CELEX: 62009CJ0438
Language: en
Date: 2010-12-22 00:00:00
Title: Judgment of the Court (Third Chamber) of 22 December 2010.#Bogusław Juliusz Dankowski v Dyrektor Izby Skarbowej w Łodzi.#Reference for a preliminary ruling from Naczelny Sąd Administracyjny.#Case C-438/09.

Case C-438/09
      Bogusław Juliusz Dankowski
      v
      Dyrektor Izby Skarbowej w Łodzi
      (Reference for a preliminary ruling from the 
      Naczelny Sąd Administracyjny)
      (Sixth VAT Directive – Right to deduct input VAT – Services provided – Taxable person not registered for VAT – Details required on the VAT invoice – National tax legislation – Exclusion of right to deduct under Article 17(6) of the Sixth VAT Directive)
      Summary of the Judgment
      1.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Deduction
            by a taxable person having paid that tax in respect of services supplied by another taxable person not registered for that
            tax – Condition – Invoice drawn up by that supplier containing all the required information 
      (Council Directive 77/388, Arts 18(1)(a), and 22(3)(b))
      2.        Tax provisions – Harmonisation of laws – Turnover taxes – Common system of value added tax – Deduction of input tax – Exclusions
            of right to deduct – Option for Member States to retain exclusions existing on entry into force of the Sixth Directive – National
            legislation excluding the right to deduct tax paid by a taxable person to another taxable person on the ground that the latter
            is not registered for that tax – Not permissible
      (Council Directive 77/388, Art. 17(6))
      1.        Articles 18(1)(a) and 22(3)(b) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating
         to turnover taxes - Common system of value added tax: uniform basis of assessment, as amended by Directive 2006/18, must be
         interpreted as meaning that a taxable person has the right to deduct value added tax paid in respect of services supplied
         by another taxable person who is not registered for that tax, when the relevant invoices contain all the information required
         by Article 22(3)(b), in particular the information needed to identify the person who drew up those invoices and to ascertain
         the nature of the services provided.
      
      If the competent tax authority has the information necessary to establish that the taxable person is, as the recipient of
         marketing services, liable to VAT, it cannot impose, in relation to the right of that taxable person to deduct input tax,
         additional conditions that may have the effect of rendering that right ineffective for practical purposes 
      
      Accordingly, any failure by the service provider to meet the requirement stated in Article 22(1) of the Sixth Directive cannot
         call in question the right of deduction to which the recipient of those services is entitled under Article 17(2) of that directive.
      
      (see paras 35-36, 38, operative part 1)
      2.        Article 17(6) of the Sixth Directive 77/388 on the harmonisation of the laws of the Member States relating to turnover taxes,
         as amended by Directive 2006/18, must be interpreted as precluding national legislation which excludes the right to deduct
         value added tax paid by a taxable person to another taxable person, who has provided services, when the latter has not registered
         for the purposes of that tax.
      
      The power granted to the Member States in Article 17(6) of the Sixth Directive does not constitute an unfettered discretion
         to exclude all, or virtually all, goods and services from the right to deduct value added tax, and thus to render meaningless
         the system established by the provisions of that Directive. That power does not therefore apply to general exclusions and
         does not release Member States from the obligation sufficiently to define the goods and services in relation to which the
         right to deduct is excluded.
      
      (see paras 41, 47, operative part 2)
JUDGMENT OF THE COURT (Third Chamber)
      22 December 2010 (*)
      
      (Sixth VAT Directive – Right to deduct input VAT – Services provided – Taxable person not registered for VAT – Details required on the VAT invoice – National tax legislation – Exclusion of right to deduct under Article 17(6) of the Sixth VAT Directive)
      In Case C‑438/09,
      REFERENCE for a preliminary ruling under Article 234 EC from the Naczelny Sąd Administracyjny (Poland), made by decision of
         14 July 2009, received at the Court on 9 November 2009, in the proceedings
      
