FIRIN OOD v Direktor na Direktsia ‘Obzhalvane i danachno-osiguritelna praktika’ — Veliko Tarnovo pri Tsentralno upravlenie na Natsionalnata agentsia za prihodite.
Date: 2014-03-13
29. According to settled case-law, the procedure provided for in Article 267 TFEU is an instrument of cooperation between the Court of Justice and the national courts, by means of which the Court provides the national courts with the points of interpretation of European Union law which they need in order to decide the disputes before them (see, inter alia, Case C‑279/12 Fish Legal and Shirley  [2013] ECR, paragraph 29).
30. In the context of that cooperation, questions concerning European Union law enjoy a presumption of relevance. The Court may refuse a request for a preliminary ruling made by a national court only where it is quite obvious that the interpretation of European Union law that is sought bears no relation to the actual facts of the main action or its purpose, where the problem is hypothetical, or where the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (see, inter alia, Fish Legal and Shirley , paragraph 30).
35. Article 65 of Directive 2006/112, which provides that, where payments are made on account before the goods or services are supplied, VAT becomes chargeable on receipt of the payment and on the amount received, constitutes a derogation from the rule laid down in Article 63 and, as such, must be interpreted strictly (Case C‑419/02 BUPA Hospitals and Goldsborough Developments  [2006] ECR I‑1685, paragraph 45).
36. Thus, in order for VAT to become chargeable in such circumstances, all the relevant information concerning the chargeable event, namely, the future supply of goods or services, must already be known and therefore, in particular, the goods or services must be precisely identified at the time when the payment on account is made (to that effect, BUPA Hospitals and Goldsborough Developments , paragraph 48).
39. None the less, as the Advocate General has observed in point 24 of her Opinion, Article 65 of Directive 2006/112 cannot apply where, at the time of the payment on account, it is uncertain whether the chargeable event will take place. This would be the case, in particular, where there is fraudulent conduct.
40. The prevention of tax evasion, avoidance and abuse is an objective recognised and encouraged by Directive 2006/112. In that connection, the Court has held that European Union law cannot be relied on by individuals for abusive or fraudulent ends. It is therefore for the national courts and judicial authorities to refuse the right of deduction if it is shown, in the light of objective factors, that that right is being relied on for fraudulent or abusive ends (to that effect, Case C‑285/11 Bonik  [2012] ECR, paragraphs 35 to 37).
41. That is the position where a tax fraud is committed by the taxable person himself. In such a case, the objective criteria which form the basis of the concepts of ‘supply of goods or services effected by a taxable person acting as such’ and ‘economic activity’ are not met ( Bonik , paragraph 38 and the case-law cited).
42. By contrast, it is incompatible with the rules governing the right of deduction under Directive 2006/112 to impose a penalty, in the form of refusal of that right, on a taxable person who did not know, and could not have known, that the transaction concerned was connected with fraud committed by the supplier or that another transaction forming part of the chain of supply, upstream or downstream of the transaction carried out by the taxable person, was vitiated by VAT fraud ( Bonik , paragraph 41 and the case-law cited).
43. The establishment of such a penalty system would go beyond what is necessary to preserve the public exchequer’s rights (see, to that effect, Bonik , paragraph 42 and the case-law cited).
44. Consequently, since the refusal of the right of deduction is an exception to the application of the fundamental principle constituted by that right, it is incumbent upon the competent tax authorities to establish, to the requisite legal standard, the objective evidence needed to substantiate the conclusion that the taxable person knew, or should have known, that the transaction relied on as the basis for the right of deduction was connected with fraud committed by the supplier or by another trader acting upstream or downstream in the chain of supply ( Bonik , paragraph 43 and the case-law cited).
48. In this connection, it should be noted that Articles 184 to 186 of Directive 2006/112 lay down the conditions under which the tax authority may require adjustment to be made by a taxable person (to that effect, Case C‑234/11 TETS Haskovo  [2012] ECR, paragraph 26).
49. So far as concerns the impact on the deduction of VAT made by a taxable person of any events occurring after the deduction has been made, it is apparent from the case-law that the use to which the goods or services are put, or are intended to be put, determines the extent of the initial deduction to which the taxable person is entitled and the extent of any adjustments in the course of the following periods, which must be made under the conditions laid down in Articles 184 to 186 of the directive ( TETS Haskovo , paragraph 29 and the case-law cited).
50. The adjustment mechanism provided for in those articles is an integral part of the VAT deduction scheme established by Directive 2006/112. It is intended to enhance the precision of deductions so as to ensure the neutrality of VAT, with the result that transactions effected at an earlier stage continue to give rise to the right to deduct only in so far as they are used to make supplies subject to VAT. That mechanism thus aims to establish a close and direct relationship between the right to deduct input VAT paid and the use of the goods or services concerned for taxable output transactions ( TETS Haskovo , paragraphs 30 and 31).
51. So far as concerns the coming into existence of an obligation to make an adjustment to an input VAT deduction, Article 185(1) of Directive 2006/112 establishes the principle that such an adjustment must be made, inter alia, where, after the VAT return is made, some change occurs in the factors used to determine the amount of the deduction ( TETS Haskovo , paragraph 32).
54. It must be recalled in this regard that, so far as concerns the treatment of VAT that has been improperly invoiced because there is no taxable transaction, it follows from Directive 2006/112 that the two traders involved are not necessarily treated identically. On the one hand, the issuer of an invoice is liable to pay the VAT entered on that invoice even if there is no taxable transaction, in accordance with Article 203 of Directive 2006/112. On the other hand, exercise of the right of deduction by the recipient of an invoice is limited solely to tax corresponding to a transaction subject to VAT, in accordance with Articles 63 and 167 of that directive (Case C‑643/11 LVK – 56  [2013] ECR, paragraphs 46 and 47).
55. In such a situation, compliance with the principle of fiscal neutrality is ensured by the possibility, to be provided for by the Member States, of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith or where he has, in sufficient time, wholly eliminated the risk of any loss of tax revenue ( LVK – 56 , paragraph 48).
56. Furthermore, as the Advocate General has observed in point 43 of her Opinion, as long as, in circumstances such as those in the main proceedings, the payment made on account has not been refunded by the supplier, the taxable amount payable by the latter by virtue of receipt of that payment on account cannot be reduced pursuant to the provisions of Article 65, in conjunction with Articles 90 and 193, of Directive 2006/112 (see, to that effect, with regard to adjustment of the taxable amount in the case of discounts, Case C‑86/99 Freemans  [2001] ECR I‑4167, paragraph 35).