OPINION OF ADVOCATE GENERAL

KOKOTT

delivered on 4 June 2020 ( 1 )

Case C‑335/19

E. Sp. z o.o. Sp. k.

v

Minister Finansów

(Request for a preliminary ruling from the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland))

(Request for a preliminary ruling – Tax law – Value added tax – Directive 2006/112/EC – Articles 90 and 185 – Reduction of the taxable amount – Total or partial non-payment of the price – Requirement that the recipient of the service is not insolvent or being liquidated – Corresponding adjustment of the initial input tax deduction – Time of adjustment)

I. Introduction

1. Under what conditions can a taxable person adjust his tax liability if his contracting partner has not paid him? This is ultimately a question that the Court of Justice has been called upon to deal with on many occasions. ( 2 ) It gives rise to a fundamental problem in an indirect tax system, especially in cases where two undertakings are involved. This is because the adjustment of the supplier’s tax liability corresponds to an adjustment of the input tax deduction already made in respect of the recipient of the supply. However, the latter adjustment is generally unsuccessful if the recipient of the supply is in insolvency proceedings or has even already been liquidated. The State is left empty-handed in such cases.

2. The Polish legislature has precluded this risk to tax revenue by allowing the service provider’s tax liability to be adjusted only if the service recipient is not subject to insolvency proceedings or in liquidation at the time of the adjustment. The service provider therefore bears the risk of being liable for tax that he has not actually been able to collect. The Court must decide whether this is reconcilable with his function of ‘tax collector on behalf of the State’. ( 3 )

3. However, the legitimate interest of Poland and the European Union in preventing a loss of value added tax (VAT) may be taken into account in other ways. The Court should therefore use this request for a preliminary ruling as an opportunity to express its view on the point in time at which the input tax deduction in respect of the recipient of the supply is adjusted if he has not yet paid the consideration and is therefore not subject to the burden of any VAT.

II. Legal framework

A. EU law

4. The EU-law framework is formed by Articles 73, 90, 184, 185 and 273 of Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax (‘the VAT Directive’). ( 4 )

5. Article 73 of the VAT Directive provides for the taxable amount: ‘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.’

6. Article 90 of the VAT Directive provides for the subsequent adjustment of the taxable amount and the legal consequences for the supplier: ‘1. In the case of cancellation, refusal or total or partial non-payment, or where the price is reduced after the supply takes place, the taxable amount shall be reduced accordingly under conditions which shall be determined by the Member States. 2. In the case of total or partial non-payment, Member States may derogate from paragraph 1.’

7. Articles 184 and 185 of the VAT Directive concern the adjustment of deductions of the recipient of the supply in the case of subsequent changes. Article 184 provides: ‘The initial deduction shall be adjusted where it is higher or lower than that to which the taxable person was entitled.’

8. Article 185 of the VAT Directive reads as follows: ‘1. Adjustment shall, in particular, be made where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted, for example where purchases are cancelled or price reductions are obtained. 2. By way of derogation from paragraph 1, no adjustment shall be made in the case of transactions remaining totally or partially unpaid or in the case of destruction, loss or theft of property duly proved or confirmed, or in the case of goods reserved for the purpose of making gifts of small value or of giving samples, as referred to in Article 16. However, in the case of transactions remaining totally or partially unpaid or in the case of theft, Member States may require adjustment to be made.’

9. Article 273 of the VAT Directive provides for options for the Member States inter alia to combat evasion: ‘Member States may impose other obligations which they deem necessary to ensure the correct collection of VAT and to prevent evasion, subject to the requirement of equal treatment as between domestic transactions and transactions carried out between Member States by taxable persons and provided that such obligations do not, in trade between Member States, give rise to formalities connected with the crossing of frontiers. The option under the first paragraph may not be relied upon in order to impose additional invoicing obligations over and above those laid down in Chapter 3.’

B. Polish law

10. These requirements of EU law were transposed into Polish law by the Ustawa o podatku od towarów i usług (Law on tax on goods and services), of 11 March 2004 (Dz. U. 2011, No 177, heading 1054, as amended, ‘the Law on VAT’).