      Bogusław Juliusz Dankowski
      v
      Dyrektor Izby Skarbowej w Łodzi,
      
      THE COURT (Third Chamber),
      composed of K. Lenaerts, President of the Chamber, D. Šváby, R. Silva de Lapuerta (Rapporteur), E. Juhász and T. von Danwitz,
         Judges,
      
      Advocate General: P. Mengozzi,
      Registrar: K. Malacek, Administrator,
      having regard to the written procedure and further to the hearing on 11 November 2010,
      after considering the observations submitted on behalf of:
      –        Bogusław Juliusz Dankowski, by R. Grzejszczak, J. Skrzydło, T. Grzejszczak and A. Kania, adwokaci,
      –        the Polish Government, by A. Kramarczyk, M. Szpunar and B. Majczyna, acting as Agents,
      –        the German Government, by C. Blaschke and J. Möller, acting as Agents,
      –        the Greek Government, by Z. Chatzipavlou, D. Tsagkaraki and K. Georgiadis, acting as Agents,
      –        the European Commission, by D. Triantafyllou, A. Stobiecka‑Kuik and K. Herrmann, acting as Agents,
      having decided, after hearing the Advocate General, to proceed to judgment without an Opinion, 
      gives the following
      Judgment
      1        This reference for a preliminary ruling concerns the interpretation of Article 17(2) and (6) and Articles 18 and 22 of the
         Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of the Member States relating to turnover
         taxes ‑ Common system of value added tax: uniform basis of assessment (OJ 1977 L 145, p. 1), in the version in force at the
         material time.
      
      2        The reference has been made in proceedings between Mr Dankowski and the Dyrektor Izby Skarbowej w Łodzi (the Director of the
         Łodź tax chamber) concerning a restriction imposed on the right to deduct value added tax (‘VAT’).
      
       Legal context 
       European Union law
      3        Under Article 2 of the Sixth Directive:
      
      ‘The following shall be subject to value added tax:
      1.      the supply of goods or services effected for consideration within the territory of the country by a taxable person acting
         as such;
      
      …’.
      4        Article 4 of that Directive provides:
      
      ‘1      “Taxable person” shall mean any person who independently carries out in any place any economic activity specified in paragraph
         2, whatever the purpose or results of that activity.
      
      2.      The economic activities referred to in paragraph 1 shall comprise all activities of producers, traders and persons supplying
         services including mining and agricultural activities and activities of the professions. …
      
      …’.
      5        Under Article 17 of the Sixth Directive:
      
      ‘1.      The right to deduct shall arise at the time when the deductible tax becomes chargeable.
      2.      In so far as the goods and services are used for the purposes of his taxable transactions, the taxable person shall be entitled
         to deduct from the tax which he is liable to pay:
      
      (a)      [VAT] due or paid within the territory of the country in respect of goods or services supplied or to be supplied to him by
         another taxable person;
      
      …
      6.      Before a period of four years at the latest has elapsed from the date of entry into force of this Directive, the Council,
         acting unanimously on a proposal from the Commission, shall decide what expenditure shall not be eligible for a deduction
         of value added tax. Value added tax shall in no circumstances be deductible on expenditure which is not strictly business
         expenditure, such as that on luxuries, amusements or entertainment. 
      
      Until the above rules come into force, Member States may retain all the exclusions provided for under their national laws
         when this Directive comes into force.
      
      …’.
      6        Article 18(1)(a) of the Sixth Directive provides:
      
      ‘To exercise his right to deduct, the taxable person must:
      (a)      in respect of deductions under Article 17(2)(a), hold an invoice drawn up in accordance with Article 22(3) ...’.
      7        In accordance with Article 22(1) of that directive:
      
      ‘(a)      Every taxable person shall state when his activity as a taxable person commences, changes or ceases. …
      …
      (c)      Member States shall take the measures necessary to identify by means of an individual number:
      –        Every taxable person … who, within the territory of the country, effects supplies of goods or of services giving him the right
         of deduction, other than supplies of goods or of services for which tax is payable solely by the customer or the recipient
         …’.
      
