SC Terracult SRL v Direcţia Generală Regională a Finanţelor Publice Timişoara –Administraţia Judeţeană a Finanţelor Publice Arad – Serviciul Inspecţie Fiscală Persoane Juridice 5 and ANAF Direcţia Generală Regională a Finanţelor Publice Timişoara Serviciul de Soluţionare a Contestaţiilor.
Date: 2020-07-02
22


It is common ground between the interested parties which submitted written observations in the present case that any supply of rapeseed made in October 2013 in Romania by a taxable supplier to another taxable person, each with a Romanian tax identification number, had to be subject to the reverse charge mechanism for VAT. Under that mechanism, no VAT payment takes place between the supplier and the taxable person that is the recipient of the supplies, the latter being liable, in respect of the transactions carried out, for the input VAT (see, to that effect, judgment of 26 April 2017, Farkas, C‑564/15, EU:C:2017:302, paragraph 41 and the case-law cited).
23


Since VAT is not payable by such a supplier, in accordance with Articles 193, 199 and 199a of the VAT Directive, the supplier cannot be regarded as liable for the payment of VAT and the fact that that supplier has paid the VAT on the mistaken assumption that the supply concerned was not subject to the reverse charge mechanism for VAT does not permit derogation from that rule (see, to that effect, judgment of 23 April 2015, GST — Sarviz Germania, C‑111/14, EU:C:2015:267, paragraphs 28 and 29), with the result that that VAT incorrectly invoiced and paid must, in principle, be refunded to the supplier.
24


It is settled case-law of the Court that the right to a refund of charges levied in a Member State in breach of rules of EU law is the consequence and complement of the rights conferred on individuals by provisions of EU law as interpreted by the Court. The Member State concerned is therefore in principle required to repay charges levied in breach of EU law. The claim for repayment of overpaid VAT concerns the right to recovery of sums paid but not due which, according to settled case-law, helps to offset the consequences of the tax’s incompatibility with EU law by neutralising the economic burden which that tax has wrongly imposed on the trader who, in fact, has ultimately borne it (judgment of 14 June 2017, Compass Contract Services, C‑38/16, EU:C:2017:454, paragraphs 29 and 30 and the case-law cited).
25


In that regard, it must be borne in mind that the principle of neutrality of VAT, which is a fundamental principle of the common system for VAT, is meant to relieve the taxable person entirely of the burden of the VAT in the course of its economic activities. That system therefore ensures that all economic activities, whatever their purpose or results, provided that they are, in principle, themselves subject to VAT, are taxed in a wholly neutral way (see, to that effect, judgment of 13 March 2014, Malburg, C‑204/13, EU:C:2014:147, paragraph 41 and the case-law cited).
26


As regards the refund of VAT invoiced in error, the Court has already held that the VAT Directive does not contain any provisions relating to the adjustment, by the issuer of the invoice, of VAT that has been invoiced improperly and that, in those circumstances, it is in principle for the Member States to lay down the conditions in which improperly invoiced VAT may be adjusted (judgment of 11 April 2013, Rusedespred, C‑138/12, EU:C:2013:233, paragraph 25 and the case-law cited).
27


In order to ensure neutrality of VAT, it is for the Member States to provide, in their domestic legal systems, for the possibility of adjusting any tax improperly invoiced where the person who issued the invoice shows that he acted in good faith (judgment of 11 April 2013, Rusedespred, C‑138/12, EU:C:2013:233, paragraph 26 and the case-law cited).
28


However, where the issuer of the invoice has, in sufficient time, wholly eliminated the risk of any loss of tax revenue, the principle of neutrality of VAT requires that VAT which has been improperly invoiced can be corrected without such adjustment being made conditional by the Member States upon the good faith of the issuer of the relevant invoice. The adjustment cannot be dependent upon the discretion of the tax authority (judgment of 11 April 2013, Rusedespred, C‑138/12, EU:C:2013:233, paragraph 27 and the case-law cited).
29


However, in the case of supplies of goods covered by the reverse charge mechanism for VAT, the risk of loss of tax revenue linked to the exercise of the right to a refund is eliminated. If the taxable person to which those supplies are made is liable for the input VAT, the former may, in principle, deduct that tax so that no amount is owed to the tax authority (see, to that effect, judgment of 11 April 2019, PORR Építési Kft., C‑691/17, EU:C:2019:327, paragraph 30 and the case-law cited).
32


As regards the principle of effectiveness, which requires that a national procedural provision must not make the exercise of the rights conferred on individuals by EU law practically impossible or excessively difficult, it is clear from the Court’s case-law that the possibility of exercising the right to a refund of VAT, without any temporal limit, would be contrary to the principle of legal certainty, which requires the tax position of the taxable person, having regard to his rights and obligations vis-à-vis the tax authorities, not to be open to challenge indefinitely. The Court has also stated that it is compatible with EU law to lay down reasonable time limits for bringing proceedings, if they are not to be out of time, in the interests of legal certainty, which protects both the taxpayer and the authorities concerned. Such periods are not by their nature liable to make it virtually impossible or excessively difficult to exercise the rights conferred by EU law, even if the expiry of those periods necessarily entails the dismissal, in whole or in part, of the action brought (see, to that effect, judgment of 14 February 2019, Nestrade, C‑562/17, EU:C:2019:115, paragraphs 41 and 42 and the case-law cited).
35


In those circumstances, the principle of effectiveness precludes such national legislation or administrative practices in so far as they are liable to deny a taxable person the opportunity to correct its invoices concerning certain operations and to rely on them with a view to obtaining a refund of VAT improperly invoiced and paid by that taxable person, even though the five-year limitation period laid down by that legislation has not yet elapsed (see, by analogy, judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraph 40).
36


With regard to the referring court’s doubts concerning the principle of proportionality, it must be borne in mind that the national legislature is able to attach penalties to the formal obligations of taxable persons to encourage them to comply with those obligations, in order to ensure the proper working of the VAT system and that, accordingly, an administrative fine can be imposed on a taxable person whose application for a refund of the VAT paid but not due is the result of its own negligence (see, to that effect, judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraphs 48 and 49).
37


It is important to note that, assuming that the taxable person’s negligence is established, which is a matter for the referring court to determine, the Member State concerned must employ means which, whilst enabling it effectively to attain the objective pursued by national legislation, are the least detrimental to the principles laid down by EU legislation, such as the principle of neutrality of VAT. Therefore, in view of the position which that principle has in the common system of VAT, a penalty consisting of an absolute denial of the right to a refund of VAT incorrectly invoiced and paid but not due, appears disproportionate (see, to that effect, judgment of 26 April 2018, Zabrus Siret, C‑81/17, EU:C:2018:283, paragraphs 50 and 51 and the case-law cited).
38


It must also be added that, as observed by the Romanian Government, the right to a refund of VAT must be denied if that right is being relied on fraudulently or abusively. The prevention of fraud and potential abuse is an objective recognised and promoted by the VAT Directive and EU law cannot be relied on by individuals for abusive or fraudulent ends (see, to that effect, judgment of 3 October 2019, Altic, C‑329/18, EU:C:2019:831, paragraph 29 and the case-law cited). However, in the present case, the referring court makes no mention, in its request for a preliminary ruling, of the existence of fraud or abuse.