Schmeink & Cofreth AG & Co. KG v Finanzamt Borken and Manfred Strobel v Finanzamt Esslingen.
Date: 2000-09-19
37 It is settled case-law that it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine in the light of the particular circumstances of the case both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted by the national court concern the interpretation of Community law, the Court of Justice is, in principle, bound to give a ruling (see, in particular, Case C-415/93 Union Royale Belge des Sociétés de Football Association and Others v Bosman and Others [1995] ECR I-4921, paragraph 59; Case C-200/97 Ecotrade v AFS [1998] ECR I-7907, paragraph 25; and Case C-254/98 Schutzverband gegen unlauteren Wettbewerb v TK-Heimdienst Sass [2000] ECR I-151, paragraph 13).
48 Secondly, it should be observed that the Sixth Directive does not contain any provisions relating to the adjustment by the issuer of the invoice of VAT which has been improperly invoiced. The Sixth Directive merely defines, in Article 20, the conditions which must be complied with in order that deduction of input taxes may be adjusted at the level of the person to whom goods or services have been provided.
49 In those circumstances, it is for the Member States to lay down the conditions in which improperly invoiced VAT may be adjusted.
50 The national court has pointed out that, according to Genius Holding, an issuer of an invoice is not entitled to adjust VAT which has been improperly invoiced unless he can show that he acted in good faith.
51 It should be noted in that regard that in Genius Holding the plaintiff in the main proceedings had deducted VAT in respect of which he had been invoiced by two of his subcontractors. This was an infringement of the applicable national law under which the subcontractors were not liable to pay VAT in respect of services provided to the principal contractor, the tax being due only by the latter on the amount which he invoiced to the person who had placed the order. The tax authorities had taken the view that VAT had been improperly invoiced to the plaintiff and that it could not therefore deduct it. The authorities had therefore reassessed the taxable amount.
53 In answering that question, the Court held in Genius Holding that the right to deduct provided for in the Sixth Directive did not apply to tax which is due solely because it is mentioned on the invoice. The Court explained in paragraph 13 of its judgment that the right to deduct could be exercised only in respect of taxes actually due, that is to say, the taxes corresponding to a transaction subject to VAT or paid in so far as they were due.
54 As the Court observed in paragraph 17 of its judgment in Genius Holding, if any tax which has been invoiced could be deducted, even though it does not correspond to taxes legally due, tax evasion would be made easier.
55 In Genius Holding the deductions which had been made initially by the plaintiff had therefore to be adjusted in accordance with Article 20(1)(a) of the Sixth Directive.
56 That was the context in which the Court held in paragraph 18 of its judgment in Genius Holding that, in order to ensure the application of the principle of neutrality of VAT, it was for the Member States to provide in their internal legal systems for the possibility of correcting any tax improperly invoiced where the issuer of the invoice shows that he acted in good faith.
57 It should be observed that, unlike the situation in Genius Holding, in the cases in the main proceedings the risk of any loss in tax revenues has been completely eliminated in sufficient time either because the issuer of the invoice has retrieved and destroyed the invoice before its recipient used it or because, although the invoice has been used, the issuer of the invoice has settled the amount shown separately on the invoice.
58 In such circumstances, where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional by the Member States upon the issuer of the relevant invoice having acted in good faith.
59 It should be noted in that respect that the measures which the Member States may adopt under Article 22(8) of the Sixth Directive in order to ensure the correct levying and collection of the tax and for the prevention of fraud must not go further than is necessary to attain such objectives (Joined Cases C-110/98 to C-147/98 Gabalfrisa and Others v Agencia Estatal de Administración Tributaria [2000] ECR I-1577, paragraph 52). They may not therefore be used in such a way that they would have the effect of undermining the neutrality of VAT, which is a fundamental principle of the common system of VAT established by the relevant Community legislation.
60 It must be noted that the requirement that the issuer of the invoice should demonstrate his good faith when he has in sufficient time wholly eliminated any risk of lower tax yields is not necessary to ensure the collection of VAT or to prevent tax evasion (see, to this effect, Case C-361/96 Grandes Sources d'Eaux Minérales Françaises v Bundesamt für Finanzen [1998] ECR I-3495, paragraphs 29 and 30).
61 By contrast, as was the case in Genius Holding, where the risk of any loss of tax revenues has not been wholly eliminated, the Member States may make the possibility of adjusting VAT which has been improperly invoiced conditional upon the issuer of the relevant invoice having acted in good faith. As the national court has stated, if it transpires that it is no longer possible to cancel a deduction granted in respect of the addressee of the invoice and the issuer of the invoice has not acted in good faith, he may be held responsible for the shortfall in tax revenues in order to ensure tax neutrality.
62 Finally it should be noted that, as the Commission has rightly submitted, Community law does not prevent Member States from treating the issuing of bogus invoices improperly mentioning VAT as attempted tax evasion and from imposing, in such a case, fines or penalty payments prescribed by their domestic law.
63 The answer to the second question must therefore be that where the issuer of the invoice has in sufficient time wholly eliminated the risk of any loss in tax revenues, the principle of the neutrality of VAT requires that VAT which has been improperly invoiced can be adjusted without such adjustment being made conditional upon the issuer of the relevant invoice having acted in good faith.
The first question
68 Nevertheless, when such a risk has been eliminated, adjustment in respect of improperly invoiced VAT cannot be dependent upon the discretion of the tax authorities.