      8        Article 22(3) of the Sixth Directive is worded as follows:
      
      ‘(a)      Every taxable person shall ensure that an invoice is issued … in respect of … services which he has supplied or rendered to
         another taxable person …
      
      (b)      Without prejudice to the specific arrangements laid down by this Directive, only the following details are required for VAT
         purposes on invoices issued under … point (a) …:
      
      –        the date of issue;
      –        a sequential number …;
      –        the VAT identification number referred to in paragraph 1(c) under which the taxable person supplied the … services;
      –        [where the customer is liable to pay tax on goods supplied or services rendered]… the [customer’s] VAT identification number
         referred to in paragraph 1(c) under which the …..services [were] rendered to him …,
      
      –        the full name and address of the taxable person and of his customer,
      –        the quantity and nature … of the services rendered,
      –        the date on which the supply … of services was made or completed …,
      –         …’
      9        Article 22(8) of the Sixth VAT Directive provides:
      
      ‘Member States may impose other obligations which they deem necessary for the correct collection of the tax and for the prevention
         of evasion …
      
      The option provided for in the first subparagraph cannot be used to impose additional obligations over and above those laid
         down in paragraph 3.’
      
       National legislation
      10      Article 96 of the Law of 11 March 2004 on the tax on goods and services (ustawa o podatku od towarów i usług), in the version
         applicable to the facts of the main proceedings, provides that taxable persons are required, before commencing their activity,
         to submit to the competent tax authority, an application for registration.
      
      11      Article 88(3)(1)(a) of that Law provides that invoices cannot form the basis for the right to deduct tax payable and for a
         refund of the tax difference or for a refund of input tax, where the sale is supported by invoices issued by a trader who
         does not exist or is not entitled to issue invoices.
      
      12      The order for the implementation of that Law, adopted by the Minister for Finance, provides that taxable persons registered
         as active taxable persons for the purposes of VAT who hold a tax identification number are to issue invoices marked with the
         words ‘VAT invoice’.
      
      13      Article 48(4)(1)(a) of that order provides that, where the sale of goods or services is supported by invoices issued by a
         trader who does not exist or is not entitled to issue invoices, such invoices cannot serve as the basis for the right to deduct
         tax payable and for a refund of the tax difference or for a refund of input tax.
      
       The dispute in the main proceedings and the questions referred for a preliminary ruling
      14      Mr Dankowski, the applicant in the main proceedings, is the owner of an undertaking named Dan‑Trak. Between 2004 and 2006,
         a Mr Płacek, the manager of an undertaking named Artem‑Studio, supplied him with a number of taxable marketing services. However,
         Mr Płacek had neither complied with the requirement to register for the tax on goods and services, nor paid VAT, although
         he had issued invoices documenting the services provided and specifying the tax payable.
      
      15      By decision of 23 March 2007 the Dyrektor Izby Skarbowej w Łodzi, while not questioning that the services concerned had been
         provided, refused Mr Dankowski the right to deduct the input VAT, as detailed on the invoices drawn up by Mr Płacek.
      
      16      The stated grounds for that decision were that the person who had issued the invoices concerned was not registered as a taxable
         person for VAT and that, because of the failure to comply with the requirement of registration imposed by the relevant provisions
         of national law, the invoices issued by that trader did not give rise to a right to deduct the input VAT.
      
      17      Mr Dankowski then brought before the Wojewódzki Sąd Administracyjny w Łodzi (the Łódź administrative court) an action for
         annulment of that decision. In support of his action, Mr Dankowski claimed, inter alia, that the registration of a trader
         as a taxable person liable to pay VAT is no more than a technicality which can have no effect on the right to deduct input
         tax.
      
      18      By judgment of 4 December 2007 the Wojewódzki Sąd Administracyjny w Łodzi dismissed the action. 
      
      19      In an appeal on a point of law brought before the Naczelny Sąd Administracyjny, Mr Dankowski relied, inter alia, on the fact
         that the application of the provisions of Polish tax law was not compatible with European Union law, and he claimed that Article
         17(6) of the Sixth Directive had been interpreted incorrectly.
      
