Radu Florin Salomie and Nicolae Vasile Oltean v Direcția Generală a Finanțelor Publice Cluj.
Date: 2015-07-09
30. According to settled case-law of the Court, the principles of legal certainty and of the protection of legitimate expectations must be observed not only by the EU institutions, but also by Member States in the exercise of the powers conferred on them under EU directives (see, to that effect, inter alia, judgments in Gemeente Leusden and Holin Groep , C‑487/01 and C‑7/02, EU:C:2004:263, paragraph 57; in ‘ Goed Wonen ’, C‑376/02, EU:C:2005:251, paragraph 32; and in Elmeka NE , C‑181/04 to C‑183/04, EU:C:2006:563, paragraph 31).
31. As the Court has held on numerous occasions, it follows, inter alia, that EU legislation must be certain and its application foreseeable by those who are subject to it. That requirement of legal certainty must be observed all the more strictly in the case of rules liable to entail financial consequences, in order that those concerned may know precisely the extent of the obligations which those rules impose on them (judgment in Ireland  v Commission , 325/85, EU:C:1987:546, paragraph 18).
32. Similarly, in areas covered by EU law, the legal rules of the Member States must be worded unequivocally so as to give the persons concerned a clear and precise understanding of their rights and obligations and to enable national courts to ensure that those rights and obligations are observed (see judgment in Commission  v Italy , 257/86, EU:C:1988:324, paragraph 12).
40. It also follows, admittedly, from the principle of legal certainty that the tax position of the taxable person cannot be open to challenge indefinitely (see, to that effect, judgment in Fatorie , C‑424/12, EU:C:2014:50, paragraph 46).
41. However, the Court has already held that the principle of legal certainty does not preclude a practice of the national tax authorities whereby, within a limitation period, they revoke a decision by which they granted the taxable person the right to deduct VAT and subsequently, following a fresh investigation, order him to pay that tax together with default interest (see, to that effect, judgment in Fatorie , C‑424/12, EU:C:2014:50, paragraphs 51).
44. In the second place, in relation to the principle of the protection of legitimate expectations, the right to rely on that principle extends to any person in a situation in which an administrative authority has caused that person to entertain expectations which are justified by precise assurances provided to him (see, to that effect, judgment in Europäisch-Iranische Handelsbank  v Council , C‑585/13 P, EU:C:2015:145, paragraph 95).
45. In this regard, it is necessary to determine whether the conduct of an administrative authority has given rise to a reasonable expectation in the mind of a prudent and well-informed trader and, if it did, the legitimate nature of that expectation must then be established (see, to that effect, judgment in Elmeka , C‑181/04 to C‑183/04, EU:C:2006:563, paragraph 32 and the case-law cited).
50. As regards, in the third and final place, the conformity with EU law of the surcharges applied in this case by the tax authority, it must be borne in mind that, in the absence of harmonisation of EU legislation in the field of the penalties applicable in cases of non-compliance with the conditions laid down by arrangements established under such legislation, Member States retain the power to choose the penalties which seem to them to be appropriate. They must, however, exercise that power in accordance with EU law and its general principles, and, consequently, in accordance with the principle of proportionality (see judgment in Fatorie , C‑424/12, EU:C:2014:50, paragraph 50 and the case-law cited).
51. Thus, although Member States may, in order to ensure the correct levying and collection of the tax and to prevent fraud, inter alia, lawfully lay down, in their respective provisions of national law, appropriate penalties to sanction the failure to observe the obligation to register persons taxable for VAT purposes, such penalties must not, however, go further than is necessary to attain those objectives. It is for the national court to determine whether the amount of the penalty does not go further than is necessary to attain the objectives of ensuring the correct levying and collection of the tax and the prevention of fraud, having regard to the facts of the case and, inter alia, the sum actually imposed and the possible existence of fraud or circumvention of the applicable legislation attributable to the taxable person whose failure to register is being penalised (see, to that effect, judgment in Rēdlihs , C‑263/11, EU:C:2012:497, paragraphs 45, 46 and 54).