11. Article 89a of the Law on VAT reads: ‘1. A taxable person may adjust the taxable amount and the amount of output tax arising from the supply of goods or services within the territory of Poland with respect to accounts receivable which are deemed probably unrecoverable. The adjustment shall also apply to the taxable amount and the amount of tax attributable to the part of the accounts receivable which are deemed probably unrecoverable. 1a. Accounts receivable shall be deemed probably unrecoverable where the accounts receivable have not been settled or disposed of in any manner within 150 days of the payment date stipulated in the agreement or invoice. 2. The provision of paragraph 1 shall apply where the following conditions are met: (1) the supply of goods or services has been made for the benefit of a taxable person referred to in Article 15(1) who is registered as an active VAT taxpayer and is not subject to insolvency or liquidation proceedings; … (3) on the day preceding the date of filing the tax return in which the adjustment referred to in paragraph 1 is made: (a) the creditor and debtor are both registered as active VAT taxpayers; (b) the debtor is not subject to insolvency or liquidation proceedings; … (5) less than two years have elapsed since the end of the year in which the invoice documenting the accounts receivable was raised; 3. The adjustment referred to in paragraph 1 may be made in the settlement for the period in which the accounts receivable are deemed probably unrecoverable provided that the accounts receivable have not been settled or disposed of in any manner by the date on which the creditor files the tax return for that period. 4. Where, following the filing of the tax return in which the adjustment referred to in paragraph 1 is made, the amount due is settled or disposed of in any manner, the creditor shall increase the taxable amount and the amount of output tax in the settlement for the period in which the amount due is settled or disposed of. Where the amount due is settled in part, the taxable amount and the amount of output tax shall be increased in proportion to the amount settled. 5. When filing the tax return in which the adjustment referred to in paragraph 1 is made, the creditor shall notify its competent tax office of that adjustment, stating the amounts of the adjustment and the details of the debtor. … 7. The provisions of paragraphs 1 to 5 shall not apply if the creditor and debtor are linked by a relationship of a kind referred to in Article 32(2) to (4). 8. The minister responsible for public finances shall determine, by way of a regulation, the template for the notification referred to in paragraph 5 …’

12. Article 89b of the Law on VAT provides: ‘1. In the event of non-payment of the amount due arising from the invoice which documents the supply of goods or services in the territory of Poland within 150 days of the date stipulated in the agreement or invoice for payment, the debtor shall adjust the deducted amount of VAT resulting from that invoice in the settlement for the period in which 150 days elapsed from the expiry of the date stipulated in the agreement or invoice for payment. 1a. The provision of paragraph 1 shall not apply if the debtor has paid the amount due at the latest on the last day of the settlement period in which 150 days elapsed from the expiry of the date for payment of that amount. … 2. In the event of partial payment of the amount due within 150 days of the expiry of date stipulated in the agreement or invoice for payment, the adjustment shall apply to the input VAT attributable to the unpaid part of the amount due. The provision of paragraph 1a shall apply mutatis mutandis. … 4. Where the amount due is settled following the adjustment referred to in paragraph 1, the taxable person shall have the right to increase the amount of input VAT in the return for the period in which the amount due is settled by the amount of tax referred to in paragraph 1. Where the amount due is settled in part, the input VAT may be increased in proportion to the amount settled. … 6. Where it is found that a taxable person has breached the obligation specified in paragraph 1, the head of the tax office or the fiscal control authority shall determine an additional tax liability of 30% of the amount of the tax arising from unpaid invoices which has not been adjusted in accordance with paragraph 1. No additional tax liability shall be determined in respect of natural persons who, in connection with the same act, are liable for a petty fiscal offence or for a fiscal offence.’

III. Facts and preliminary ruling proceedings

13. The dispute underlying the request for a preliminary ruling is based on an application for an individual tax ruling submitted by E. sp. z o.o. (the applicant in the main proceedings, ‘the applicant’) to the Minister Finansów (Minister for Finance, Poland).

14. The applicant is registered as an active VAT taxpayer. It provides tax advice services to, inter alia, third party economic operators for consideration. The applicant issued a VAT invoice to one of them for tax advice services supplied which were subject to taxation in the territory of Poland. At the date on which the service had been supplied, the client was registered as an active VAT taxpayer and was not subject to insolvency proceedings and was not in liquidation. Up until the date of submitting the application for an individual tax ruling, the applicant had not received the payment that had been invoiced. More than two years had not elapsed from the date on which the invoice had been issued. However, the prescribed payment date was exceeded by more than 150 days.

15. At the date on which the application for an individual tax ruling was submitted, the debtor of the accounts receivable was still registered as an active VAT taxpayer, but was now in liquidation. In the application for an individual tax ruling, the applicant sought to ascertain whether the taxable amount and therefore the output tax arising from the supply of services in the territory of Poland could be adjusted in the circumstances described.