      20      In those circumstances, the Naczelny Sąd Administracyjny decided to stay the proceedings and to refer to the Court the following
         questions for a preliminary ruling:
      
      ‘(1)      Do the rules of the [VAT] system, in particular Article 17(6) of the Sixth Directive … preclude legislation of a Member State
         under which a taxable person does not acquire the right to deduct input tax arising from a VAT invoice issued by a trader
         who is not registered as a taxable person for the purposes of the tax on goods and services? 
      
      (2)      Is it relevant to the answer to the first question that:
      (a)      there is no doubt that the transactions indicated on the VAT invoice are subject to VAT and that they have actually been carried
         out;
      
      (b)      the invoice contained all the details required under Community legislation;
      (c)      the restriction on the taxable person’s right to deduct input tax arising from an invoice issued by an unregistered trader
         operated in national law prior to the date on which the Republic of Poland acceded to the Community?
      
      (3)      Does the answer to the first question depend on additional criteria being satisfied (for example, proof that the taxable person
         acted in good faith)?’
      
       Consideration of the questions referred for a preliminary ruling
      21      By the three questions referred, which can be examined together, the referring court asks, in essence, whether, in the circumstances
         of the main proceedings and taking into consideration Articles 18(1)(a) and 22(3)(b) of the Sixth Directive, a taxable person
         has the right of deduction in respect of VAT paid on services supplied by another taxable person who is not registered for
         VAT purposes and, if the answer is that he does, whether Article 17(6) of that directive precludes national legislation which
         excludes the right of deduction where services have been supplied by such a taxable person.
      
       The first part of the questions referred for a preliminary ruling
      22      It must be borne in mind, first, that, the right of deduction provided for in Article 17(2) of the Sixth Directive is an integral
         part of the VAT scheme and in principle may not be limited (see Case C‑409/99 Metropol and Stadler [2002] ECR I‑81, paragraph 42, and Case C‑465/03 Kretztechnik [2005] ECR I‑4357, paragraph 33). 
      
      23      The right to deduct is exercisable immediately in respect of all the taxes charged on input transactions (see Case C‑437/06
         Securenta [2008] ECR I‑1597, paragraph 24; Case C‑102/08 SALIX Grundstücks-Vermietungsgesellschaft [2009] ECR I‑4629, paragraph 70, and Case C‑29/08 SKF [2009] ECR I‑10413, paragraph 55).
      
      24      The deduction system thus established is intended to relieve the trader entirely of the burden of the VAT payable or paid
         in the course of all his economic activities. The common system of VAT consequently ensures neutrality of taxation of all
         economic activities, whatever their purpose or results, provided that they are themselves subject in principle to VAT (see
         Case C‑137/02 Faxworld [2004] ECR I‑5547, paragraph 37, and SKF, paragraph 56).
      
      25      As regards the dispute in the main proceedings, it is common ground that the services concerned were provided by a trader
         as input transactions and that those services were used by the applicant in the main proceedings for the purposes of his taxed
         output transactions.
      
      26      Consequently, the substantive conditions governing the origin of the right of deduction, provided for in Article 17(2) of
         the Sixth Directive, are satisfied.
      
      27      As regards the rules governing the exercise of the right of deduction, Article 18(1)(a) of the Sixth Directive provides that
         the taxable person must hold an invoice drawn up in accordance with Article 22(3) of that directive.
      
      28      Article 22(3)(b) lists the details which are required, for the purposes of VAT, on invoices issued in accordance with the
         provisions of Article 22(3)(a) of the Sixth Directive, the latter provision stating that every taxable person must ensure
         that an invoice is issued in respect of services supplied by him to another taxable person.
      
      29      As regards the details listed in Article 22(3)(b) of the Sixth Directive, the referring court has found that the invoices
         submitted by the applicant in the main proceedings contain all the information required by that provision. It is apparent
         in particular from the documents submitted to the Court, and from the information provided by the Polish Government at the
         hearing, that those invoices contained the tax identification number of the person providing the services concerned, that
         number being automatically allocated to traders by the Polish tax authorities, irrespective of whether an application for
         registration has been submitted by them.
      