56. According to settled case-law of the Court, the right to deduct is a fundamental principle of the common system of VAT, which in principle may not be limited, and is exercisable immediately in respect of all the taxes charged on transactions relating to inputs (see, to that effect, inter alia, judgments in Gabalfrisa and Others , C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 43, and in Idexx Laboratories Italia , C‑590/13, EU:C:2014:2429, paragraphs 30 and 31).
57. That system is designed to relieve the trader entirely of the burden of the VAT due or paid in the course of all his economic activities. The common system of VAT consequently ensures that all economic activities, whatever their purpose or results, provided that they are themselves subject to VAT, are taxed in a wholly neutral way (see, to that effect, judgments in Gabalfrisa and Others , C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 44, and in Idexx Laboratories Italia , C‑590/13, EU:C:2014:2429, paragraph 32)
58. Furthermore, the Court has already held that the fundamental principle of VAT neutrality requires that deduction of input VAT be allowed if the substantive requirements are satisfied, even if the taxable person has failed to comply with some of the formal requirements (see, to that effect, judgments in Ecotrade , C‑95/07 and C‑96/07, EU:C:2008:267 paragraph 63; in Uszodaépítő , C‑392/09, EU:C:2010:569, paragraph 39; in Nidera Handelscompagnie , C‑385/09, EU:C:2010:627, paragraphs 42 and 43; and in Idexx Laboratories Italia , C‑590/13, EU:C:2014:2429, paragraph 38).
59. Consequently, where the tax authority has the information necessary to establish that the substantive requirements have been satisfied, it cannot, in relation to the right of the taxable person to deduct that tax, impose additional conditions which may have the effect of rendering that right ineffective for practical purposes (see judgment in Idexx Laboratories Italia , C‑590/13, EU:C:2014:2429, paragraph 40).
60. Identification for VAT purposes, provided for in Article 214 of Directive 2006/112, and the obligation of the taxable person to state when his activity as a taxable person commences, changes or ceases, provided for in Article 213 of that directive, are only formal requirements for the purposes of control, and they cannot undermine, inter alia, the right to deduct VAT in the case where the substantive conditions which give rise to that right are satisfied (see, to that effect, judgments in Nidera Handelscompagnie , C‑385/09, EU:C:2010:627, paragraph 50; in Tóth , C‑324/11, EU:C:2012:549, paragraph 32; and in Ablessio , C‑527/11, EU:C:2013:168, paragraph 32).
61. It follows, in particular, that a taxable person for VAT purposes cannot be prevented from exercising his right of deducti on on the ground that he was not identified as a taxable person for those purposes before using the goods purchased in the context of his taxed activity (see, to that effect, inter alia, judgment in Nidera Handelscompagnie , C‑385/09, EU:C:2010:627, paragraph 51).
62. In addition, the measures which the Member States may adopt under Article 273 of Directive 2006/112 to ensure the correct collection of VAT and to prevent evasion must not go further than is necessary to attain those objectives and must not undermine the neutrality of VAT (see, to that effect, inter alia, judgments in Gabalfrisa and Others , C‑110/98 to C‑147/98, EU:C:2000:145, paragraph 52; in Collée , C‑146/05, EU:C:2007:549, paragraph 26; in Nidera Handelscompagnie , C‑385/09, EU:C:2010:627, paragraph 49; and in Idexx Laboratories Italie , C‑590/13, EU:C:2014:2429, paragraphs 36 and 37).
63. Thus, penalising the failure on the part of the taxable person to comply 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 those obligations, since EU law does not prevent Member States from imposing, where necessary, a fine or a financial penalty proportionate to the seriousness of the offence. Such a practice also goes further than is necessary for the correct collection of VAT and for the prevention of evasion within the meaning of Article 273 of Directive 2006/112, 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 not made until after the expiry of the limitation period available to the taxable person for the purpose of making the deduction (see, by analogy, judgment in Ecotrade , C‑95/07 and C‑96/07, EU:C:2008:267, paragraphs 67 and 68).