16. By decision of 12 January 2015, the Minister for Finance held that this was not possible. He based this on the ground that, under point 3 of Article 89a(2) of the Law on VAT, the fact that the debtor of the accounts receivable was in liquidation precluded an adjustment of the taxable amount and therefore the output tax. As the rule in Article 90 of the VAT Directive was optional for the Member States, Article 89a of the Law on VAT did not infringe Article 90 of the VAT Directive.

17. The applicant brought an action against this before the Wojewódzki Sąd Administracyjny w Szczecinie (Regional Administrative Court, Szczecin, Poland). The company brought an appeal in cassation against the judgment dismissing the action. The Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) stayed the proceedings and referred the following two questions to the Court of Justice for a preliminary ruling under Article 267 TFEU: ‘(1) Do the provisions of [the VAT Directive] – and in particular Article 90(2) thereof – having regard to the principles of fiscal neutrality and proportionality, permit the introduction into national law of a restriction on the ability to reduce the taxable amount in the event of partial or total non-payment by reason of the specific tax status of the debtor and the creditor? (2) In particular, does EU law not preclude the introduction of a rule in national legislation which provides for the option of taking advantage of “bad debt relief” only on condition that on the date on which the service or goods are supplied and on the day preceding the date on which the tax return adjustment is filed in order to benefit from this relief: — the debtor is not subject to insolvency or liquidation proceedings, — the creditor and debtor are both registered as active VAT taxpayers?’

18. The applicant, Poland and the European Commission submitted written observations in the proceedings before the Court.

IV. Legal assessment

A. The questions referred

19. By these two questions, which, in line with the Commission’s opinion, can be answered together, the referring court asks how Article 90 of the VAT Directive is to be interpreted. Specifically, it would like to ascertain whether that article precludes a provision such as that in Article 89a of the Law on VAT. Pursuant to the latter provision, an adjustment of the taxable amount despite the fact that the agreed consideration has not been paid is excluded in the event that the recipient of the supply is insolvent or not registered.

20. However, in so far as the court’s questions relate to the fact that the debtor of the account receivable (that is to say the recipient of the supply) is no longer registered as an active taxable person at the time of the adjustment, the questions are hypothetical and therefore inadmissible. ( 5 ) According to the facts communicated to the Court of Justice, the applicant’s debtor was a taxable person registered as active both at the time of supply of the service and at the time of the application. The questions are admissible only in so far as they relate to the fact that the recipient of the supply is already in insolvency or liquidation proceedings.

21. The answers to these questions hinge decisively on the purpose of Article 90 of the VAT Directive (see B). This limits the possibilities for Member States to restrict an adjustment of the taxable amount. Even though the Court did once state in a ruling that, in the case of non-payment of the purchase price, Article 90(2) of the VAT Directive allows Member States to decide ‘whether such a reduction is not allowed in that situation’, ( 6 ) that decision has been further developed by subsequent rulings ( 7 ) (see C). Thus, Member States must always justify restrictions on the adjustment of the taxable amount by the taxable supplier (see D).

22. On closer examination, however, the referring court’s main concern is the question of whether and how the national legislature can eliminate, in compliance with EU law, a systemic risk of loss of VAT revenue arising in cases involving non-payment and the subsequent insolvency of the recipient of the supply. In addition, Article 185 of the VAT Directive is discussed (see E).

B. The purpose of adjusting of the taxable amount

23. There should be agreement on the starting point: VAT must indeed be paid in any event by the supplier. However it is settled case-law of the Court that VAT is an indirect tax on consumption to be borne by the end consumer. ( 8 ) In this respect, the taxable traders simply act ‘as tax collectors for the State and in the interest of the public exchequer’. ( 9 ) The tax liability of the supplier thus has a purely technical function that results solely from the indirect way in which VAT is collected.

24. From a substantive perspective, the aim of VAT as a general tax on the consumption of goods is to impose a tax not on the supplier, but on consumer capacity, which is demonstrated by consumers’ expenditure of assets to procure a consumable benefit. ( 10 ) This is particularly clear from the provisions of Article 73 of the VAT Directive. According to that article, the taxable amount consists of everything which constitutes the consideration which ‘has been or is to be obtained’ by the supplier (that is to say the service provider).

25. Consequently, the Court ( 11 ) has explicitly ruled on several occasions that ‘the taxable amount serving as a basis for the VAT to be collected by the tax authorities cannot exceed the consideration actually paid by the final consumer which is the basis for calculating the VAT ultimately borne by him’.

26. If the recipient of the supply does not pay the supplier, the supplier therefore does not substantively owe any VAT. The basis for charging VAT is not applicable because the trader has not ultimately provided any goods or services for consideration within the meaning of Article 2 of the VAT Directive.