      30      Even though that provision refers to the ‘VAT identification number’, it is clear that the tax identification number allocated
         in this particular case ensures that the taxable person concerned can be identified and therefore is such as to meet the requirements
         of the third indent of Article 22(3)(b) of the Sixth Directive.
      
      31      However, as observed by the referring court, although that service provider issued invoices relating to the services supplied
         to the applicant in the main proceedings, he had not applied for registration with the competent authority for the purposes
         of VAT. 
      
      32      Article 22(1) of the Sixth Directive provides that every taxable person is to declare when his taxable activity is to commence.
      
      33      However, notwithstanding the importance of such registration if the VAT system is to operate properly, a failure on the part
         of a taxable person to meet that requirement cannot impinge on the right of deduction conferred on another taxable person
         by Article 17(2) of the Sixth Directive. 
      
      34      Article 22(1) of the Sixth Directive provides only that there is an obligation on taxable persons to state when their activity
         commences, changes or ceases, but that provision in no way authorises Member States, in the event of such a declaration not
         being submitted, to defer the exercise of the right to deduct until the time at which taxable transactions actually begin
         to be carried out on a regular basis, or to deprive the taxable person of that right (see Joined Cases C‑110/98 to C‑147/98
         Gabalfrisa and Others [2000] ECR I‑1577, paragraph 51, and Case C‑385/09 Nidera Handelscompagnie [2010] ECR I‑0000, paragraph 48).
      
      35      Therefore, where the competent tax authority has the information necessary to establish that the taxable person is, as the
         recipient of marketing services, liable to VAT, it cannot impose, in relation to the right of that taxable person to deduct
         input tax, additional conditions which may have the effect of rendering that right ineffective for practical purposes (see
         Joined Cases C‑95/07 and C‑96/07 Ecotrade [2008] ECR I‑3457, paragraph 64, and Case C‑392/09 Uszodaépítő [2010] ECR I‑0000, paragraph 40).
      
      36      Accordingly, any failure by the service provider to meet the requirement stated in Article 22(1) of the Sixth Directive cannot
         call in question the right of deduction to which the recipient of those services is entitled under Article 17(2) of that directive.
      
      37      The same is true of Article 22(8) of the Sixth Directive, pursuant to which the Member States may impose other obligations
         which they deem necessary for the correct collection of the tax and for the prevention of evasion. Although that provision
         allows Member States to take certain measures, those measures must not however go further than is necessary to attain that
         objective and may not therefore be used in such a way that they would have the effect of systematically undermining the right
         to deduct VAT, which is a fundamental principle of the common system of VAT (see Joined Cases C‑286/94, C‑340/95, C‑401/95
         and C‑47/96 Molenheide and Others [1997] ECR I‑7281, paragraph 47, Gabalfrisa and Others, paragraph 52 and Ecotrade, paragraphs 65 and 66).
      
      38      It follows from the foregoing that Articles 18(1)(a) and 22(3)(b) of the Sixth Directive must be interpreted as meaning that
         a taxable person has the right to deduct VAT paid in respect of services supplied by another taxable person who is not registered
         for VAT, where the relevant invoices contain all the information required by Article 22(3)(b), in particular the information
         needed to identify the person who drew up those invoices and to ascertain the nature of the services provided.
      
       The second part of the questions referred for a preliminary ruling
      39      Consequently, since, pursuant to the Sixth Directive, the applicant in the main proceedings has the right of deduction, the
         referring court seeks to ascertain whether Article 17(6) of the Sixth Directive must be interpreted as precluding national
         legislation which excludes the right to deduct VAT paid by a taxable person to another taxable person, who has provided services,
         where the latter is not registered for VAT.
      
