European Commission v Portuguese Republic.
Date: 2012-03-08
35. Second, to accept the interpretation maintained by the Commission would run counter to the principle of legal certainty and the objective of simple and uniform application of the rules of the common system of VAT.
48. As is clear from Article 272(1)(e) and Article 296(1) of the VAT Directive, the objective of the flat-rate scheme for farmers is to enable Member States to release farmers, on whom the application of the normal VAT arrangements or the special scheme for small enterprises would be likely to give rise to difficulties, from certain or all of the obligations usually imposed on taxable persons covered by the normal VAT arrangements, by granting to them flat-rate compensation for the amount of input VAT paid by those farmers. That scheme therefore pursues both the objective of simplification (Case C‑43/04 Stadt Sundern [2005] ECR I‑4491, paragraph 28) and the objective of offsetting the amount of input VAT (Case C‑321/02 Harbs [2004] ECR I‑7101, paragraph 29). Since the Commission has, as is clear from the documents submitted to the Court, referred to that latter objective both in the letter of formal notice and in the reasoned opinion, there is no basis, in any event, for the Portuguese Republic’s claim that that objective was not relied on as a ground for complaint in the present action.
49. It must also be recalled that the flat-rate scheme for farmers is a scheme which derogates from and is an exception to the general scheme of the VAT Directive and must therefore be applied only to the extent necessary to achieve its objective. Further, in accordance with settled case-law of the Court, any derogation or exception to a general rule is to be interpreted strictly ( Harbs , paragraph 27, and Stadt Sundern , paragraph 27). Next, no provision is made in the VAT Directive for an exemption from VAT in respect of farming. On the contrary, as the Advocate General stated in points 46 to 48 of her Opinion, although no VAT is charged on the sales of flat-rate farmers, the flat-rate scheme for farmers was specifically not designed to be an exemption scheme, because such a scheme would not have made it possible to eliminate the burden of input VAT and therefore to safeguard the neutrality of the common system of VAT. It is clear moreover from Article 296(1) of that directive that farmers are as a general rule subject either to the normal arrangements, the special scheme for small enterprises, or the said flat-rate scheme.
50. Moreover, while the simplification of administrative obligations burdening flat-rate farmers is indeed one of the objectives pursued by the flat-rate scheme for farmers, the goal of simplification cannot justify the introduction of an exemption which is not provided for by the VAT Directive (see, to that effect and by analogy, Case C‑128/05 Commission  v Austria [2006] ECR I‑9265, paragraph 25). That is reinforced by the fact that the objective of simplification must, in the present case, be reconciled with the objective of offsetting the input VAT borne by the farmers concerned, which necessarily implies that a minimum of administrative obligations are imposed on flat-rate farmers, inter alia, in order to collect the data required for the determination of the applicable flat-rate compensation percentages.
53. It is true that the result of paying simple compensation which is entirely flat-rate does not, by definition, ensure the complete neutrality of VAT. It does however achieve the highest neutrality possible taking into account the need to reconcile that payment and the objective of compensation with the objective of simplification of the rules to which flat-rate farmers are subject, which is also one of the objectives of the flat-rate scheme for farmers, as stated in paragraph 48 of this judgment.
59. Further, it must be observed, first, that the Portuguese Republic’s argument that it is appropriate to fix a flat-rate compensation percentage higher than zero only where the farmers are so placed as to be in tax credit in respect of VAT vis-à-vis the State has no basis in the text of the VAT Directive. On the contrary, the Court has previously stated that, while the macro-economic data relating to flat-rate farmers alone, to which Article 298 of the VAT Directive refers, do comprise, as stated by the Portuguese Republic, inputs (intermediate consumption and gross fixed-asset formation) and outputs (final production, including own consumption), together with the total amount of taxes relating to inputs, the Court has also stated that the flat-rate compensation percentages are obtained by dividing the total amount of taxes relating to inputs by the outputs (Case 3/86 Commission  v Italy [1988] ECR 3369, paragraph 8). The VAT which may be payable on output transactions and, consequently, the possibility of the farmers, in particular those covered by the flat-rate scheme, being in tax credit, is therefore not taken into account in determining the applicable flat-rate compensation percentage.
60. Next, it is clear from settled case-law of the Court that the question whether a Member State has failed to fulfil its obligations must be determined by reference to the situation in that Member State as it stood at the end of the period laid down in the reasoned opinion (see, inter alia, Case C‑110/00 Commission  v Austria [2001] ECR I‑7545, paragraph 13, and Case C‑487/08 Commission  v Spain [2010] ECR I‑4843, paragraph 34). Further, the rules laid down in Article 258 TFEU are to be applied without the Commission being required to comply with fixed time-limits. The Commission is thus entitled to decide, in its discretion, on what date it may be appropriate to bring an action and it is not for the Court, as a general rule to review the exercise of that discretion (Case C‑297/08 Commission  v Italy [2010] ECR I‑1749, paragraph 87 and case-law cited).
64. In accordance with settled case-law, the Court may of its own motion examine whether the conditions laid down in Article 258 TFEU for bringing an action for failure to fulfil obligations are satisfied (Case C‑362/90 Commission  v Italy [1992] ECR I‑2353, paragraph 8, and Commission  v Spain , cited above, paragraph 70).
65. It is clear in particular from Article 38(1)(c) of the Rules of Procedure of the Court of Justice and from the case-law relating to that provision that an application initiating proceedings must state the subject-matter of the dispute and a summary of the pleas in law on which the application is based and that that statement must be sufficiently clear and precise to enable the defendant to prepare its defence and the Court to rule on the application. It is therefore necessary for the essential points of law and of fact on which a case is based to be indicated coherently and intelligibly in the application itself (Case C‑178/00 Italy  v Commission [2003] ECR I‑303, paragraph 6, and Case C‑211/08 Commission  v Spain [2010] ECR I‑5267, paragraph 32).