27. In that regard, the referring court’s fears that an adjustment of the taxable amount in the event of non-payment of the price would result in untaxed final consumption are unfounded. Going beyond the deeming provisions in Articles 16 and 26 of the VAT Directive, without payment there is also no ‘final consumption’ to be taxed, because the recipient has not spent any assets on it.

28. A distinction must be made between this substantive basis for charging tax and the method of taxation. Pursuant to Article 63 of the VAT Directive, the VAT claim arises when the goods or the services are supplied. It is not decisive that the recipient has also paid the consideration (‘debit principle’). This method of charging for VAT is clearly based on the assumption that the agreed consideration is generally paid promptly after a supply of goods or services.

29. If, however, as a matter of substantive law only the actual price for goods or services paid by the recipient is taxed, but the method of taxation is based on the agreed price, the two systems must be reconciled at some point. This is ensured by Article 90(1) of the VAT Directive, according to which the initial tax debt of the supplier must be corrected accordingly.

30. Accordingly, it corresponds to the consistent case-law of the Court that Article 90(1) of the VAT Directive is an expression of a fundamental principle of the VAT Directive, according to which the taxable amount is the payment actually received. The corollary of this principle is that the tax authorities may not charge an amount of VAT exceeding the tax paid by the taxable person. ( 12 )

31. Article 90(1) of the VAT Directive consequently represents the necessary counterpart to the method of taxation in Article 63 of the VAT Directive (‘debit principle’). ( 13 ) It obliges the Member State to reduce the taxable amount accordingly. ( 14 )

C. Member States do not have the power to exclude a reduction of the taxable amount in the case of non-payment

32. The Court in its judgment in Goldsmiths therefore decided that a deviation from this fundamental principle in Article 90(1) of the VAT Directive must be justified, so that measures adopted by the Member States on the basis of Article 90(2) of the VAT Directive do not undermine the objective of tax harmonisation. ( 15 )

33. However, in the judgment in Almos Agrárkülkereskedelmi – on which the arguments of the referring court and in particular Poland are based – the Court stated that, in the event of non-payment of the price, taxable persons could not rely on a right to reduction of their taxable amount for VAT under Article 90(1) of the VAT Directive if the Member State concerned intended to apply the derogation provided for in Article 90(2) of that directive. ( 16 ) In that judgment, the Seventh Chamber stated, moreover, that the VAT Directive ‘intended to leave it to each Member State to determine whether the situation of non-payment of the purchase price … leads to an entitlement to have the taxable amount reduced accordingly under conditions it determines, or whether such a reduction is not allowed in that situation’. ( 17 )

34. However, as already stated by the Court in its ruling in Di Maura ( 18 ) and in subsequent rulings, ( 19 ) that judgment must not be interpreted as meaning that it is possible for Member States to exclude any reduction of the VAT taxable amount.

35. Although Article 90(2) of the VAT Directive permits the Member States to derogate from paragraph 1 in the case of total or partial non-payment, the legislative texts for the predecessor provision, the content of which is identical, show, first, that this power was provided for only in order to avoid abuses. ( 20 ) Secondly – as the Court has already held ( 21 ) – this power to derogate, in situations of total or partial non-payment, is based solely on the notion that in certain circumstances and because of the legal situation prevailing in the Member State concerned, non-payment of consideration may be difficult to establish or may only be temporary.

36. It follows that the exercise of such a power to derogate must be justified, so that the measures taken by the Member States for its implementation do not undermine the objective of fiscal harmonisation pursued by the VAT Directive. ( 22 ) It also follows that the power to derogate cannot allow the Member States to exclude altogether reduction of the VAT taxable amount in the event of non-payment. ( 23 )

37. To accept that it is possible for Member States to exclude any reduction of the VAT taxable amount would also run counter to the principle of the neutrality of VAT. This would mean, inter alia, that the trader, as tax collector on behalf of the State, is entirely to be relieved of the burden of tax due or paid in the course of his economic activities, themselves subject to VAT. ( 24 ) In addition, as I have already stated in my opinion in the Di Maura case, ( 25 ) the fundamental rights of the taxable supplier must be considered. They may be interfered with only in a proportionate manner (second sentence of Article 52(1) of the Charter of Fundamental Rights of the European Union). ( 26 )

