difficult than the provision of services purely within a Member State. That principle thus requires the abolition of any restriction on the freedom to provide services imposed on the ground that the person providing a service is established in a Member State other than that in which the service is provided.
Observing that the obligation to submit a tax declaration at issue in the present case does not impinge on the exercise of the activity of advertising in Hungary and is applicable irrespective of the place of establishment of all suppliers of advertising services subject to the Hungarian tax on advertising, the Court held that that administrative formality does not, per se, constitute an obstacle to the freedom to provide services.
It could not be found in the present case that there had been any difference in treatment capable of constituting a restriction on that fundamental freedom. While some suppliers, in particular those established in Hungary, are exempt from the obligation to submit a tax declaration, that is because they have already submitted a tax declaration or registered in respect of some form of direct or indirect tax levied in Hungary. That exemption does not have a deterrent effect, but prevents suppliers already registered from being required to complete a meaningless formality, since the purpose of the obligation to submit a tax declaration in relation to the tax on advertising is precisely to enable the Hungarian tax authority to identify those persons liable to that tax.
As regards penalties in the field of taxation, the Court noted that, although systems of penalties in the field of taxation fall within the competencies of the Member States in the absence of harmonisation at EU level, such systems should not have the effect of jeopardising the freedoms provided for by the FEU Treaty.
In that context, the Court examined whether the penalties connected with failure to submit the tax declaration laid down by the legislation at issue in the present case infringe the freedom to provide services. In that regard, the Court held that, strictly speaking, the system of penalties at issue applies without distinction to all taxpayers who fail to comply with their obligation to submit a tax declaration, irrespective of the Member State in which they are established. However, only taxpayers not resident in Hungary are, in reality, capable of being fined.
Indeed, suppliers of advertising services established in Hungary may be fined for failure to comply with similar obligations to submit a tax declaration and to register required of them under the general provisions of the national tax legislation.
However, the system of penalties under the Law on the taxation of advertisements enables significantly higher fines to be issued than the system of fines provided for in the event of infringement, by a supplier of advertising services established in Hungary, of its obligation to register. Furthermore, neither the amount of the fines nor the time limits under the latter system are as stringent as those which apply in respect of the penalties provided for by the Law on the taxation of advertisements. It follows that that system of penalties constitutes a restriction on the freedom to provide services.
The Court went on to accept that the effectiveness of fiscal supervision and the effective collection of tax constitute overriding reasons in the public interest capable of justifying such a restriction, and that imposing sufficiently high fines is indeed likely to deter suppliers of advertising services who are subject to the obligation to register from failing to comply with that obligation. Nevertheless, the Court held that the system of penalties at issue was disproportionate. In that regard, the Court emphasised, in particular, the fact that that system does not provide for any link between the exponential increase, within particularly short periods of time, in the total amount of the fines and the seriousness of the failure to submit a tax declaration, and the fact that the taxpayer concerned would in effect be unable to avoid being subject to the maximum amount of the fine by complying with its obligation to submit a tax declaration prior to receiving the last decision to issue a fine by which that amount is reached.