      40      In that regard, it must be borne in mind that that provision is a derogation which enables, in certain circumstances, Member
         States to retain their existing legislation in respect of exclusion from the right of deduction, as at the date of entry into
         force of the Sixth Directive for the Member State concerned, until such time as the Council has adopted the provisions envisaged
         by that article (see Case C‑371/07 Danfoss and AstraZeneca [2008] ECR I‑9549, paragraph 28, and Joined Cases C‑538/08 and C‑33/09 X Holding and Oracle Nederland [2010] ECR I‑0000, paragraph 38).
      
      41      As regards the scope of that provision, the Court has held that the power granted to the Member States in Article 17(6) of
         the Sixth Directive does not constitute an unfettered discretion to exclude all, or virtually all, goods and services from
         the right to deduct VAT, and thus to render meaningless the system established in Article 11(1) of that Directive. That power
         does not therefore apply to general exclusions and does not release Member States from the obligation sufficiently to define
         the goods and services in relation to which the right to deduct is excluded (see Case C‑305/97 Royscot and Others [1999] ECR I‑6671 paragraphs 22 and 24; Case C‑434/03 Charles and Charles-Tijmens [2005] ECR I‑7037, paragraphs 33 and 35, and Case C‑395/09 Oasis East [2010] ECR I‑0000, paragraph 23).
      
      42      Furthermore, as the scheme here involves a derogation from the principle of the right to deduct VAT, it must be interpreted
         strictly (see Case C‑414/07 Magoora [2008] ECR I‑10921, paragraph 28, and Oasis East, paragraph 24).
      
      43      So far as concerns the main proceedings and the possible applicability of the derogation provided for in Article 17(6) of
         the Sixth Directive to the present case, it must be noted that that directive entered into force in Poland on the date of
         the accession of that Member State to the European Union, namely 1 May 2004. Therefore, that is the material date for the
         purposes of the application of the abovementioned provision in respect of that Member State (Oasis East, paragraph 25).
      
      44      For the purposes of assessing the national legislation at issue in the main proceedings in the light of Article 17(6) of the
         Sixth Directive and the abovementioned case‑law, it is clear that that legislation constitutes a general measure which excludes
         the right to deduct input VAT in relation to any transaction carried out by a taxable person who has not complied with the
         requirement of registration for the purposes of VAT.
      
      45      However, such legislation entails a restriction on the right to deduct VAT which goes beyond what is authorised by Article
         17(6) of the Sixth Directive.
      
      46      The Court has ruled that the Member States are not empowered to maintain exclusions from the right to deduct VAT which apply
         in a general manner to any expenditure related to the acquisition of goods or services (Case C‑74/08 PARAT Automotive Cabrio [2009] ECR I‑3459, paragraphs 28 and 29, and Oasis East, paragraph 30).
      
      47      It follows from all of the foregoing that Article 17(6) of the Sixth Directive must be interpreted as precluding national
         legislation which excludes the right to deduct VAT paid by a taxable person to another taxable person, who has provided services,
         where the latter has not registered for the purposes of that tax.
      
       Costs
      48      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court,
         the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs
         of those parties, are not recoverable.
      
      On those grounds, the Court (Third Chamber) hereby rules:
      1.      Articles 18(1)(a) and 22(3)(b) of the Sixth Council Directive 77/388/EEC of 17 May 1977 on the harmonisation of the laws of
            the Member States relating to turnover taxes - Common system of value added tax: uniform basis of assessment, as amended by
            Council Directive 2006/18/EC of 14 February 2006, must be interpreted as meaning that a taxable person has the right to deduct
            value added tax paid in respect of services supplied by another taxable person who is not registered for that tax, where the
            relevant invoices contain all the information required by Article 22(3)(b), in particular the information needed to identify
            the person who drew up those invoices and to ascertain the nature of the services provided.
      2.      Article 17(6) of the Sixth Directive 77/388 as amended by Directive 2006/18 must be interpreted as precluding national legislation
            which excludes the right to deduct value added tax paid by a taxable person to another taxable person, who has provided services,
            where the latter has not registered for the purposes of that tax.
      [Signatures]
      * Language of the case: Polish.