38. In this respect, it is possible to infer from the case-law of the Court a certain differentiation as to whether and how restrictions to the adjustment of the taxable amount within the meaning of Article 90 of the VAT Directive can be justified. Specifically, the Court distinguishes between substantive aspects (for derogations ( 27 ) within the meaning of Article 90(2) of the VAT Directive) and formal aspects (for conditions ( 28 ) within the meaning of Article 90(1) of the VAT Directive). However, both derogations and conditions provided for by Member States must be proportionate. ( 29 )

39. In this respect, a substantive derogation in the case of non-payment of the price must relate to the uncertainty caused by the fact that ‘non-payment of consideration may be difficult to establish or may only be temporary’. ( 30 )

40. From a formal perspective, however, conditions of a more general nature may be laid down to ensure that the correct amount of tax is collected and fraud is prevented. In this respect, the Court has already ruled, for example, that acknowledgement of receipt of a correcting invoice ( 31 ) by the recipient of the supply or prior notice of the adjustment of the taxable amount ( 32 ) to the recipient of the supply may, in principle, be possible conditions for a reduction of his own tax liability.

D. Justification for restricting an adjustment of the taxable amount

41. In the present case, the Polish legislature made the adjustment of the taxable amount (and thus the tax liability) of the supplier conditional on the fact that the recipient of the supply is still a registered taxpayer who is neither subject to insolvency proceedings nor in liquidation both at the time of supply of the service and on the day preceding the date of filing the adjusted tax return.

42. This does not appear to be merely a formal, general condition for the adjustment of the taxable amount by the taxable supplier. First, the latter has no influence whatsoever on this characteristic, which is why it cannot be considered a mere formality. Secondly, this requirement excludes an adjustment of the taxable amount per se if supplies of goods or services are made to a trader which, although still in existence, is in insolvency or liquidation proceedings.

43. However, the VAT Directive is based on the presumption that such supplies and services are subject to tax. Accordingly, Article 90 of the VAT Directive (see point 30 above) is based, as a fundamental principle, on the presumption that the taxable amount of such supplies of goods and services may be adjusted where all or part of the consideration is not paid. Contrary to the view taken by Poland, the exclusion of this possibility for such supplies and services is therefore not a merely formal condition but a substantive derogation.

44. In order to be permissible, therefore, such a substantive derogation in the case of non-payment of the price would have to relate to the uncertainty caused by the fact that ‘non-payment of consideration may be difficult to establish or may only be temporary’. ( 33 ) This is not the case, however.

45. As already stated by the Court in the A-PACK CZ s.r.o. ( 34 ) case, and as rightly emphasised by the Commission also, the fact that the recipient of the supply is in insolvency proceedings is rather evidence of the definitive nature of the non-payment. The same applies to the fact that the recipient of the supply is in liquidation. It is therefore neither possible nor proportionate to restrict an adjustment of the taxable amount in cases where it is almost certain that the agreed consideration will definitively not be paid.

46. This is all the more true given that, under Polish law, a basic requirement for an adjustment of the taxable amount is a period of 150 days during which no payment has been made despite having fallen due. The question of whether pre-financing of VAT over a period of five months can be regarded as proportionate in any case can be left open here. The reason for this is that, in a case where the consideration has not been paid for 150 days and the recipient of the supply is already in liquidation, there is no longer any uncertainty as to the definitive nature of the non-payment.

47. Even measures which the Member States may adopt under Article 273 of the VAT Directive to ensure the correct collection of the tax and to prevent evasion must likewise not go further than is necessary to attain such objectives and must not undermine the neutrality of VAT. ( 35 ) As already held by the Court, strict liability on the part a taxable person as from a specific date (in this case, the opening of the insolvency or liquidation proceedings) would go beyond what is necessary to preserve the public exchequer’s rights. ( 36 ) There would be strict liability, however, if the taxable supplier could not adjust his tax liability despite non-payment of the price.

48. Furthermore, it is not clear how the restriction of an adjustment of the tax liability as from the point at which a specific event beyond the control of the supplier occurs is supposed to be capable of combating VAT abuse.

49. In conclusion, therefore, Article 90 of the VAT Directive does not allow Member States to exclude the adjustment of the tax liability of the taxable supplier because the recipient of the supply is already subject to insolvency proceedings or in liquidation at the time of the supply or the time of the adjustment.

E. Eliminating the risk of loss of tax revenue

50. In essence, the Polish legislature’s primary concern – as pointed out by the referring court – is to eliminate the risk of loss of tax revenue due to the recipient’s lack of solvency. Poland’s arguments in the present proceedings are therefore essentially based on the functioning of the VAT system and the protection of the financial interests of Poland and also the Union.

