Keywords

Summary



Keywords

1. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax

(Council Directive 77/388, Arts 17, 18(2) and (3) and 21(1)(b))

2. Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax

(Council Directive 77/388, Arts 18(1)(d) and 22)

Summary

1. Articles 17, 18(2) and (3) and 21(1)(b) of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 2000/17, do not preclude national legislation which lays down a limitation period for the exercise of the right to deduct by a taxpayer, provided that the principle of equivalence which requires that the limitation period applies in the same way to analogous rights in tax matters founded on domestic law and to those based on Community law, and the principle of effectiveness, pursuant to which the limitation period may not render virtually impossible or excessively difficult the exercise of the right to deduct, are respected.

The principle of effectiveness is not infringed merely because the tax authority has a longer period in which to recover unpaid value added tax than the period granted to taxable persons for the exercise of their right to deduct because the position of the tax authority cannot be compared with that of a taxable person and the fact that a limitation period begins to run as regards the tax authority at a date subsequent to the date from which the limitation period applicable to the right to deduct of a taxable person begins to run is not such as to infringe the principle of equality

(see paras 46, 51, 54, operative part 1)

2. However, Articles 18(1)(d) and 22 of Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes, as amended by Directive 2000/17, preclude a practice whereby tax returns are reassessed and value added tax recovered which penalises a failure to comply, first, with obligations arising from formalities laid down in national legislation pursuant to Article 18(1)(d), and, second, with the obligations relating to accounts and tax returns under Article 22(2) and (4) respectively, by denying the right to deduct in the case of a reverse charge procedure.

The failure by a taxable person to comply with the formalities imposed by a Member State pursuant to Article 18(1)(d) of the Sixth Directive cannot deprive him of his right to deduction since, in accordance with the principle of fiscal neutrality, the deduction of input tax must be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements.

Furthermore, the measures taken by the Member States to ensure that taxable persons comply with their obligations relating to declaration and payment or impose other obligations which they deem necessary for the correct collection of the tax and for the prevention of evasion may not be used in such a way that they would have the effect of systematically undermining the right to deduct value added tax. A reassessment and recovery practice, which penalises non-compliance on the part of the taxable person with the obligations relating to accounts and tax returns by a denial of the right to deduct, clearly goes further than is necessary to attain the objective of ensuring the correct application of such obligations within the meaning of Article 22(7) of the Sixth Directive, since Community law does not prevent Member States from imposing, where necessary, a fine or a financial penalty proportionate to the seriousness of the offence in order to sanction a failure to comply with those obligations. That practice also goes further than is necessary for the correct collection of the tax and for the prevention of evasion, since it may even lead to the loss of the right to deduct if the reassessment of the tax return by the tax authorities is made after the expiry of the limitation period available to the taxable person in which to make the deduction.

(see paras 62-63, 65-68, 72, operative part 2)