51. This is a common problem that exists in many countries. Who should bear the insolvency risk of the recipient of the supply in respect of VAT – the State or the supplier? The reason for this is that if the recipient of the supply is a taxable person himself, the change in the taxable amount of the supplier actually leads to an adjustment of input tax for the recipient of the supply pursuant to Article 185 of the VAT Directive. The latter must also adjust the incorrect input tax deduction – which corresponds to the adjusted tax liability of the supplier. The State then has a tax claim against the recipient of the service.

52. However, this mechanism is unsuccessful if the recipient of the supply is in insolvency proceedings or in liquidation. In such cases, there will generally no longer be sufficient funds available to reimburse the State with the amount of the deduction that has already been claimed. The referring court takes the view that the adjustment of the tax liability by the supplier even ‘interferes with the insolvency proceedings in an impermissible manner’. This meant that, at the expense of the tax authorities, a creditor of the debtor is satisfied and compensated by the State. This delineates the risk of a loss of tax revenue for the Member State, even if the line of argument largely comes to nothing. The supplier is also not satisfied. His claim is also lost, as are those of the other creditors. Only the State acts as a creditor in respect of the input tax adjustment claim, which, however, is generally worthless.

53. Ultimately, however, this risk of loss of tax revenue, that is to say the risk of harm to the financial interests of the Union and Poland, results solely from a very literal interpretation of Article 167 of the VAT Directive. The wording of this provision links the right of deduction of the recipient of the supply solely to the incurring of tax liability by the supplier. Therefore, the recipient of the supply already has a right of deduction before payment is made (‘immediate deduction’). ( 37 )

54. This immediate deduction should be applied in order to limit the risk of default for the State and thus take account of the interests of the Member States and the Union in the effective collection of VAT. This is because Member States are free to adjust the deduction promptly in the event of non-payment of the consideration rather than reverting to using the recipient of the supply as an ‘insolvency guarantor’.

55. The rule in Article 167 of the VAT Directive is based on the notion that the recipient of a supply of goods or services will pay for it promptly and will therefore also be charged input tax promptly. There is therefore a presumption that VAT will be charged promptly. The wording does not indicate whether, on the other hand, the intention is for relief to be provided by means of deductions over a period of years even if no VAT has been charged.

56. That would also run counter the purpose of the deduction system. This is because the deduction system allows the deduction of only the sums paid by each taxable person to his own suppliers in respect of VAT on the corresponding transaction. ( 38 ) Before such a payment is made, no tax has been charged ( 39 ) and the ‘refund’ of input tax that has not yet been paid is merely a form of subsidy. ( 40 )

57. Furthermore, such a right of deduction existing for several years until the supplier adjusts the tax liability would be open to abuse by the recipient of the supply. This would be contrary to the principles underlying Article 273 of the VAT Directive, which allows Member States to provide for obligations to ensure that the correct amount of tax is collected. Such an unlimited right of deduction without there being a VAT burden is inconsistent in particular with the spirit of Article 325 TFEU, according to which the Member States must protect the financial interests of the Union.

58. In particular, Article 185(1) of the VAT Directive provides for an adjustment of deductions inter alia where, after the VAT return is made, some change occurs in the factors used to determine the amount to be deducted. In the case of non-payment, Member States may even require adjustment to be made (paragraph 2). This possibility is detached from the circumstance of whether the supplier has already adjusted his tax liability. Thus, pursuant to the second sentence of Article 185(2) of the VAT Directive, Member States may provide that the recipient of a supply who has not paid the consideration and has therefore not been charged VAT is obliged to adjust his deduction at the earliest opportunity pursuant to Article 185 of the VAT Directive.

59. In that context, the end of a tax period is a reasonable period in which to verify the presumption underlying the immediate deduction of input tax that the recipient of the supply will pay in the near future. At the time of the next tax return for the next tax period (generally one month later), it will be clear whether the input tax deduction made has been made in error up to now from a substantive perspective (as no VAT has been charged). This confines the systemic risk of a loss of tax revenue to that one tax period.

60. In this respect, the tax creditor (in this case Poland) does not have to wait until the recipient of the supply is in insolvency proceedings or in liquidation, but can already anticipate the risk to tax revenue at an earlier point.

61. If the recipient of the supply does actually pay the consideration to the taxable supplier at a later point, there is a new change in the factors used to determine the amount to be deducted. Therefore, a new adjustment is made pursuant to Article 185(1) of the VAT Directive. This ensures that the recipient of the supply is relieved of the burden of VAT as soon as it becomes a cost factor for him. This is perfectly in line with the principle of neutrality of VAT as developed and interpreted by the Court. ( 41 )

62. Therefore, the solution to the problem in cases involving the non-payment of the consideration between two taxable persons, as described by the referring court, is not to be found in a restriction of the adjustment of the tax liability for the taxable supplier, but in a more rapid correction of an input tax deduction without the recipient of the supply being charged input tax.

V. Conclusion

63. I therefore propose that the Court answer the questions referred for a preliminary ruling by the Naczelny Sąd Administracyjny (Supreme Administrative Court, Poland) as follows: Article 90 of Council Directive 2006/112/EC 28 November 2006 on the common system of value added tax does not allow Member States to exclude the adjustment of the tax liability of the taxable supplier because the recipient of the supply is already subject to insolvency proceedings or in liquidation at the time of the supply or the time of the adjustment. However, in the case of transactions remaining partially unpaid, Article 185(2) of that directive does allow Member States to require that the input tax deduction be adjusted in the next tax period.

( 1 ) Original language: German.

( 2 ) In this regard, see for instance judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887), of 2 July 2015, NLB Leasing (C‑209/14, EU:C:2015:440), of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131), of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328), of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339).

( 3 ) In this regard see, inter alia, judgments of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 23), of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21), and of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

( 4 ) OJ 2006 L 347, p. 1.

( 5 ) Regarding this legal consequence, see, for example: judgment of 14 February 2019, Vetsch Int. Transporte (C‑531/17, EU:C:2019:114, paragraph 45).

( 6 ) Judgment of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328, paragraph 25).

( 7 ) Particularly by the judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20 et seq.), of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 35 et seq.), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 20 et seq.).

( 8 ) Judgments of 7 November 2013, Tulică and Plavoşin (C‑249/12 and C‑250/12, EU:C:2013:722, paragraph 34), and of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19), and order of 9 December 2011, Connoisseur Belgium (C‑69/11, not published, EU:C:2011:825, paragraph 21).

( 9 ) Judgments of 21 February 2008, Netto Supermarkt (C‑271/06, EU:C:2008:105, paragraph 21), and of 20 October 1993, Balocchi (C‑10/92, EU:C:1993:846, paragraph 25).

( 10 ) See judgments of 3 March 2020, Vodafone Magyarország (C‑75/18, EU:C:2020:139, paragraph 62), of 11 October 2007, KÖGÁZ and Others (C‑283/06 and C‑312/06, EU:C:2007:598, paragraph 37, ‘it is proportional to the price charged by the taxable person in return for the goods and services which he has supplied’), and of 18 December 1997, Landboden-Agrardienste (C‑384/95, EU:C:1997:627, paragraphs 20 and 23).

( 11 ) Judgment of 24 October 1996, Elida Gibbs (C‑317/94, EU:C:1996:400, paragraph 19), and, similarly, also the judgments of 16 January 2003, Yorkshire Co-operatives (C‑398/99, EU:C:2003:20, paragraph 19), and of 15 October 2002, Commission v Germany (C‑427/98, EU:C:2002:581, paragraph 30), and also the Opinion of Advocate General Léger in MyTravel (C‑291/03, EU:C:2005:283, point 69).

( 12 ) Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraph 37), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 17), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 29), of 20 December 2017, Boehringer Ingelheim Pharma (C‑462/16, EU:C:2017:1006, paragraph 32), of 2 July 2015, NLB Leasing (C‑209/14, EU:C:2015:440, paragraph 35), of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131, paragraph 37), of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 27), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 15).

( 13 ) The same function is contained in Articles 184 and 185 of the VAT Directive, which represents the counterpart to the deduction on a debit principle under Articles 168 and 178 of the VAT Directive and corrects a deduction which was initially too high. Article 185(2) of the VAT Directive in particular allows deductions to be adjusted to ensure that they correspond to the actual VAT charged. The customer, who pays no VAT in the absence of his payment of the consideration, is also not required to be relieved of a (notional) charge by means of a deduction.

( 14 ) See also, expressly, judgments of 3 September 2014, GMAC UK (C‑589/12, EU:C:2014:2131, paragraph 31), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 26).

( 15 ) Judgment of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

( 16 ) Judgment of 15 May 2014 (C‑337/13, EU:C:2014:328, paragraph 23).

( 17 ) Judgment of 15 May 2014, Almos Agrárkülkereskedelmi (C‑337/13, EU:C:2014:328, paragraph 25).

( 18 ) Judgment of 23 November 2017 (C‑246/16, EU:C:2017:887, paragraph 20 et seq., in particular paragraph 23).

( 19 ) Judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20 et seq.), and of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 35 et seq.).

( 20 ) See p. 15 of the explanatory memorandum of the Commission proposal of 20 June 1973 (COM(73) 950 final) on Article 12 (taxable amount).

( 21 ) Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraph 54 et seq.), of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 19), of 22 February 2018, T‑2 (C‑396/16, EU:C:2018:109, paragraph 37), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 17), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

( 22 ) See judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), of 22 February 2018, T‑2 (C‑396/16, EU:C:2018:109, paragraph 38), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 18), and of 3 July 1997, Goldsmiths (C‑330/95, EU:C:1997:339, paragraph 18).

( 23 ) Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraphs 20 and 21).

( 24 ) Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 20), and of 23 November 2017 (Di Maura, C‑246/16, EU:C:2017:887, paragraph 23).

( 25 ) My Opinion in the Di Maura case (C‑246/16, EU:C:2017:440, point 45 et seq.).

( 26 ) The pre-financing of VAT affects the freedom to choose an occupation, to conduct a trade, and the basic right to property (Articles 15, 16 and 17 of the Charter). In addition, in accordance with Article 20 of the Charter, there is possible discrimination against a trader for whom VAT only becomes chargeable in accordance with Article 66(b) of the VAT Directive when payment is received (‘money received basis’).

( 27 ) Judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 21), of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 37 et seq.), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

( 28 ) Judgments of 3 July 2019, UniCredit Leasing (C‑242/18, EU:C:2019:558, paragraphs 38 and 39), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 32 et seq.), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 23 et seq.).

( 29 ) See judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 26), of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraph 33), of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 25), and of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 28).

( 30 ) See expressly judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 23) and, similarly, judgments of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 40), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

( 31 ) Judgment of 26 January 2012, Kraft Foods Polska (C‑588/10, EU:C:2012:40, paragraph 25) – provided that this is possible without significant effort or expense.

( 32 ) Judgment of 6 December 2018, Tratave (C‑672/17, EU:C:2018:989, paragraphs 35 and 36). However, the question of the subsequent provision of lacking information was not addressed.

( 33 ) See expressly judgments of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 23), and see also judgments of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 40), and of 23 November 2017, Di Maura (C‑246/16, EU:C:2017:887, paragraph 22).

( 34 ) Judgment of 8 May 2019, A-PACK CZ (C‑127/18, EU:C:2019:377, paragraph 24)).

( 35 ) See, inter alia, judgment of 9 July 2015, Salomie and Oltean (C‑183/14, EU:C:2015:454, paragraph 62 and the case-law cited).

( 36 ) Judgment of 6 December 2012, Bonik (C‑285/11, EU:C:2012:774, paragraph 42), and of 21 June 2012, Mahagében (C‑80/11 and C‑142/11, EU:C:2012:373, paragraph 48).

( 37 ) This is in line with the case‑law of the Court – see, for example, judgment of 28 July 2011, Commission v Hungary (C‑274/10, EU:C:2011:530, paragraph 48).

( 38 ) For example, judgment of 22 February 2018, T – 2 (C‑396/16, EU:C:2018:109, paragraph 24 and the case-law cited). See also judgment of 29 April 2004, Terra Baubedarf-Handel (C‑152/02, EU:C:2004:268, end of paragraph 35). It is true that in the German version of that judgment the Court uses the wording ‘abgeführt hat’ (‘has been paid’ in the English version). However, since it is referring to the recipient of the supply who pays that VAT not to the tax office but to the service provider, it is clearly the latter that is meant. The French version also uses the phrase ‘avoir été acquittée’, which can also be naturally translated correctly as ‘gezahlt wurde’ (‘has been paid’). This becomes particularly clear in paragraph 36 – in which it is also correctly translated.

( 39 ) See also the Opinion of Advocate General Campos Sánchez-Bordona in Volkswagen (C‑533/16, EU:C:2017:823, point 64): ‘It is not possible to separate deduction from payment of the tax: if the taxable person has not paid the tax … there is no legal or financial basis on which to exercise the right.’ See also my Opinion in Biosafe – Indústria de Reciclagens (C‑8/17, EU:C:2017:927, point 44).

( 40 ) See, in very clear terms, H. Stadie in Rau/Dürrwächter, UStG, § 15 Anm. 87 – Version: May 2019.

( 41 ) Judgments of 13 March 2014, Malburg (C‑204/13, EU:C:2014:147, paragraph 41), and of 3 March 2005, Fini H (C‑32/03, EU:C:2005:128, paragraph 25 and the case-law cited).